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“In today’s challenging economic climate…” How many times have you read that opening phrase in media articles? Yes, things have been challenging fiscally, and indeed remain so, not least for engineering consultancies.
But through good or bad times, business success for engineering firms remains the same: optimising resource = increased profitability. While the maths may be simple delivering the optimisation can prove more challenging.
Resource management (RM) is emerging as the solution to solving this equation. It effectively provides a framework within which engineering firms can easily and effectively plan, implement and deploy their people skills.
What is resource management?
In my experience, only around 20 percent of engineering firms actually recognise and use RM as a high-value, stand-alone discipline in its own right – which is surprising given that the management of resources is, by definition, engineering firms’ raison d’etre.
And a surprising 75% of companies surveyed by The Aberdeen Group admitted to having no overview of their resource situation more than one month ahead. In engineering firms, planning resources at least six months in advance enables you to get the most out of their employees and improve the bottom line.
Resource management – key best practices
So what are the ‘key best practices’ that engineering firms should be aware of, and adopt, in order to increase people utilisation and attain higher profitability?
1. Recognise that ‘busy’ doesn’t necessarily mean billable
There is a very big difference between staff being busy and being billable. Look around your organisation and you will probably see people who seem to be busy, yet their utilisation rates – and therefore their billable hours - are at an unsatisfactorily low level. You may also experience a complete disparity across the resource pool, with some people overloaded, while others remain under-utilised.
2. Don’t base projects on ‘guesstimates’.
All too often, engineering firms do not align project estimation, execution and existing capacity. Making ‘guesstimates’ on projects is often the key driver in resource under- or over-utilisation.
Under-estimate and you will be scrambling to find additional resources. If you are in danger of missing a deadline on a project, because resource management has not been at the top of the agenda, you can either recruit additional staff or hire external subcontractors.
Either way, the impact on project costs and profitability can be significant. The lesson? Short-term resource management and planning, combined with a narrow siloed view, can seriously impact the bottom line. By integrating your sales pipeline system with RM you can achieve a better understanding of resource impacts, both short- and long-term.
3. Avoid different versions of the truth
Having a uniform RM system that spans all departments and all resources will help ensure consolidation of all account and project information. And, more importantly, it will provide you with a single and accurate version of the ‘truth’.
4. Regard resource management as the ultimate in business intelligence
Managers should have a dashboard that they look at every day when they log into the system, displaying KPIs such as utilisation, billability, project resource load 3/6/12 months out, and subcontractors’ usage.
5. Take traditional ERP, CRM and PM systems to the next level
You might be thinking – we already have a traditional ERP, CRM or PM system to manage our client and project-based operations. Why should we bother with RM? The fact is that, while some RM functionality can be found in traditional ERP systems, it tends to be very much focused on managing resources on single projects, rather than looking at resources overall.
Conclusion
The return-on-investment story is compelling. For example, if you have a resource pool of 100 people, with an average hourly rate of £150, finding just one extra hour per month, through the use of RM, will result in £180,000 extra revenue per year. With acquisition and implementation costs a fraction of this, a payback period of less than six months is common.
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