Want to improve resource forecasting, but don't know where to start? Here's how to make calculated resource decisions and why forecasting is important.
In 2020, the PMI conducted a study that found that 11.4% of resources get wasted because of poor project management practices. To be more exact, the “project management laggards” were unable to find the right strategies to follow.
The truth is that resource forecasting is one of the strategies you always need to start with to succeed.
So what is it all about?
Resource forecasting is a method of producing the best possible estimates for future resource needs. These forecasts are used to help project managers and team leaders determine whether or not project activities can be completed based on the amount of resources available and the time frame in which they will be needed.
And although resource forecasting in project management can mean various project resources — time, money, equipment, etc., here we’ll talk about the most important project resource — people.
Forecasting your team’s capacity starts at the point where you analyze their current workload and utilization levels. Who is fully booked or underbooked? Does anyone already have too much work on their plate? Proper workload management should easily answer these questions.
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As with anything in human resource planning, resource forecasting is never based on one source. Instead, you need to gain insights from various data pools to make an accurate prediction of future resource needs.
Here are the main sources to extract data from:
By getting data from all of these sources into one place you can reduce the chance of unexpected resource risks, improve your resource management, and increase overall business output.
But let’s look into that in more detail.
The process of human resource forecasting and modeling allows you to see where there may be gaps in your organization's skill set or talent pool — so that you can hire new people who have those skills and talents right away. This makes planning ahead much easier because instead of trying to fill positions later on when they become vacant, they are already on board when they're needed most.
But it will also help you avoid unnecessary overhiring, seasonal hires that tend to be costly, and hires that won’t stick around because of lack of workload or lack of relevant workload.
Vishal Garg, the CEO of Better.com, recently admitted that they laid off about 4,000 employees, and that overhiring cost them about $200 million.
It’s never about having lots of resources — but it’s always about knowing how to use them right.
Project resource forecasting helps you determine exactly how many people you need to complete each project. This will give you a better idea of how much time it will take to complete each phase of your project, which will help you make more accurate timelines and budgets.
But project staffing plans are not the same as hiring plans. The latter focuses on the gaps, while the former points at the potential gaps and the slots you can cover with your existing resource base.
If there are any key challenges facing your company in the near future, such as growth opportunities or new hires who may need training, forecasting can help identify these issues early on so that they can be addressed before they become problems later down the road (and before they become costly).
After all, you can’t expect all of your existing resources to stay on for the whole duration of your projects. That’s why accounting for that wiggle room, the come-and-go situation, is a part of building realistic expectations from your human resource planning and forecasting.
In fact, this Work Institute Retention Report says that about 35% of employees will leave their job to go work elsewhere every year, while 47% of HR teams point out that employee retention and turnover are their biggest challenges at the moment.
As with every other business, yours is going to be impacted by the state of the industry, competition, and world events in general.
For example, at points when lots of industries are in decline (think back: COVID-19), a multitude of companies have to adjust their human resource planning and dive into resource optimization.
However, when your industry is facing an upward trend, you can expect more projects in the pipeline and adjust your resource forecasting model accordingly.
Suppose you have a new exciting project: an ambitious startup wants you to build their website from the ground up. You get their business idea, unique selling points, current state of affairs at the company, potential or existing customers, and an amateur website they have been using up till this point.
Such a project would not just require you to assemble a team of experts — it would have to be a cross-functional team. Among others, you’d need a copywriter, a graphic designer, and developers to get the website up and running.
Using your existing project data and planning, you can take the first step in forecasting human resource demand and supply — see if you have enough resource availability in your current pool or maybe it’s time to go look for some reinforcements.
But what if you are already doing resource planning and forecasting? Where can you improve?
Let’s take a look.
Automation is the name of the game.
In 2022, doing efficient resource management is all about automating administrative work, enabling real-time data, reducing or even removing manual updates, and using reliable resource forecasting tools.
In a recent research, PwC found that 77% of high-performing teams have project management software onboard. Naturally, it is never limited to resource management alone, but the more options with resource juggling you get the better.
You don't want to run out of resources halfway through the project — it can lead to cost overruns and poor productivity. This is why you need to work on your resource forecasting process so you can use it before being faced with an actual project.
Here are some of the best practices for resource forecasting that could be of great help in this.
Ready to get started? Whether you’re a forecasting newbie or looking for advanced methods to level-up what you can achieve with forecasting, here are our resource forecasting best practices.
Start your forecasting journey and begin making confident decisions with these foundational tips.
You’ve got to learn to walk before you can run, and the foundation of effective resource forecasting begins with getting the basics right. From establishing proper processes to defining your organizational scope, it’s important to set the stage for everything that follows.
Getting the basics down could look like:
On a very basic level, forecasting is also about understanding the composition of your workforce. Is it more full-time employees? Is it contractors? Is it part-timers? Is it another type of employee? So it's developing a much more cohesive picture, looking at what your organization actually needs to become sort of an efficient machine in delivering [your] projects."
- Lyssa Parisella - VP Customer Success, Runn
Your forecast is only as reliable as the data it’s built upon. Look at it this way: clean data is like a clear map; without it, making the right directional choices becomes impossible.
This is just one reason why maintaining data hygiene is critical. You can make sure you’re basing your decisions on the most up-to-date, relevant resource data by:
This commitment to clean, accurate data will ensure that your forecasting efforts are grounded in reality, making your projections far more reliable.
