Mastering Resource Capacity Planning
and Demand for Optimum Project Performance
Executive Summary
Introduction
This paper will cite the significance of Resource Capacity Planning and Demand management, how are current organizations benefiting from this feature to substantially increase the on time project delivery rate and, thus, the chances to execute the projects successfully. Additionally, in the absence of Capacity and Demand management, how the organization will fail to utilize their resources optimally and channelize their efforts towards high value projects to yield the highest returns. Further, this paper will give the reader adequate insight on how to adapt Resource capacity planning needs according to organization structure whether it be a sustained work environment or fast paced agile work environment. Moreover, this paper will outline the challenges faced by organization in adopting this approach and how do the organizations combat this situation. Additionally, this paper will highlight the statistical data gathered by various organizations on how resource capacity planning has significantly improved the operations and steered the path to success.
What is Resource Capacity Planning and Demand Management?
Resource Capacity Planning is the ability to assess the resource availability and the resource load of all the resources that exist in an organization to perform the work versus the total anticipated projects and projected load of future projects that the organization plans to accomplish in a certain period. (Vandersluis C., 2015)
Resource Management mainly focuses on ongoing assignment and maintenance of organizational resources as part of project operations and execution. In contrast, resource capacity planning is the act of assessing available capacity during the demand prioritization and selection process. (Manas J., 2016) In short, it’s the act of assessing whether the needed skills and roles are available to perform an incoming task before scheduling the resource against the task to be done. Also, capacity planning is intended to schedule the task whenever there is an availability or make suitable tradeoffs to free up the resources or initiate a possibility to staff the work alternatively if there are resource constraints.
Role of Capacity Planning in Project Management
Capacity planning plays a vital role in project management as it is an effective way to explore who is available at any given time from the pool of resources for any particular project work.
Thus, it provides a single resource pool to track the people, their skills, and their availability. Capacity planning makes the human resource management transparent and dependable to plan the project activities with confidence. Once the resource capacity planning and demand management is analyzed successfully, it would be effortless to assess the success and feasibility of the project within the given the resource constraints and to understand the impact of executing a particular project on other projects running concurrently.
“Run your practice like an airplane – always stay at about 85% to 90% capacity” to:
- a. Leave room for last – Minute Clients
- b. To absorb system Shocks
- c. To Always Be Selling”
Ronald J. Baker, Value Pricing Expert
Value of Resource Capacity Planning and Demand Management in IT projects
Resource Capacity planning has a significant role in planning the IT project as it serves as a crucial junction to know and achieve the resource supply and project demands balance. In short, Resource capacity planning is a highly effective and easy way to find out which resource is available at what time to work on project assignments.
Resource capacity planning serves as a great value proposition tool for any project (see Figure 1) as this approach relies on using a single resource pool to track the resources, their skills and their availability, thus, making the entire human resource management transparent and reliable.
Augment Resource Utilization
Resource capacity planning enables the manager to get more work done from same number of people by overcoming resource availability challenges and, thus, increasing the chances of project success through positive project delivery. For instance, Resource Capacity planning helped one of the organizations overcome their resource availability challenges. A company substantially increased their delivery capacity by 11%. This was not by introducing new resources but simply through better visibility of resource availability, thus, being able to maximize their utilization. (Jordan A., 2016)
“When it comes to project resource management, many organizations take the path of least resistance- doing what is easy over what is effective.”
– Andy Jordan, President, Roffensian Consulting
Improved Time Management
Project team can organize their time more effectively and can stay on top of the priorities and workload as they can forecast their tasks and avoid unforeseen assignments
Effective Resource Planning
By giving a broad insight to the resource pool and resource availability at any given point of time, the functional manager can effectively plan in terms of accurate forecasting for the resources by keeping them engaged effectively for a given timeframe without over allocating or under allocating them. Further, manager can rotate the resources as desired to meet any strategic requirement. Thus, it makes resource management stress free as the manager can easily locate resources and assign them to the project.
Improved Team Morale
Since the manager has transparency to view resource pool and is aware of resource availability and allocation capacity, project team can deliver conclusive results and maintain positive morale at the same time. Team can avoid a burnout and display better productivity to yield optimum project delivery results.
The decision maker only needs to know the capacity of the resource and the ability of the resource to accomplish the task at any given point of time to derive at the projected availability of the resource to fulfill other tasks that the resource can take on simultaneously.
-Ian Vacin, VP, Education at Karbon and Karbon Academy
Access Real Time Data
With resource planning, manager has upfront knowledge about the resource availability, which avoids the hassle of scheduling the people when the resource might be unavailable at a given time to perform a task. This helps the manager to deal with a realistic scenario and avoid unproductive situations thereby increasing chances of on time delivery.
