Unlocking the Value of Labor with TBM
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Labor is one of the most significant and complex cost drivers in technology, often accounting for more than half of total IT spending. In the Technology Business Management (TBM) framework, labor is not just an expense—it’s a strategic asset that powers solution delivery, accelerates innovation, and determines the true cost and value of technology investments. To gain transparency and optimize labor value, TBM practitioners must model labor costs with precision, allocate them accurately, and align them to technology outcomes.
What Counts as Labor?
In TBM, labor includes any internal or contracted personnel whose work supports technology functions. Importantly, TBM distinguishes between labor in traditional, time-tracked environments and labor in agile, team-based delivery models. While both types of labor are valid and necessary, they are modeled differently within TBM, a distinction explored in more detail in the Making Agile Labor Count section below. Trackable labor should be modeled within the Staffing Cost Pool using only the following cost sub-pools from the TBM Taxonomy:
- Internal Labor – Base compensation for full-time and part-time employees performing operational technology work. This includes salaries and wages directly tied to service delivery, development, and support.
- Internal Labor Capital – Compensation for employees whose time is capitalizable, typically for activities like building or enhancing technology assets. Commonly associated with product development or major infrastructure investments.
- Staff Augmentation – Costs for contract workers brought in to supplement internal staff on a temporary basis. Often sourced through staffing agencies or individual contractor arrangements.
- Staff Augmentation Capital – Similar to Staff Augmentation, but tied to capitalizable projects. Includes external resources engaged in building long-term technology assets.
- Other Operating – Any other employee-related labor costs that don’t fall under the previous categories, such as severance, training-related labor, or labor-related legal settlements.
Managed services or outsourced functions that do not offer line-of-sight to individual contributors or time investment should be modeled under other cost pools, such as Outside Services, but are not considered labor for TBM purposes.
Mapping Labor in the TBM Taxonomy
Labor costs captured in the Staffing Cost Pool are allocated across Resource Towers based on where the work is performed and the technology function it supports. These Towers span the full spectrum of technology capabilities and organizational functions defined in the TBM Taxonomy, including Application, Compute, Data, Data Center, Delivery, End User, Network, Risk & Compliance, Security, Smart Devices, Storage, and Tech Management.
Mapping labor to Towers typically involves using cost centers, job functions, or team affiliations to determine where work is delivered. For instance, a database administrator may be mapped to the Data & Analytics Tower, while a Scrum Master could be allocated to Delivery. This mapping is essential for producing accurate views of resource consumption and service costs.
Labor may be allocated to any Tower where staff contribute services or solutions, depending on the organization’s structure and model maturity. For the complete list of Resource Towers and guidance on their use, refer to the TBM Taxonomy page. For deeper guidance on mapping practices and decision criteria, see the Mapping Costs to IT Towers page.
Labor may also be associated with Technology Solutions based on the outputs of work (e.g., ERP, Collaboration Tools, CRM) using consumption-based modeling approaches. For guidance on aligning cost and work structures, see the TBM Modeling pages.
Sourcing and Managing Labor Data
Effective labor modeling depends on sourcing reliable data from multiple systems. TBM practitioners commonly pull labor information from the following sources:
Common Labor Data Sources:
- HRIS (Human Resources Information Systems)
- Payroll and General Ledger systems
- Time-tracking systems (e.g., Clarity, JIRA time logs)
- Project portfolio management (PPM) tools
- Agile management platforms (e.g., JIRA, Rally)
- Resource management tools
When time tracking is unavailable, practitioners can estimate labor distribution using role-based averages, historical project allocations, or organizational design maps (e.g., cost centers or agile team structures). In Agile environments, velocity data, story point estimates, and team composition records provide valuable proxies for effort distribution.
Data completeness and integrity directly influence the accuracy of labor allocations in TBM models and their value in reporting and insights. Poor or inconsistent data can lead to misaligned cost views and undercut trust in TBM outputs. Learn more about handling labor data challenges in TBM Adoption.
