Capacity management is a delicate balancing act that has a very real impact on a businesses bottom line. Learn how to do it right in our ultimate guide.
If capacity management has been an issue lately, chances are that you're not alone. According to DevPro Journal, every fourth manager ranks capacity as the biggest challenge their software development companies face. It's not easy to deal with a backlog when capacity is limited, developers admit as well. So understanding the concept of capacity management and related processes becomes more important than ever. In this guide, learn the definition, examples, and best practices to improve your capacity management plan.
By definition, capacity management is the process of matching your resources to upcoming business demands. It involves forecasting future resource needs, so you can secure exactly the right staff and skills for your project pipeline.
In turn, capacity is the total output that your business is capable of with the resources it currently has. It is achieved by utilizing those resources effectively to deliver maximum productivity and profit.
The purpose of capacity management is to ensure resources are as productive as possible. Put simply, it’s about making sure your resources are earning - not burning - money for your business.
Capacity management aims to have just the right number and type of resources to deliver work on time and to a high standard - without wasting money on staff who aren’t fully utilized.
This is achieved by aligning your resources to the work available, so that their billable time is optimized, without wearing them out.
Consider a digital agency with a team member, Priscilla, who manages social media campaigns. Priscilla is on a fixed salary, and she has eight hours a day to dedicate to working with clients.
If there isn't enough work to keep Priscilla busy all day, part of her salary becomes an unnecessary cost.
If there is too much work, she can't keep up and clients aren't seen to. She will be working overtime, getting stressed, and will likely be less productive as a result.
Now imagine this capacity management example applied to every employee in your business. You can understand the challenge and importance of an effective capacity management process.
Capacity management can be challenging. It involves:
That said, there are common causes of poor capacity management that can - and should - be resolved. These include:
For example, in a project-based business, the sales team may have KPIs that require them to bring in a certain number of projects per month. However, if the delivery team doesn’t have the people or skills to deliver those projects, you’ll have a capacity issue.
This may result in project delays, under-delivery, or the need to hire more staff at short notice. All of which can undermine client outcomes and project profitability.
Poor capacity management is seriously bad for business.
Don’t worry though. Keep reading for practical strategies and tactics to improve your business capacity management process.
Proactive capacity management is about planning your capacity and actively managing it to maximize business outcomes.
Reactive capacity management is about firefighting and trying to prevent problems caused by emerging capacity issues.
You can guess which we recommend 🙂
Reactive capacity management risks priority projects not having the resource capacity they need to run effectively.
Without visibility over how its capacity is being used, a business can be caught by surprise and find itself unable to provide its service.
Take a consultancy, for example. A new client is onboarded and requests a package of work. The manager allocates a consultant to work with them. However, if the manager doesn't check that the consultant has the actual capacity to take on that client, it can create delivery issues.
It can result in committing to work without having the resources required to do it.
The manager now has to:
Proactive capacity management, on the other hand, would have anticipated likely needs to ensure the business has enough consultants for future work. And better visibility into resource availability would allow the work to be assigned to a consultant with capacity.
Effective capacity management comes with several benefits. Mainly, however, it contributes to efficient resource and project management significantly.
Let’s break down these benefits:
It wouldn’t be an exaggeration to say that improved resource management is the top benefit of capacity management.
Essentially, when you assign project-specific tasks to different employees while looking at what’s already in their pipeline and planning vacation time for them, you prevent burnout.
Plus, by optimizing resources, that is assigning tasks based on team members’ strengths, you keep human resources engaged at work. In turn, this helps you improve performance management, deliver better client outcomes, and retain employees.
When the best-fit employees work on specific projects, the results are often excellent. To add to that, efficient capacity management means you’re meeting project deadlines in time.
Both factors — good quality work and work completed in time — increase client satisfaction, helping you retain them and grow your profits.
What’s more, improved client experiences often translate into referrals and good word of mouth — perks that you can’t ignore.
Having a strong grip on who is at their maximum capacity, what they’re working on, what they’re skilled at, and the number of ongoing projects helps you in two ways.
For one, it assists you in better managing your current production capacity. In turn, this assists in meeting project deadlines and improving client satisfaction.
And two, managing human resources efficiently helps you take on more and better-suited future projects based on available resources.
A good capacity management process is the combination of a range of different metrics. Capacity management metrics include:
The first step in implementing a good capacity management process is to actually prioritize it. Knowing the benefits of a capacity management plan helps to recognize its importance and ensure you actually have one.
A capacity management plan should include details of the businesses current capacity level, both in total and in terms of its financial, human and IT capacity. It should also consider if there's anything on the horizon that will impact on capacity, such as:
Three other factors to look at for effective capacity management include:
There are also few helpful best practices that can improve capacity management.
Capacity management software is a highly effective way of automating a reliable capacity management plan. A tool such as Runn is highly visual and engaging, helping to monitor resource availability and proactively resource priority tasks.
Manual capacity management is laborious, error-prone, and requires regular updates. However, using Runn software enables decision makers to get real time data and inform resource reallocation with confidence.
Here’s a brief rundown of how Runn can help you better manage capacity:
Runn makes it easy to generate reports on employee utilization, forecast tentative projects, track project KPIs and see variance in forecasts.
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