Lead, lag, or match – which capacity planning strategy can create the right outcomes for your business?
Capacity planning sounds simple - it’s all about predicting future demand, and making sure you have enough staff to deliver.
But knowing who and when to hire isn’t always easy. Do you bring in new staff in anticipation of increased demand? What if that surge in sales doesn’t materialize?
Or do you wait until demand has risen…but risk overworking existing employees while you recruit?
These are the questions that strategic capacity planning aims to resolve.
This article explains three different capacity planning strategies in depth – lead, lag, and match – so you can decide which strategy works best for your capacity planning needs.
Capacity planning is the process of working out how much capacity is needed to meet the demands for your products or services. It helps you work out when to onboard new staff, when to reduce your workforce, and allows you to allocate resources efficiently to meet demand.
The process typically involves working from predictions of market demand or your own sales forecast figures to estimate the optimal capacity ahead of time. It should also take external factors into account, to give you an accurate idea of your capacity targets.
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Strategic capacity planning ensures your business can deliver its promises, meet client demand, and make a profit.
In professional service businesses – like IT firms – it’s essential. Your people are your key asset – turning their time and expertise into bankable bucks. You need to manage the size and skills of your workforce to ensure they’re delivering the best ROI and meeting market needs.
Here’s what strategic capacity planning delivers…
This may seem fairly obvious but without the capacity to take on work, your business will grind to a halt. Matching capacity to demand is essential for seizing the opportunities available in the market, fueling growth and profitability.
Capacity planning ensures you have the right roles, skills, and expertise to deliver your projects to a high standard. This bolsters everything from reputation and repeat custom, to competitive advantage and cost effectiveness.
Having a capacity plan protects your business from overspending on staff that you don’t need. If you hire people without a plan, they may be underutilized, burning money instead of earning it. You want billable hours, not bench time.
Matching your workforce to demand ensures people are optimally utilized. They’re in the sweet spot where they’re neither bored not burnt out. Workloads are well-balanced and they have the right amount of work to engage and satisfy them.
Effective capacity planning gives you a long-term view of your resources – so you know exactly what skills and roles you need in the future. This allows for timely recruitment, succession planning and upskilling, which reduces costs associated with last-minute staffing and hiring expensive external expertise.
At the heart of all of these benefits is improving resource utilization – effectively matching supply and demand to operate more efficiently, deliver projects profitably, and optimize staff allocations – positioning your company for long-term success in a competitive market.
There are three types of capacity planning.
Each type of capacity planning has pros and cons, which we explore below. Although none is 100% perfect, one thing’s for sure. Without adequate capacity planning, you’re staffing your organization based on guesses and gut feelings, which is never going to work!
Lead strategy is like the Boy Scouts of capacity planning, fully embracing the motto ‘Be Prepared’. It is a proactive approach to capacity management that doesn’t wait around for customer demand to spike. It anticipates trends, predicts demand changes, and hires extra staff to be ready for them.
Organizations using a lead strategy will forecast future demand based on market trends, historical data, or anticipated growth – and use this insight to hire ahead of time. Then, when there is an increase in demand, they’re ready to deliver.
This approach gives businesses a competitive advantage because they’re able to seize opportunities and mobilize faster than companies that wait to scale their workforce.
But it isn’t without risks.
Hiring in advance can lead to overstaffing if the predicted demand doesn’t materialize, which increases costs and leads to underutilization.
Imagine you run the in-house IT department at a large utilities firm. Your team typically manages routine maintenance, internal tech support, and system upgrades. However, there is an upcoming digital transformation project under discussion.
This would generate a significant increase in workload over the next year for your existing team, and require specialist skills that are in high demand in the market. Rather than waiting for the demand to peak – and risk being unable to secure the staff you need – you proactively hire additional IT specialists now and begin upskilling existing staff.
By doing this, your department is fully prepared to handle the increased demands as soon as the transformation project begins, ensuring smooth implementation without delays or bottlenecks.
Lead strategy involves predicting demand, so start scanning the horizon and talking to people in the know. Forewarned is forearmed in this future-focused capacity planning approach.
Accurate forecasting is the heart of successful lead strategy. You need to draw on available data sources to predict future demand based. These include market trends, historical data, and information on upcoming projects or events that could increase workload.
