Professional and Career Topics

I was talking to an engineer from a different company recently. They mentioned that their employer required that staff at their company have a very high utilization rate (it was somewhere over 95% but I do not recall the actual number.)

(For those who may be unfamiliar with the term, a utilization rate in this context is the amount of an employee's hours that are billable to a client/generating income. Essentially, doing your technical job).

From an efficiency perspective I can see the value of utilization rates, as they can be an easy way to determine if the amount of work currently available is too much/too little for the amount of existing staff. It can also prevent one staff member from going to disproportionally more trainings or conferences than other staff members. And I recognize that even if there is no official utilization rate that a staff member is held to, there is naturally a certain amount of hours everyone at the company needs to work (on average) to turn a profit and keep everyone employed.

However, I can also see ways in which this can be abused, particularly if a new hire is not familiar with the concept. For example, if an employer provides 160 hours of PTO in a year (lets say 2 weeks of sick time and 2 weeks of vacation), but also holds staff accountable to a utilization rate of 95%, then the employee will not actually be able to take all of their PTO (I am assuming 2000 working hours per year in this case). In some cases, it can also presumably force employees who aren't eligible for overtime pay to work overtime in order to be allowed to take vacation or sick time at a later point. There are ways around this, such as by not including PTO/holidays in the count for utilization rate and only using it to track an employee's workable hours vs the hours spent on trainings/conferences/etc. I understand that in many places, tasks such as proposal writing is not billable and therefore will count against an employee's utilization rate as well.

I was wondering if anyone else had experience with clearly stated and enforced utilization rates. Are they a net positive or negative for the company or the employees? What is their impact on staff morale/turnover/efficiency/training opportunities/etc?

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Christopher Seigel P.E., M.ASCE
Civil Engineer
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Hi Chris, thanks for the topic.

In the "Good old days" it was called "Billable time."

It was usually assigned to individuals within technical functions, e.g., Civil; ME, EE, Arch., etc.

The background for this was usually a project within which one played a supporting or leading role.
Time sheets then recorded the time billed to a project, and that was compared to the project's
planned budget (see "Earned Value Management"). The comparison provided evidence that the work planned for the project was either
ahead of schedule, at schedule, or behind schedule. Then mgt. could make suitable adjustments to get the work back on plan.

It offered guidance to each and all what the org's expectations were to remain profitable,
continuing in business which included many benefits, e.g. College Tuition.

The range of this ratio, in the past, was generally from 70% to 85% based on the role one played in their group.

BTW, "Enforced" feels somewhat punitive. 
e.g., if one's billable time went over or much under the set targets, their manager would inquire to learn what's up.

Cheers,
Bill

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William M. Hayden Jr., Ph.D., P.E., CMQ/OE, F.ASCE
Buffalo, N.Y.

"It is never too late to be what you might have been." -- George Eliot 1819 - 1880
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Utilization rate used to be the bane of my existence.  It was originally very high, but then I was also expected to work on proposals as well, which further reduces the rate.  As a result, I felt like I couldn't go to training to "make up" for the non-billable time and there was a several year period in which I went to very little training (the bare minimum to keep my PE).  There was also a lot of nonbillable time associated with overhead company initiatives that also took away from that.  In addition, I did not get paid overtime until I reached at least 40 hrs of billable time, which if I had a bunch of proposals that week, I may have worked a 70 hour work week, but only got paid for 40 hours because only 35 of it was non-billable.  I did eventually get my utilization rate lowered to around 60%, which helped in that regard and I found I got bugged about it much less by higher-ups.  This was all with a larger company and it did become a morale buster for many.

I now work for a small engineering company that does not focus on utilization rate.  They do know what it is, and I'm sure if it were trending in the wrong direction, they'd say something.  I work on proposals even more than I did at the larger firm, only because we have no dedicated marketing personnel, but I get paid for every hour that I work, regardless of if it is billable for not.  It's a much more relaxed atmosphere and the company is growing by leaps and bounds, so we are definitely profitable.  I suppose it's easier to keep track of this stuff at a much smaller firm and I understand larger firms need it as an objective metric, but maybe there is a middle ground somewhere.  I do not know what that middle ground looks like though.

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Angela Hintz P.E., M.ASCE
Senior Project Engineer
Buffalo NY
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Thanks, Ms Hintz, for an instructive viewpoint. I encountered billable time but not its evil twin. Utilization time makes proposal writing extremely unattractive if it diminishes available personal leave and training time. It would seem likely to produce poor proposals and less future work, a serious management error.

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William McAnally Ph.D., P.E., BC.CE, BC.NE, F.ASCE
ENGINEER
Columbus MS
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Original Message:
Sent: 05-06-2024 09:05 AM
From: Angela Hintz
Subject: Utilization Rates And Their Effects on Companies and Employees

Utilization rate used to be the bane of my existence.  It was originally very high, but then I was also expected to work on proposals as well, which further reduces the rate.  As a result, I felt like I couldn't go to training to "make up" for the non-billable time and there was a several year period in which I went to very little training (the bare minimum to keep my PE).  There was also a lot of nonbillable time associated with overhead company initiatives that also took away from that.  In addition, I did not get paid overtime until I reached at least 40 hrs of billable time, which if I had a bunch of proposals that week, I may have worked a 70 hour work week, but only got paid for 40 hours because only 35 of it was non-billable.  I did eventually get my utilization rate lowered to around 60%, which helped in that regard and I found I got bugged about it much less by higher-ups.  This was all with a larger company and it did become a morale buster for many.