When you don't have clean data or good data hygiene in resource and project management, you're acting blind. You actually have no idea what the consequences are of moving people around and whether you actually do have somebody that's being underutilized or has a specific skill set and could be swapped out from one project to the other to ensure both deliver at the same time. So what's really important is there has to be a commitment to keeping the data up to date all the time.”
- Lyssa Parisella - VP Customer Success, Runn
Learn more: Forecasting Best Practices for Resource Management (Webinar 🎥) ➡️
Effective forecasting isn’t just the responsibility of the resource management team — it impacts the entire organization. That’s why you need total stakeholder commitment.
Transparency across multiple departments is key, ensuring everyone has visibility into resource allocation and demand. We recommend engaging Sales and Customer Success teams in the capacity planning process, as their input on upcoming opportunities and project demand is invaluable.
Clear visibility helps optimize resource distribution and prevent issues like overutilization. What’s more, it’s important that other teams share their resourcing needs early (and regularly) so that you can plan for the future with all the necessary information at hand.
In resource management, things change quickly, and without good communication, everything will quickly fall apart. Maintaining regular communication will help keep your forecasting on track and can look like:
We’re often told to plan for the worst-case scenario, but don’t forget to plan for the best case too! Scenario planning is a crucial step in forecasting, as it helps you prepare for all possible futures.
By having a plan for each of these scenarios, you can ensure that your resource strategy is flexible and adaptable — no matter what the future holds.
Planning for the worst-case scenario will help you understand whether you’ll have underutilized resources if new opportunities fall through. Identify where these resources can be redeployed ensures they don’t sit idle.
Considering the likely-case scenario means looking at your current portfolio, including all opportunities with over an 80% probability of occurring and those marked as high priority. Can your current team handle these projects?
Finally, you should prepare for the best-case scenario. What happens if your business doubles or if multiple high-impact projects come through?
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Reviewing past project performance can teach valuable lessons that inform future resource planning. And ultimately, that’s the goal of resource forecasting.
Trend analysis is a powerful tool that helps reveal recurring patterns, such as which projects consistently slipped or were delayed, allowing you to understand why things happened the way they did.
Understanding the root cause of delays — such as poor estimation, scope creep, or resource misallocation — will help you improve your future forecasts.
In practice, this means conducting annual or quarterly retrospectives where you review what went right, what went wrong, and the unforeseen challenges you encountered.
You’ll learn to use these insights to adjust your forecasts to better align with real-world conditions, leading to more accurate and effective resource planning.
In a recent study, PwC found that 77% of high-performing teams use project management software.
Automation is the name of the game nowadays, and using the right tools can make your resource management efforts more efficient by automating previously manual updates, enabling access to real-time data, and increasing resource report reliability.
Resource forecasting tools are essential for increasing your forecasting accuracy, as they gather your data in one place, help you produce reports for stakeholders, and make juggling available resources easier than ever before.
Already got the basics down? We’ve got you covered. As your resource planning capabilities mature, implement these enhanced practices:
Here’s a question for you: Are you ready for an RMO?
An RMO, or Resource Management Office, is a function dedicated to creating resource management plans, which entail managing and optimizing the allocation, utilization, and tracking of all the relevant resources.
Centralizing your forecasting under a central resource management function provides a ton of benefits, including creating a unified approach to planning, reducing silos, and streamlining decision-making.
Businesses with mature planning capabilities need a centralized system to create transparency between departments and encourage a more collaborative approach to forecasting.
This increased visibility into availability makes sharing resources between teams or departments easier, leading to more efficient forecasting, optimized allocations, and improved project outcomes.
Having a centralized model is obviously our goal as resource managers, because we know that is the most effective way for all of these pieces to work together.”
- Julie McKelvey, Global Resource Manager
We love templates at Runn. Great templates accelerate the forecasting process by providing consistent frameworks for many processes, allowing you to make confident decisions faster.
For example, templates can allow you to quickly assess how changes will impact your resources — without adding the full project to your portfolio. This will give you a clear picture of potential needs and bottlenecks early on, streamlining forecasting and allowing for more efficient planning.
Yes, we’ve already covered scenario planning, but we’re bringing it to your attention again - for a good reason. As your forecasting processes become more sophisticated, your scenario planning should evolve to accommodate added complexity.
For example, you should incorporate more detailed parameters, such as specific team skills, internal work commitments, or even team-specific efficiency factors. This will enable you to create more nuanced forecasts that consider the strengths and limitations of individual teams or roles.
You can even extend your forecasting horizon, planning for longer-term scenarios — such as five years out — to better prepare for future growth and shifts in business demands.
Having clarity and understanding what people are actually working on, what skills they have to make those projects function and deliver at the timelines expected is really, really important, because if not, you're really just sort of guessing what you'll need.”
- Lyssa Parisella - VP Customer Success, Runn
Finally, don’t forget to integrate financial forecasting into your processes. Financial forecasting can help you answer big questions, like which teams yield the best margins.
Incorporating financial considerations into your forecasting process will help you prioritize resources to align with broader financial goals, ensure allocations are optimized for cost efficiency, and integrate resource planning into your organization’s strategic vision.
To wrap it up, human resource forecasting is not an exact science. There are lots of risks, opportunities, and what-ifs to consider throughout when you do it. But if one thing is clear, it’s that a reliable resource forecasting tool can make a world of difference in your experience with making resource predictions and estimations.
