UTILIZATION RATE FORMULA
To find Utilization Rate you divide the hours of work you did on actual architecture by the total number of hours you worked.
UTILIZATION RATE EXPLAINED
Utilization rate is the efficiency of labor. It is the ratio of work you do for a project to all the work you do. Even if you don’t get paid, as long as that work is “billed” to a project, it counts toward your Utilization Rate. So hours spent beyond an hourly-not-to-exceed still count.
You might see the term Utilization Ratio, which is the same concept, just expressed as a ratio instead of a percentage. Remember, ratios don’t have units, they are just a comparison of numbers, like 24:40. We multiply a ratio by 100 to read it as a percentage. You may encounter values in one form or the other on an exam. So 1:4 is a ratio and it’s equivalent to saying 25%.
It's worth noting that Utilization Rate also can’t account for the efficiency of the actual work…if you spend 38 hours out of 40 working on a project, you will have a very high Utilization. But if you spent half of those 38 hours reading Hyperfine Blog you’re really not getting that much work done. Doesn’t change your Utilization Rate though!
In the article High Performing Firms: By the Numbers on the AIA Website, high-performing firms have a total utilization ratio of about 60%. From the Architect's Handbook of Professional Practice, a target for the entire firm is 60%-65% and for principals and architects it should be above 75%.
Not relevant to the ARE, but back when I had a real job I'm pretty sure my utilization ratio was terrible. But I have people skills!
So 60% is the goal. Below 60% is probably too low. I don’t know if there’s a too high but you can’t really get to 100% and someone already above 85% might be too busy to take on new work.
Overhead and Break Even Rate
Overhead Rate and Break Even Rate are also key terms you need to know for the ARE 5.0. Not directly related to Utilization Rate, I only mention them here because I also have a post and video about those terms, which you can find at ARE 5.0 – Overhead and Break Even Rate.
MORE ON UTILIZATION RATE
I have more detailed content on Utilization Rate, including sample problems WITH all the math shown in two of the ARE 5.0 study material courses I made. And I've set both of them to be free previews, so you don't even have to sign up! You can check out the ARE 5.0 PcM-PjM Study Assignments Course, or the ARE 5.0 Financial Formulas Course, which is available by itself, or within the PcM-PjM course. Follow those links and then scroll down to the Course Lessons section to view the content.
UTILIZATION RATE VIDEO
Can't read this blog because you're driving? Check out the YouTube video for Utilization Rate instead!
Although I guess I could embed the video too.
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