If you’ve ever built a large LEGO set, you know that you need to have the right number and types of pieces available in the correct order to successfully create your masterpiece. If you don’t, you’ll waste time looking for the correct pieces or end up trying to fit a square peg into a round hole.
Resource capacity planning is similar—before you start or even accept a new project, you need to evaluate capacity. That is, assess your employees’ workloads and their availability, so you can compare that data to the project scope, budget, and deadline. If the balance scale is tipping to one side, you need to rebalance.
Resource capacity planning is vital to project management because it helps you proactively avoid overbooking employees and monitor their utilization rates. Plus, it helps you account for vacations, possible sick days, and flexible schedules so that you schedule people only when they are available and ready to take on new work.
As a result, you deliver high-quality projects within budget and on time while also ensuring your teams are happy and enjoying a healthy work-life balance. In other words, effective resource capacity planning helps project managers stay ahead of the game.
What is resource capacity planning?
Resource capacity planning helps project managers determine the resources they will need to meet current and future workflow demands. Project managers look at the capacity of those resources and compare that capacity to the demand for them.
Resource capacity planning for non-human resources
“Capacity” refers to the amount of time available to do work, while non-human resources can be the facilities, assets, equipment, and any other resource required to do the work.
If your one widget machine can turn out 20 widgets per hour, and you have an order of 100,000 widgets, you can forecast what you’re going to need resource-wise in order to fulfill the order within an agreed timeframe. In addition, you can forecast your ability to take on new projects.
Resource capacity planning for people
Resource capacity planning gets trickier when it involves humans. That’s because humans aren’t machines who can turn out work at a constant pace without a break.
The human brain is wired for deep focus for only about four hours a day, which means we work best when we have time to relax and recharge. Plus, administrative tasks like emails, status reports, and research are part of a project and take up time.
So, if you schedule team members for eight-hour days, assuming that they will be working every single minute, your project planning is flawed. Plus, your employees will burn out from the constant stress of deadlines. Aside from vacations, people also have contingencies—they may get sick, need to leave early for caregiving responsibilities, or have to prioritize another project.
A sound way to ensure the success of your resource capacity planning is to build buffer time into employee schedules. That is, book employees for 80% of their billable hours so that they have breathing room to catch up in case of events outside their control.
In essence, the key goal of forecasting and planning is to manage gaps between capacity and demand, whether they are currently visible or unforeseen. Resource capacity planning helps you predict resource shortages or excess and their impact on timelines, revenue, or margins.
The aim is to create a “single source of truth” that compiles all resource utilization and capacity data. Alongside this data, you’ll need information on skills, available resources, current and future projects, any events that impact available capacity (such as planned leave), and the goals or priorities of the business.
The role of resource capacity planning in project management
Resource capacity planning plays a key role in project management because it helps you forecast realistic budgets and deadlines and book the exact team members you need. Plus, you can be confident that they will be available to work on the tasks you assigned to them, which sets you up for successful projects and boosts team morale.
Alignment between sales and delivery
Resource capacity planning helps your organization avoid the “over promise and under deliver” trap. Most companies don’t set out to do this at all, but if you don’t have clear forecasts of your resources and capacity, it’s easy to assume you’ll be able to deliver just because you have the requisite resources.
When you have reliable resource capacity forecasting, you can make sure that sales (“here’s what we can do for you”) and delivery (“here’s how it’s actually happening”) are aligned. For project managers, this means smoother sailing when dealing with stakeholders.
Matching the resource to the project
Resource capacity planning gives you a holistic view of how much each resource can take on, the tasks that are the best fit for their skills, and when they will have available time to be assigned new work. It means having the right resources in the right place at the right time.
Definition of any gaps
With resource capacity planning, you can forecast the gaps between your project needs and the availability of team members and prepare accordingly.
When you define your gaps, resource managers can plan to deal with them ahead of time, for example, by bringing in freelance workers, hiring a new employee, or, if it’s an equipment gap, renting an extra widget machine.
Generally speaking, the more lead time you can give for acquiring additional resources, the better. Hiring can take some time, while rentals of equipment or facilities are usually contingent upon the demand for those resources.
Optimal use of resources
Capacity planning helps project or resource managers avoid situations where resources spend a lot of time “on the bench” while you’re trying to meet your project timeline.
For example, you could consider an employee who requires training in a particular task to be “on the bench” while they undergo that training, especially if it requires more than on-the-job training. Instead, you can be proactive about having people trained ahead of time.
