What Is Resource Utilization? Plus 7 Practical Ways to Improve It

Resource Utilization Definition
Why it’s important
What Is Utilization Rate
What influences utilization rate?
How to Calculate Utilization
What’s considered a ‘good’ utilization rate?
How to Automate Utilization Rates
7 tips to improve resource utilization
Is resource utilization the key to project success?
Wrap-Up

Resource Utilization Definition

In the project management field, particularly in professional services, your most valuable resources are your people: the individuals who make it all possible.

Resource utilization in project management refers specifically to time management of individual human resources based on hours worked versus capacity.

When you measure and track resource utilization in project management, you see a percentage for each resource that reflects how much time they’re putting in versus how much time they could put in. That’s the long and the short of it.

Here’s everything you need to know about resource utilization in project management, plus seven tried-and-true ways to improve it.

Resource Utilization Definition

Resource utilization measures how efficiently individual human resources are leveraged, based on their actual workload versus capacity.

In layman’s terms, resource utilization is how well resources are being used to achieve the goals of the project. These metrics show current work being put in against total potential work in terms of logged time

The aim of looking at resource utilization is to see how much effort, in terms of capacity, is being put in by individual team members within a set period of time.

Why it’s important

Resource utilization helps project managers keep projects on track by monitoring to what degree team members are working to their potential, in terms of time.

Resource utilization is an important KPI for project managers because it reveals so much about the current health of the project and even the people who make it tick.

Particularly in the construction space, resource utilization is so critical to project success (and profitability), new project management methods have sprung up just to deal with it.

Resource utilization tells you how individual team members are doing at meeting time, budget, and other project constraints.

This percentage will additionally help you understand at what levels your team members can answer the above demands under their current workload. All while simultaneously producing fantastic results customers love:

Are there people working way under capacity?
Are there people going way over capacity?
Is the workload balanced among team members?
Is the project moving slower because time isn’t being managed effectively? Vice versa?

When you’re determining resource utilization and trying to improve it, these are the kind of questions you’ll be answering.

These answers come in the form of a utilization rate, which the project manager calculates in order to ascertain the health of the project.

What Is Utilization Rate?

Resource utilization is measured in terms of a percentage called utilization rate:

Utilization rate in project management reflects how much potential is being extracted from a human resource in terms of hours worked against total capacity.

The utilization rate will tell you whether the individual or group is operating at, below, or above capacity. It will also tell you how well resources have been allocated in the interest of time and budget.

On top of all that, utilization rates can reflect shifting personal circumstances among human resources themselves. These percentages often tell the story of project risks that come to fruition, and other issues that inevitably require strong, empathetic leadership skills from the project manager.

What influences the utilization rate?

Utilization rates aren’t cut and dry because although they provide a tangible measurement of productivity in terms of time, various factors can influence how much a resource is working in relation to capacity.

People have bad weeks. Vendors don’t come through. Supplies arrive late. Projects are written with uncertainty that can derail the utilization rate of an individual and even an entire team.

Here are a few circumstances that can influence the utilization rates of project teams:

The industry or niche

Inefficient workflows

Burnout aka low productivity

Unbalanced workloads

External personal circumstances

Project delays

Budget constraints

Time constraints

Project manager traits
Non-billable time

How to Calculate Utilization

Calculating utilization is incredibly easy; you can do it in your head. You just need to be clear on the time frame and capacity. Here’s how to figure it out:

1. Determine resource capacity from your capacity planning data

You can’t calculate a utilization rate if you don’t know the capacity of the individual. In order to leverage utilization rate as a KPI, you have to make capacity planning part of your project planning.

Ideally, before work gets underway on the project, have your team verify their individual capacity in terms of hours per week, or if you choose, total project hours.

You can also choose task-based capacity planning for less complicated projects. In this format, capacity is based on tasks per week versus hours per week.

2. Choose your time frame

Will you be measuring resource utilization over a week? Two weeks? An entire project lifespan? Decide on the time frame you want to see.

