We often talk about being overbooked, overworked, and overscheduled in our personal and professional lives, but we rarely discuss the inverse—underutilization. While it may seem like the lesser of two evils, underutilization can negatively affect team morale, engagement, and, ultimately, productivity.
In this article, we’ll define underutilization in project management, explore its impacts, and give you the tools and techniques you need to identify and address underutilization before it strikes.
What is team underutilization?
At its most basic, underutilization means that you (or your team) are working fewer hours than planned on a project/s. In the team context, even if some people work at or above their capacity, the overall team could collectively be experiencing underutilization.
People shouldn't be booked up to 100% of their time to ensure proper resource utilization. Even if someone is dedicated full-time to a project, that doesn’t mean they can be productive every hour of the workweek (more on that later)!
Underutilization doesn’t only occur when people have fewer hours to work than planned. It can also stem from a skills mismatch.
Let’s say you onboard a data scientist with an advanced degree in artificial intelligence (AI) and machine learning to work on your project because the client requested someone with that skill set. In execution, you realize that the client doesn’t know the first thing about AI, and what they truly wanted was someone to do data entry.
Since the data scientist is doing data entry as their primary job function, they could be considered underutilized—their work does not align with their capabilities. They consequently are not challenged and grow dissatisfied with the work.
Impacts of resources underutilization
So why should project managers and resource managers care about underutilization?
Underutilization reduces motivation, damages morale, and negatively impacts the quality and output of work. While it may seem counterintuitive, resource underutilization can lead to burnout if the team constantly grinds away at tedious tasks. Since it’s not easy to recover from burnout, reaching this stage compromises your team’s long-term effectiveness.
Another inconvenient consequence of underutilization is that it could lead to a reduction in team members. If your performance metrics reveal dips in utilization, your organization may reassign team members to other projects. Once they are otherwise engaged, it becomes challenging to claw them back to support your efforts.
4 signs that you need to take measures
While the effects of resource underutilization may seem innocuous, they have the potential to become more pernicious if left unchecked. As a project manager and team leader, I’ve seen this manifest unexpectedly throughout my career.
Here are some warning signs to watch out for:
- Reduced project budget, planned slowdowns in budget allocation, or unexpected funding delays. Changes to your project budget impact how many hours your team members can work and which skill sets you can afford. Monitor your budget closely, and adjust resource allocation accordingly to avert underutilization.
- External blockers or dependencies. A dependency on another project team may impede your ability to make progress. As a project manager, your job is to get ahead of dependencies to ensure that your team stays unblocked and avoids underutilization.
- Reduced motivation or team morale. Your team members seem checked out and are less excited about meeting their professional development goals. Discouraged workers may appear lackluster about generating new ideas or celebrating accomplishments.
- Reduced team output, subpar quality, and/or missed deadlines. If your team is producing less than they did before, is not meeting quality standards, or is struggling to hit deadlines, this can also be a sign of reduced motivation.
In these instances, an excellent first step is checking in regarding personal issues outside of work that may impact performance. Another possible explanation is that team members are underutilized. They don’t feel challenged, so they are disincentivized to complete their assigned work, and the quality suffers.
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How to address underutilization
It’s easier to prevent underutilization from happening than dealing with it once it’s occurred. Here are some suggestions for avoiding underutilization:
Determine your ideal utilization rate
As mentioned above, you should definitely not aim for 100% capacity. These are people we’re talking about! They require things like breaks, paid time off, and sick leave. Never mind the limitations of working eight hours uninterrupted when performing complex or creative tasks. Your ideal utilization rate might vary depending on organization and type of work, but I’d argue that assuming six productive hours out of an eight-hour work day is a reasonable estimate that shouldn’t cause too much client angst.
Develop and maintain accurate budget forecasts
Formulate a project budget with uncertainty in mind. Watch your budget and ensure you can authorize people with sufficient hours each period. If you’re not able, make plans to engage each employee on other projects, so they have sufficient work to do.
While it may be tempting to have someone on retainer, it’s better for the person if they aren’t being paid to sit around. If you’re worried about unplanned increases in workload, remember that you are not forecasting 100% utilization, which gives you some buffer.
Plan ahead to address potential bottlenecks
Identify known and potential dependencies as part of project planning, and get ahead of them. This involves collaborating closely with other teams to unblock work.
It also means you shouldn’t be afraid to get creative with contingency planning. Is there a way for your team to start on the task even if they can’t finish it? Can you pull in another team member to address the dependency if the team that owns it is bottlenecked?
Don't be afraid to tackle unforeseen utilization issues
Sometimes, underutilization crops up unexpectedly, despite careful planning. In these situations, it’s good to maintain a running list of housekeeping projects for the team to tackle. Examples include organizing the shared drive, crafting templates, or refreshing marketing materials.
The intent is to engage the team in useful tasks while they are temporarily waiting for other work.
Why is utilization important?
Utilization is vital to keeping people engaged and fulfilled in their work. If people—your most important resources—feel they lack purpose in their role or don’t feel challenged with their assignments, their motivation lags. Reduced motivation threatens job performance and can negatively impact overall team productivity.
The good news is that proper project planning, monitoring, and controlling can help prevent and address underutilization so that your team remains fulfilled, harmonious, and humming along.
