Bench Guidelines

For talent-based businesses, managing bench and utilization is key. Given the particularity of each services business, there is no right or wrong posture around team management. We’ll discuss some bench best practices that can help with optimizing gross margins at technology services companies.

When companies refer to the bench, they mean a pool of folks who may not be assigned to customer projects or are waiting for their next project to start to bill. Overall, these are billable roles that are either working on customer projects or waiting to be assigned to customer engagements (part of COGS).

If a company had 100 billable resources, and 80 of those were assigned to customer projects while 20 were unassigned, the bench would be 20%. This is one way to view the bench - headcount or FTEs.

Another way to view the bench is through a financial lens. Let’s imagine this group of 20 unassigned team members are the lowest-cost or entry-level individuals at the company. The sum total of COGS for this group will not be as relevant as the remaining 80 folks who are more senior and billing; therefore, from a COGS standpoint, this will represent a low share of COGS. If this company had a 55% project gross margin and a 50% company gross margin, the low-cost bench may represent 5% of revenues.

Acknowledging that each business is different, we can nevertheless make an informed assessment that utilization levels of more than 80%-85% from a headcount perspective, or bench cost/revenue of 9%-8% or less are healthy overall.