Most project managers will look at resource utilization on a week-by-week basis as well as the total during the review stage when the project is wrapped.

3. Gather your time-tracking data

You now know the capacity of your team members, or the total amount in hours/tasks they can spend on a weekly or per-project basis. You also know the timeframe you want to measure.

Next, you need to know how much time was logged. Pull up the time tracking data of the individual team members for the preselected time period.

In the case of task-based capacity planning, you would instead be looking at completed tasks for each individual within the time frame.

4. Divide hours worked by capacity for the time period. Multiply by 100%.

Take the hours worked for the timeframe, divide it by capacity (in hours), and multiply by 100%. This will show how much a person has worked in relation to their available hours.

For example, if I worked 36 hours last week, but my total availability or capacity was 40 hours, you’d divide 36 by 40. Multiply by 100% and the answer for my utilization rate is 90%.

What’s considered a ‘good’ utilization rate?

This author has always known a ‘good’ utilization rate to hover around 80% or even higher as a common goal among project managers in construction and design.

However, it appears what’s considered a ‘good’ utilization rate depends on the industry you’re in.

For example, construction projects usually have higher utilization rate targets than marketing project teams. And ‘good’ utilization rates for software development teams fall somewhere between the two.

Utilization Rate Formula + Anecdotal Examples

Hours worked ÷ Capacity x 100% = Utilization Rate

The utilization rate formula is a simple division problem that reflects worked hours against capacity. Below are a few anecdotal examples that show how you would calculate the utilization rate in each situation. You’ll also see how different project risks can impact utilization rates among team members.

Example 1: A productive resource

A project manager decides to look at the utilization rate of Team Member 1 for a two-week period. Team Member 1’s total capacity for the period was 80 hours; they logged 78 hours with the team’s time-tracking tool.

To figure out the utilization rate, simply divide 78 (total hours worked) by Team Member 1’s capacity of 80.

78 hours worked ÷ 80 hours capacity x 100% = 90.75% EXEMPLARY UTILIZATION RATE

The utilization rate is 90.75%, which is considered exemplary, but could at the same time provoke a check-in with Team Member 1 to show gratitude and offer support to keep this level of productivity sustainable.

Example 2: Unexpected delays

Another project manager is eyeing the utilization rate of a hypothetical design team member on the project’s Gantt chart. The project has already been in motion for three weeks, but it looks like this team member didn’t put in as many hours as expected.

With a total capacity of 120 hours for three weeks, this person tracked 90 hours in total:

90 hours worked ÷ 120 hours capacity x 100% = 75% AVERAGE UTILIZATION RATE

The utilization rate of this individual on the design team is 75%. The project manager notices this a significant dip for this employee who usually is more around 85%.

Upon further investigation, the project manager realized the productivity abruptly declined during week two, around the same time as a permit was denied that drastically cut the employee’s hours.

Therefore, the project manager ascertains that the decline in productivity is due to an unforeseeable delay, not a reason attributed to the individual.

48% is less than half, and a categorically poor utilization rate. The project manager investigates and discovers that other team members have been picking up the slack.

A poor utilization rate in this circumstance would warrant a conversation with the person not pulling their weight. Perhaps it’s due to illness, perhaps an extenuating circumstance, whatever the reason, it’s the project manager’s responsibility as a leader to get to the bottom of it.

How to Automate Utilization Rates

You don’t have to ever calculate utilization rates again if you don’t want to. You can forget your calculator or your Excel spreadsheet.

When time tracking is already in the wheelhouse of your project management software, that data can then automatically populate the real-time resource utilization status for each employee.

Once the capacity data has been entered, the system takes care of the rest.

Automated alerts as well can help safeguard low productivity levels, helping project managers know when it’s time to intervene.

Today, you can automate utilization rates directly with project management software, as long as it meets the following requirements:

Capacity planner - Input the capacity of individual team members during the project planning stage, and make changes to the capacity planner when necessary as the project timeline progresses.
Built-in time tracking or integrated time tracking software - Automating resource utilization rates requires current data from the time tracking system used by employees. Up-to-date time tracking data means a more accurate representation of utilization.

