The Hindu Business Line : Every inch of space counts

At 6:30 p.m., Ramesh, a 55-year-old-accountant, is leaving the office and his son Pratik is heading to work at the call centre unit of the same company. They both work in the same building but meet each other only on weekends.

Top executives of their departments have independently discussed their requirements with the CFO for approving a larger facility due to the growth in business in their units. In an ideal scenario, they should expand into each other’s existing location. That is the magic of “seat utilisation”.

Companies have always preferred to keep the seat utilisation ratio (employees/seats) less than 1.0 and built the extra capacity in the facility to accommodate future expansion, minimum for the next two years.

The concept of working in multiple shifts has existed right from the early days of mass production, where the most expensive heavy machinery needed to be run 24X7 for maximum utilisation.

If we take 160 hours(8 hrs day for 20 days) as the office hours per person per month, and each seat is available for 720 hrs (24 hrs per day for 30 days), it means an absolute mathematical maximum limit seat utilisation of 4.5 (720/160).

By apportioning the leaves of the employee throughout the week (even during the week days) and thus enforcing forced absenteeism in every working day, one of the large teams in a leading BPO player has reached the seat utilisation of more than 3.

Top 4 cost components

Currently, in the IT/ITES sectors, the top-four cost components are salary, space, technology infrastructure and support services.

Salary and technology infrastructure are market-driven factors and comparable in most companies of equal status.

The cost of support services is directly proportional to the employee strength and space. Real-estate prices have jumped more than 200 per cent in the last three years in all major cities in India; allowing more people to work in the same area reduces the per unit cost of space and support services.

Most of the ITES (BPO/Call Centre) players have achieved an average seat utilisation ratio of 1.4 (author’s estimate).

However, IT services (Software) has not been much affected by seat utilisation as it continues to attract higher billing rates and earns enough margins to sustain the large facility.

With the dollar weakening every month, demand of salary hike in Indian rupees, customers unwilling for price escalation and scarcity of quality infrastructure, every one needs to think towards higher seat utilisation.

Ever since the launch of C++ programming in 1990, the popular object oriented software, there are numerous examples where a project is broken into independent modules and each module is worked with different teams across geographies to shorten delivery time. If one can work on modules across geographies, what prevents a business from working in multiple shifts?

IT companies need to design attractive incentive packages for those employees who are willing to work in night shift, so that they can free lots of valuable space for growth.

Change of mindset required

Moving towards higher seat utilisation requires change of management mindset, especially in judging the performance of employees, with well-defined and measurable traits, to track productivity and quality, instead of duration in the office.

If an employee spends longer duration in office, then one will notice a drop in productivity and too less time will result over productivity, which he/she needs to continue.

A team that has continuous over-utilisation, more than 100 per cent, would need immediate management attention, else either it will result in service breakdown or abnormal attrition.

Higher seat utilisation not only helps in keeping costing control but also results in indirect advantages, such as improving traffic decongestion and preserving trees, on which new facilities might have come up.

Extension to other fields

The concept of seat utilisation can be extended to many fields, for instance, sharing of doctors’ chambers; since visiting hours are limited to four-five hours per day, the same premises can be shared by non-competing areas of expertise (Ophthalmologists and Orthopaedics). Schools run for six hours a day and can be easily extended to two shifts. India has land/people ratio 11 times lower compared to the US, it makes more sense to optimally utilise every inch of space.

The author has serviced the global financial industry for more than a decade both as a banker and as a service provider. He can be reached at rohit.garg@gmail.com

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