Allocating Labor Costs Transparently
Transparent labor allocation is essential for communicating the value of technology teams and accurately reflecting the cost of solutions. A well-designed labor allocation approach enables decision-makers to understand where labor resources are going, evaluate their impact, and optimize staffing based on value delivery.
Common labor allocation strategies include:
- Activity-based costing: Ideal for environments with mature tracking systems or detailed agile metrics. This method ties labor cost to actual work output, such as story points, deliverables, or project artifacts. Ideal for environments with mature tracking systems or detailed agile metrics. This method ties labor cost to actual work output, such as story points, deliverables, or project artifacts.
- FTE-based allocation: This strategy assigns labor costs according to full-time equivalent (FTE) distribution. It’s effective when employees are dedicated to specific Towers or Solutions. This model can be supported using data and mapping logic discussed on the Mapping Costs to IT Towers page. This strategy assigns labor costs according to full-time equivalent (FTE) distribution. It’s effective when employees are dedicated to specific Towers or Solutions.
- Fixed percentage models: These use budgeted or historical effort distributions to apply labor cost ratios across various technology areas. While less precise, they are useful in early-stage TBM implementations.
Agile labor cost allocation: Agile teams typically function as persistent, cross-functional units. Labor costs can be allocated based on team composition, velocity trends, and output metrics like features delivered or story points. Agile tooling such as JIRA and Rally provides valuable input data.
Download our infographic Transitioning From Time Cards to Agile Labor Management for information on transitioning to agile labor cost management.
Each approach comes with trade-offs in accuracy, effort, and system dependency. The chosen model should reflect your organization’s data maturity and delivery model. For guidance on surfacing these allocations in dashboards and reports, visit the TBM Modeling: Reporting page.
Evolving Labor Cost Allocations
To improve the fidelity and value of labor cost reporting, TBM practitioners must evolve their allocation models over time. This progression involves transitioning from early-stage approximations to more accurate, consumption-aligned methods.
Maturity Stage | Allocation Method | Common Characteristics | What Enables the Transition |
Level 1: Basic | Fixed % or department-level cost center allocation | Broad, often flat allocations across IT; limited transparency | Payroll/GL data, department budgets |
Level 2: Role-based or FTE allocation | Labor costs mapped to Towers or Solutions using FTEs or job roles | Improved Tower-level accuracy; some mapping to delivery areas | HRIS data with role clarity, cost center-to-Tower mapping |
Level 3: Project- or activity-based | Labor assigned via project codes, delivery artifacts, or PPM data | Reflects where labor is used, supports Solution-level attribution | PPM systems, project tagging standards |
Level 4: Agile or team-based | Labor tied to persistent teams, velocity, or output metrics | High alignment to delivery structure and outcomes | Agile tools (JIRA, Rally), stable team constructs |
Modeling maturity also applies to labor categorization and labor cost reporting:
- Many organizations begin by modeling only OpEx labor. As models mature, capital labor is incorporated.
- Early reports show labor by Tower or department. Mature dashboards show labor by Technology Solution—aligned to business outcomes.
These stages help practitioners assess where they are in their labor modeling journey and what improvements are needed to advance. To improve reporting as your models mature, explore reporting practices aligned to labor transparency.
Turn Labor Data into Business Strategy
As labor cost models mature, they become powerful tools for strategic planning and decision support. Accurate labor allocation enables organizations to understand not just where their workforce investments are going, but what value those investments are returning.
Strategic labor insights support:
- Workforce forecasting – Using labor data trends to anticipate hiring needs, optimize skill allocation, and plan resource shifts.
- Sourcing strategy refinement – Comparing internal and external labor cost structures to support decisions about outsourcing, contracting, or staff augmentation.
- Service and Solution performance management – Understanding labor distribution by Technology Solution to evaluate cost-effectiveness, delivery efficiency, and team contribution.
- Value-based investment planning – Informing which capabilities to scale or reduce based on the labor effort required and the value delivered.
Use cases that illustrate these applications include:
These actionable insights help TBM practitioners evolve beyond static reporting and empower leaders to align workforce investment with business value.
