Internal hours as Professional Services KPI
Definition, Calculation, Example

Why are internal hours an important metric? How to calculate and measure internal hours?
Internal hours, also known as "bench-time," represent the time spent on non-billable tasks and projects. Some companies mark employee vacations as an internal time during capacity planning.

Service Performance Insight: "A professional service firm should aim for a non-billable headcount of less than 30%."
It is vital to control the amount of time spent on internal projects and their results. This metric indicates how effective the resource planning and management are in a company. Some companies allocate their internal hours between projects for service and knowledge development, as well as marketing help. Some companies avoid any bench time in trying to achieve maximum utilization. With the truth about Google's famous '20% time' policy, any internal hours time could be scheduled and accounted for.
Internal hours should be calculated via time tracking tools the same way as billable hours but into non-billable tasks and the agency's internal projects, for example training, marketing, education, and conferences.

But what if a consultant did track the billable hours but did not track any internal hours? If a consultant gets paid as a full-time employee, some internal hours were spent anyway. The formula for such case will be as follows:
$$ Internal\; hours\; =\; Capacity\; -\; Billable\; hours $$
An agency has 3 consultants and capacity of 504 hours this month. Consultants tracked 416.
There were 88 internal hours in this month.
$$ Internal\; hours\; =\; 504\; -\; 416\; =\; 88 $$
Time tracking software allows measurement of the time for non-billable projects without a client or with an "internal client," which controls results of such projects.

With internal hours indicator you got answers to such questions:
  • How much time has this internal project taken over the course of a year?
  • Which employee spends too much time on non-billable tasks?
  • What kinds of internal projects take more company time than they should?

The easiest way to see the total and detailed internal hours inside the organization for any time is Metric.ai hours view. Metric.ai takes internal/billable settings from time tracking software, or you can override it yourself manually.
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