PPM 101: The Challenges of Resource Capacity Planning

Resource capacity planning is a critical function of portfolio management. Organizations commonly want to understand resource availability because every company has a limited number of people. On paper, capacity planning sounds simple – compare resource estimates against available time to work. In practice, but it is perhaps the most challenging discipline. In this post we will provide an overview of resource capacity planning and conclude with recommendations for successful capacity management.

What Is Resource Capacity Planning?

Resource capacity planning is about comparing future resource utilization of project resources against available capacity to do work. Utilization is the amount of effort a person spends on work (project work, operational work, etc.) during a given amount of time. Capacity is the standard amount of time available to do work. In order to accurately measure utilization and capacity across the portfolio for each resource role we need to know a few basic things:

  • All the projects in the portfolio
  • The forecasted utilization for that role for each project in the portfolio for a given timeframe (e.g. monthly)
  • The amount of non-project work time for that role for a given timeframe (e.g. monthly)
  • The standard available working time for that role (typically 40 hours per week)

Collecting this information for a given resource pool is at the heart of capacity planning and enables us to answer two fundamental questions:

  1. When do we have capacity to commit to additional work? (portfolio-oriented)
  2. Are resources available to complete our committed work? (project oriented)

The Portfolio Oriented View of Resource Capacity Planning

This first question is portfolio-oriented in nature to help senior leaders on a portfolio governance team understand when new project work can be initiated with available resources. Understanding resource availability informs whether new projects can be successfully completed on time, on scope, and on budget. If a project is initiated when there are inadequate resources, it often requires some of those team members to work above their available capacity or they work less than the project forecasts which in turn extends the project and results in extra multi-tasking. Both of these conditions should be avoided. Unfortunately, the most critical project resources are almost always fully utilized. When there are inadequate resources for a new project, the portfolio governance team has a few options:

  • Add more resources (often through contractors or hiring new employees)
  • Reduce the work of existing resources to make them available for new project work (often by cancelling existing projects or putting projects on hold)
  • Reduce the scope of the new project to fit within the current availability
  • Extend the duration of a project to fit within the current availability

The Project Oriented View of Resource Capacity Planning

The second question “are resources available to complete our committed work?” is a project-oriented view. The focus is on a single project and whether there are any new resource shortages or constraints that would prevent the team from hitting their schedule, scope, and budget targets. The same resource data used to compile the portfolio level view can also be used to drill down to a single project view and give the Project Manager a look ahead to identify potential constraints or resource gaps. No Project Manager wants to get surprised by having fewer team resources than expected. Unfortunately, it happens far too often. When a resource shortage occurs, the Project Manager has a few options:

  • Negotiate with the portfolio governance team to get the necessary resources
  • Add more resources (expensive and possibly difficult to do)
  • Revise the scope of the project
  • Extend the duration of the project

None of these options are particularly desirable and should be avoided.

Resource Capacity Management

Based on what we have covered so far, you can begin to see why resource capacity planning is difficult. Now we will discuss how to collect the data needed to manage resource capacity, starting with the project teams. Resource capacity planning represents the greatest overlap between portfolio management and project management.

It Starts with the Project Manager

The primary data needed are resource forecasts for each project; these forecasts are provided by the Project Manager and are based on resource estimation. As soon as we talk about estimation, it should trigger a response that the data is not 100% accurate. That’s right – resource capacity planning is based on less than 100% accurate information. In fact, every human being struggles with predicting the future. That is one reason why resource capacity planning is difficult.

Estimating is Based on Project Planning

When it comes to resource estimating, it is largely based on the project team’s ability to plan. Project planning needs to consider:

  • Project scope
  • Tasks (what needs to be done to complete the project scope)
  • Costs (or effort, often measured in hours)
  • Duration (how long will each task take)
  • Resources (who is doing the work)
  • Task dependencies (relationships to other activities)

The better the team can plan, the better the resource estimates will be.

The Portfolio Manager Makes Sense of All the Data

The job of the Portfolio Manager (or portfolio management team) is to collect the resource data, aggregate it, analyze it, and report back to the portfolio governance team. This role is central as it coordinates across project teams, resource managers, and the portfolio governance team.

Resource Capacity Planning Involves Many Moving Parts

The graphic below highlights the many moving parts of resource capacity planning both at the portfolio level and at the project level. A breakdown in any of these areas will degrade capacity planning; therefore aligning these process areas is critical.

At the portfolio level, we have three components:

  • Resource data: ensure timely and quality resource data
  • Resource analysis: requires analysis and report building skills by a dedicated portfolio team
  • Portfolio governance: requires senior leaders in the portfolio governance team to regularly review resource data, understand how to use the resource reports, and make quality and timely portfolio decisions.

