The Beginner's Guide to Capacity Planning for 2022 & Beyond

Businesses that are growing quickly, or that experience bursts of high demand, need to make sure that they have enough resources to handle the increased workload. As a result, capacity planning has become an important part of strategic planning for many companies.
Iryna Viter

Capacity planning is a great way to make businesses more efficient. When it’s done right, it can help to identify new growth opportunities, increase the return on investments, and keep staff morale levels high.

Resource capacity planning can really help with juggling multiple projects, increasing your chances of completing several of them on time and on budget. At the same time, you can use capacity-based planning in all business areas to reduce costs and maximize the benefit you get from resources.

This article explains the benefits of establishing a solid capacity planning process, and how you can realize those benefits.

What is capacity planning?

Two mistakes managers commit way too often are 1- overestimating resource availability, and 2- matching tasks to people that don’t have the necessary skills.

Capacity requirements planning helps managers reconcile supply with demand. By definition, it ensures you have the skills and resources to complete tasks or projects.

When properly executed, resource capacity planning answers two relevant questions for senior leaders:

  1. When do we have capacity to take on additional work?
  2. Do we have the necessary resources to complete work?

Let’s not forget that capacity-based planning is also about efficiency and productivity.

Efficiency because resources are put to good use, aren’t idle or overbooked.

Productivity because they are utilized as well as they can be, doing as much work as they can without being pushed too hard.

Capacity planning vs resource planning

There’s a subtle difference between capacity planning and resource planning. The two are very similar, but where resource planning is about assessing the capacity of a specific resource, such as a piece of equipment or a worker, capacity planning deals with the capacity of a whole workplace or department.

Capacity planning is more holistic and strategic than resource planning. When making a capacity plan, you would look at the supply of a range of resources to complete a certain task. When making a resource plan, you would look at the capacity of a single resource, likely across a number of different tasks.

Why is resource capacity planning important?

When you have a lot of clients, you need to make sure you have enough capacity to handle spikes in demand. Factors such as remote staff, autonomous teams and departments can make it difficult to gauge how efficient your business could be, especially if you were to take another project. Capacity management greatly enhances the visibility over your business.

The goal of capacity planning is typically to offset two conditions:

1) An insufficient amount of resources leading to performance and delivery issues.

2) An environment with excess capacity which leads to wasted money.

There are many benefits that come out of it:

Increased project margins

Capacity planning allows you to build project timelines that utilize the most affordable resources as much as possible.

For example, you may be planning to start a project next week, when only a senior  developer is available. With a capacity plan, you would be able to see that you could start the project the following week, assign a junior developer still capable of doing the job and not risk delaying delivery of the project.

Project reliability

In project management, resource availability has a large impact on the time it takes to complete certain projects. It’s much better to know at the start that you can utilize the resources you need at a given period.

A capacity plan is essentially an aggregated resource plan, taking the availability of each resource and making it visible in one place. As a project manager, it’s a huge help to know that your project plan is reliable.

Skill management and hiring

Planning capacity, you can manage the skills you have on your team. By reconciling your capacity plan against business goals, it’s easy to see if you can deliver on your core business, or if you need to look at hiring more staff in certain areas.

You can also manage skills within business areas. For example, knowing your IT capacity means having a good idea of all the skills of each team member. It helps you to identify when teams are missing key skills, and if you need to hire for those skills.

Intelligent resource allocation

Being able to allocate and book resources in advance gives you the obvious advantage of knowing you’ll be able to get them when they’re needed. A capacity plan gives you an overall look at business capabilities, so you can allocate resources in accordance with business priorities too.

On top of that, you can identify bottlenecks, clashes, periods of resource over- or under-utilization, or any other resource risks that may require addressing. Doing this ahead of time saves costs and allows you to come up with a resource management plan that minimizes lost productivity.

Capacity planning terms

There are two key concepts you need to understand in making the best capacity plan. The first is bottlenecks.

A bottleneck is something or someone that impedes the flow of resources and blocks other planned work.

For example, you need the frames of a house to be erected before you can put on the roof, install the wiring, or tile the bathrooms. When the foundations are laid, there is very little else that can be done until the frames are up. If you were to have other resources on site during this time, such as electricians or roofers, they wouldn’t be able to achieve anything.

Planning capacity, you’re able to identify these periods of latency for certain resources because you can see that your capacity during these times decreases.

It allows you to redeploy those resources until they’re needed again to ensure they’re being utilized, reducing unnecessary costs and allowing other projects to benefit from their use. You can also schedule other non-time-dependent tasks to occur in these periods, when you have more resources available.

The second concept you need to know is your critical path. In project management, the critical path to completing any project is the longest chain of the most important tasks that need to be done, and the order in which they need to be done. A critical path shows you the best process that you can take in order to complete that project.

When it comes to capacity planning, it provides the demand side of the equation. You can see what’s needed, and when it’s needed, and you can then match that demand with the supply of resources you have available. One of the best tools you can use to identify your critical path is a Gantt chart.