Barriers to Labor Transparency
Despite its strategic value, labor data remains one of the most difficult elements to model in a TBM system. Barriers span the data pipeline—from acquisition to reporting—and often stem from system limitations, cultural challenges, or organizational silos.
The table below outlines the most common types of labor modeling barriers, provides examples of contributing factors, and offers recommended actions to help overcome them.
Barrier Category | Key Details / Contributing Factors | Recommended Actions |
Acquiring Labor Data | – Fragmented systems (HRIS, payroll, project tools) – Access restrictions from HR or Finance – Manual extraction required | – Prioritize integration with highest-confidence systems (e.g., payroll, GL) – Secure executive support for data access – Automate extracts via APIs or ETL where possible |
Improving Data Quality | – Inconsistent job titles, outdated hierarchies – No unified employee IDs – Errors in time-tracking or project data | – Normalize roles across systems – Use master data management (MDM) – Implement data validation routines |
Modeling Labor | – No clear mapping logic to Towers or Solutions – Unclear capitalizable activity classifications – Misalignment with financial assumptions | – Begin with Tower-level approximations – Partner with Finance to align on CapEx/Opex – Use delivery artifacts or project records to guide mapping |
Allocating to Towers | – Cost centers span multiple Towers – Blended team structures – Inadequate documentation of work distribution | – Develop Tower mapping matrix using role/team data – Engage delivery managers to validate assumptions – Apply iterative refinement across sprints or quarters |
Allocating to Solutions | – Teams work on multiple outputs – Lack of traceable output metrics – Solutions not well-defined in org structure | – Leverage PPM or agile tools to identify work-product links – Use proxy metrics (e.g., story points per Solution) – Align team planning structures to Solutions where possible |
Reporting Labor | – TBM tools lack dedicated labor views – Allocations are too coarse – Volatility in input data causes mistrust | – Build custom views in BI platforms or extend TBM tools – Show trends over time to reduce volatility perception – Create scenario or sensitivity reports for validation |
Communicating Insights | – Abstract or overly technical views – Transparency triggers cultural friction – Leaders not trained on interpreting reports | – Use visual storytelling to simplify messaging – Socialize labor insights with delivery leaders first – Provide executive briefings and interpretation guides |
For more insights into successful labor modeling practices, visit the TBM Adoption page and explore aligned strategies in Organizational Change Management.
Practitioner Recommendations
To make labor modeling actionable and sustainable, TBM practitioners should focus on a few high-impact strategies. These recommendations distill best practices for establishing accurate labor cost models, communicating results, and maturing labor insights over time.
- Use only valid Staffing sub-pools: Model labor within the five approved sub-pools from the TBM Taxonomy to ensure consistency and enable comparability.
- Align allocations to valid Towers and Solutions: Ensure labor costs are distributed based on real or estimated consumption using cost centers, time tracking, or proxy data.
- Start with the highest-confidence data: Leverage payroll, project codes, and known team structures to build early models and refine them iteratively.
- Engage the right stakeholders: Bring HR, Finance, and delivery leaders into the modeling process to improve accuracy and support adoption.
- Track labor modeling maturity: Use the TBM Maturity Assessment to benchmark your current state and identify areas for improvement.
- Balance precision with practicality: Aim for modeling approaches that are actionable and can be repeated consistently—even if they are not perfect.
- Document and socialize assumptions: Create transparency by sharing how labor is modeled and where refinements are needed, enabling collaboration and continuous improvement.
Additional Resources
To support your labor management efforts, consider exploring the following:
- Adoption Strategy Community
- Transitioning From Time Cards to Agile Labor Management
- Mastering TBM Adoption: Roles & Responsibilities
While you’re here, join the TBM Council to connect with peers and stay updated on all things TBM. Explore our communities to see how others are tackling similar challenges, or check out our Knowledge Base for frameworks, case studies, and how-to guidance. Learn more about the TBM Framework and how it supports smarter decision-making across IT and Finance. Find guidance on using labor in your TBM Model to map to IT Towers. You can also attend an upcoming event, pursue training or certification, or see how our partners are contributing to this area of TBM practice.
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