For small & midsized IT firms one of the biggest challenges is managing the bench capacity at optimum level as Sales Forecast numbers may not be accurate. Big diversified IT firms like Infosys or TCS or Wipro would have sophisticated systems, processes and dedicated people in place to have a dependable forecast. In spite of that it is common to note such large corporates missing their quarterly revenue targets frequently these days
Maintaining an optimal bench rate is very important due to multiple reasons as it provides buffer to absorb new business, provides flexibility to add resources to critical projects if it misses any deadline, helps to maintain employee’s work life balance, provide time for Skill enhancement activities etc. It is also understandable that if bench rate increases, your profitability decreases as the resources in bench is fixed cost to your Organization shaving away your bottom-line directly
It is understandable from the above that efficient management of bench rate (25 – 20% is optimal) is the key to the profitability and growth of the small company. Saying above how do we do it?
In simplistic terms it is all about matching your Capacity with Demand. Just sending our weekly resource utilization rates to managers doesn’t help to solve the problem. It requires focused coordinated effort among teams that manages Supply, Capacity & Utilization side of your Organization like Sales, Marketing, Human Resources and Delivery team to come out with action plan on a periodic basis. Many companies look this as an issue in isolation blaming each other rather department than working out a holistic approach to manage the situation better.
Though some of them are known to many of us, I like to share some common Capacity and demand management strategies that can help us. From demand management side, these are some prominent strategies
- Price your services to match your capacity. If you are under heavy utilization price your services at premium, if you are sitting with heavy bench capacity, discount it
- Spend money on Advertisements / Campaigns to promote your services bringing in new business in upcoming months
- Manage your backlog effectively. Negotiate with your customers to slice and dice project deadlines in a way that works well for you. Go aggressive on times-lines, effort etc if you have higher bench, go passive if you are running at high utilization
- If you are facing seasonal demand, develop complimentary product lines that can balance it. To give an example if you are primarily into IT services, during slack time put your resources to develop some complimentary products which can bring in some steady stream of services through product support and maintenance
On Capacity side, some of the strategies are below
- Fine tune your HR policies periodically to bring in fresh new talents by aggressive referral programs, advertisements etc if you are seeing an upswing in business.
- Maintain a good balance between hiring fresh grads vs. laterals depending on your long terms / short term visibility
- Tune your appraisal / salary revision / bonus / other retention policies to let the unproductive resources go
- Start building relationship with companies of your stature facing similar problems to augment each other capacity when needed
- Plan for multiple shifts if seating capacity is an issue
- Ask resources to build reusable components that can be used in a plug and play mode in your new projects increasing you capacity and directly adding to your bottom-line
- Up skill resources by focused training, mentoring coaching etc during slack time in areas where you frequently encounter bottlenecks etc
Keeping the strategies aside, you would see a real improvement in your situation only if you have focused sessions periodically among departments from Demand, Capacity and Utilization side to understand the current situation objectively, arrive at some consensus on visibility for upcoming months and put in place an action plan for each and every department to manage the issue well rather than working in isolation with a bunch of excels ….