What is your workforce utilization rate telling you?

Explore the intricacies of workforce utilization rates in construction management. This article delves into the metric's nuances, revealing insights and strategies for optimized productivity, resource allocation, and project success.

What is your workforce utilization rate telling you?

There are endless quotes about time and its value. From Charles Darwin to John Lennon to Steve Jobs, it seems everyone has had a witty quote about how important time is whether it be for business or personal use. They’re often deep, layered quotes with the intention of enlightening their audience. However, of all the quotes about time and its importance, there’s no more simple way to sum it up than was done by Benjamin Franklin.

“Remember that time is money. Waste it now. Pay for it later.”

One of the biggest struggles in construction workforce planning is keeping teams working at capacity, or fully utilizing their time. If a team member isn’t being utilized, they’re essentially “on the bench” and waiting to get in the game. Having team members on the bench creates an overhead cost that will negatively impact your bottom line. If you’re looking to effectively manage your workforce capacity, it’s critical to calculate and understand your workforce utilization rate.

What is a utilization rate?

Your workforce utilization is one of the most important metrics you should be constantly aware of and working to improve. Generally, there isn’t a standard, unified way that every industry calculates their utilization. However, when you eliminate different industry-specific factors that are sometimes included in the calculation, utilization rates are often defined as:

The amount of time your team spends working on projects vs. the total amount of time that employee is available to work. In short, what is the billing efficiency of your team?

To accurately calculate your team’s utilization rate, you first need to accurately track their time. Construction workforce planning tools like Bridgit Bench not only help to track your team’s time using simple project allocation percentages, but also can directly calculate your utilization rate based on specific titles, divisions, and regions.

Once you’re accurately tracking your team’s time you can see what percentage of their time is spent working on projects (billable hours) and what percentage is being spent on non billable work like administrative work.

If you’re interested in learning more about workforce management, check out our guide to construction workforce management.

Is the goal a utilization rate of 100%?

Let’s be honest, if your workforce utilization rate is anything under 100%, it means that your team is costing you money. That isn’t always a negative thing though. While having your workforce fully allocated at 100% on projects may seem good on paper and your bottom line, it also means you aren’t investing any of their time nurturing their skills and training to further their career development with your company. It can also mean your team is spread too thin and you risk burning out your team. Having a consistent utilization rate of 100% may actually begin to negatively impact your team, and ultimately, your organization.

What is a good labor utilization rate?

In construction, and with seasonal work, it can be expected that your utilization will fluctuate. Keeping your team working at a utilization rate between 90-100% is a good place to start. You can’t expect to keep your utilization rate at 100% all the time, but keeping it close will certainly make it easier to manage and identify areas where you may need to bring on more team members, or adversely, lay some team members off.

What are the utilization warning signs?

This can differ from company to company. Some organizations will try to keep their team members during the slower season and invest in their development, which will lower their overall utilization rate. Some organizations will use their utilization rate to lay off team members when there aren’t a wealth of projects to work on, keeping their utilization consistently high. If your team is firing on all cylinders, and there is plenty of work to go around, seeing your utilization rate dipping below 90% may be an early warning sign that you’ve got too many team members waiting to get into the game and off the bench.

How can I improve my workforce utilization?

So you’ve done the work to calculate your workforce utilization rate, or perhaps you’ve invested in a construction workforce planning tool that can provide that information for you. What next? You can use your utilization rate as a metric to track and improve, but how exactly can you make those improvements?

ForConstructionPros has outlined 8 useful tips for general contractors to improve their workforce utilization rate. In summary:

  • Develop basic training classes fit for your company

    • Keep training days in your back pocket for days when weather, materials being delivered, or client rescheduling is preventing work from being done

  • Create a depth chart for team members’ skills, strengths and experience

    • A depth chart can provide a quick reference when a team member needs to be replaced on a project.

  • Make sure team leaders can calculate productivity rates for their team

    • Don’t overstaff a project simply because it’s the status quo that “Mark always gets 7 team members”. Your team leads should be able to calculate how many people they’ll need to get the job done.

  • Work hard to fit the right people to the right job

    • While not always possible, try to allocate team members to projects that best fit their skill levels and past experience success.

  • Challenge your team and field leaders to coach, teach, and lead

    • You can’t always set aside a week for team members to do training or an apprenticeship. Encourage your project leaders to take the initiative in coaching their team through decision-making and problem-solving.

  • Staff lean when possible

    • Avoid the temptation to overstaff projects that present challenges to your team. Extra staff should have a specific purpose beyond simply throwing more hands at the problem. The quickest way to put a project at risk is too many idle hands and a lack of focus.

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Utilization rates and your bottom line

Forecasting your workforce utilization rate can be a long tedious process depending on the construction workforce management tools you have in place. Spreadsheet systems can be incredibly difficult to calibrate properly to accurately calculate your workforce utilization rate and leave your organization open to costly errors in a formula. In fact, most organizations using spreadsheets for construction workforce management simply won’t calculate their utilization rates because it’s incredibly tedious to keep current and increasingly difficult when they begin factoring in individual unavailability like sick leave or vacation time.

