Curious to see how a capacity planning model could help your business? Here's everything you need to know to get started with capacity modelling.
A capacity planning model gives your company the ability to accurately predict and react to shifting client demands without having to resort to costly, last-minute changes.
It's all about minimizing risk by providing in-depth insights, helping you identify potential bottlenecks, and giving you the information to make proactive decisions that keep projects on track.
But, with that said, creating a capacity model that's fit for purpose involves a substantial amount of data and analysis at the start – and ongoing maintenance and governance as long as it is in use.
Let’s take you through it in this guide, where we’ll look at the concept of the capacity model, the value it brings, and the steps you can take to get the most out of it.
A capacity planning model is a method for representing workload vs. capacity – whether you're looking at a team, an individual role, or even a skill in your pool of resources.
There are three different strategies you can take when building your capacity planning model template:
As the name suggests, this is a reactive model where you increase capacity only after you spot increased demand and confirm that your existing resources are not enough.
Unlike the previous strategy, this one is proactive. It requires you to increase capacity by forecasting that the demand will increase (provided you have reliable data suggesting that).
Last but not least, this strategy will require you to constantly monitor workload vs. capacity to spot discrepancies and fix them in real time.
Long story short, a capacity model gives you a realistic overview of your capacity, workload and upcoming demand.
With clarity on these fronts, you can better understand if and how your current resource pool can accommodate demand without being overworked or under-utilized.
Visibility into available capacity also helps with everything from recruiting to onboarding and from project planning to prioritization:
Put simply, capacity planning allows you to see and plan ahead of time any upcoming workloads, scope out tasks/projects as they come in, and prevent scheduling mistakes early on to keep projects on track.
Admittedly, capacity planning models can be complex to make and even more challenging to maintain. There are numerous moving parts for keeping your capacity agile and dynamic to meet fluctuation demands.
To create an effective capacity model, though, make sure you include all the following in your model:
When you’re ready to take your capacity planning model to the next level, you can also include your operational goals and scalability plans. The former helps you align workforce planning with business objectives and the latter helps you prepare for future expansions by ensuring your workforce can adapt to changing demands.
Building a capacity planning model and creating capacity reports in general is never an easy job. But here are five tried and tested practices to help you keep things organized and effective:
Before you are able to plan anything else, you need to establish your baseline capacity. This is what's known as your "effective capacity", and you reach this number by taking the total contracted work hours of your team, less any time off. This therefore represents your team's baseline maximum possibility capacity.
What is business demand like at the moment? Do you expect an increase, a decrease, or stable sailing in the number of projects you will have in the upcoming months?
Further Reading: How to Measure Capacity vs Demand in Professional Service Businesses ➡️
Plan potential capacity adjustment needs based on the data you collected from the first two steps. If you see the demand growing but capacity going down – time to hire more or do some resource/ project prioritization. If you see an opposite trend, refrain from hiring new people as they will most probably be often left on standby.
If some projects are more urgent or important than others, work out a strategy for how you would prioritize resources, especially if you have some limitations there.
What could go wrong, if anything? What limitations do you expect to potentially hinder progress in the future? Perhaps there is a resource that is in high demand but is already fully booked? Perhaps you have several projects due at the same time and are not sure if your team can make it?
Effective capacity planning gives you the tools you need to think ahead and calculate your further steps before you actually need to take them.
Dig deeper: How to Do Resource Capacity Planning (Theory & Practice) ➡️
Avoid using Excel to create capacity planning models, particularly if you’ve a large or growing team.
Building your capacity planning model in Excel is a risky business because you can easily get tangled in all the data or get blindsided by some numbers that can slip through the cracks.
The more data you feed into spreadsheets, the higher the possibility of creating errors, or extrapolating based on erroneous information. Not to mention, when you are calculating capacity, a single error can mean creating false expectations.
In a study on Excel use, a representative from the University of Hawaii found that 88% of spreadsheets contained errors. Some of them were mechanical, logical, or caused by omission.
Besides being error-prone, spreadsheets also don’t give you any granular insights into available skills and capacity. There’s also no way to monitor and account for people's time off.
To add, team collaboration features are limited, as only one person can edit at a time.
The solution, you ask? Use a robust resource planning software. TPG Telecom, for instance, recommends Runn – using it themselves for managing between 30 to 40 projects at a time with a team of 600+ people.
Cindy Tan, the General Manager of IT Planning at TPG, points out:
The capacity planning we had done in Excel - which had taken weeks - well, when we did that same work in Runn, it was completed in two days...
Shareholders, executives, or directors are always going to ask you to justify why you need such a large team. But using Runn, you can clearly demonstrate the demand and the workload. And that’s the information you need to have some very constructive conversations,” Cindy adds.
Creating a capacity model helps a company better anticipate and respond to those natural fluctuations in demand that no business can avoid.
There is no one right way to build a capacity model – there are countless different business models, and countless different ways that each business can make it through the year.
A capacity model is simply a tool that can be customized for any given situation, as long as it can accurately assess a company's current state and estimate its future needs based on the information provided. For most businesses, rather than going it alone, it makes sense to get some assistance with the heavy-lifting of capacity planning by using a tool that optimizes the process.