Another example of optimization is avoiding the potential underutilization of resources. If you’ve got Stacey on the project for her excellent programming skills, there shouldn’t be any point where she is twiddling her thumbs, waiting for her next tasks. You want to optimize your use of her time and skills.
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How to calculate resource capacity
Resource capacity is calculated by measuring the timeline and availability of your resources. This includes accounting for any standards expected of their time. For example, a full-time employee might have an eight hours per day, five days per week standard contract.
When measuring people capacity, some factors to account for include:
- Availability of any full- or part-time employees
- Availability of contractors or temporary employees
- Any planned leave or contract terminations
The next part is calculating the resource demand. The resource demand includes the resources required to meet the various tasks of the project (including administration and operational activities). Demand is usually measured in units, such as hours, FTE, or personal days. If the project requires 56 hours per week, but a full-time employee works 40 hours, then FTE for the project is 1.4.
These calculations allow you to measure capacity versus demand so that you can prepare a resource capacity forecast.
For example, just because you have three team members who are each contracted to work 40 hours per week doesn’t mean you’ll have 120 hours of time available for your project. They might each have commitments to other projects that cut back their availability for any other work.
While there are multiple inputs that go into calculating capacity and demand, once you have those, the calculation to check whether you will be short, over, or just right on resources is demand minus capacity (with both measured in the same unit, such as FTE). A positive number means you are short, while a negative number means you have more than enough.
7 best resource capacity planning practices
Resource capacity planning is best done by being realistic about deadlines and accounting for the extra time employees might need when challenges arise.
Begin your resource capacity planning by ensuring you have complete visibility into team availability, ideally with a group calendar that allows for a two-way sync so that you aren’t blindsided by a booking that was on a personal calendar or a different work calendar.
When you follow best practices, you are setting your teams and projects up for success.
- Track real-time and effort
Accurate forecasts come from accurate contributing data. You should have a good grasp of the real-time and effort that is required to complete tasks to a high level. If you were to assume that something takes two hours when, in reality, it takes three, your resource demand assumptions would already be inaccurate. A way to gather accurate data is by having team members track their time when performing tasks.
- Identify known or potential bottlenecks
These bottlenecks might involve a person, skillset, or piece of equipment. For example, if you doubled worker capacity to prepare the materials that make the widgets but didn’t increase the number of widget-making machines, the widget machine part of the process is a bottleneck.
- Use multiple inputs for your capacity vs. demand calculation
This is one of those calculations that sounds simple enough but, in fact, has multiple contributing factors. These might include role, skillset, department, and location. Consider every resource required and its true capacity.
- Keep updated team competency information
You need up-to-date information on the competencies of your resources in order to accurately plan ahead. Someone with a key skill may have left, or someone else may have been trained in something new. Know the competencies you have available at any given time so that you can foresee any challenges in getting the skill sets you need.
- Allow for potential mishaps
If you plan resource capacity down to the nearest hour and don’t allow for anything beyond that, you’re bound to run into “anything that can go wrong, will go wrong.” Build some time for potential mishaps into your capacity planning—the worst that can happen is nothing goes wrong at all, and then you’ve got time up your sleeve. No one complains about early delivery!
- Calculate true work availability
Your team members might be contracted to eight-hour days, but no one is doing “actual work” for that whole time. You need to account for time spent doing the transactional activities that are related to work, such as checking and responding to emails, searching for information, or sitting in meetings. You might be able to take action to reduce some of those activities, but you need to have clarity over how much time they’re taking up first.
- Take industry dynamics into account
Given that each industry has its own unique client demands and resource skills, capacity planning will look different for each one. Project scopes will vary, tasks will take different lengths of time, and resource availability will differ as well.
Make resource capacity planning easier and scalable with software
Traditional methods of resource capacity planning usually involve spreadsheets that collate multiple points of data. But 88% of spreadsheet formulas have 1% or more errors. Besides, relying on spreadsheet formulae to produce accurate forecasts is time-consuming and tedious.
Instead, software can solve your resource management complexities with automated functionalities for accurate forecasting, resource allocation, and capacity management.
Plus, a tool like Resource Guru offers calendar integrations with Google Calendar and Microsoft Outlook and lets you filter by skill sets, so you can create your dream team without a hitch. And, as your business grows, you can “right-size” your resource planning needs with a scalable solution.