Critical Factors Involved in Determining Optimum Resource Capacity Planning and Demand
Effective capacity planning is dependent on several factors such as organization structure, legal regulations, technology, staffing needs and urgency to meet the goals. The approach taken to plan the resource capacity and demand depends substantially on how the firm is structured- Vertically, Horizontally or Hybrid.
Vertical Structured Companies
These companies also called as “functional” or “tall” organizations are fairly common forms of organization. These organizations are governed by the top decision making management which delegates authority to lower level managers. (Allbusiness.com). Organization departments are grouped based on the specialization and project communications are handled within the same specialization. It is relatively easy to perform resource planning in a vertical organization as the top authority determines the work hours and the processes to be handled by the delegating teams who is responsible for completing the work.
Horizontal structured companies
This structure can also be called as “Project” based where a resource provides his skill and services across multiple projects as and when needed to serve the client fully. Thus, the same resource can be working across multiple projects under different managers at the same time. Since the resource is performing the same focused work across different projects, the manager needs to have a clear idea of how many tasks need to be done by the particular resource to support each project, how long the task will take and what is the resource’s throughput to determine the required capacity of the resource.
Hybrid Structure Companies
This structure also called as “matrix” is complex as it involves both Functional and Project based structures. Resource capacity planning for hybrid structure needs meticulous planning and frequent interactions across functional manager and project managers to determine the capacity of each resource.
Short term resource capacity planning focuses on scheduling needs, multiple assignments allocations, balancing resource capacities and capabilities, hiring and cross training requirements, activates related to increasing the turnover and production. Long term resource capacity planning refers to planning geared around channelizing the resources during mergers, acquisitions, relocations, reorganizations to retain the resources effectively and avoid duplication of skillsets.
Challenges faced for Capacity Planning
With pressing business needs, and the impulse to deliver the organization requirements at the earliest, resource capacity planning seems to be of less significance for the management. Most of the times, management feels there is no adequate time or staff available to invest in resource capacity planning practice.
Who is responsible
Moreover, many organizations still struggle to understand the concept of resource capacity planning and its benefits. Besides, what is the optimum organization structure to effectively plan the capacity and demand management is also subject to several questions which makes resource planning very difficult to practice and thus companies are not willing to adopt it in their work culture.
Sharing the true data
Sometimes the actual resource utilization and demand are not projected intentionally or the numbers provided may be misleading. The project managers may fear that true revelation of resource utilization can create awareness for other managers and they can acquire the resources for their project. This is especially true for the key resources who deliver core competency across various areas and are in high demand. The fear to lose such a skilled resource causes the managers to pad the project requirements and project 100% utilization for the skilled resource. At last, these skilled resources are the assets that a project manager want to retain first and for the longest time in their project. Thus, sharing the true data can be a huge disincentive for project managers. (Vandersluis C., 2015)
Insufficient Visibility
According to Plain view, 2016 benchmark study, many managers face with the issue of insufficient visibility into pipeline demand or resource availability. Besides, many organizations face with ineffective demand prioritization and governance process which makes Resource Management and Capacity Planning a laborious task to execute. Further, companies do not have the right tools and resources in place to conduct what if scenarios and extensive research study to understand their business model and capacity needs.
How to achieve Capacity Planning and Demand in IT Project Environment?
Resource planning approach varies if the organization work environment is systematic and standardized versus if the firm’s demands are uncertain and variable. In the streamlined and stable work environment, the manager can define a consistent resource planning strategy using the below steps:
Step 1: Learn about your workforce
Manager needs to figure out how much work can a particular resource handle, what is the competency of the resource in delivering a particular task. Based off this knowledge, manager can develop a matrix with some key features such as delivery rate, work handled, skill set, business knowledge. Manager can grade the resource on a scale and develop an evaluation chart.
Step 2: Evaluate Resource’s Productivity
Manager needs to assess each team member’s strength and weaknesses and how the team member performs best under given situations. Based off this data, manager can assess the throughput of the resource.
Step 3: Conduct Needs Analysis
Manager defines the total scope of work that needs to be completed for the given project. The work outlined should be broken into workable packages ready to be allocated to the resource or joint resources based on task complexity and criticality to deliver.
Step 4: Conduct Resource Supply Analysis
Keep the resource calendars updated regarding time offs, vacations etc. Identify the right resource/resources to handle the tasks, and the throughput of the resource to analysis the need for demand. For instance, if a resource A works, 40 hours/week and resource B works only 20 hours but 1.5 times faster, then resource B works 30 hours effectively compared to other resources.
Step 5: Come up with Gap Analysis
Once the needs analysis and supply analysis are performed, identify the task that needs special skillset to fulfil, establish the hours needed to perform that task and assign the task to the resource that can specifically accomplish the task in a way to possibility avoid overlaps or over allocations. Even after allocating the man hours to the tasks, there is a strong possibility of have gaps in supply and demand when the firm does not have skilled staff to fulfil a particular task or the firm has a staff with the kind of work that can be delivered in the month time.
