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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:

  1. How do you strike the right balance between profitability, utilization, and growth?
  2. How do you structure non-billable time?
  3. What are the best ways to measure and make visible the associated KPIs and outcomes?

Discussion Notes:

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)

Standardization

  • 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
http://sloanreview.mit.edu/article/why-giving-employees-paid-unstructured-time-pays-off/
http://m.fastcodesign.com/1663137/how-3m-gave-everyone-days-off-and-created-an-innovation-dynamo
http://www.computerworld.com/article/2506129/it-management/time-off-to-innovate–good-idea-or-a-waste-of-tech-talent-.html?page=3

Utilization rates
http://trustedadvisor.com/articles/profitability-in-professional-services
*https://www.10000ft.com/reference/best_practices/costs-profitability
*http://www.internetviz.com/psjblog/2010/01/strategic_resource_management/
Managing a Professional Service Firm, starting on page 10, Tables 1-1 and 1-2

KPIs for Service Firms
http://spiresearch.com/spiglass/2013/10/what-are-the-essential-kpis-for-professional-services-organizations/
http://www.axium.com/blog/10-key-performance-indicators-for-architecture-and-engineering-firms/

Article Summaries

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

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