June 29, 2022
General
Iryna Viter

How to Do Resource Forecasting - A Complete Guide

Want to improve resource forecasting, but don't know where to start? Here's how to make calculated resource decisions and why it's important.

In 2020, the PMI conducted a study where they found that 11.4% of resources get wasted because of poor project management practices. And to be more exact, the “project management laggards” were unable to find the right strategies to follow. 

The truth is, resource forecasting is one of the strategies you always need to start with to succeed.

So what is it all about?

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What is resource forecasting?

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 workload on their plate? Proper workload management should easily answer these questions. 

resource forecasting
Runn provides robust resource forecasting features you'll need to understand and plan everyone's availability.

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:

  1. Sales pipeline — your sales team knows what projects are inbound and how many of them you already have in the pipeline. Based on this data, you can try doing some resource forecasting to predict whether your existing resources are enough.
  2. Project plans and scenarios — as soon as you’re able to drill into the projects, break them into milestones, timelines, deliverables, and tasks, your human resource forecasting will get more accurate. It is this growing visibility into your projects that will make your resource demand forecasting efforts more relevant.
  3. Resource calendars — they are something of a zoomed-out view of your resource scheduling. But they account for everything that could impact your project — resource availability, holidays, planned work, time entries, etc. 
  1. Timesheets — those can help you squeeze more work into the cracks of day — they will make it easy for you and your teams to register billable and non-billable time, track project progress, and identify productivity areas. 

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. 

Why resource forecasting is important

1. It paints a clear hiring picture

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. 

2. It helps you model accurate project staffing plans 

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 helps you make more accurate timelines and budgets.

But project staffing plans are not the same as hiring plans. The latter focus on the gaps, while the former point at the potential gaps and the slots you can cover with your existing resource base. 

3. It helps you analyze potential challenges

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, Work Institute Retention Report says that about 35% or employees will leave their job to go work elsewhere every year, while 47% of HR teams point out that employee retention and turnover is their biggest challenge at the moment. 

4. It uncovers industry trends

As 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

But when your industry is facing an upward trend, you can expect more projects in the pipeline and adjust your resource forecasting model accordingly. 

An example of resource forecasting

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. 

How to improve your resource forecasting process

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 of resource forecasting that could be of great help in this. 

Resource forecasting best practices

1. Allocate or soft-book resources in advance

If you’re working for a professional services business, chances are high that you get to manage multiple projects at the same time. And that the exact point where resource allocation can get tricky — you want to get maximum value out of your resources without overstretching them.

The secret behind accurate resource planning lies in visibility. The more data you have on your resources the better estimates and allocations you will be able to make. 

For instance, when planning a project to see what the real picture with your resources is like, Runn's People Planner feature could save you hours of work. 

With this feature, you can look at all the experts in your organization and their availability over time. Within a few clicks, you will find the right person to allocate to the project, and plan their workload accordingly so they have enough time to participate in all the initiatives they’re involved in. 

With an easy color-coded dashboard, you can see who’s full, overbooked, has some time free, or has lots of time on their hands, along with their names and roles in the company. 

But since resource forecasting is often about building what-if scenarios, you can also soft-book your resources by creating Placeholders

With this feature, you can assign an expert like a Developer or a Graphic Designer to the project you’re planning out, and figure out how many productivity hours you would need from that expert without assigning an actual person to it. That way you can identify new opportunities for your talent pool or help the hiring team pinpoint resource gaps. 

2. Measure utilization to see where demand is

In simple terms, utilization is your productivity hours. Nobody is productive 100% of all the business days — people need to take breaks, socialize with colleagues, run ad-hoc requests, etc. But in order to understand just how productive your teams are, you need to know their utilization — how many hours they actively work on the tasks given to them.  

A utilization report will always show you where the demand is. Higher utilization means more demand for certain skills and people. In the example above, you can see that the Designer has a utilization rate of 132% and the Project Manager has a utilization rate of 105%. This means that the organization needs to get more resources with the same skill sets in order to balance the workload. 

But there’s also capacity planning and workload charts. These charts will give you a sneak peak into the amounts of work your teams will be looking at in the near future, making it easy for you to predict how much availability you can expect from them. It is one of the many views and projections you can use to do realistic resource forecasting instead of getting caught up in wishful thinking. 

3. Identify the skills gaps

Once you have your project backbone built up, identify the resource skills gaps and fill them up. There could be different reasons why your team lacks certain skills which you'll want to address (e.g. training, hiring new employees, outsourcing some work to a different company, etc.).

But, contrary to popular belief, filling the skills gaps doesn't always mean hiring new people. You should always keep in mind that your forecast can only be as good as the information that goes into it. Always try to find out who among your existing resources has or can gain the skills and knowledge required for achieving the forecasted goals and objectives. 

Also, give someone accountability for each of these gaps. This will ensure that there is one person in charge of closing each gap and that people actually have the required skills to achieve the goals set by project management.

To wrap it up, human resource forecasting is not an exact science. There are lots of risks, opportunities, and what-ifs to consider 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. 

Book a call with us to see why Runn could be just the tool you need for great forecasting!

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