All about Resource Capacity

Resource management is an integral part of any business or organization. Planning the demand and the supply of the resources effectively and efficiently will help the organization in many ways.

Also, 70%, as per the recent survey on Labor statistics, 70% of the total business costs come from employee benefits and payroll.

Hence, we need to adopt a data-driven approach.

Resource identification, allocation, management, billability, max utilization & productivity are very key elements in the resource management process.

It sounds great in theory, but practically, very difficult to manage the resources of the organization.

Being in PMO, it’s very important to understand resource capacity planning, why it is important, and the best ways for strategic planning.

Sharing from the experience and the recent learning.

What is resource capacity planning?

Organizations are facing highly competitive market demand across the globe. So facilitating real-time forecasting of resource capacity is important.

Doing so will provide warnings about resource shortage, excesses, on-the-bench capacity, revenue, margins, etc. The business can take corrective actions from time to time.

How to Measure Resource Capacity Supply and Demand?

Accurately measuring the resource potential is the critical part of resource capacity planning.

Resource capacity is the total number of standard hours an individual can work as per the company’s policy.

It can be measured by the timelines and it adds to

• Full time and part-time employees
• Permanent employees and contractors
• Employees joining on a specific date
• Employees leaving the org by specific dates.

For example, a company has 8 hours a day and five days a week.

So the capacity is 40 hrs/week or One full-time equivalent or five-person days for a full-time employee.

For Part-time resources, it will be 4-6 hrs/working day or 4 days per week ( 4*8=32)

Resource capacity on FTE = Resource capacity in hours / Org full-time working hours.

Resource capacity for Part time = 32/40 = 0.8 FTE = 32/ 8 = 4 man-days

Hence, the amount of work is measured in hours, FTE, person days or man days.

Measuring Capacity vs. Demand

Supply vs Demand is anticipating deficiencies or abundances of assets within the short or long term. The gap is often estimated in hours or FTE or Individual days.

It is called the shortage of resources when the demand is above the supply. It is called excesses of resources when the supply is more than the demand.

For example, If demand is for 5 FTE/week against the capacity of 6.5 FTE/week, an additional 1.5 FTE/week is available. However, if the demand is for 7 FTE/week and the capacity is 5.5FTE/week, there is a shortfall of 1.5 FTE.

Benefits of Resource Capacity Planning:

IBM said that new employees are more likely by 30 times and old employees are 12 times likely to leave if the career goals are not met.

Additionally, Leadership is finding difficult with challenges in terms of

1. Understanding the actual work vs planned work
2. Tasks that are difficult to estimate
3. Shifting and conflicting priorities
4. Autonomous teams
5. Matrix structures
6. Remote / Part time workers

So let’s get the list of benefits in resource capacity planning.

✅ Doing resource planning helps you to identify the most profitable ways of meeting the resources’ needs.

✅Businesses can take corrective actions ahead of time.

✅Capacity planning lets you plan and see what everyone is working on and make changes to the work assignments as required depending on the cost.

✅It will help you to identify the skill shortages in the early stage.

✅Reduce the overall resourcing cost by eliminating the under/over skilled resources on the project.

✅Avoid the last benefit hiring cost with proper capacity planning

✅Improve the billable utilization of the resources. Billable utilization is a critical KPI for a business to ensure profitability and sustainability.

✅Mobilize the non-billable resources to low priority work and billable to high priority projects.

Best Practices in Capacity planning & Tracking:

Resource planning is the heart of the organization, as the planning is not limited to being done at the project level but across the portfolio as well. Hence, it is important to follow the below best practices.

1. Always Forecast Supply vs Demand in terms of the timeline (Monthly, Quarterly, Yearly)
2. Forecast by role, domain, location, skills, experience etc.
3. Keep track of the competency and workforce details uptodate.
4. Identify the shortage or excess ahead of time.
5. Track the competency across the matrix organisation.
6. It helps to plan for the resource for a new project that may need a niche skill which is difficult to get from the market.
7. It helps to track of the future potential projects in the pipeline and forecasts the resource estimation demand.
8. It helps to know if any contingency resources are required in terms of re-skill, hire etc.
9. Helps the resource manager to resource planning which is crucial for having the right employee with the right skills and cost for the projects.
10. It is better to avoid the first visible first fit approach, instead follow “best visible best fit” principle for resource allocation.
11. Forecast the future pipeline projects appropriately and ensure that excess capacity is not wasted by allowing movement of resources across departments to maximize utilisation.
12. Streamline resource requisition and allocation process with proper approvals and notifications.
13. Proactive planning is the key to success as opportunity loss if you cannot find the right candiate at the right the time with the right skillset.

Best methodology to track the Capacity planning:

While the best practices can help businesses in many ways, additionally, using the right tools appropriately is also a significant factor.

1. Choose a software or the tool that will help to forecasts and improves profitability and productivity.
2. The tool needs to be scalable, configurable and expandable.
3. The tool should provide real time analytics and dashboards.
4. Tool should integrate with the In-house applications seamlessly.

Hope you found the post informative. Your valuable feedback, question, or comments about this post are always welcome by leaving me message on  contact form is truly appreciated.