Utilization is a dirty word. Time to learn your ABC's
It's not the 90's. Measure your teams on how much they contribute, not how busy they are.
Professional Services firms, for decades have been all about billable utilization. The bench. How much of your time you bill.
Yup, if you’re measured by utilization you might feel like you’re just a cog in the wheel ⚙️ and if that’s how your company runs… well, you are just that. A cog in the wheel 🤷♂️.
At ServiceRocket, we run our tech-enabled service business a little different. Because we’re 100% employee owned and run, we’re able to think about things differently.
We don’t need to have a 5x return within a few years for our investors - so we get to innovate with our business model and can play the long game. We’ve made lots of mistakes along the way but some things have really worked out well.
We think of services, and in particular consulting, as a craft not just a job. And we run our business that way.
We continually look at ways to reduce negative anxiety, and one of the ways that professional services firms across many industries have got it wrong is to drive by utilization. The mental health costs are enormous, resulting in long hours and consultants feeling isolated and alone. Search the web, you’ll see the sad stories.
So we took a step back and thought about what really matters to our stakeholders - our Rocketeers and our customers and came up with a simple set of principles to run our business. Note the order of precedence. You HAVE to look after your PEOPLE, so that they can look after your CUSTOMERS so that you can have a healthy BUSINESS.
Rocketeers are the heart ❤️ of our business and our flywheel and their satisfaction is important. And we also know that we are all aligned in Growing the Tree 🌳.
The principles we came up with are unique and refreshing but also quite natural. It’s as simple as ABC.
A - Availability
B - Backlog
C - Contribution
We don’t drive by Utilization. That’s akin to driving a car by looking at the RPMs. Instead we look at how we’re doing on the journey, and how much fuel we have in the tank. It’s a Contribution/Capacity equation.
Let’s dig further and you’ll see how it all fits together. It’s simple, but remember that simple isn’t easy.
Availability is how much capacity we have available. Right now and in the foreseeable future. Because our time is a perishable resource, not just in consulting but also in our product and engineering teams, as well as our sales and growth teams. We proactively plan our PTO, Wellness and Cultural Heritage leave way ahead of time. We don’t believe in the myth of unlimited PTO (that’s a post for another time). If we are in control of what we have available and communicate it well, our customer success and account management teams can proactively work with our customers to make the best use of that availability.
Backlog is how much work we have upcoming that we know about, either committed or even potential. If we know whats coming we can provide that data feed directly to our workforce planning team, who can ensure we’re doing our best to manage our workforce to the Backlog, that we have the right availability of skills in the right timezones.
Contribution is probably the biggest challenge for most to get their head around but it’s really simple. We encourage all Rocketeers to work smarter, not harder. Utilization encourages employees to be busy and to overbill customers. We don’t do that. We understand that our customers are also part of our journey and they too want to play the long game with us. If you incentivize contribution, then Rocketeers come up with innovative ways to provide value to customers rather than just completing timesheets.
So do we ever look at utilization?, sure. The systems we use generate it and we look at it as a lagging indicator, with the goal of comparing it to how much we contribute. What we’re after is the highest ratio of contribution (aka value) compared to the utilization. You’ll often see folks talk about utilization, cost and “the bench”.
It’s actually one of the biggest challenges we have when we have a new Rocketeer that joins us from a traditional old school consulting firm, they are engrained with focusing on utilization.
At ServiceRocket, we’re blessed to not have to think in those terms, it can take folks some time to adjust to it but we think it’s the model of the future.
What do you think about the ABC principles?