Striking a balance between resource demand, teammate availability and project deadlines is delicate work, especially when you factor in scalability and potential priority shifts. Resource capacity planning is a structured method for dealing with these challenges effectively. A well-prepared capacity plan can help you allocate work accordingly, avoid resource overload, and even anticipate future resource demand. In this article, we’ll outline how resource capacity planning supports both short and long-term success, explain some useful capacity planning formulas, and take a look at how resource capacity planning works in a real-world context.
What is Resource Capacity Planning?
Resource capacity planning is a method by which leaders can determine whether they have enough resources to tackle new projects and meet demand. To plan capacity appropriately, you need to acknowledge both the strengths and the limitations of your team, tools and budget. Resource capacity planning requires you to evaluate your current resource availability, compare it to forecasted demand, and identify the gaps to make sure your resources are being leveraged to (but not past) their full extent.
The Role of Resource Capacity Planning in Project Management
When it comes to managing projects effectively, the importance of resource capacity planning cannot be overstated. A solid resource capacity plan supports project success by ensuring all assigned resources are being used efficiently and appropriately, which then makes it easier to complete work on time. Planning for capacity can also help you financially by allowing you to preemptively coordinate workloads within your staffing and resourcing budgets. When you plan for capacity, you can better balance your team’s workload distribution, leading to strong satisfaction rates and higher morale. From a broader perspective, a strong capacity plan helps teams align with wider organizational goals and can improve overall productivity rates.
Resource Capacity Planning vs. Resource Planning
Resource capacity planning is linked to overall resource planning, but they each refer to distinct processes. “Resource planning” refers to the steps you take to allocate resources to a project you’ve already taken on. On the other hand, “resource capacity planning” is how you determine which projects are right for your team and how many projects your team has the bandwidth to take on. Resource planning is a shorter-term solution for executing projects, whereas resource capacity planning is an approach for calculating your team’s workloads in the long term.
Why is Resource Capacity Planning Essential?
When you make a resource capacity plan, you’re bolstering the growth and scalability of your team. A well-considered resource capacity plan is an investment in your overall project success, and will enhance your team’s flexibility and productivity.
Leaders who plan resource capacity successfully can avoid resource shortages by ensuring that resources are available to meet project demands. A successful resource capacity plan also reduces the risk of team overload, burnout and low productivity. When your team’s workloads are balanced, productivity and satisfaction levels will go up. Resource capacity planning can help you address resource limits proactively so you can prevent project bottlenecks and meet deadlines.
Key Steps to Effective Resource Capacity Planning
Prism PPM resource management dashboard.
Resource capacity planning is a process that can be broken up into eight steps.
Step one: Define the scope, objectives, and requirements of your potential project(s). These details will lay the groundwork for accurate forecasting and will allow you to make smarter resourcing decisions. During this first step, be sure that all your key project stakeholders are aligned on information about project timelines, milestone measurement, and central goals.
Step two: Assess your current resource availability and capacity. Knowing the assets and limitations of your team will help you make the right calls on project adoption. Consider creating a skills matrix to track and score your teammates’ skill sets, or use utilization reports to gain insight into past trends in your resource availability.
Step three: Forecast your resource demand. This can be done by looking to historical data trends regarding resource consumption and project completion rates. You can also use the Critical Path Method to map out project tasks and identify core deadlines and checkpoints, which helps to keep the focus on which tasks are essential to project success.
Step four: Calculate your capacity requirements. There are several simple formulas you can use to determine aspects of your capacity bandwidth. For example, if you need to calculate your total capacity utilization, you can follow the formula below:
Capacity Utilization Percentage = (Actual Output ÷ Potential Output) x 100
Let’s say your team has historically shipped 7 new features a month, but theoretically could ship 10 new features in ideal circumstances. If you follow the above formula, you’ll find that your capacity utilization is 70%.
Another common capacity formula is resource loading, which helps you determine how much of your resource’s capacity has been allocated to tasks. The formula is as follows:
Resource Loading = (Work assigned to resource ÷ Resource’s available capacity) x 100
Here’s a real world example of this formula in action: One of your employees has a weekly working capacity of 40 hours, but across several projects, their workload for the week is scheduled to be 55 hours, resulting in a 37.5% overallocation. You may need to do resource leveling across the projects to ensure your employee isn’t overloaded, or maybe consider adding additional resources if the over-allocation is predicted to continue or grow larger.
Step five: Identify gaps in your plan and optimize resource allocation. This can be achieved through a variety of means, including risk analysis, simulating future scenarios, and evaluation of your current and predicted resources. Make sure you’re communicating with all key stakeholders cross-functionally to identify all potential snags and specific pain points. Involving as many team voices as possible will help you create a capacity plan that works for everyone.
Step six: Take advantage of capacity planning tools and software. There are plenty of software tools available to streamline much of the capacity planning process and help you manage your data. For example, Prism PPM’s capacity planning tools support high-level scenario forecasting and can automate task allocation based on resource skills. To learn about some of the top capacity planning tools on the market today, take a look at this article.
Step seven: Continuously monitor and adjust your plan. As with any aspect of running a team, real-time data is crucial. Make sure your reporting capabilities are set up to provide you with actionable insights into your capacity plan. Look at both leading and lagging indicators that will surface trends or staffing bottlenecks ahead. Use those insights to rescale your plan as needed.
Step eight: Track key metrics for ongoing success. Just as your data can point out potential risks in your capacity plan, it can also show you where it’s succeeding. Remember to celebrate your wins and use success metrics to hone your future capacity planning efforts.
