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Functional Definition for Utilization Rate
2

Functional Definition for Utilization Rate

Functional Definition for Utilization Rate

(OP)
I recently learned that our utilization rate is not calculated in a fashion that makes sense to me.  Is my firm doing it correctly, or are we unique and our approach is statistically flawed as I suspect.

Here's how our system works: Assuming a 40 hr week for simplicity, if I work 40 billable hours and nothing more --- then I am at 100% utilizaton.  Similarly, if I work 30 hours billable and 10 hours of admin-related -- then I am 75% utilized.

Now, assume that 10 hours of admin-related time is inescapable for a variety of 'leadership' reasons, now consider the following:  I work 50 hours in the week, 40 of which are billable, and 10 of which are not.  According to our policy I am now 80% utilized.  If however, I lie and don't write down anything for my admin time, I am 100% utilized.

Naturally, what follows is that colleagues who report '0' for their admin time are 100% utilized, whereas I have a lower rate because I honestly report my admin time.

Does this make sense?

Torquester

RE: Functional Definition for Utilization Rate

I would say the calculation is correct for "billable time" which more clearly identifies the purpose.

This might spur livelier debate in the "  How to Improve Myself to Get Ahead in My Work" fourm, forum731

RE: Functional Definition for Utilization Rate

The formula seems correct, but the input data is suspect. Don't clients pay for admin time too, maybe under overhead? If so, it's a good way to double bill. I suggest the ethics forum.

RE: Functional Definition for Utilization Rate

If you work 50 hours, but only get paid for 40, I'd say your rate was 125% ... they are getting a deal.
Are the unpaid 10 "admin" hours directly related to the 40 billable? Or to put it another way, were the 40 billable hours only made possible by the result of the 10 admin?


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RE: Functional Definition for Utilization Rate

Here's how our system works: Assuming a 40 hr week for simplicity, if I work 40 billable hours and nothing more --- then I am at 100% utilizaton.  Similarly, if I work 30 hours billable and 10 hours of admin-related -- then I am 75% utilized.

sounds right so far...

I work 50 hours in the week, 40 of which are billable, and 10 of which are not.  According to our policy I am now 80% utilized.  If however, I lie and don't write down anything for my admin time, I am 100% utilized.

That sounds incorrect to me.  It has been my experience that 100% utilized simply means you are putting in as many billable hours as working hours that the accountants assumed when estimating the overhead rates for the current fy (40hrs/wk, typ, but at a fractional utilization).  Billable/40 = utilization.  The overhead expenses of the organization should not be significantly influenced by the number of non-billable hours you work (the variable OH portion is small for salaried office staff), so the number of overhead hours recorded should have little to no effect on utilization.  

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