Capacity planning by skills is one way to make sure you have the competencies you need for business success and growth – here’s how to do it.
Capacity planning by skills is the process of assessing whether you have an adequate supply of skills to meet client demand and deliver future strategy.
It’s just one of many different ways to cut the capacity planning cake – by skills, by headcount, by utilization rate, and so on.
Put simply, capacity planning by skills is concerned with auditing the skills you have at your disposal, working out the skills you’ll need in the future, and devising a strategy to close that gap.
We talked to experts from the Resource Management Institute to understand the challenges of skills-based capacity planning and distilled their wisdom on how to do it. Enjoy!
Capacity planning by skills is a more refined way to determine whether you have the people you need to deliver your future work.
Unlike capacity planning by headcount, for example, which looks to fill a certain number of roles, skills-based capacity planning focuses on the competencies and knowledge you’ll need. Instead of simply getting people into posts, it’s concerned with getting the RIGHT people into the RIGHT posts.
Done well, capacity planning by skills helps organizations to:
Want more reasons? Check out these key capacity planning statistics and benefits ➡️
This process is concerned with understanding where you’re at, where you want to be, and how to get there. It’s really that simple.
The first step to skills-based capacity planning is to understand the skills your organization currently has at its disposal. To do that, you’re going to need three things – in this order:
You need a central repository where staff skills can be recorded and accessed. This could be a standalone database, a human resources platform with a skills-tracking module, or a dedicated resource management system.
The goal is to have all of your skills information up-to-date, consistent, and easy to analyze.
Your skills inventory will span numerous teams and they might all describe their skills in different ways. For example, one person might list ‘programming’ as a skill, while another says ‘Java’. This fragments the skills list and makes it hard to pull comprehensive data.
You need to create a standardized list for people to choose from.
For example:
Be specific and map your skills list to current and future business needs – you don’t need to capture irrelevant information. Be granular so the information is useful but not so granular that it is difficult for people to use. And make sure there’s a way to capture skill levels so you know whether you have basic, intermediate, or advanced skills.
You can create a survey to capture staff skills. We suggest a two-stage process whereby each staff member is invited to fill in their own skills profile.
Then this is sent to their manager for checking and verification – it could be that the staff member has under- or overestimated their skill level, or forgotten a talent that could come in useful.
Once your skills inventory is complete, provide a way for staff to update and validate their profile throughout the year if they undertake training. And have an annual organization-wide update.
Once you’ve audited the current skills profile in your organization, you need to understand how well that matches current and future demand
Now we’ve established that, where can you find demand information? If you have interlock reports set up, this process will be easier. If not, here’s where to look.
Look at your active projects and work units. What skills are required and in what quantity? Are the projects progressing well or struggling due to skills or capacity gaps? How are resource utilization rates looking across different skill sets?
These are projects in negotiation or expected to land soon. They need to be broken down into work units so you can understand their impact on capacity, demand, and skills supply.
Develop a strong relationship with the sales team to understand what’s coming up – broken down into work units – as far in advance as possible. Use historical data on similar projects to help inform your resource and skills forecasting.
It’s important to understand the strategic objectives of the organization, so you can plan capacity accordingly.
For example, your senior leaders may be planning to enter new markets (which could require specific language or cultural skills), develop new products (needing different expertise), or reduce costs (which may mean focusing on upskilling rather than hiring).
This knowledge can only strengthen your strategic capacity planning.
You also need to remember it’s not just clients calling on your resources. Internal initiatives demand staff time and talent too. Find out what’s on the horizon in terms of organizational changes, tech upgrades, office moves, etc.
When resources are in use on these internal projects, they’re not available for client work. So factor internal projects into your planning too.
With insights into current and future projects – both client-facing and internal – you can build a picture of all the work units at play.
Now you have Point A (current capacity by skills) and Point B (demand for skills). It’s time to work out how well they match up.
For each skill in your database, assess how much time your employees can allocate to that skill. You want to know how many hours each person has available for work, excluding things like vacations, training, time off, etc.
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Remember, you should be aiming for around 75-80% utilization, not 100%. A 100% utilization rate is the fast track to burnout, delays, and employee turnover – the opposite of what you’re trying to achieve.
Using your understanding of work units in play and on the horizon, translate this into the hours required per skill. For example, a forthcoming web design project may require 200 hours of front-end programming, and an internal IT upgrade project may need 300 hours of network administration.
At the end of this process, you should have a list of the amount of each skill you need. Ideally, this will be tracked against a calendar so you understand your timeframes for building any required capacity.
Now it’s a case of comparing supply to demand. How are things looking?
It may seem simple on paper, but we know it’s never that straightforward. Projects might get delayed, new priorities could emerge unexpectedly, or some projects may not materialize at all. While you can’t control the future, you can be prepared for it. A proactive approach – albeit fallible – is better than a reactive one.
A useful tool here is scenario planning – mapping out different project combinations to understand how each impacts your team’s capacity, supply, and demand. By preparing for different potential scenarios, you’ll be better equipped to handle the unpredictable nature of your work.
Once you’ve worked out the gap between your current supply of skills and the demand, it’s time to make a plan to fill those gaps – whether it’s upskilling your existing staff, hiring new people, or cross-training your team.
Remember, your choice of capacity-building strategies should contribute to the wider organizational objectives. For example, if your leadership team is looking for cost efficiencies, upskilling is more affordable than hiring external candidates. But if filling gaps fast is the priority, external hires could be faster to proficiency.
Further Reading: Staffing Smart: How to Identify Hiring Needs ➡️
Of course, it isn’t just about plugging skills gaps. You may find you have too many of certain skills (redundancy) that you need to address too. In these circumstances, you may want to consider retraining staff to meet skills gaps as an alternative to costly layoffs.
Identify any critical skills where there’s a major shortage – for example, unsustainably high utilization rates or skills confined to one or two employees. That’s a huge risk if anyone falls ill or quits. And could cause major bottlenecks and project delays.
Your existing staff will rarely say no to training and development. And equipping them with new skills is a cost-effective way to build capacity. Here are some options:
If you can’t meet demand through internal development, it’s time to look at external hires. This may be something your Human Resources team takes forward, but you can help inform their strategy by telling them who’s needed.
Indirectly, resource managers can also support external recruitment by making the organization a great place to work – for example, by connecting people to work they want to do, and protecting them against overutilization. Not all heroes wear capes…
Despite the many benefits of capacity planning by skills, it isn’t easy. You need to know the current skills profile of the organization and an understanding of future plans and priorities. Without that, you can’t create a roadmap to get from point A to point B.
Here are some of the common challenges to skills-based capacity planning:
However, knowing the hurdles is the first step to clearing them.
Bookmark these nine common capacity planning challenges to arm yourself ➡️
A resource management platform like Runn makes skills-based capacity planning oh-so-easy. With Runn you can:
Plus you can build project schedules, monitor and manage project progress, and so much more.
