Idle Capacity
In service companies, it is invisible when you have no way to verify how each person in your company is spending their time.
It may seem that everyone is working, sitting in front of their computers, moving the mouse with a focused expression, but that doesn’t mean they are being productive.
Now, it’s your company’s responsibility to create an environment where people can be productive and develop their talents.
And therefore, you, the Owner, are responsible for making sure that happens.
When I begin working with an Owner of a service company, the first step of the methodology is called: "The List of Things That Drive You Crazy." In this exercise, we put their concerns in black and white.
One of the most common concerns is that despite having teams of more than 30 people, everything always seems urgent and there’s no clearly defined person responsible.
However, there’s also a common thread: as the company grew, the knowledge of how it operates was passed down by word of mouth.
In other words, the Owner knows 100% how the company works, a couple of people know 95% because they’ve been with the company for a long time.
From there, the knowledge trickles down, but it’s usually below 50%. People acquire it when they join: from the person they’re replacing or from coworkers who only have a little more information.
That’s why you, along with your right-hand people, become the bottleneck. And that’s also why Operational Chaos is holding your company and your peace of mind hostage.
Types of Idle Capacity
Considering non-productive time as idle capacity, we can identify several types:
This is why it’s so difficult to identify idle capacity, because in most cases people are busy—just not in productive things for themselves or for the company.
Let's Run Some Numbers
If you have a team of 30 people responsible for providing service, and a 40-hour workweek (8 hours from Monday to Friday), each person has 160 hours per month.
In total, you have an inventory of 4,800 hours per month to provide service.
That is, as long as you have no idle capacity.
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A company with Operational Chaos wastes at least 50% of its payroll.
This means you only have 2,400 effective hours.
Assuming you need 40 hours a month to serve a client, you can only serve 60 clients, with inconsistent service.
Of course, this directly impacts your operating profitability. You serve fewer clients, generate less revenue. Idle capacity increases your expenses.
In reality, you can’t even calculate Operating Profitability.
Productive Capacity
As a reminder, as the Owner, it’s your responsibility to ensure that your company is a productive environment.
You need to make it clear to each person what they are supposed to do, how they will be measured, what the consequences are, and how it contributes to the company’s overall good. And ensure this remains the case every day of the year.
A productive capacity should allocate 80% of the time to client services, 10% to internal company matters, and 10% as a buffer.
Let’s analyze how the 4,800 hours are distributed with these proportions:
Now let’s compare client volume and operating profitability.
These numbers prove the basis of our methodology: Making the most of what you already have.
In other words, you already have everything you need: clients, experience, a team. You just need to build a productive environment that safeguards operational profitability through the efforts of each person, every day.
To motivate you to make this change, I recommend you calculate your own idle capacity numbers—you have a huge opportunity in your hands.
We can help you build a productive environment that consistently improves your operating profitability.
Remember: Productive Environment