How to do resource capacity planning in your project-based business - for higher productivity, lower costs, and happier clients.
Effective resource management is essential for your success as a professional services business. But resource management doesn’t start when you begin allocating resources to a new project. It begins months before, with resource capacity planning.
Resource capacity planning is a strategic activity that seeks to align your resource capacity to your resource needs. It involves looking to the future to predict demand and then assessing whether you have the resources you’ll need to satisfy it.
Done well, resource capacity planning supports your strategic objectives by ensuring you have the capacity to meet your commitments and the agility to pursue new projects.
It also delivers ever-desirable business benefits like higher productivity, increased staff satisfaction, and - of course - improved customer outcomes.
Resource capacity planning is the process of forecasting business demand and making sure you have sufficient resources to meet it. The objective is to ensure you can meet current and future commitments in a way that is cost-effective, efficient, and keeps both staff and customers happy.
Resources can refer to any project resource - such as personnel, equipment, raw materials, etc. But for this article - aimed at professional service firms and project-based businesses - we’re just talking about human resources. That’s because human resources are your biggest asset, biggest cost, and biggest opportunity for efficiency.
Resource planning empowers organizations to make data-informed decisions about workforce investments, project planning, and potential expansion.
By adding resource capacity planning to your strategic planning process, you can gain a significant competitive advantage and lay the foundations for sustainable growth.
There are some core principles underpinning the theory of resource capacity planning. It’s all about aligning your workforce to your future business requirements. As well as optimizing your resources for efficiency and ROI.
You can find plenty of dry explanations of resource planning theory elsewhere online. So here’s our juicier take on it - seven guiding principles of resource capacity planning.
The primary objective of any resource planning is to match supply to resource demand. Capacity planning is no different.
It involves assessing the likely demand for your services and ensuring you have the right type and number of resources to deliver.
It’s a delicate balancing act, as under- and overutilization of resources are both problematic.
Effective resource planning hits the Goldilocks spot that’s juuuuuuust right.
By accurately matching resource supply with project demand, you avoid wasting resources or facing shortages. This efficiency leads to cost savings and improved project outcomes.
[Note that there are three capacity planning strategies you can choose to use: lag, lead, or match. Read more in our beginners’ guide to capacity planning.]
The resource capacity planning process ensures your most valuable assets - your people - are protected.
Overutilization causes a wide range of problems - from reduced productivity and mental acuity, to fully blown burnout and mental health issues. Conversely, underutilization causes boredom and disenchantment.
Ensuring people’s work is suitably challenging but manageable is a core principle of resource management. And effective capacity planning helps achieve that by ensuring there are the right number of resources for the work available. No one is bored or burnout. Everyone is optimally engaged with a fair workload that suits their skills.
There isn’t just a moral imperative. Happy employees do better work, are more engaged, and tend to stick around longer. That reduces costs associated with involuntary turnover.
Past performance is the best predictor of future performance. (Unless you’re radically changing direction and moving from software development to circus tent design). So another key tenet of resource planning is forecasting future demand using past data.
Resource capacity planning considers historic project management information such as:
Analyzing resource data gives you insights into any areas of resourcing that require improvement or investment to enhance your efficiency. And helps predict how confirmed and tentative projects will affect capacity and resource demand.
By accurately forecasting demand, you can make informed decisions about resource investments, staffing levels, and expansion plans.
[Of course, you need to look ahead and outside the business too. So capacity planning also involves activities like analyzing market trends, technological developments, or regulatory change.]
The old adage says you can’t manage what you don’t measure. So a key part of resource planning is categorizing your current resources and auditing exactly what - or rather, who - you’ve got.
By grouping your resources according to important criteria - like role, skills, cost, availability, etc - you can create resource categories that are needed for specific operational activities.
You can then assess the capacity of these categories - identifying bottlenecks, capacity crutches, and gaps you need to address.
Related: How to Make a Resource Calendar (Even if It's the First Time)
Gap analysis is the process of identifying any resource gaps that could reduce your capacity. Any gap between required and available resources will limit your ability to meet your strategic objectives (like delighting clients, increasing your profit, and growing your business).
Gap analysis reveals potential resource constraints before they become a problem for your business; not to mention your staff and your clients. Failure to fill a resource gap could result in any number of undesirable outcomes - from staff being stressed and overstretched, to missing deadlines and opportunities.
Resource capacity planning can’t happen in isolation. Client success - or failure - isn’t the responsibility of just one team.
The resource planning process needs to include every stakeholder team and align them to shared priorities and KPIs. Any disconnects between these teams can cause downstream issues.
For example, late hires can delay projects and increase costs. While a lack of awareness of resource capacity can cause overpromising to clients.
Service businesses operate in a dynamic and often volatile environment, characterized by high competition and low predictability. This means resource capacity plans can quickly change or become obsolete.
Developing skills in resource planning - and reviewing your capacity plan regularly - helps you adapt and survive a changing market. Scenario planning is one way businesses can be prepared for the unexpected, and pivot quickly and confidently to Plan B.
Related: Why Scenario Planning is Oh-So-Important for Project Businesses
Let’s look at how this applies in real life (kinda). Here’s how a consulting firm - or design agency or software studio, you decide - can benefit from resource capacity planning.
Better client outcomes - The capacity planning process gives the business a better insight into resource skills and availability. By incorporating capacity planning into their day-to-day operations, project managers improve their resource allocation - ensuring they allocate people with the right skills and availability to each project. This ensures that multiple projects are staffed with the most qualified individuals available at the time, leading to higher-quality deliverables and client satisfaction.