Capacity planning best practices

There is a lot of context and nuance that goes into team capacity planning. It involves a lot of moving parts, such as project planning, resource analysis, resource management, and strong communication. At its core, capacity planning includes the following tasks:

• Analysis of current utilization of resources

• Forecasting of future demands on resources

• Comparison of forecasts with budgeted funds

• Identification of problems in advance so they can be addressed before they occur

The best capacity planning process for one project may not always be best for another project. However, generally speaking, the following tips can help if you’re looking to improve it across all projects.

1. Acquire multi-functional resources

Resources that can perform a range of different tasks give you more options when it comes to making project plans. This is particularly relevant when it comes to your staff. It helps to upskill staff wherever you can, in order to grow the capacity of your business and foster their own professional development.

2. Set up a resource pool

Typically, your resource pool will include all the resources in the business or at least the project portfolio and their available capacity. However, it doesn’t mean you should track it all. Before looking into every corner and attempting to figure out who works on what, it’s best to focus on highlighting resource estimates for your most critical resources.

It would be a waste of time if project managers were required to predict the utilization of each individual for each project. Typically, there are a small number of people who are in high demand across several projects, your subject matter experts that are being pulled in different directions. These are your most important resources (also known as bottleneck resources) .

Capturing resource estimates for this narrower resource pool will still deliver great value while filtering out noise with minimal effort. When these vital resources are overutilized, it doesn't matter whether everyone else is available. They truly determine the flow of work and the capacity to complete project tasks on time.

2. Decide on the level of allocation granularity

You need to know exactly how much work your resources can take at any point in time. That includes the availability of staff members and other resources, and exactly what they’re capable of. This information is key to avoiding resource clashes and being able to build project plans you can stick to.

Being able to understand resource availability at a company level means that you have to decide how you want to track allocations - on a task or a project level, and how often you want to do it - weekly, monthly, or quarterly. Let’s take a look at project and task allocations separately.

Project allocations

If you don't know what tasks your current and future team will be working on right away, but you want to book a team member for, say, 200 hours over the next five weeks, you'll want to assign your team members to a project. This would mean that your resource management strategy is high level.

Task allocations

Task allocation is just a list of tasks that you allocate to your team. It works best when you have a list of detailed customer requirements that can be turned into tasks ahead of time.

At Runn, we recommend collecting resource projections at the project or phase level. Attempting to obtain more detailed data at the task level is a tad utopian. To forecast resource availability in advance using task allocations, you’d need to know who would work on what tasks in a month or two beforehand. Most likely, this projection won’t be very accurate, but will take a lot of time to plan and re-plan further down the line.

3. Block out operational time

Because relatively few employees spend 100 percent of their time on project work, you must account for the amount of time each person spends on operational activities to achieve a somewhat realistic resource picture (e.g. day to day work, emails, meetings, etc.). It’s best to generalize time for operational work, you don’t want to track how your resources spend every minute of their day.

4. Determine the roles for each project

Knowing the resources required by each project means you can now look at acquiring these resources. As part of this step, it’s important to involve your team members in helping the client estimate how much time it will take to complete the underlying package of work.

5. Prioritize projects

When you’re allocating resources, it helps to know which projects are the highest business priorities. Concentrating on the projects that make the biggest impact on your business just makes sense.

5. Allocate resources

Knowing available resources, project requirements and business priorities, you can then look at allocating resources.

This capacity planning process allows you to focus on the most important projects, delivering them the resources they need at the right time. With so many variables at play, it helps to use a specific capacity planning software to make the process easier and reduce the chance of human error.

Capacity planning tools

Now that you have an effective capacity planning process you can follow, let's look at capacity planning tools.

Runn software uses a range of tools to help you to schedule and manage projects and resources efficiently.

  • Resource utilization report. By getting a quick, easy view of everyone’s utilization, you can see which resources are in demand and make better hiring decisions. The higher the utilization rate, the more critical the resource becomes. Runn allows you to see the percentage of someone’s time that’s been allocated, as well as the number of hours they’ve been assigned to on a given day.
  • People planner. Track resource allocations, vacation time and placeholders in a calendar view to avoid heavy workloads or anyone sitting on the bench.
  • Capacity planning charts and dashboards. Automated reporting shows you the entire capacity of your organization against confirmed workload at any given time. You can also split reporting into business units, locations or a range of other factors for real-time understanding and future planning.
  • Assignment transfer. Drag-and-drop assignment allows you to re-plan and task the appropriate staff members. You can also use placeholder assignment to test project timeline variations and come up with the most efficient plan.
  • Filtering. Quick-time visibility over people in certain roles, with availability, in certain teams or with other tags to make capacity planning much more straightforward.
  • Budget overview. See project phases and milestones in real time. Budget tracking allows you to be dynamic with project roll-out, matching your spend with times where you can afford it.
  • Tentative bookings. See how potential projects would impact your resources before locking them in.
  • Variance charts. See the difference between reality and your budget, timeline and other plans. This impacts your future capacity planning and allows you to make decisions in advance to avoid clashes or bottlenecks.

Capacity planning can greatly impact the productivity and efficiency of your organization. It helps you to deliver priority business projects to time and budget, which is a core function for any project manager.

With a smart, intuitive and visual tool like Runn, capacity planning has never been easier. Save money by reducing cost overruns, ensure vital projects get the resources they need and increase staff satisfaction by ensuring team members are assigned productive workloads.

Talk to Runn today about how to implement capacity planning for the benefit of your business.

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