Is your most valued investment also burning a hole in your company wallet?

As a CEO or a CFO, does this question bother you?

While running an enterprise and scaling it up, there are multiple known and unknown costs that we incur. Sometimes, our most valued assets are cash guzzling and due to various reasons, the return on this investment can go sideways. Believe it or not, workforce or headcount is the biggest investment and the biggest cost. In fact, this is one investment that any entrepreneur makes with a lot of hope and research, and yet it can meet very limited success at an organizational level.

In a report published by Gartner in 2019 titled "Resource Management in IT Services Companies," the research firm highlighted the impact of poor resource management on IT services companies. The report stated that mismanagement of resources can result in significant revenue losses for IT services companies, with some companies experiencing losses of up to 20% of their annual revenue.

According to a recent survey conducted by the Project Management Institute (PMI), resource pipeline leakages can cost companies as much as $109 million for every $1 billion spent on projects. These industry-leading agencies have loudly called out that one of the bigger holes in a company’s wallet is poor resource management. Hence it is extremely important to acknowledge this often neglected cost and there must be a conscious effort to plug the leakages. 

What is a resource pipeline?

Resource pipeline is a term used to describe how the headcount is distributed across various departments in the organization considering the short-term and long-term needs of the business. Each resource is tracked on parameters like availability, utilization, allocation, and bench. Once the tracking is done, then as an outcome, each employee gets tagged basis the billing and non-billing hours.

What is the resource pipeline leakage?

Resource pipeline leakage is the loss in revenue due to the underutilization of available resources. Resource pipeline leakages occur when resources are lost or wasted throughout the project lifecycle, resulting in increased costs, delayed timelines, and reduced profitability. These leakages can take many forms, such as lost productivity, inefficient processes, or inadequate resource planning.

What are some of the known Impact areas of resource pipeline leakages?

Reduced Project Margins: Resource pipeline leakages can lead to reduced project margins, as lost resources can result in increased costs and delayed timelines. According to a study by Deloitte, IT services companies that effectively manage their resource pipelines can achieve 50% higher profit margins than those that don't.

Lower Quality of Service: When resources are lost, it can result in a lower quality of service for clients. This can lead to dissatisfaction, reduced customer loyalty, and even lost business. In fact, a survey by Accenture found that 71% of customers would leave a company if they were dissatisfied with the service they received.

Decreased Employee Morale: Resource pipeline leakages can also impact employee morale, as they may feel overworked or undervalued due to inadequate resource planning. This can lead to lower productivity, increased turnover, and ultimately, higher costs for the company. In a study by McKinsey & Company, 87% of executives cited employee engagement and morale as a top priority for their organization.

How do you measure the resource pipeline leakage?

Identification of the time spent by resources on various engagements, while working is very important. Project data that gets generated on a day-to-day basis must be analyzed. Right from the availability of a resource to how much time is being spent on allocated tasks in a particular project and how much is non-allocated, data at each resource level must be accumulated and mapped to projectwise billing rates.

Optimal resource utilization allows project managers to foresee resource availability across multiple categories.

Track Resource Utilization: To detect pipeline leakages, it's important to track the utilization of your resources on an ongoing basis. This can be done using a resource management system or a spreadsheet to track how much time each resource is spending on each project, as well as the types of tasks they are performing.

Monitor Project Progress: Project progress can be a key indicator of resource pipeline leakages. If a project is falling behind schedule, it could be an indication that resources are not being utilized efficiently, or that there is a bottleneck in the resource pipeline. Monitoring project progress can help you identify these issues early on and take corrective action.

Analyze Historical Data: Analyzing historical project data can provide valuable insights into resource pipeline leakages. By looking at past projects, you can identify patterns of resource utilization, such as which resources are consistently overutilized or underutilized. This can help you make more informed decisions about resource allocation and avoid pipeline leakages in future projects.

Conduct Regular Resource Audits: Regular resource audits can help you identify areas of inefficiency in the resource pipeline. This involves conducting a comprehensive review of your resource pipeline, including resource allocation, utilization, and performance. The audit should identify areas where resources are being wasted, as well as opportunities to optimize resource allocation.

Solicit Feedback from Project Teams: Project teams can provide valuable insights into resource pipeline leakages. They are often the first to notice when resources are not being utilized efficiently, or when there are bottlenecks in the resource pipeline. Soliciting feedback from project teams can help you identify issues early on and take corrective action before they become major problems.

Based on the project intelligence collected from various projects, the gap in utilization can be identified at each resource level. 

How to mitigate resource pipeline leakages?

Comprehensive data acquisition and real-time analysis across the enterprise is the key to addressing and nailing down the leakages. Especially in services organizations where in the billing happens on an hourly basis, each passing hour is a loss in revenue. 

Some of the key actions that can be taken to mitigate leakages are - 

Urgency in action: Once the leakages are detected, the resources should be mapped to billable projects based on skills and competency mapping.

Uptime in resource allocation: Build a real-time project-wise resource allocation dashboard that gets refreshed on a daily basis. This report should have resource hourly rates, task allocation data, and linkages to the timesheet of the resource. 

Skill and Competency mapping: Organization-wide skill mapping should be readily available so that resources with the right skills and experience are allocated to the right projects. This not only helps deliver quality output but also boosts the morale of the resources. 

Portfolio planning: By maintaining a single source of truth across projects, portfolios, and organization divisions, the headcount demand of short-term and long-term goals can be met. This also augments the talent acquisition team with their effort to hire the best talent required to deliver profitable projects. 

In a nutshell, act now, sweat it now so that you don’t bleed your resources in the field. Make this transition even sweeter with Whizible.

Stop leaving your money un traced. Talk to our experts and start optimizing your resource pipeline today! 

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