How to Analyze and Optimize Your Team’s Time Usage
Time is one of the most valuable resources for any business. There are equally 1440 minutes per person at our disposal every day and no cutting corners on this hard cold fact. However, how we use it makes us either highly successful or utterly stressed-out.
For service-based businesses, time is the most valuable resource. If you bill for your time, your company’s profit is directly tied to how productively your team uses their time. However, before putting in more hours and expanding your team, make sure your current team utilization is at one hundred percent.
Following these 5 simple yet proven steps will help you take your team’s efficiency to the next level.
1. Define and bundle your team’s activities
It might seem odd or even impossible to standardize the daily workflow of creatives and knowledge workers, but let me show you a simple process:
- Write down all the recurring activities for your team.
- Let your team assess and improve the list of activities.
- Create unique activity categories.
- Start tracking time as per defined categories – ask your team to add an activity tag to every task they log.
In the end, you should have standardized activity types – that consist of tasks – which include time entries under the tasks.
In Scoro, you can easily set up company-wide Activity Types.
…if you’re a Marketing Agency, the defined activities could look something like this:
- (Visual) content creation
- Social media management
- Paid advertising
- Email marketing
- Customer communication
- Admin tasks
Why is it important?
First of all – ROI (return on investment). Do you currently know which daily/weekly/monthly tasks drain your time resources? Alternatively, on which activities should you focus to increase profits? Remember the Pareto 80/20 principle:
80% of the results will come from 20% of the efforts.
What’s your 20%? Analyzing time usage can be difficult, but bundling will make it much easier and more accurate. If you do not define activity types before starting time-tracking, everyone will describe their tasks vaguely in their own words. Could you imagine processing and analyzing all this information afterward?
Do the preparation and make sure that everyone’s on the same page about how to categorize their work and which aspects have to be documented and collected.
2. Collect the data
Are activities all set? Good! Let’s start tracking! Wait, but… which tools to use?
The names for productivity and time management tools can be quite misleading. Depending on your business, you might look into various work/project/time/business/team management, ERP, PSA, and other related software. It all comes down to features – you’ll want to be able to see:
- Logged time per task;
- Deadlines and work progress;
- A shared team calendar;
- Bonus: customized pre-set activity types
- Bonus: real-time KPI dashboard
An excellent time management software is easy to use, yet it will give you deep insights and reports about your team’s work and results. You can choose a simple task-and-time-entries tool, but it’s recommended to keep all your business and team management in one place. It just makes everything much more fluent and efficient.
Keep in mind – everyone must use the same tools for collecting and storing information. You don’t want to end up with scattered data.
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How to motivate your team to track their time?
- Lead by example by tracking your own time and making your schedule and time usage reports accessible to your team.
- Be transparent and help your team understanding the importance of time tracking. Also, make sure to communicate which data is being collected, how it will be used, and who will access it.
- Explain in-depth that the goal is not to have obsessive control and micromanage but to be more productive as a team. Maybe improved results could also mean getting a monthly bonus? Or perhaps it means less over-time and more family time? Or less stress and many more moments of celebrating success? You know your team best – bring out the aspects your people value the most.
- Tracking time doesn’t have to include in-depth analysis – if people are aware of their daily habits and workflows, they will inherently start to think about how to improve and optimize. Tracking makes people more cognizant of how they work while they work. It makes them notice the ups and downs and make calculated decisions about making the best use of their time. Help your team understand how the tracking will also benefit them individually.
Read on: 8 Rules of Employee Time Tracking
3. Crunch the numbers
Now that you’ve organized your team’s work by categories and collected all the necessary data make sure to analyze that.
“Data without insights is meaningless, and insights without action are pointless.” – Harvard Business Review
How do you know what’s working and what’s not? Are there any industry standards? How do I decide which tasks take too much time, and what is fine?
Calculate your Net Profit Margin
In HubSpot’s survey of digital agencies, a majority of companies were either not sure of their profit margins or reported margins between 11-20%. By these statistics, anything over 20% is outstanding, while other industry experts argue that even 15% is great. Hubspot’s researchers add that you shouldn’t take an example of those who report margins of 30% and more – it’s likely their books are a mess, or they are confused with the net margin term.
According to this survey, a whopping 15% of surveyed agencies were not sure what’s their profit margin. Hopefully, you’re not one of them. But how do you calculate your net profit margin?
Net profit margin, or net margin, is equal to net income or profits divided by total revenue and represents how much profit each dollar of sales generates.
Net margin = Profit / Revenue
Profit = (Hourly rate * Billed hours) – (Payroll costs + Overhead expenses)
Higher Net Margin = Higher Billable Ratio
Why not just say, “more billable hours equals more profit”? Because then it becomes about increasing quantity, not quality. You could hire more people or have your team put in more hours, but it will not increase the ratios. So, you’ll end up doing more work with getting lower results because of poor efficiency. The key is to raise your team’s Billable Ratio.
Karl Sakas, author and agency advisor, offers a great explanation: “To increase agency profitability, you must increase your agency’s Billable Ratio — that is, the percentage of time that your team spends on client-billed work. I recommend a target of 60%+ agency-wide, but individual employees’ targets will range from 0% (for sales and operations) to 80% or more (for Subject Matter Experts like designers, developers, and copywriters).”
“When I see agencies with low or negative profit margins, it’s almost surely a sign that Billable Ratio is closer to 30-40% than 60%. Fixing this takes time and effort, but isolating the problem is the first step.” – Karl Sakas
Analyze time utilization per position
If you get paid for time, your capacity is divided between billable and non-billable hours. While some positions could aim for a 100% billable ratio, consider that some jobs have few to none billable hours per month.
Keep in mind that the suggested overall Billable Ratio is 60% and up. Make sure you calculate your numbers per position and in total – see if they align. After setting a desired and realistic billable ratio, you can start tracking if:
- your team’s time is fully utilized;
- or you have an issue with billable hours getting lost.
Analyze every position (or even team member) separately to see if there are any blind spots to be improved.
Analyze ROI per activity type
Remember the activity types you created in the beginning? After accurately tracking tasks, billable and non-billable hours for each activity, you’ll be able to identify which activities and tasks bring in the most money, or in the opposite – need to be optimized very carefully, such as meetings.
4. Set metrics and goals
Which metrics to track?
While revenue and net profit are essential, tracking utilization rates is important for optimization. So if you’re looking to raise your team’s efficiency, try looking past money numbers, and put these metrics on your dashboard:
- Time logged (per activity type and position)
- Billable and Non-billable Hours (per activity type and position)
- Total Billable Ratio
- Billable Ratio (per activity type and position)
- Total Time Utilization
- Time Utilization (per activity type and position)
What are your goals?
If you know what to track, you’ll also need to define what you are aiming for. There is no glory in vanity metrics and overwhelming your KPI dashboard with unnecessary data.
Your goals could include something from these:
- Uncovering inefficient work processes, such as time wasted on unproductive meetings, time-consuming tasks with low ROI, etc.
- Uncovering your golden tickets – activities or positions which bring in the most profits.
- Making sure that actual billable hours are equal to desired billable hours.
- Desired Net Margin and Billable Ratio increases by the end of the year.