Types of Resource Capacity Planning Strategies
Depending on your desired outcomes, there are different types of resource capacity planning strategies you can pursue.
- Predictive capacity planning is an approach that uses historical resourcing data to make long-term forecasts. This capacity planning method is used when the types of projects being forecasted are similar or identical to past ones.
- Real-time capacity planning is a more short term solution for managing your current capacity needs. It allows you to react to circumstances in the moment, which can be great if your team is working in a highly dynamic environment.
- On-demand capacity planning is most useful in the moment. It allows you to allocate and provision resources as soon as they’re needed, rather than taking the long-term approach. This approach is valuable for teams and projects that require a lot of flexibility.
- Finally, hybrid capacity planning is a comprehensive approach that combines all of the previously mentioned approaches. To both manage resources in the moment and plan them accordingly in the future, this is the best approach to take.
Common Formulas for Resource Capacity Planning
When planning capacity, it helps to arm yourself with metrics and concrete data points. Here are some simple math formulas you can use to find the percentages for things like utilization, capacity requirements and workload balance.
- Utilization Rate = (Actual Hours Worked / Available Hours) x 100
Utilization is a measurement of your team’s productivity based on how much of their available time is applied to tasks and work. This formula will help you gauge whether your resources are being used efficiently. It’s a good idea to revisit this formula regularly to identify trends and learn how to more effectively allocate tasks and resources.
- Capacity Requirements = (Total Projected Demand / Number of Available Resources) x Standard Working Hours
Projecting what is needed for a set of projects is a critical aspect of capacity planning. Understanding staffing requirements up front allows project and resource managers to better align assignments with needs, and also may inform hiring decisions as project capacity requirements increase and new skills are needed.
- Resource Allocation Efficiency = (Time Spent on Productive Tasks / Total Time Available) x 100
This formula will help you uncover the percentage of time your teammates spend on value-adding tasks. If that percentage is too low, it’s a sign you may need to better communicate priorities or readjust resource distribution.
- Workload Balance = Total Assigned Tasks / Number of Team Members
Finally, the workload balance formula will help you discover whether tasks are distributed fairly across your team. Maintaining an even workload balance is crucial for supporting a healthy work environment, so be sure to revisit this measurement regularly to avoid stress or burnout amongst your team.
Common Challenges in Capacity Planning (and How to Overcome Them)
Resource capacity planning is not without its challenges. The most common of these is accurate forecasting. Predicting the future accurately is tricky, but it can be done if you use the formulas described above and take advantage of your team’s historical resourcing data to make informed forecasts.
A common problem in capacity planning occurs when resources are working across a series of projects. As timelines shift and plans change, resource bottlenecks can arise. A resource bottleneck occurs when demand for a specific resource outpaces actual availability. This can be avoided by proactively managing project schedules, understanding project status and prioritization, and continuously monitoring demand.
When planning for capacity, you may run into issues with balancing long-term and short-term resourcing needs. In cases like this, try using a hybrid capacity planning approach to maintain flexibility while still sticking with your long-term strategy.
It’s also smart to incorporate details like buffer time into your plans, so you can successfully navigate any project scope changes. Additionally, it is crucial to utilize skill matching as a part of your plan. That way, you’ll be sure every teammate is working on the tasks they’re best suited to handle. Finally, always remember to communicate every aspect of your capacity plan to key stakeholders, so everyone is engaged in the plan and no one is taken by surprise when plans need to be restructured.
Real-World Examples of Successful Resource Capacity Planning
Let’s take a look at an example of good capacity planning in action. The City of Roseville’s Electric and Environmental Utilities departments each had a strategic plan for their organization, requiring skilled employees to deliver on their mission and goals. Joint utility system projects, however, required shared services staff from the utility business systems teams, leading to resource conflicts and a lack of visibility into how to solve them.
Implementing Prism PPM helped the City of Roseville centralize their project data, removing the silos that kept teams from understanding resource capacity. They established standardized project plans with portfolio-level resource allocation tracking, giving them transparency across team members’ workloads and views into resource utilization. Prism PPM also allowed them to set up reporting and dashes that keep all teams and stakeholders informed, enabling them to proactively and collectively address any potential capacity challenges
Best Practices for Effective Resource Capacity Planning
Effective capacity planning is a continuous process. As you embark on your capacity modeling journey, here are some best practices to keep in mind:
- Regularly review capacity plans, and make adjustments as needed based on emerging data and project requirement changes.
- Set realistic, achievable timelines and manage your expectations based on actual capacity to avoid delays and overbooking.
- Foster open communication and collaboration within your team to achieve better visibility when it comes to resource limits and priorities.
- Continuously align your capacity plan with your organization’s broader strategy to ensure your plan supports broader objectives.
- Track and measure KPIs related to resource management to avoid over- and under-allocations, budgeted vs actual hours, and estimates to complete
Prism PPM: Best-in-Class Resource Capacity Planning
Resource capacity planning is just easier with the right software solution. If you’re struggling with siloed data, inefficient spreadsheets, or a lack of visibility into capacity, Prism PPM can help. Our best-in-class capacity planning features include real-time resource tracking, demand forecasting, capacity reporting and What if scenarios that allow you to easily recast staffing across your portfolio at any time. With Prism PPM’s scalable tools, you have real time capacity data in one place, providing visibility into every project and across your project portfolio.
Curious to learn more about what Prism PPM has to offer? Get started with a demo.