I now work for a small engineering company that does not focus on utilization rate.  They do know what it is, and I'm sure if it were trending in the wrong direction, they'd say something.  I work on proposals even more than I did at the larger firm, only because we have no dedicated marketing personnel, but I get paid for every hour that I work, regardless of if it is billable for not.  It's a much more relaxed atmosphere and the company is growing by leaps and bounds, so we are definitely profitable.  I suppose it's easier to keep track of this stuff at a much smaller firm and I understand larger firms need it as an objective metric, but maybe there is a middle ground somewhere.  I do not know what that middle ground looks like though.

------------------------------
Angela Hintz P.E., M.ASCE
Senior Project Engineer
Buffalo NY
------------------------------

Thanks for sharing your experience. I am curious if you could share more about what you did to eventually get your utilization lowered. Was this a conversation with management, an official change in position, or something else? 

------------------------------
Christopher Seigel P.E., M.ASCE
Civil Engineer
------------------------------

Original Message:
Sent: 05-06-2024 09:05 AM
From: Angela Hintz
Subject: Utilization Rates And Their Effects on Companies and Employees

Utilization rate used to be the bane of my existence.  It was originally very high, but then I was also expected to work on proposals as well, which further reduces the rate.  As a result, I felt like I couldn't go to training to "make up" for the non-billable time and there was a several year period in which I went to very little training (the bare minimum to keep my PE).  There was also a lot of nonbillable time associated with overhead company initiatives that also took away from that.  In addition, I did not get paid overtime until I reached at least 40 hrs of billable time, which if I had a bunch of proposals that week, I may have worked a 70 hour work week, but only got paid for 40 hours because only 35 of it was non-billable.  I did eventually get my utilization rate lowered to around 60%, which helped in that regard and I found I got bugged about it much less by higher-ups.  This was all with a larger company and it did become a morale buster for many.

I now work for a small engineering company that does not focus on utilization rate.  They do know what it is, and I'm sure if it were trending in the wrong direction, they'd say something.  I work on proposals even more than I did at the larger firm, only because we have no dedicated marketing personnel, but I get paid for every hour that I work, regardless of if it is billable for not.  It's a much more relaxed atmosphere and the company is growing by leaps and bounds, so we are definitely profitable.  I suppose it's easier to keep track of this stuff at a much smaller firm and I understand larger firms need it as an objective metric, but maybe there is a middle ground somewhere.  I do not know what that middle ground looks like though.

------------------------------
Angela Hintz P.E., M.ASCE
Senior Project Engineer
Buffalo NY
------------------------------

I did talk to management about lowering my utilization rate and basically said that if they wanted me to continue doing proposals, then they would have to bend a little on the utilization rate to accommodate that, or otherwise, I wouldn't be able to spend much time on proposals.  I was fortunate that they did lower it, but I still did receive a lot of pressure to try and bill as many hours as I could.  I find it nice now that I don't really have to worry about utilization rate with my newer company, as I do a fair share of the proposals here too, but only because my experience in the field allows me to flesh out scopes and budgets, and they recognize the value in that.

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Angela Hintz P.E., M.ASCE
Senior Project Engineer
Buffalo NY
------------------------------

Original Message:
Sent: 05-09-2024 11:16 AM
From: Christopher Seigel
Subject: Utilization Rates And Their Effects on Companies and Employees

Thanks for sharing your experience. I am curious if you could share more about what you did to eventually get your utilization lowered. Was this a conversation with management, an official change in position, or something else? 

------------------------------
Christopher Seigel P.E., M.ASCE
Civil Engineer
------------------------------


Original Message:
Sent: 05-06-2024 09:05 AM
From: Angela Hintz
Subject: Utilization Rates And Their Effects on Companies and Employees

Utilization rate used to be the bane of my existence.  It was originally very high, but then I was also expected to work on proposals as well, which further reduces the rate.  As a result, I felt like I couldn't go to training to "make up" for the non-billable time and there was a several year period in which I went to very little training (the bare minimum to keep my PE).  There was also a lot of nonbillable time associated with overhead company initiatives that also took away from that.  In addition, I did not get paid overtime until I reached at least 40 hrs of billable time, which if I had a bunch of proposals that week, I may have worked a 70 hour work week, but only got paid for 40 hours because only 35 of it was non-billable.  I did eventually get my utilization rate lowered to around 60%, which helped in that regard and I found I got bugged about it much less by higher-ups.  This was all with a larger company and it did become a morale buster for many.

I now work for a small engineering company that does not focus on utilization rate.  They do know what it is, and I'm sure if it were trending in the wrong direction, they'd say something.  I work on proposals even more than I did at the larger firm, only because we have no dedicated marketing personnel, but I get paid for every hour that I work, regardless of if it is billable for not.  It's a much more relaxed atmosphere and the company is growing by leaps and bounds, so we are definitely profitable.  I suppose it's easier to keep track of this stuff at a much smaller firm and I understand larger firms need it as an objective metric, but maybe there is a middle ground somewhere.  I do not know what that middle ground looks like though.

------------------------------
Angela Hintz P.E., M.ASCE
Senior Project Engineer
Buffalo NY

This is always an unsatisfying issue and will never go away. Employers need a system for tracking time and monitoring resources for good project management. Employers also need a means to monitor and manage performance, particularly underperformance. Employees need to feel that the system is fair and squares with the employee value proposition set by company policy. Enlightened management ensures that staff feel like they are being treated fairly and with respect. There will always be situations where business demands require extra time. When things get out of wack, or there is no explicit value proposition, it is time to consider walking.

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Mitch Winkler P.E.(inactive), M.ASCE
Houston, TX
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