Utilization and Labor

According to American labor leaders and pioneers, Labor Day celebrates the everyday men and women who work to create “all the grandeur we behold.”

Created as a holiday to celebrate the laboring classes, it honors workers and workers’ rights, like paid sick days, 40-hour workweek and fair working conditions, as well as their contributions to “America’s strength, prosperity and well-being.” GH 

I wonder how the founders of the labor movement would react to the working hours of agency labor?

It’s a business that knows no bounds when it comes to encroaching on quality of life. 

But if you love it, well, such is your life; a labor of love. 

As a business owner, leader or manager in a creative enterprise, utilization of labor is an invaluable tool in accounting the efficiency and financial success of a business. Or is it? 

Utilization in the commercial creative world is a problematic measurement because try as we might to straight-line the process, it is anything but. To the uninitiated staring at a utilization report, it will appear as if efficiency gains should be easy to achieve. Sometimes it really is that easy. Most of the time it’s not. 

While some jobs are task-based and easier to measure, those roles involved in generating strategy and creative work are extremely hard to pin down because creating great work is rarely straight-line. The hours involved are never truly captured and as a result, a false economy is at work. 

Utilization in this context is a blunt instrument and should not be the sole arbiter of performance. Sadly, it has become the hammer that pounds the nails. 

There are two ways to maximize utilization: produce and sell work of such value that you never want for a client or sell the full utilization of your services by taking on just about any work at all. Commercial creative organizations immediately step on a slippery slope when they start taking on work to fill utilization. 

This often happens with a strong sense of benevolence and desire to keep people employed in the face of a downturn in business. Fair enough, but it’s a short-money game that undermines the future of the enterprise if not kept in check.

Because clients are willing to pay only so much for work, it’s a rare day when all the hours involved are actually paid in full. Often, they are not even recorded. Agency personnel learn quickly that they need to bring the work in on estimate.  

The estimate is a negotiation of value between the client and agency. Thus, utilization is an attempt to quantify efficiency relative to the agreed value. It’s also, too often, a denial of real cost. 

Utilization reports that appear to show capacity are sometimes pure fiction that suggest more capacity than actually exists. In fact, most agency staffers are entirely overworked and underperforming because they lack adequate time to recharge. 

Management often turns a blind eye to unbilled hours knowing that if they report these hours, their superiors will be forced to confront the client or open a Pandora’s box of internal issues. 

Maybe the project is over hours because the fee was negotiated incorrectly, the client is a hot mess, or the agency cannot get out of its own way. Regardless of the cause, it’s a rare client who will agree to pay more. 

The true cost: talent flight and the long-term viability of the enterprise. 

Now, let’s go utilize our beach chairs and put our feet up on this, the 140th anniversary of Labor Day, and celebrate some well-deserved rest.