The difference between activity and profitability

There is a distinction to be made between activity and profitability: these terms do not cover the same aspects of reality and are not interchangeable. Here are some definitions:

• activity is the quantitative aspect and describes the amount of time spent in each category of activities against the available time.
• profitability is the qualitative aspect and describes the amount of revenue billed against a defined target.

To gain a better understanding of the difference, consider the following examples:

• example 1: a team member spent 100% of his/her time at pre-sales tasks during a given billing period. While these tasks are important for future revenue generation, they do not bring in any direct, immediate revenue. Thus, we can say that:
  • the team member has had a 100% activity rate,
  • but a he/she has had a 0% profitability: the team member has not billed anything.
• example 2: another team member, highly qualified, received a short assignment for which he was able to command a hefty price per hour, say twice the regular price. While the team member worked only 50% of his time, he was able to invoice it as if he had worked 100%. Thus, we can say that:
  • the team member has only had a 50% activity rate,
  • but a he has had a 100% profitability.

Of course, there is a correlation between activity and profitability but as demonstrated the two are not interchangeable and both need to be measured to understand the situation of a team: measuring only one and not the other would give a partial, inaccurate representation of the reality.

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