It is mandatory to bridge such gaps by following the short term or long term strategies
(See Figure 2):
Short Term Strategies:
- Increase capacity: have people work overtime or bring more skilled labor
- Increase time: Request the client to push the deadline in future
- Decrease the quality – This is not usually recommended
Long Term Strategies:
- Cross train the staff: Broader skill set for the staff will help fill the gaps easily
- Time your work in phases: This can help create some efficiencies though not always
- Increase time: Request the client to push the deadline in future
- Decrease the quality – This is not usually recommended Time
Figure 2: Short Term and Long Term Strategies
Step 6: Develop a strategy
Managers needs to devise a strategy where they can constantly update the plans based on demand and supply needs. Due to this limitation, pull strategy is a better way to plan for long term needs.
Resource Capacity Planning for Agile Work Environment
Resource capacity planning in agile work environment is mainly dependent on Kanban process where the work is ‘pulled through’ from one phase to another till the end of the process and no new work is added until something is completed. This helps to keep the resources focus on current tasks without adding additional liability.
(See Figure 3)
Figure 3: Resource Capacity Planning in Agile Work Environment
Impact of Resource Planning on Project performance and outcome
Planview conducted a detailed benchmark study on Resource Management and Capacity Planning in 2016 and captured some of the interesting facts to show the competitive advantage that Resource capacity planning offers to the organizations that practice this approach versus those that do not. (Planview, 2016)
Per the research, increased resource capacity planning helps to achieve below:
- Accelerated product Innovation while lowering risks
- Speeding decision making by 27%
- Improving prioritization by 25%
- Act on new opportunities in hours rather than in weeks
Study also shows that poor capacity planning can lead to:
- 77 % Overcommitted resources
- 62% Inability to prioritize resources
- 56% Inaccurate resource estimates
- 56% Lack of real-time resource projects
Study summarizes some of the key business risks the organization will be exposed to, if it does not practice Resource Capacity planning and management optimally. (See Figure 4)
Figure 4: Top Business Risks of Not Addressing Resource Capacity Planning
Further, a detailed benchmark study in 2013 (Planview, 2013) found a direct correlation between high resource management, capacity planning maturity levels and organizations ability to plan, prioritize and adapt to change. (see Figure 5)
Figure 5: Maturity Spectrum
Who has the responsibility to perform Capacity Planning and Demand in the organization
It has been always one of the most contentious issues to decide who is the organization gets to assess the resource capacity planning and demand management needs in a multi project work environment. Typically, organizations use matrix structure where the resource will report to a respective functional department manager and concurrently will be responsible to the project manager for the project the resource is supposed to work for. It is a strenuous situation where the project manager needs to control the resource for the effective project delivery, and the resource manager at the same time needs to assure, particular resource is not overwhelmed on a given project. (Vandersluis C., 2015)
In a project based work environment, Project manager can perform the resource capacity planning and decide on resource supply versus pipeline demand in a more streamlined and organized fashion. However, the retention of resources over long term is indefinite as the resources are bond to release after the project term ends. Thus, the availability of resources on a long run is highly volatile under project based organization structure.
Future of Capacity Planning
The significance of Resource capacity planning and demand management has been realized for quite some time but it is becoming more prevalent lately with increase in fast paced digital era where the business needs to act proactively to capture the customer base.
Companies are increasingly investing time, money, and efforts to plan the resource capacity and perform demand management to support the IT initiatives, meet the customer expectations and attain better value from the service provided.
Still, in coming years, lot of organizations need to adopt this practice and make Resource capacity planning a part of their routine practice to yield optimum benefits.
About Author
Dr. Nidhi Gupta is an accomplished professional who has served the healthcare industry for over 10 years as a dental surgeon in India and as a lead consultant to the nonprofit organization of Health and Human Services for the state of Texas to assist with healthcare programs, eligibility, business data analytics, and reporting needs. She acquired her bachelor’s degree in dentistry in India and has worked in various clinics and hospitals to support healthcare and dental needs. She has also presented various scientific papers at state and national conferences to spread the latest trends and significance of proper diagnosis in healthcare.
In addition, Dr. Gupta attained her master’s degree in business administration from Tarleton State University and holds both the PMI Agile Certified Practitioner (PMI-ACP)® and Project Management Professional (PMP)® certifications to reinforce the business and management tenets for state healthcare and the public sector industry. She has worked as a project manager at the Department of Transportation to delineate the infrastructure and security needs for the public sector.
Dr. Gupta has also worked as an editor and writer for the “Erath County Business Report” newsletter to highlight the business and GDP milestones on a quarterly basis. She has also provided valuable insights to the city of Austin, Texas, and has been recognized agency-wide for her vital contributions to promote a green building program for increased health benefits and energy conservation. Dr. Gupta currently serves as the volunteer chairperson for social media and marketing for the PMI Austin Chapter.
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