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“Your workforce is your most valuable asset. The knowledge and skills they have represent the fuel that drives the engine of business.”
~ Harvey Mackay, an American businessman.
It is undeniably true that the workforce is pivotal to every project’s success. Therefore, organizations need to ensure they have competent resources to fulfill ongoing and future project demands.
This is where capacity planning plays a significant role. It helps bridge the capacity and demand gap proactively and meet resource requirements efficiently.
However, it is easier said than done. Challenges such as poor visibility into future demands, market volatility, changing business demands, sales-delivery misalignment, etc., make it cumbersome for managers to create an efficient capacity planning framework.
This article highlights the consequences of poor planning and how Saviom’s resource management software can help overcome them.
So, let’s get started.
1. Resource capacity planning: definition and its significance
Resource capacity planning refers to the process of foreseeing the gaps between the capacity and demand, identifying resource excess/shortfall, and eliminating it ahead of time. It is beneficial in several ways, as follows.
- Allows the sales team to forecast pipeline project demands and helps the delivery team assess them to determine if they have the right resources available for the project. Thus, it helps ensure sales-delivery alignment.
- Helps identify skill gaps and shortages ahead of time and implement resourcing measures such as training/upskilling, hiring, etc., to bridge the same.
- Reduces project resource costs by eliminating the allocation of under/over-skilled resources and enabling the deployment of a cost-effective global workforce.
- Enables a detailed analysis of resource requirements to determine if they are one-off or recurring and hire a permanent or contingent workforce accordingly to prevent expensive hiring/firing cycles.
- Maximizes productive utilization of resources by gaining foresight into billable and strategic utilization of the workforce ahead of time.
Now that the benefits of capacity planning are clear, let’s understand how inefficient capacity planning can be detrimental.
2. Effects of ineffective capacity planning
Improper capacity planning can have multiple repercussions on a firm. A few prominent ones are listed below.
2.1 Increased skill mismatch and gaps for pipeline projects
A lack of effective capacity planning may lead to incompetent allocation of resources. As a result, resource managers might allocate under-skilled employees to critical projects or niche-skilled resources to low-priority work, leading to skill mismatches.
In addition, inefficient capacity planning makes it challenging for managers to identify skill gaps in advance and implement training and upskilling opportunities to bridge the same. Furthermore, it can also cause wrongful hiring of candidates, making it difficult to fill the existing skill gaps efficiently.
2.2 Excess/shortage of resources
If capacity planning is inefficient, resource managers fail to compare and analyze resource capacity and demand. As a result, they will not be able to identify capacity vs. demand gaps and mitigate resource shortages or excesses.
When there is a resource shortfall, the available resources will be allocated to projects beyond their capacity leading to overutilization, subpar deliverable quality, schedule overruns, etc. In case of resource excess, finding the right work for additional resources may become difficult, resulting in underutilization, increased bench size, etc.
2.3 Sudden surge in bench size
Due to a lack of visibility into projects and resources’ schedules and an inappropriate capacity planning process, managers fail to foresee the ramp down activities where resources are rolled off on a large scale. This may result in a sudden unmanageable increase in bench size.
Since benched resources cannot utilize their skills efficiently or generate revenue, it can lead to low morale and billable losses. Further, failure to find suitable work for the benched personnel leads to disengagement and low productivity, eventually increasing unplanned attrition.
2.4 Unavailability of niche-skilled resources
Niche-skilled resources are often scarce in the market. Without a robust capacity planning strategy, resource managers fail to foresee demand for these resources across pipeline projects ahead and determine their availability.
As a result, they may not be able to initiate appropriate measures like hiring, out rotation-backfill, etc., proactively, leading to a shortage or unavailability of niche-skilled resources. Thus, managers might allocate non-critical resources or resort to last-minute hiring, causing schedule/budget overruns.
2.5 Incompetent resource allocation
Inaccuracy in assessing the nature of future project demands makes it arduous to identify suitable resources for each job. So, even if the workforce with requisite skills is available, resource managers may fail to assign the right people to each project, leading to incompetent resource allocation.
If they allocate under-skilled resources to a high-priority or critical project, it may cause employee burnout, poor performance, low productivity, and subpar deliverable quality. On the contrary, assigning critical resources to low-priority projects or tasks can cause disengagement, low morale, and unplanned attrition.
2.6 Frequent hiring/firing cycles
A lack of visibility into pipeline projects’ demands causes the inability to evaluate and determine if they are one-time or recurring. As a result, organizations hire permanent employees for short-term requirements. However, since allocating to new projects becomes challenging, they are eventually released from the organization.
In other cases, resource managers may end up hiring an on-demand workforce for recurring demands, increasing hiring costs. This frequent hiring/firing cycle can jeopardize a firm’s reputation and cause a loss of market opportunities due to challenges in attracting the right talent pool.
2.7 High unplanned attrition/absence
A poor estimate of future project requirements can cause a misalignment between capacity and demand. When resource capacity exceeds demand, a significant number of resources hit the bench as there are no suitable opportunities to utilize their capacity. These benched resources may feel disengaged and leave for other organization.
When demand exceeds capacity, catering to multiple project requirements simultaneously becomes hard. Hence, resource managers assign resources to additional projects beyond their capacity, leading to overutilization. If left unchecked, this work overload can entail burnout, prolonged absences, and eventually, unplanned attrition.
Given the best capacity planning methods, the following section explains how a resource management solution can enhance it.
3. How can resource management software help improve the capacity planning process?
Saviom’s advanced resource management software helps streamline capacity planning in several ways. Here’s how.
It provides enterprise-wide visibility resource visibility and advanced filters, including competency, skill, location, etc., to help find suitable resources for each project, ensuring competent allocation.
Further, the capacity-vs-demand report reports help forecast pipeline project demands, identify resource excess/shortfall, and take suitable resourcing measures to eliminate it proactively.
The tool also provides the people-on-the-bench report that shows resources already benched and those scheduled for roll-offs to hit the bench. In addition, the project vacancy reports showcase future vacancies. Managers can leverage these reports to allocate benched resources to suitable projects, thereby reducing their idle time and minimizing billable losses.
Additionally, utilization reports and color-coded heatmaps help identify instances of under/overallocation and take corrective measures to eliminate them. Thus, all these functionalities cumulatively help enhance the process of capacity planning.
4. Conclusion
Resource capacity management is the key to an organization’s success and sustainability. It helps a firm fulfill multiple projects’ demands seamlessly, stay resilient to market volatility, and maintain a competitive edge.
By following the proven practices discussed above and implementing a next-gen resource management solution, a company can formulate a robust capacity planning strategy and ensure business productivity and profitability.
So, are you ready with your capacity planning framework?
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This content is brought to you by Mahendra Gupta
Photo provided with permission from Saviom.