Every top dog needs to analyze the efficiency of the business, which includes reviewing employee productivity and determining if they are generating enough profit. In addition, it is important to evaluate the billing trends in the company and incorporate the information into your employees’ performance reviews and incentive plans. Are your employees billing enough hours? You can use key metrics such as the number of billable hours worked by the employees and percentage of billable hours from the Employee Utilization report to close the gap and redefine their activities, if they are under the percentage goal. For most professional service firms, we recommend a range between 70 and 90 percent. You can calculate the utilization of your employees by this formula:
Utilization % = (Billable Hours /Total Hours) x 100
We’ve learned from our customers that you can create some healthy team competition by stack ranking the employees’ percentage goal achievement for billable hours on a monthly basis and publishing these in a monthly newsletter or displaying the results in the employee break-room. No one wants to be at the bottom of the barrel–so the numbers should improve in a short time span. Recognize your top performer by naming a MVP (most valuable player) for the month and offer monthly or quarterly contests with prizes such as vacation giveaways or gift cards for the highest utilization percentage achievers.
The Employee Realization Rate report in BillQuick is a powerful management tool that can be used to gauge and analyze staff productivity, and accordingly coach the team. The realization rate provides information about an employee’s total billable time and the amount billed to the client. This report can be used to set performance goals, develop improvement plans on how to increase the billable hours of employees in a team, and analyze the trends. Managers can run the realization report quarterly, monthly or at least yearly. That will allow them to compare the performance results and watch out for any disturbing trends. For example, see if Alan’s realization rate went up or down from the previous year. If his realization rate was $99 in 2012 and $128 in 2013, Alan is improving his efficiency and his numbers are trending in the right direction. Not only can you set target realization rates for each employee at the beginning of each quarter and compare it to the previous quarter, you can also reward those employees that are improving their productivity by giving them a quarterly bonus. Realization rate can be calculated as:
Realization Rate = Invoiced Amount/Total Invoiced Billable Hours
Realization % = Invoiced Amount/Billable Amount (of billed entries) x 100
As a manager, you can provide feedback to the employees regarding their realization rates, and coach them to finish their job assignments quickly and efficiently to improve these rates. To sum up, the Employee Utilization and Employee Realization Rate reports are very effective and instrumental in monitoring staff productivity, completing performance reviews, determining incentive plans, quarterly bonuses, training and skill development, and computing employee stack rankings. Furthermore, you should analyze the trends (at least quarterly) to see if you are increasing your billings and make the necessary adjustments if you’re not.