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Optimizing Resource Utilization

Resource management & capacity planning in project management is essential to helping your organization maximize ROI

The single biggest contributor to your success – or failure – is the ability to have the right people with the right skills and information doing the right work at the right time. It’s also the element of SPM that should be the easiest to manage effectively, as it’s one of the few variables that you actually have the ability to control.

The challenge of allocating the right people to the right work

Every organization has resource bottlenecks caused by overallocations and single points of expertise. Some team members will be under-allocated resulting in lost opportunities and reduced performance levels. Demand constantly shifts, making it a challenge to have the right people consistently available when they are needed. And the tri-modal reality makes it even harder to effectively manage resources.

Resource management has not traditionally been handled as a strategic discipline. Strategic portfolio management best-practices require the organization to categorize resources into different roles and experience levels to understand capacity and capability within the resource pool. Modeling the resourcing impact of different portfolio decisions – including the impact on demand over time – is key. And both of those things must be done across the trimodal reality, regardless of how work is delivered and resources allocated – across all business areas and functions.

Model the impact of portfolio decisions on resource capacity

Effective SPM also requires organizations to proactively forecast resource needs through complete visibility into upcoming supply and demand to allow for the identification of future challenges and opportunities. This proactive approach must also consider the evolving skills and experience needs of the organization as it grows and evolves.

Forward-looking resource management is perhaps the single biggest differentiator between strategic success and missed opportunities. It allows a business to fully utilize the resources available, developing an investment mix that optimizes performance while leveraging available skills and people to their fullest. It is the catalyst for effective adaptive planning – without understanding the people and the impact on those people of proposed adjustments you can never be sure that you are implementing the right changes in the right way and at the right time.

The right tools help you see the entire picture

To have an accurate picture of available resources, their skills and experience, and their allocations both now and upcoming, you’ll need reliable data with clear visibility into that data. That perspective is needed regardless of delivery method and across projects, programs, products and capabilities. At the same time, you need reliable forecasts of resource needs by role, skill and specialty traits, and you need to know the resource impact of any decisions you make – before you make them.

The view of your resources must be contextualized to the audience – portfolio managers and leadership need to understand the opportunities to pursue additional investments and the threats to current initiatives. Resource owners need to see current and forecast demands on their people and understand potential problems far enough ahead that they can act to address them. Project managers need to see bottlenecks on their projects before they occur and understand resource related dependencies on other work. And of course, individuals need to see what they are expected to deliver, and what their planned work looks like.

Achieve this and you’ll be able to make much smarter decisions about your business – delivering closer to your full potential. But more importantly, when you have this level of visibility into resourcing supply and demand at all levels of the business, your teams realize that they are contributing to something important. Everyone involved from executives to team members understand the connection between work and strategic success. That drives engagement and motivation, and in turn leads to greater performance and productivity.

Why is Resource Utilization Important to Optimize?

Project Managers and demand authors have varying levels of sophistication – some are experts while others may be “accidental” participants. Not all have the scheduling savvy to maintain and accurately generate resource estimates and forecasts from the detailed schedule. In fact, many spend more time wrestling with the schedule to generate accurate resource estimates than actually managing projects. With a variety of execution styles being used, it’s difficult to capture initial estimates, ongoing forecasts, and calculate resource utilization as the project changes.

What is Resource Utilization Rate?

Project managers measure resource utilization by calculating Rate. The basic formula is # of hours worked / # of hours available, defined in a percentage.

For example, if a team works 4500 hours on a project but has 5200 hours available, the resource utilization rate would be 85.5%.

At a high level it seems easy to calculate resource utilization rate, however the reality is much more complex due to the tri-modal reality.

Greater Accuracy in Resource Demand / Forecast Data Improves Resource Management

Since there’s so many challenges associated with calculating resource utilization, many project managers elect to use spreadsheets or similar tools outside of the PPM system. This introduces even more uncertainty around the integrity of the data. Integrating the resource plan directly into the PPM system is critical to ensure that project managers of all skill levels can easily capture accurate resource estimates and forecasts.

Allocating the Right Resources to the Right Projects

Resource managers are ultimately responsible for ensuring the right people are working on the right projects. They need to know about each new resource request, quickly identify the available resources and number of hours, and communicate the resource commitment to the project manager.

Resources Allocation Methods

Allocation methods need to support the execution technique. There is no one size fits all approach to resource allocation. For Agile execution styles, resources are calculated based on teams. As a result, team utilization rates are calculated, which can differ greatly from individual utilization rates. For teams using the waterfall method, resources are allocated individually, either by associated skill or role.

Project Managers Need to Make Resource Utilization Transparent

Resource allocation also needs to be aligned with the right investment planning approach (project, program, capability or product). And of course, quickly and easily identifying and addressing resource over- and under-allocation is critical. Finally, for proactive capacity planning, all stakeholders must have a real-time view into resource supply and demand so they can maintain the skills inventory needed to find the right people and the best fit.

Model the Impact of Portfolio Decisions on Capacity

Historically, when asked to model the impact of portfolio decisions on resource utilization, Portfolio/Resource Managers and their teams had to stay late and crunch the numbers in a disconnected excel spreadsheet. They lacked a tool that could quickly and easily help them answer common questions, like “what’s the impact of adding, dropping or delaying projects?” or “what’s the immediate impact of this decision on the portfolio and resource utilization”. With the advent of drag-and-drop analytical capabilities, they can now model a wide variety of scenarios and assess the impact of any portfolio change on resource capacity. Those tools also address the logistical nightmare of capitalizing work, and make it easier for portfolio managers and financial analysts to generate estimates and forecasts.

Benefits to Resource Management Software

Resource management software can increase ROI, identify improvement areas, create a resource utilization plan, and provide a way to measure a program’s success. Team members, projects, and productivity trends are all forecasted and reported on in real time. Portfolio managers can receive alerts when the workload shifts or availability changes. The resource utilization score is a metric that should be leveraged by all key stakeholders to ensure project success. Choosing the right resource management platform is critical to capacity planning and resource allocation efforts.