5 Steps to Optimize Resource Capacity Planning

What is Resource Capacity Planning?

Resource capacity planning is the ability to understand, manage and forecast resource demand and utilization requirements across the enterprise. It’s often said that “people are your most valuable asset”.  They’re also among the most expensive.  So making sure you have the right amount of people in the right places at the right time with the right skills is essential.  That’s resource capacity planning, and it’s what we’re going to explore in this guide.

What are the components of a Resource Capacity Plan?

Effective resource capacity planning requires the ability to manage all of these variables as part of an integrated approach.  Resource management decisions cannot be taken in isolation, and one variable cannot be considered without also considering the impact on all of the others.

1. Resource Requirements – The people required to deliver projects and similar discretionary work will constantly change as different work items need different numbers of people, with different skills, for different periods of time.
2. Operational Needs – The operational resource needs, while stable in isolation, will be impacted by the solutions delivered by all those projects – automation may reduce the need for people, new products and services may increase the need.  Additionally, some of those changes will be permanent (a new manufacturing line) and some will be temporary (additional support staff until customers become comfortable with a new product).
3. Organizational Plans – Are constantly evolving as adaptive planning responds to shifting priorities, emerging threats and opportunities, and variances in work delivery and benefits realization.  All of these changes impact the people that will be required, and when those needs will occur.

Optimizing Resource Capacity Planning – 5 Steps

Organizations need a capacity planning strategy – a way to handle resource management that isn’t just focused on those resources, but also considers project management across each of the tri-modal realities, resource allocation, resource demand, the ability to identify and resolve resource conflicts, and so on.  Here are the five steps: 

1. Calculate & Track Resource Capacity 

How many people do you have available?  It seems like an easy question to answer, but it isn’t, and that’s where resource capacity issues often begin. 

Example

A company has 300 employees.  200 are dedicated to operational work and the remaining 100 are available for discretionary initiatives – project management, programs, epics, and so on.  But that doesn’t mean that you have resource capacity of 100 people:

• A common model suggests that at any given time 15% of an employee’s time is lost to non-work related items – coffee breaks, personal business, off-topic conversations etc.  That reduces those 100 resources to 85.
• The same model suggests that 15% of that remaining 85 is lost to non-allocated work activities – general company meetings, corporate emails, and so on.  Now we’re down to a little over 72 people.
• If there is no spare capacity retained then the company will be unable to respond to any variances, take on any urgent additional work, implement plan adjustments, etc.  To keep that spare capacity we’re now down to between 50 and 60 people who can actually be working on projects at any given point.

Being able to accurately answer the question ‘what is our current capacity?’ is essential to effective capacity planning.  And that capacity planning process must be standardized across all business areas and functions.

2. Define & Analyze Resource Needs

Resource capacity planning must be a forward looking discipline.  It must be capable of interpreting numerous variables to ensure the best possible decisions are made.  That includes:

• Number, skills, and experience – of resources needed to deliver the work, along with when those resources will be needed and how long they will be needed for.
• Impacts on operations – of the proposed work – where more people will be needed, where fewer resources will be appropriate, where skills needs are evolving, etc.
• Ability to meet current demand – the strategy for addressing resource capacity needs.  Where is it most appropriate to hire additional resources, when should existing employees be retrained, where can contract resources be leveraged, and where is outsourcing most appropriate.  This must also consider the costs, ease of application, and lead time necessary for each of those approaches.
• Adjust to changing resource needs over time – Consider the longer term evolution of resourcing needs. not just the impact on projects and operations of the current portfolio of initiatives, but also the impact that the strategic roadmap will have on overall and specific resource demand and capacity.

To gain this level of understanding, integration of resource management capabilities with the rest of the organization’s strategic portfolio management approach is needed.  But so too is the ability to perform powerful what-if analyses and model different portfolio mixes to optimize resource capacity, manage bottlenecks and create a schedule that fully leverages available people and skills.

Resources capacity planning must understand the cone of uncertainty – the idea that the further into the future plans are being made, the less confidence there can be in the resourcing estimates.  This requires organizations to build in flexibility in capacity planning and regular reviews of those plans to ensure they are still appropriate and relevant. 

3. Centralize Demand & Management

Organizations like to create resource pools to help manage capacity, demand and allocation.  But the truth is that there is really only one resource pool – the employees of the organization. 

Add resources to the project resource pool and you take those people away from operations and / or support.  And that has an impact on those areas.

