Utilization rate

Utilization rate is the share of a person's available working time that is spent on billable work. It is calculated by dividing billable hours by available hours for a period. In project businesses it is the headline measure of whether capacity is being converted into revenue.

How is utilization rate calculated?

Billable hours divided by available hours, for a defined period. If a consultant has 160 available hours in a month and records 112 billable hours, utilization is 70 per cent. Available hours normally means contracted hours minus holiday and sick leave, not calendar hours.

What is a good utilization rate?

It depends on the role and the model, and any single benchmark is misleading. Delivery staff normally sit higher than people with management or sales duties, and a rate close to 100 per cent usually means there is no capacity left for anything unplanned. The trend and the reason behind it say more than the level.

What is the difference between utilization and billability?

Utilization measures how much of the available time was spent on billable work. Billability measures how much of the recorded work could be charged at all. A person can be fully utilized on work that is never invoiced, which is why the two are read together.

What distorts a utilization rate?

The definition of available hours, whether absences are deducted, whether internal projects count as billable, and whether all hours are actually recorded. A rate calculated on a different basis each quarter says nothing. The figure is only useful once the basis is fixed.

troi reports utilization per person and period. See reporting and controlling.