5 Capacity Planning Strategies to Prove Your PMO’s Value

Protect your bottom line by spreading resources wisely from the top down, across the enterprise

Capacity planning or effective use of your resources is one of your most important jobs as a project management leader.  Historically, effective capacity planning has been a challenge for many  organizations, filled with multiple spreadsheets and lots of guesswork.  This approach has resulted in more projects being approved than can be delivered. And without clear visibility into capacity and a corresponding control of this aspect of your program and project management, this can often result in excess overtime, ill-advised hiring and rupturing financials.

With skillful resource demand planning, without pushing your talent to their limits, you can be successful and protect the bottom line. Here are five ways to create successful capacity planning processes that result in sound financials:

1. Build realistic utilization formulas to connect your people to costs

Your skilled resources can’t finish working on one project today and then start something completely different tomorrow at the same speed of productivity and efficiency. It takes a while to adjust — to drop one piece of work and start a new piece of work. And when team members who are assigned to multiple projects at the same time have to switch gears, it becomes costly. With the proper utilization percentages, your plans will be realistic and give better visibility into the true constraints and gaps. Managing the financial capacity against your resource plan seems like an obvious thing to do, but many companies just don’t have the visibility to do it.

2. Analyze the project mix

You have to do your homework and effectively match projects and resources to make the most money and meet strategic goals. A resource with the flexibility to be a project leader, implementation consultant or a developer, as required, also retains more value as you’re assigning resources to a wide array of projects. Identifying what kinds of projects deliver the most ROI is an important exercise towards meeting your deliverables within budget.

3. Manage resource gaps appropriately

There will always be resource gaps to manage so make sure you have cost profiles for build versus buy, and for rent versus outsource for your resource teams. Compare costs for developing employees for a particular skill, versus outsourcing a particular capability or contracting for it. You need hard numbers for each of these decisions when managing gaps, or you’ll be spending too much and losing margins or spending too little and losing clients (or sponsors’ trust) due to poorly-developed resources or inappropriate expertise on the job.

4. View from enterprise level

If you’ve met the three objectives we’ve discussed above for only one department or services delivery silo, you can still lose money. The only way to connect true costs to each of these actions is to do it from the top down. Otherwise, there will be the hidden costs inherent in being surprised when the right hand doesn’t know what the left hand is doing. Never mind the dreaded “opportunity cost,” when valuable resources are underutilized or working on a non-business critical project when elsewhere in the portfolio, strategic projects are starving for the value they could bring.

5. Manage benefits for your particular business model

What is your value proposition when your projects are meeting their goals, both financially and strategically, and how can you measure your resource usage against these winners? How can you avoid applying resources to an unprofitable project that you don’t know is a loser, because your resource use doesn’t have an assigned cost per project? We’ve seen that capacity planning always has a corresponding cost. If you can identify these costs to make sure the benefit outweighs the financial strain for the short term and investments in the long term, you can be assured your company is headed in the best strategic direction possible. And that means you will be getting the most “bang for your buck.”

Lauri Klaus

Lauri Klaus

Lauri Klaus is the CEO and Cofounder of KeyedIn, a Minneapolis-based company that helps organizations simplify business processes, improve performance and drive results through its innovative SaaS-based PPM, PSA and ERP business solutions.

1 Response

  1. This is really an excellent article–I think that PMOs have a particularly tough time proving out resource gaps when there’s so much guess work involved. The problems associated with opportunity costs and capacity planning are VERY REAL and should be accounted for.

    I took a look at the many factors affecting resource capacity planning for 2019 and did a bit of a roundup of my own. I imagine that folks interested in upping their PMOs value might be interested in how capacity planning is evolving with the changing office: https://blog.resourceguruapp.com/6-major-factors-affecting-resource-capacity-planning-in-2019/

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