Consulting companies love utilization because it is easy to calculate: divide billable hours by available hours and congratulations, we have a percentage. That percentage can help with capacity planning, but on its own it tells you surprisingly little about whether you are running a healthy consulting business. Highly utilized consultants can still be working on badly priced engagements, absorbing scope nobody accounted for, or delivering work the client is unhappy with.
You can also have somebody temporarily underutilized who helps close the next engagement or improves how future projects are delivered. That does not make revenue optional, and a consulting company that ignores its margins will not stay in business very long. But if the business only works when almost everyone bills almost every available hour, I would question the business model before questioning the employees. Utilization should inform that conversation, not end it.
The same problem shows up when accounting starts defining the culture. Charge codes, revenue attribution, practice profitability, and commission calculations should help leaders understand the business. When employees spend more time working out which bucket their contribution belongs in than whether it creates value, those tools have started getting in the way. Incentive plans deserve the same scrutiny: people should understand how compensation is calculated, be able to verify the inputs, and have a reasonable amount of control over the conditions. Otherwise, the incentive creates suspicion instead of motivating useful work.
I would rather know whether the client would hire us again. That means understanding whether we solved the problem, delivered something sustainable, and left people able and willing to use it. Estimates and margins belong in that assessment, alongside follow-on work and customer recommendations. Reaching 83.7 percent utilization last month does not answer any of those questions.
This post is part of my 25 lessons from 25 years in consulting series, exploring what it takes to build a consulting firm that delivers for clients and supports the people doing the work.
From leadership and employee experience to sales and delivery, the series comes back to one idea: a consulting company should be its own best client.
Have a lesson of your own? Share what has worked, what hasn’t, or what you wish more consulting firms understood in the comments.