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 refers to a range of techniques that ensure resources are sufficient to meet upcoming business requirements cost-effectively. In turn, capacity is the total output that a business is capable of with the resources it has, and it's achieved by fully utilizing those resources.
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 and she can't keep up, clients aren't seen to, and likely won't be impressed. She will be working overtime, and will likely be less productive as a result.
There may also be variables, such as busy times of year or time off for a holiday. Sometimes sales will make commitments the team can't deliver.
Poor capacity management usually results from:
Usually this leads to frustrated and unhappy staff, dysfunctional work culture, lack of stability, and lack of trust. Then, good clients and staff leave and project profitability suffers.
How the agency provides a cost-effective service to match the demand is the balancing act that capacity management helps to achieve.
The purpose of capacity management is to ensure resources are as productive as possible.
In the agency example, capacity management translates to there being the right amount of client work needed to keep the staff member occupied at all times. Extra work can be delegated elsewhere, so that person isn't overwhelmed, and clients are satisfied with progress on their projects. The staff member is resourced with cost-effective equipment and all the other tools and support they need, without an excess of resources that represent additional costs.
Capacity management is especially important for assigning resources to match priorities. Without proactive capacity management, priority projects or critical processes end up not having the resource capacity they need to run effectively.
Consider what reactive capacity management might look like. Without visibility over how its capacity is being used, a business can be caught by surprise when it finds itself unable to provide its service.
Take a consultancy, for example. A new client can come in requesting an urgent package of work, and the manager may allocate a consultant to working with them. However, if the manager doesn't check if the consultant is up to the task or has the actual capacity to take on that client, it can create delivery issues. This is reactive capacity management, and it can result in committing to work without having the resources required to do it.
Starting to compare your workloads vs capacity, you'll see peaks and troughs everyone is talking about:
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.
Running consistently profitable projects starts with understanding how to calculate ROI for a project. We'll show you how to calculate this essential metric.
Effective resource management really can make or break a project-based business. That's why hiring a resource manager can be truly transformational. But what is a resource manager, and what can they bring to an organization?