This meeting we discussed utilization and non-billable time to understand how to find the right balance of structure, accountability, and focus for creative work while at the same time providing the latitude to pursue non-billable tasks that inspire people and grow the organization… We were guided by 3 key questions:
- How do you strike the right balance between profitability, utilization, and growth?
- How do you structure non-billable time?
- What are the best ways to measure and make visible the associated KPIs and outcomes?
Balance profitability, utilization, and growth
- There are categories of non-billable time (biz dev vs org dev vs. personal dev)
- Service firms can borrow from agile software development and lean manufacturing
- Standardizing process vs. doing the “extra things”
- The work is also a way to develop (not either/or between client work and org dev)
- Not how much time do you need but how much time does the work need? (separate specific people from role)
- People need to understand the value of “what you get” from the non-billable time – make it clear how this ties into promotion/advancement/compensation
- Benefits of people working on multiple projects -Help people manage their time better -Speed up the pace of learning -Improves cross-team communications
Structuring non-billable time
- Less relevant, the smaller you are
- If people are busy, they will resist the “non-mission critical stuff” and will need reinforcement and encouragement
- How you do it depends on the degree standardization of work
- One factor is project allocation – is each person working on a single project and or multiple project? Multiple projects can be better for team development pace but some work requires deeply embedded, dedicated people
- Often flexibility and responsibility are inversely proportional (i.e.,, interns have the most “free” time)
- Variability creates tension within a service business (revenue, utilization, etc)
- Standardization of service offerings (and therefore team size, team structure, billing, etc) can address but this creates a tension for a creative organization (recruiting people)
- Standardizing your offering makes it easier to predict how much time, people etc. are required to deliver the project
- -S, M, L, XL -AIA Scope of Work and Work Stages is one approach to this also
Here are some of the resources we consulted:
Unstructured time and creativity
Managing a Professional Service Firm, starting on page 10, Tables 1-1 and 1-2
KPIs for Service Firms
Unstructured Time and Creativity Why giving Employees Paid, Unstructured Time Pays off -Harvard Study looking at the differences between Commissioned and Non-commissioned work. Commissioned work was found to be significantly less creative. Even sub-consciously people feel constrained when working for someone.
How 3M Gave Everyone Days Off and Created an Innovation Dynamo -3M runs the 15% problem, Google has the 20% program -One thing giving people the time but how do your turn those ideas into real innovations -Approach may work best at companies where there’s a high level of creative competitiveness; that is, where impressing peers is just as important as the innovation itself. -3M make their employees present their 15 % ideas to their colleagues.
Time off to innovate: Good idea or a waste of tech talent? -“It’s energizing for employees to take a break from their day-to-day business and think creatively about solving other problems.” Doug Williams, Forrester Research. -Innovation Time Off (ITO) programs need guidelines. 20% projects have to have some business value although it must also be clear that not all ideas lead to successes. Utilization rates Two methods: -Billable hours / Recorded Hours per week. -Billable hours / Fixed number of hours per week. Profitability in Professional Services Organizations (PSO) -Billing rate calculations
KPIs for Service Firms Key Performance Indicators (KPIs) What are the essential KPIs for PSO’s? -Revenue -Client satisfaction -Margin -Workforce plan -Article breaks down the definitions of each of these
10 Key Performance Indicators for Architecture and Engineering -A short summary of 10 KPI’s that AE firms should be tracking to understand the health of their business