Ken Hodgkins is CFO of Metro Testing + Engineering, orchestrating financial precision for innovation in the AEC space.
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“That didn’t go as expected, did it?” I remember sitting there with my boss having just attempted to have a meeting with a business leader in an underperforming business unit. We were hoping that we would be able to get agreement on some actions that would alter the performance of his team. Instead, we spent the better part of the hour trying to agree on what the metrics were saying. The business leader was consistently trying to modify, normalize or downplay the metrics altogether.
Have you ever found yourself in this situation with some of your internal metrics?
In my industry—architects, engineering and construction (AEC)—we use a metric called utilization to measure productivity. The calculation takes the amount of time (measured in hours) that an individual, team or company spends on client work divided by the total amount of time that the total company uses. This includes time that individuals are away from work during sick time, statuary holidays or vacation time. It is a fabulous metric for understanding the overall productivity of all resources (people are resources, too) over a long period of time.
However, the traditional way of calculating it creates some issues when an organization attempts to use the metric as a productivity metric for an individual or team. Too many conversations around low productivity end up derailed by the inevitable discussion that “Janet was on vacation” or “Jim was off sick.” It gets even more extreme during times when large pools of people are off. Think Christmas, Thanksgiving, spring break, etc. By including time that individuals aren’t even available to complete tasks, you end up constantly having to adjust and recalculate to have any type of meaningful conversation.
So there has to be a better way, right?
That’s why I’ve always pushed the organizations that I’m in to use a modified utilization metric that specifically excludes the hours for sick days, statuary holidays and vacation time from the denominator of the calculation. By doing so, you are now able to have productive conversations at the individual or team level that can be acted on. I refer to this metric as “available utilization.” This is the best type of metric to have a more complete measure of productivity.
But … There’s always a but, isn’t there?
Using available utilization works best when it’s being used at the individual or team level for productivity and performance conversations. It loses its value when one zooms up to the company level. At that level, one would want to include again the time previously excluded.
At the end of the day, it’s always important to ensure that when you have any type of metric, you are using it for the correct use. If you find yourself having to always make adjustments or exceptions to a metric, then perhaps it’s time for you to investigate if there are alternative ways to look at your metrics to ensure you’re getting what you need out of them. Understand the purpose of the metric and how you are using it. If those don’t align, then it’s time to rethink your metrics.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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