Ok, hold on to your hats. Now we get into the nitty-gritty of the resource capacity planning process.
Calculate resource capacity
Obvious as it sounds, the first step in the resource capacity planning process is to calculate your resource capacity. This means creating a complete inventory of all the resources involved in your projects (including any freelancers or contract staff if they are involved in your projects).
Calculate their core working hours
For each of your resources you need to understand their core working patterns. Are they full time, part time and if part time how many hours do they work each week? Also remember that resources in different locations may have different working patterns.
Account for holidays, vacation, sickness and other absence
A common mistake when calculating resource capacity is to assume that resources will deliver 100% of their core working time as capacity for project work. People generally have between 3 and 5 weeks vacation each year, sick days which average around 5 days per year and public holidays which can vary between 5 and 15 days depending on location.
So it is essential that these are reflected into the resource capacity calculations. The way to do this is by looking at prior years and establish a trend by month for capacity variances. So for example in the UK we can reasonably assume that the summer months will have less capacity than November. A trend is the only way to model this as your capacity plan will probably be running out further than people book actual vacation days and you cannot plan on what days people will be sick.
Given the above information you can calculate the capacity of your resources. For resource capacity planning purposes it is normally sufficient to hold this information at a monthly level.
As a general rule of thumb resources on average lose between 10 – 15% of their capacity due to vacations, sickness etc.
Account for overheads / business as usual activities
Ok, so you have come up with a figure per resource for the capacity they can provide (based on core working hours less holidays, sickness etc). However we still need to reduce this capacity figure further to reflect real life.
Resources have other activities – administration, meetings, chatting around the water cooler which they do. Again the best way to model this is via a trend. Ideally this trend should be modeled at the role level. For example a junior consultant may spend less time in meetings than a senior consultant.
When working out a trend figure for overheads it is important that you are not double accounting for overheads. The work estimates for the projects themselves (i.e. the demand) should already include the overheads for that project. So we should ignore this in the capacity calculation (in reality it is actually demand). What we need to include in our capacity calculation is the overheads the resource will incur for non project related activities.
A recap of the resource capacity calculation
Ok, let us just recap the above in a couple of lines.
Resource capacity = core working hours – sickness trend – holiday trend – other absence trend – overhead trend
And a key thing to remember is that absence trends and overhead trends can vary by location and role.
Organize resource capacity into roles
The next thing to do is organize your capacity into roles. So for each resource work out what they do – are they a project manager, a business analysts etc. Then total the resource capacity by role. Also remember that some people may split their time across more than one role.
Forecast your demand
Now, you need to look at all the demand being made on your resources and record this by role per demand item (a demand item could be a project, a programme or a business as usual activity etc). Again hold this information by month. So you should now know for each project etc. what level of resources roles are required and when.
Are general organization overheads demand?
As we stated above, organization level overheads (i.e. training, seminars, appraisals etc.) that reduce a resource’s availability for work should be handled by reducing the resource’s capacity. They should not be modelled as demand items as they are rarely discretionary. The demand items should be things that your organization can choose to do or not do or defer to a later time. In the round this is rarely the case for organization level overheads. However if you wish you can model overheads as demand – just remember to adjust the capacity calculations accordingly.
Look at the gaps between your resource capacity (supply) and resource demand
The final step is to analyze the difference between your resource capacity and resource demand. A shortfall of resource means you either need to hire more resource or defer or cancel some projects.
Solving capacity planning problems
If organizations have a shortfall of skills they can hire more resources but in reality there may be no budget for new hires and new hires take months to come on stream and add value. The biggest levers we can pull to solve capacity issues are typically on the demand side.
How often to re-evaluate your capacity plan
Often capacity planning is an inherent part of the overall portfolio management process (PPM) and so the frequency of capacity planning is often driven by the portfolio review process. However there is no right or wrong answer here and it really depends on your organization.
Most organizations following a PPM process review their portfolio between once a month and once a quarter. This process will involve giving new projects the green light, killing off projects, reallocating resource and reviewing resource levels. So in those organizations the capacity planning process is very much tied to the PPM process. However in organizations who only review their portfolio say every three months, often resource managers will still validate the capacity plan monthly (by feeding in updated estimates from project managers) to spot problems early.
In organizations with a less formal portfolio management process, the triggers for reviewing the capacity plan tend to be things like:
A project coming to an end.
You need to start up a new project.
Sales activity (or lack of) forces a review of resource capacity.
It is time to review budgets.
You have enough information about the next chunk of work on a project to start planning resource needs.
Capacity planning time frame
It is important to set a realistic time frame for resource capacity planning. Organizations would love to be able to have a crystal ball and forecast resource needs into the distant future. However this is simply unbelievable as most organizations work is too volatile and dynamic to allow this.
It is essential to strike a balance between a planning time frame that provides sufficient detail for the organization while not becoming too time consuming, inefficient and costly to maintain. A typical resource plan covers the next 3 to 6 months (more typically 3 months). While a typical capacity plan covers the period to around 12 months out.
Check out our post about the differences between resource planning and resource capacity planning which covers this in more detail.