How utilization is calculated in Operating

Utilization (sometimes lovingly called UTZ) is the most commonly used KPI for consulting company efficiency. Operating calculates UTZ like this:

Written By Matti Parviainen

Last updated 9 days ago

Utilization (often shortened to UTZ) measures how effectively your team's time is used — typically, what share of their working hours goes to billable client work. In Operating the exact formula is configurable, so this article explains the default, the building blocks you can use, how working hours are determined, and how to adjust the formula to match how your organization thinks about utilization.

The basic formula

Utilization is always a percentage: (numerator ÷ denominator) × 100%. You choose which kinds of work go in the numerator (the time you're measuring) and the denominator (the time you measure it against).

The default formula

Out of the box, utilization is Billable client work ÷ Working hours — the percentage of a person's working hours spent on billable client work. For most consulting firms this is the headline number.

The building blocks (work types)

You build the formula from these work types, each added (+) or subtracted (−) in the numerator or denominator:

Work type

What it counts

Billable client work

Client-project time on billable tasks

Non-billable client work

Client-project time on non-billable tasks

Billable internal work

Internal-project time marked billable

Non-billable internal work

Internal-project time (not billable)

Time off

Vacation, sick leave, and other time off (excluding public holidays)

Public holiday

Public-holiday time

Working hours

A person's available working time (see below)

How working hours are determined

For most people, Working hours = their (individual) working hours − public holidays* — so a public holiday reduces available working time rather than counting against utilization. For external people, working hours are always exactly their planned hours, even when calculating actual utilization.

*Public Holidays = Federal Holidays for the US

Customizing the formula

The utilization formula lives in Settings → Utilization Formula. Build the numerator (top) and denominator (bottom) by adding or removing work types; a live example shows the formula applied to a real person so you can sanity-check it before saving. Common adjustments:

  • Count all client work, not only billable: add Non-billable client work to the numerator.

  • Don't penalize time off: subtract Time off from the denominator, so someone on vacation isn't shown as under-utilized for that period.

  • Watch a video about the new formula builder.

Examples

  • Full week, all billable: 37.5h billable client work ÷ 37.5h working hours = 100%.

  • A day off: 30h billable client work, a 7.5h day off, 37.5h working hours → 30 ÷ 37.5 = 80%. (Time off lowers utilization under the default. If you'd rather it didn't, subtract Time off from the denominator: 30 ÷ (37.5 − 7.5) = 100%.)

  • Lots of internal work: 25h billable client work, the rest internal, 40h working hours → 25 ÷ 40 = 62.5%. Non-billable work doesn't raise utilization under the default — it isn't in the numerator.

  • Effective utilization (time off excluded from the denominator): with the customized formula that subtracts Time off, a 40h week with 8h time off and 32h billable client work → 32 ÷ (40 − 8) = 100%. The person isn't shown as under-utilized for being away.

Related articles

Things to know about the Utilization Formula Builder:

  1. Working time is the working hours set for each person (based on their Site or their individual working hours)

  2. For externals, the Working time used in the formula is their Planned hours.