At the project level we also have three components:

  • Good project planning: to ensure scope is defined, tasks are defined, and estimate duration and effort
  • Resource management: identify the right resources needed according to their skills, ability, and interest
  • Strong communication: ensure timely and quality communication among the project team and all resource managers

Resource Capacity Planning

 

Challenges with Resource Capacity Planning

We now need to cover specific challenges with resource capacity planning so that organizations can address these challenges and be successful with their capacity planning efforts.

Project Management Maturity

The ability to create a solid project plan is largely based on the skills and ability of the Project Manager. Good Project Managers will work with their team to co-create the project plan and spend ample time to drill down into the details. Unfortunately, many organizations lack the rigor or discipline to create good project plans for all projects in the portfolio. This is further hampered when people have the role of ‘Project Manager’ but do not have formal training or leadership skills to create a proper plan. This directly relates to the project management maturity of the organization.

Data Granularity

When collecting resource forecasts there are varying levels of detail that a Project Manager can collect:

  • Organization: should resource data be collected at an organizational team level? By role? Or by name?
  • Timeframe: should resource data be collected at the quarterly level? Monthly level? Weekly level?
  • Project schedule: should resource data be collected at the project level? Phase level? Task level?

It is important for organizations to be clear about the level of detail required to successfully capture resource utilization and capacity. The more granular the data, the more effort is required to collect and maintain the data.

The Portfolio Governance Team

Surprisingly, senior leaders who are part of a governance team also pose a challenge to managing resource capacity. We’ve seen one of three possibilities:

  1. Leaders question the data: even if senior leadership initiates resource capacity planning, some leaders will question the quality of the data (especially if they don’t like what the data is telling them). If senior leadership waits until resource data is 100% accurate, they will never use the data.
  2. Leaders ignore the data
  3. Leaders are unsure how to use the data

Resource Capacity Planning Tool

Another challenge is how to collect and store the resource data. For very simple teams, a spreadsheet can be used, but it is still challenging not only to input the data, but even more, to analyze the data properly. Project Managers need one view, Portfolio Managers need another view, and Resource Managers need yet a third view. Spreadsheets become unwieldy once you start tracking data across a large number of projects with multiple roles. Portfolio management software is important for getting the right views of the data.

The Role of the Resource Manager

Another challenge involves the dynamic between the Project Manager and the Resource Manager. In some organizations, Project Managers can specify how much time they need for specific resources. In most organizations, a Resource Manager (the manager of a specific team of people) needs to be consulted before resources are assigned. This requires the Project Manager to negotiate with the Resource Manager for the necessary resources. This adds another layer of complexity on resource capacity management.

Things Change

The project environment is very dynamic: the external competitive landscape changes, internal leadership or organizational changes occur, people leave the company, budgets change, strategic goals shift – all of which affect project work. The resource plan created by the Project Manager is rarely static for very long. All of the above changes could prompt the Project Team to revisit all of their resource forecasts. The more detailed the resource plan is, the more work that is required to update and maintain it as external and internal factors affect project work.

Recommendations for Resource Capacity Planning

In summary, based on working with many organizations over the years, here are a few key recommendations:

  • Start with critical resources – don’t try to capture resource data for every project team member. Identify 1-2 roles that are consistently in high demand and begin capturing their utilization and capacity. This applies concepts from the Theory of Constraints to portfolio management.
  • Begin with project level or phase level estimates – don’t try to capture resource utilization at the task level. It sounds great and is the nirvana of capacity planning, but don’t do it. Less granular data can still be very useful for answering the two questions at the beginning of this post. Phase level estimates are good enough.
  • Use the data – senior leaders must begin using the data even if it is less than perfect. As soon as people learn that senior leadership is not using the data, people will stop spending time collecting and entering resource data.
  • Communicate – communicate to the organization how the portfolio governance team is using the data. Communicate what is expected and how it will help everyone be more successful.
  • Help Project Managers level up their project planning skills – good capacity planning is based on good forecasting. Give Project teams the training they need to get better at estimating.
  • Don’t start with time tracking. Time tracking has a place, but is not required to do resource capacity planning. Many well-meaning organizations have gotten stuck in the mire of time tracking without ever implementing capacity planning. Time tracking looks at the past, forecasting looks at the future. Time tracking is not a prerequisite for improving your forecasting skills.

 

Is your organization facing any of the challenges discussed above? Do you need help improving resource management? Contact us.