Accurate resource capacity planning requires an accurate understanding of resource demand – all demand, not just the strategic roadmap items that drive the major investments.  And it requires accurate measurement of current resource allocations and performance.  That’s harder than it might at first appear for a number of reasons:

• Demand for work can come from many different business areas, not all of which are captured through a central demand management tool.  This results in shadow allocations that are unknown to a resource manager but that still detract from an organization’s ability to deliver.
• Work delivery is tracked and managed in multiple systems to reflect the tri-modal reality of work today.  If those tools aren’t integrated with each other and with the enterprise SPM solution, organizations risk double allocation of resources in different tools, providing a false picture of availability and creating practical delivery problems.
• It needs to account for cross-functional resource allocation.
• Many businesses lack consistent resource estimation approaches resulting in overly optimistic or pessimistic estimates, reducing visibility into availability and capacity.
• Resource management is frequently left in the hands of individual business areas.  Not only does this result in resource siloes, it makes resource capacity planning more difficult by clouding allocations between discretionary and other work within those business areas.

Resource capacity planning can never be optimized without a clear and complete picture of current and forecast demand, and the ability to compare that demand with current availability and utilization.

4. Engage Resources in the Process 

One of the most important areas of resource capacity planning, and one of the most overlooked, is the need to recognize that resource capacity isn’t just an abstract concept – it’s dealing with people.  Ask any project manager how well they have been able to deliver without engaged and motivated team members and you’ll soon understand the impact that sentiment can have on performance.

Resources must feel engaged with their work and their employer if they are going to be able to give their best consistently.  That requires understanding the context and purpose behind their work, it requires appropriate resource utilization rates that doesn’t see individuals over allocated or under allocated.  It requires individuals to be a part of the resource planning process.  Above all else, it requires organizational respect for the fact that resources are people.

5. Upgrade Your Resource Capacity Planning Tools

Using spreadsheets, project management software, and even dedicated resource management software isn’t enough to truly manage resource capacity planning.  Resources don’t exist in isolation, so they can’t be managed as if they do.  Strategic planning today must be an integrated, top-down approach that starts with priorities, defines and funds appropriate investments, decomposes those investments into appropriate work items, and then delivers in a way that helps ensure business outcomes are achieved.  This is commonly referred to as strategic portfolio management, or SPM, and it is an essential tool for successful organization.

With SPM, whenever an item is adjusted on a roadmap, the decomposition of an investment is created or adjusted, or when actual work deviates from a plan, there are impacts on resources.  Everyone from executives to project managers and team members must be able to understand those impacts and manage them effectively, and that requires a resource management process that is integrated with the enterprise tools.

Key challenges that most organizations face

Addressing these capacity planning challenges doesn’t need just one or two actions, it needs a well thought out, well implemented approach that optimizes capacity planning for current and future business requirements.

1. Lack of visibility –  Whether it’s an unclear picture of resources across business areas and work functions, a lack of clarity of resource needs over time, or the inability to manage resources effectively across different working methods, if you don’t know what’s happening, and what has to happen, then capacity planning will never be effective.
2. Lack of insight into appropriate actions –  So you know that you don’t have enough people to do the planned work.  What do you do?  Should you reduce the number of planned investments?  Can you move the schedule around to achieve more?  Is it better to add resources, and if so in what form?  The answers will vary with circumstances, but for many organizations the answer is always ‘we don’t know’.  And that’s a problem.
3. Lack of integration –  Resource planning is a cause and effect discipline – you can’t make a change in one area without also having an impact elsewhere.  Unless there is a fully integrated, strategic approach to resource planning, capacity planning and all other related disciplines, there will never be a consistent way to ensure that all work has sufficient resources, both now and in the future.

Optimizing resource capacity is critical for business agility

Work today is continuously evolving.  Organizations must embrace the concept of business agility to ensure that they are always able to deliver work that optimizes value against the strategic priorities.  Achieving that requires building an organization that can identify threats and opportunities quickly, analyze and model response options effectively, and implement adjustments with minimal disruption.

All of that requires people.  From project resources available to project managers when they’re needed; to a macro level capacity planning process that engages executives, HR, procurement and leadership and development experts, nothing can be achieved without the right resources in the right place at the right time.  And it can’t happen if those people don’t have the right skills, the right understanding, and the right tools to let them give their best.

That’s what can be achieved with the right resource capacity planning strategies, implemented in the right way, and with the right resource management tools integrated with the rest of the enterprise technology infrastructure.