Happier staff that stick around - By ensuring they’re appropriately resourced for their commitments - and then monitoring the workload of individual colleagues through resource capacity management - the business avoids overbooking their staff. This proactive project resource management ensures a balanced workload - one that allows talented team members to do their best work. And that keeps employees productive, engaged, and loyal to the business.
Higher productivity at no extra cost - Resource capacity planning improves resource utilization. It highlights resources that are underutilized and have capacity for more work. This helps the business pitch for more projects to fill that capacity. Or, in some cases, retrain those staff to fulfill more in-demand roles. Either way, they increase their productivity without increasing headcount or costs.
Good decisions that grow the business - Equipped with real-time capacity data, the company’s management team can make well-informed decisions about their future resourcing. They confidently invest in additional resources and pursue projects to make the most of their skills and capacity. This lets them plan for sustainable growth that doesn’t overstretch their staff.
Read more benefits of capacity management in our in-depth guide.
Now you know the theory of resource capacity planning - and how it translates into bankable benefits for a service-based business - how do you actually do it?
It might seem daunting but breaking it down into the following steps makes it more manageable.
The first step in implementing a good capacity management process is to actually prioritize it. Knowing the benefits of a capacity management plan helps to recognize its importance and ensure you actually have one.
A capacity management plan should include details of the business's current capacity level, as well as consider if there's anything on the horizon that will impact capacity - see below.
This stage requires a crystal ball and some educated guesswork. Gather your senior management team and department heads to discuss opportunities that you’d like to pursue. Create a projected pipeline that includes the work you expect or hope to secure.
When you know you’ll need a certain type of resource but not the exact people you want to allocate, you can add placeholder resources - Developer, Graphic Designer, Project Manager, or other. This lets you plan the project and estimate resource requirements and costs, even if you don’t have specific people in mind yet. It also helps flag resource constraints and recruitment needs in advance.
Don’t forget to consider:
Continue reading: Why You Need Placeholders for Demand Planning
Based on your projected pipeline, work out what resources you’re likely to need. You can do this by comparing future projects with projects you’ve completed in the past.
You can also test a variety of different scenarios to understand their impact on resources, capacity, and profitability. Find out more about scenario planning and how you can easily plan for different ‘what ifs’ using Runn.
Next, calculate your current production capacity. Look at your existing workforce and any data you have about current utilization (see the capacity planning metrics section below).
Do you have the number of resources you need? Do you have the correct skillset for your direction of travel? The following data and insights can help.
Working with your talent/human resources team, work out how to bridge the gap between where you are now and where you want to be.
This might include recruiting new roles, reassigning resources, or retraining people with redundant skill sets.
Capacity management is an ongoing process. Once a capacity plan is in place, it needs constant monitoring and regular updates.
An annual capacity planning exercise can help to stay on top of all relevant internal and external factors that impact capacity.
Using appropriate capacity planning software will make this process much easier as you’ll have decision-making data at your fingertips.
Now you know the theory and practice, let’s look at how a resource management platform - like Runn - can help at different stages of the process.
Resource management software streamlines and simplifies the resource planning process by providing at-a-glance insights and in-depth reports into resource availability, capacity, and utilization.
Runn’s intuitive real-time reports and dashboards massively simplify the resource capacity planning process, giving you cast-iron confidence in your decisions (and more time to invest in other priorities). Let’s start with how it can help you forecast resource demand.
Runn hasn’t got a crystal ball module yet. We wish. But it can still help you forecast future demand. Maybe not demand from the market. But the demand that certain projects will make on your resources.
Runn automatically keeps a record of how many resources - and how much time and budget - were used to deliver specific past projects. This information is invaluable for forecasting future capacity because you can base projections on firm facts about resource use - not guesses and gut feelings.
To access this information, simply use our People Planner and Project Planner.
You need to know what type of resources you need and how many you’ve got. So Runn lets you categorize - and search and find - people in a variety of ways.
Using the People Planner, you can create profiles for every colleague including key information like:
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This makes it easy to run and filter reports to answer any questions you have about your resources. Like: How many software developers do we have? Where do they work? And are they employees or contractors?
You can run many essential resource management reports in Runn. They let you see your resources’ capacity, availability, and workload. And updated in real-time (not old info that people have forgotten to update in Excel.)
This is invaluable for data-driven resource capacity planning. You can drill down into different groups of people - for example, by job role or skill sets - to see exactly how much capacity you have.
You can run a capacity report to see whether those groups are predicted to be under or over-capacity in the next twelve months. You can also run resource utilization reports to see whether they are under or over-utilized generally. If they’re over-capacity, that’s a resource gap you need to think about filling. If they’re under-capacity, that’s an opportunity to take on more work or retrain those resources.
You can even add in tentative / pipeline projects to quickly understand the impact of different project combinations on your capacity. This is known as scenario planning and it’s oh-so important. It helps you make informed decisions about whether to take on more projects, more people, etc.
And you can run a People Explorer report to see who you need to hire. This is achieved by reviewing the number and type of ‘placeholders’ that your project managers have entered into their project plans. This indicates that there wasn’t an available resource and can flag a hiring need.
A final benefit of using Runn is that it provides cross-departmental visibility into resource capacity.
Resource management is a team game and a centralized resource management system gives every stakeholder access to the real-time insights they need. Not just for active collaboration over capacity planning, but also for distinct departmental needs.
For example, your HR/talent team can use it to identify potentially redundant job roles that would benefit from retraining. And your sales team can use it to see whether there’s capacity to deliver a client’s potential project.
This all contributes to your organization working together, better, for elevated client success and lower operational costs.