To automate utilization rates, simply enter capacity data into the software during your project planning. From there, the system will automatically measure this KPI as you go. You can spit these out in report format or have them displayed on your project dashboard or task boards.

7 tips to improve resource utilization

1. Lean into leadership strengths (aka soft skills)

Believe it or not, one of the best ways a project manager can improve resource utilization is to lean into their own soft skills and intangibles. Those flexible, empathetic qualities that allow for swift adaptation and calmness under pressure.

In fact, this study of construction projects found that more than any other attribute, a project manager’s own personal traits had the greatest influence on resource utilization. These traits included number one, leadership, followed by competence, and third by enthusiasm for achievements.

2. Think outside the box

Sometimes, poor utilization results from a sometimes-necessary evil: non-billable time. Getting down non-billable time and coming up with solutions for other negative influences on resource utilization often requires thinking outside the box.

Perhaps your automated workflows aren’t as automated as you think they are. Maybe a change in processes is in order.

By accessing the creative part of the brain and leveraging problem-solving skills, you can discover solutions to keep resource utilization rates where they should be.

3. Use a project management tool with capacity planning & time tracking

If you use a project management tool with capacity planning and time tracking, you can automate resource utilization for all your projects. If your project management software offers capacity planning but not time tracking, check to see if it integrates with time tracking data.

You should be able to have your project management software draw this data via the integration and combine it with capacity information.

All you have to do (or your individual team members, depending on the software) is enter capacity information during project planning and adjust along the way if needed. The rest is calculated for you in real-time.

5. Keep communication open and honest around capacity

As everyone around the world knows, ‘stuff’ happens. Someone on the team may have overcommitted to a workload during project planning that they cannot handle. Extenuating circumstances abound. Family emergencies pop up. People need to take time away.

By keeping the communication open and honest around capacity, you can make changes to your planning when needed. A shrewd project manager makes people feel comfortable admitting when they need work taken off their plate or on the flip side, desiring more hours.

6. Focus on decreasing non-billable hours

Nothing can sink someone’s utilization rate like an accumulation of non-billable hours. These are especially common in marketing agencies, where startups will invest loads of their time to grow the business.

Non-billable hours are often a necessary evil, but they should be kept within reason, and in a profitable ratio with billable hours.

You can help decrease non-billable hours by eliminating a step in an inefficient process, automating admin tasks, or even onboarding an AI agent.

7. Act quickly when utilization rates are wonky

Wonky utilization rates, whether way over or way under capacity, deserve prompt investigation. A decline in productivity or even a surge that goes above and beyond the normal threshold indicates that something is happening.

It’s important that project managers figure out explanations behind the data and address issues related to utilization rates promptly. Otherwise, the timeline and the budget of the project may be in jeopardy.

Is resource utilization the key to project success?

Calculating resource utilization can help project managers discover data-driven insights into the health of projects as well as the motivations of team members.

However, resource utilization isn’t the only measurement project managers should use to promote project success.

Risk management metrics, customer satisfaction, and other KPIs should be used to form strategies, as this will make for a more well-rounded story of a project’s health. In sum, resource utilization can help increase profitability, prevent burnout, and many other wonderful things, but it must be used in conjunction with other strategies for sustainable project success.

Wrap-Up:

Potential in resource utilization doesn’t refer to some kind of intangible idea of greatness. Rather, the potential is measured by capacity, the potential in terms of time that each resource has available to work on a project.

Hours or tasks that are logged and measured against capacity reflect what’s called the resource utilization rate in project management.

Resource utilization is used by project managers to increase productivity, improve workflows, gauge individual and team morale, and much more.

Project managers monitor resource utilization by using a capacity planning tool that’s usually part of a project management solution or PSA software.

What is Resource Utilization?

Plus 7 practical ways to improve it

Resource Utilization Definition

Why it’s important

What Is Utilization Rate?

What influences the utilization rate?

How to Calculate Utilization

What’s considered a ‘good’ utilization rate?