In short:
- Non-client hours are not all the same. When managing your client-facing team, classify non-client time as productive or non-productive.
- The goal is to measure not only realization but also utilization, ensuring team members are as productive as possible.
- A more detailed time tracking system could also reveal issues with project scoping among managers or especially finicky clients.
For many service-oriented businesses, managing your client-facing team comes down to tracking billable hours. Serving clients and billing hours is their primary function, after all. And while tracking billable time is critical in services businesses, it misses part of the productivity picture. The way in which billable team members spend their non-client-facing time can provide insights into whether and how they’re building new skills and supporting the business. Here’s how we approach the task of tracking non-client hours.
The advanced customer support practice at Oracle NetSuite takes a business-first approach whereby we strive to understand our client’s business challenges prior to engaging in any discussions around specific functionality questions. As such, one of the first questions we usually ask our clients is: Is your customer-facing team using their hours as productively as possible, whether billable or not?
Get an overview of the difference between utilization and realization:
Utilization refers to how busy your team is. Realization is how much time they spend on client activities.
Most of our clients sensibly focus first on how many hours their people spend on client activities. However, by treating all non-client time as equal, they aren’t getting the full picture of their people’s productivity.
Take for example the cases of Joe and Mary. Both show up as 65% realized:
| Consultant | Realization |
|---|---|
| Joe | 65% |
| Mary | 65% |
However, looking at their utilization rate suggests Mary is contributing significantly to the firm with her non-client time.
| Consultant | Realization | Utilization |
|---|---|---|
| Joe | 65% | 70% |
| Mary | 65% | 95% |
Non-client time can be productive or non-productive.
Employees can spend time that isn’t billable to the client in two ways: on activities that contribute to the success of the firm (which we can usually classify as “productive”) or don’t contribute to the firm (“unproductive”).
Some examples of productive activities during non-client time:
Generating IP/methodology development
Employees might spend their non-billable hours developing or improving service or product offerings. For a services firm, this could be time spent working on a new methodology or line of business. For a software firm, it could be hours working with the product team on new features or strategic advice on a new release.
Training
This is time spent on activities like learning new technologies, standards or methods.
Sales support
In many services firms, the folks who are charged with delivering the services are asked to help sell the services. Customers tend to want to hear from whom they’ll be working with prior to the start of an engagement and usually have questions for the consultants or engagement manager prior to the start of the contract.
Internal improvements
This can be time spent on activities that improve the operations of the firm like implementing a new professional services automation (PSA) or other system, or adding to the knowledge management system.
Based on the above, we can run a report that shows us how Joe and Mary are spending their non-client time:
Time Detail Report
| Mary | Joe | |
|---|---|---|
| Total Non-Client Time | 35 hours | 35 hours |
| Total Productive | 30 hours | 5 hours |
| Generating IP | 0 | 0 |
| Training | 10 | 5 |
| Sales support | 10 | 0 |
| Internal improvements | 10 | 0 |
| Total Non-Productive | 5 hours | 30 hours |
| PTO | 0 | 10 |
| Administrative/bench | 5 | 20 |
Classifying non-productive time as either PTO or administrative (“on the bench”) gives a better understanding of how much additional work your firm can take on. Time spent “on the bench” represents slack time in your inventory that you could potentially improve upon, while time spent on PTO obviously can’t be repackaged to billable client time.
Sophisticated firms can even differentiate between billable and non-billable client time. We hear often from our clients that, for many reasons, they need to “write off” time worked. The reason is usually that the employee was inefficient, or the work was poorly scoped and the client is upset, or the engagement manager preemptively decided it wouldn’t be prudent to bill the client for the time for some other reason. By tracking client non-billable time, we can differentiate between time spent working on a client that wasn’t put on an invoice and client time that was put on an invoice. This is easier to do with time and materials jobs vs. fixed-fee jobs, but you can track this even in fixed-fee engagements by making some tasks explicitly non-billable.
By adding “billable realization” to our report, we realize that some employees are working hard but perhaps not effectively, or that some anomaly in the process caused an issue with billable time.
| Consultant | Billable Realization | Realization | Utilization |
|---|---|---|---|
| Mary | 65% | 65% | 95% |
| Joe | 65% | 65% | 70% |
| Blair | 50% | 80% | 90% |
Time Detail Report
| Mary | Joe | Blair | |
|---|---|---|---|
| Client Time | 65% | 65% | 80% |
| Billable | 65% | 65% | 50% |
| Non-billable | ‐‐ | ‐‐ | 30% |
| Billable Realization | 65% | 65% | 50% |
| Productive Non-Client Time | 30% | 5% | 10% |
| Generating IP | ‐‐ | ‐‐ | 10% |
| Training | 10% | 5% | ‐‐ |
| Sales support | 10% | ‐‐ | ‐‐ |
| Internal improvements | 10% | ‐‐ | ‐‐ |
| Non-Productive, Non-Client Time | 5% | 30% | 10% |
| PTO | ‐‐ | 10% | ‐‐ |
| Administrative/bench | 5% | 20% | 10% |
In the above example, we can see Blair has a lot of time that is nominally supposed to be client-focused but for which management has decided not to bill the client. This suggests that Blair might need some coaching or training to be made more effective, or Blair’s assignment wasn’t well thought out, or directions from the client were misinterpreted.
Instead of thinking only in terms of client time vs. non-client time, a more expansive time tracking system can give managers a better understanding of what their workforce is spending their time on and how productive they are.
A model that differentiates between both client and non-client and productive and non-productive will result in five main buckets and sub-buckets in which employees can classify their time:
- Non-client, non-productive (PTO)
- Non-client, non-productive (administrative/bench)
- Non-client productive
- Generating IP/methodology
- Training
- Sale support
- Internal improvements
- Client billable
- Client non-billable
Rolling It Out
As with any new requirements for employees, communication and positioning are critical to success when rolling out new time tracking protocols. If your new time tracking focus is due to implementing a new system, then explaining that “the new system offers this capability, and we want to fully implement the system” is a good start. However, resist directing improvement concerns or goals solely at employees. With more detailed time tracking, the company will be able to identify not only when employees are less productive but also when some customers are more troublesome or some project-scoping techniques need refinement. The goal is to get a better understanding of when and how time gets spent and how the company as a whole can become better at optimizing the resources it has.
