Managing Performance of Staff Working From Home
March 2, 2021
It’s become clear that the COVID-19 pandemic will have long-lasting effects on how architecture and engineering (A/E) firms operate. Some will go back to working primarily at their office, but many (if not most) will likely continue to have a significant portion of their staff working at least some of the time from home.
And while firms implemented what they believed would be short-term operational changes to adapt to restrictions on in-person gatherings when the pandemic first hit, now they’re having to consider long-term strategies for managing their teams. In particular, they’re trying to determine how best to monitor and maximize productivity in this new dynamic.
Understanding the Utilization Uptick
As dispersed workforces became the norm, many firms felt that the change wouldn’t be a problem since they noticed an uptick in utilization. The belief was that this was the result of team members no longer having to commute to the office, putting hours in when it was most convenient, etc. For many firms, the number of billable hours went up as much as 7%. And that’s a significant increase. If a firm goes from 55% to 60% utilization, that can be a big revenue boost.
However, the actual overall impact is hard to gauge. Public sector firms weren’t hit particularly hard by the pandemic in terms of available work, but private sector firms were. However, PPP loans encouraged firms to retain staff and not “right size” themselves to align with the available work.
Ultimately, there were just too many variables in 2020 for firms to have an accurate understanding of their true operational metrics, and utilization rates in particular are highly suspect. So, unfortunately, you can’t use 2020 data as the basis for developing your forward-looking remote work strategy.
There are exceptions to that statement—particularly for firms that didn’t respond to the pandemic by quickly shifting to a work-from-home model—but generally speaking, 2020 numbers aren’t helpful in looking ahead to 2021 and beyond. And utilization rate, which has never been an especially valuable metric for determining productivity by itself, is even less helpful now.
"One of the keys to feeding employees a continuous stream of work is having a project and financial management system with good resource planning capabilities."
Team Members as Business Units
We’ve never been proponents of measuring financial performance at the individual level, in part because it’s very difficult to do. It’s also a practice that can spawn unhealthy competition within the firm. That said, today’s remote working model is requiring that firms be able to measure and evaluate financial performance very granularly. Ultimately, we believe firms are going to need to look at team members as if they are, in some ways, separate “business units” so to speak.
One of the reasons for that is it will be imperative for firms to get ahead of their workflow and be able to give employees a smooth and continuous stream of work. In pre-pandemic times, firms would produce a high-level plan for the work to be accomplished each week, and then team members would just talk among themselves and find a way to get the work done, including any urgent, unexpected tasks that came up.
Of course, when people aren’t in the office together that type of collaboration becomes difficult, if not impossible. So, having a clear and complete understanding of the status of your pipeline and the pacing and scheduling necessary to meet deadlines is crucial. Ideally, you want to assign work in large chunks that let team members get into the kind of rhythm that enables them to complete the work efficiently.
Changing the Focus From Utilization to Realization
One of the keys to feeding employees a continuous stream of work is having a project and financial management system with good resource planning capabilities. Factor AE has that type of functionality, which allows you to see visually how much work each person has and how long it will keep them busy.
Once you have that accurate workload “picture,” the focus needs to change from utilization to realization—and the metric for that is revenue factor. Revenue factor is your individual utilization rate (total number of hours recorded to projects divided by the total number hours on a timesheet) times your achieved multiplier (the total amount of revenue you produced over a time period divided by your payroll cost over that same period). This number is typically between 1.5 and 2.5, with higher being better.
Firms that stick with a remote working model will have to be able to approximate a person’s revenue factor, because while the pandemic may have caused an uptick in utilization rate, many firms didn’t see an uptick in revenue per person. In other words, employees put in more time on the same kinds of projects. This was shown by the utilization rate going up to the same degree that the multiplier went down.
To address this situation, many firms are creating a “capacity budget” per person. They’re saying, “If this person works XX hours, and we expect XX percent of those hours to be coded to jobs, and their hourly rate is XX, what do we expect them to produce over time?” Firms that can get a handle on this can be indifferent about where employees do their work—at home, at the office, or some mix of the two.
What we’re seeing is that the firms that will thrive going forward will be the ones that remove the traditional home/office boundaries. These firms will plan as if workers will be at home, but will encourage them to come into the office as needed. And the expectation is that firms will see realization gains that are equal to their utilization gains, and that productivity and profitability will increase.
This change will likely require firms to reassess how employees are compensated, since a straight salary won’t make sense for employees who want to, and can, work extra hours that used to be consumed by commuting, etc. We’ll address that challenge in a future blog.
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