Leading construction workforce management tools like Bridgit Bench not only help to lighten the load when calculating utilization rates, but also help provide valuable insight by allowing users to filter their utilization rates by title, or compare by division or region.

Let’s explore a few ways forecasting your utilization rates can help your bottom line.

1. Reduce your bench cost where possible

What is Bench Cost? Think of it like a pro sports team. If a player is sitting on the bench, they’re costing the team money by not being in the game. However, players’ contracts will often reflect the amount of time they’re expected to play throughout the season. For example, Lebron James would make a lot less money if he was only expected to play for just 10 minutes each game. The construction industry doesn’t have that luxury with its project management teams, so having team members on the bench winds up costing significantly more money to the organization.

This is where utilization rates can help.

By understanding and tracking your workforce utilization rate into the coming months and years, you’re able to identify underutilized team members and get them back “in the game” before it begins to cost you. It isn’t uncommon for organizations using spreadsheet systems for workforce planning to have one or two team members completely slip through the cracks and wind up creating a high bench cost for weeks or even months.

2. Focus on employee recruitment and skills demand

Staying ahead of recruitment to mitigate future project risk can have a major impact on your bottom line given the competitive nature of hiring skilled workers. On top of that, in an article by the Industrial Safety & Hygiene News, it was revealed that there aren’t enough skilled workers entering the construction workforce to replace the nearly 5.1 million construction and extraction workers that are expected to retire in the near future. This takes an already competitive hiring landscape and amplifies it.

Being able to forecast your utilization rate can help to stay ahead of your recruitment. Forecasting your workforce utilization into the future will allow you to identify projects and bids that will require you to bring on new team members. The key isn’t simply identifying when you’ll need to hire new team members, but rather identifying it early. Having to rush the hiring process can often result in a poor hire and a study done by Human Resources Online revealed that a poor hire costs your organization 17 weeks of time from hiring, training, discovering they were a poor hire, and replacing them. 17 weeks, just shy of a third of a year.

Filtering your utilization rate will also allow your organization to map its skills demand and indicate which roles you should be hiring or training your team to take on. If your Project Engineers show a 50% increase in utilization over your Project Coordinators, you know that your demand for engineers is higher and can begin your recruitment process.

3. Develop your talent pipeline

Forecasting your utilization into the future can also help with employee engagement and retention. Having every team member fully allocated to a project (or zero bench cost) at all times is nearly impossible given the fluid nature of construction projects, but that’s not always a bad thing. Organizations should set time aside for individual training, mentorships, and certification updates. Being able to identify underutilized team members in the coming months can help to identify periods where organizations can offer opportunities for their career development. In Linkedin’s Workforce Learning Report it was revealed that 93% would stay at their current company longer if they invest in their careers.

Your utilization rate will also help to identify career development issues. You want your high performers and senior staff to be working on your highest-value projects. You’ll also likely want them to spend time developing and coaching new and junior team members.

Your utilization rates can tell you if your junior staff is being underutilized, and also if your senior staff is spending too much time on low-value projects. If junior staff don’t have the opportunity to learn and your senior staff don’t have time for mentoring and developing talent, you may have a workforce development issue.

Bridgit Bench is the leader in construction workforce planning. Our solution helps operations managers better understand their workforce utilization rates with clear-cut, highly visual utilization reports. The utilization reports can be filtered by team, division, region, or any custom people field. They can also be used to compare the utilization of people properties. If you wanted to see your utilization rate for a specific region and further compare by title, Bridgit Bench is the right tool for the job. Your utilization reports can also be viewed up to 5 years out to stay ahead of any potential drops in your workforce utilization.

Workforce Utilization FAQ

How do you calculate labor utilization rate?

To calculate labor utilization rate: divide the number of billable hours by the total number of hours available to work in a given period. For example, if labor works 40 hours per week but only logged 30 hours against projects, the utilization rate would be 30 / 40 = 0.75. This percentage represents the proportion of time that is focused on billable activities. Use this metric to assess the efficiency and productivity of labor on construction projects.

What is the difference between labor utilization and efficiency

Labor utilization focuses on the quality of time spent working, while labor efficiency focuses on the quality of work being done during that time. Both metrics are key to understanding workforce performance. 

Is labor utilization the same as labor productivity?

No, labor utilization and labor productivity are not the same. Labor utilization refers to the amount of time a worker is allocated to tasks, essentially measuring how much of their available time is spent working. In contrast, labor productivity focuses on the amount and quality of work accomplished within that allocated time. While both are important, utilization tracks time spent on tasks, and productivity measures the outcomes of that time.

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Michel Richer

Michel Richer is the Manager of Content and Product Marketing at Bridgit. He started in the construction industry early on with a local restoration company. Michel is driven to propel the construction industry forward by helping to eliminate outdated, ineffective processes.

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