Learn more: How Can You Achieve Greater Forecasting Accuracy? ➡️
Once you’ve forecasted future demand, it’s time to proactively increase capacity. Remember, this happens before any actual increase in demand or additional projects, so you’re prepared to handle extra workload as soon as it materializes.
Although lead strategy is all about planning ahead, it doesn’t mean sticking to the plan regardless. If circumstances change, you may need to amend or scale back your hiring strategy.
The word ‘lag’ typically has negative connotations. Think ‘lagging behind’ or a ‘lag in performance’. It usually indicates something that is delayed or slower than expected.
And lag strategy is named for that reason. It is a reactive approach to capacity management where workforce changes are implemented AFTER a change in demand.
In a world of proactivity and horizon-scanning, this approach may seem retrograde. However, there are advantages to lag capacity planning.
Lag strategy means you only hire additional staff when there is clear evidence of increased workload, protecting you from overstaffing and underutilization.
That said – because there is a delay in hiring – it can result in increased pressure on staff, reduced capacity, and hurried recruitment, which aren’t ideal. But these can be mitigated with proper planning.
Lag strategy is when a company expands or contracts its workforce based on a change in demand that has already happened.
Imagine your IT consultancy typically handles 20 client projects simultaneously. When the number of projects rises to 30, your current team of project managers is at maximum capacity.
At this point, you decide to hire additional project managers. This decision is made only after the increase in workload becomes apparent, protecting you from increased labor costs based on forecasting alone.
Unlike lead strategy, that looks at market trends and historic data to anticipate changes in demand, lag strategy waits until it’s happened. But the process behind it is more strategic than simply hiring when you see your staff getting stretched.
Understanding your current capacity is key to lag strategy. When demand increases, you need to be sure the hiring is the best way to meet demand. If you have unrealised capacity sitting idle, hiring more staff is wasteful.
If you see indications that you’re at capacity and need more staff, it’s time to take action…and fast. You don’t want to miss opportunities or overwork your existing workforce.
Of course, lag strategy is only one approach to capacity planning and management. It’s important to monitor how the strategy worked, so you can decide whether to continue with it or make changes in future.
Match capacity planning strategy uses data analysis and forecasting – alongside real-time monitoring – to match your workforce to emerging demand and predictable growth.
If you’re thinking that neither lead nor lag sounds ideal for your business needs, match might be right for you as it’s a halfway house between the two.
Rather than being purely reactive – like lag strategy – or proactive – like lead strategy – this balanced approach ensures you’re equipped to handle demand without overcommitting on resource costs.
As your IT consultancy receives new contracts and the demand for services rises, you monitor resource utilization and make a number of changes to increase your capacity.
You use utilization data to surface spare capacity and reallocate work to underutilized resources, as well as upskilling people who’s current skills are in lower demand.
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Rather than commit to a major intake of new permanent hires, you draw on the gig economy to plug more immediate capacity gaps, and start recruitment for permanent employees in priority areas.
The approach aligns your workforce to emerging demand through a range of techniques, ensuring you’re neither overcommitting to new staff, nor overworking existing employees.
A match strategy focuses on real-time alignment between your workforce and workload. That means monitoring current supply and demand closely, as well as analyzing historical data and market trends to anticipate future changes.
Match strategy needs you to be on the ball. Monitoring market changes, workload patterns, and performance metrics lets you to make small, timely adjustments when needed.
Unlike lead strategy – which involves pre-emptive hiring, often at scale – match strategy focuses on small and steady changes to your workforce. As demand grows, adjust capacity in stages to ensure alignment without the risk of overstaffing.
As with all of the capacity planning strategies we’ve discussed, monitoring is essential. Regularly review how well your capacity matches demand, to ensure your resources stay aligned and optimized, and your chosen strategy is serving it’s purpose.
Capacity planning is key to taking control of your professional service business’s productivity and efficiency. However, getting started with capacity planning can sound daunting.
But it really doesn't have to be. With a strong and reliable capacity planning platform like Runn, you'll get a clear overview of your resources as well as granular details, accurate resource forecasts, team utilization reports, and capacity needs forecasting.
With insights from the right tool, capacity and resource planning decisions are straightforward - allowing you to lead your team to maximum efficiency.
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