PPM 101 - What is Resource Capacity Planning?

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Taken from acuityppm.com/ppm-101-the-cha...
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. This enables companies to better manage resources in order to take on new work and accomplish existing strategic projects.
What is the difference between resource utilization and resource capacity?
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.
How should I measure utilization and capacity across the project portfolio?
In order to measure utilization and capacity for people or roles, need to know a few basic things:
1) All the projects in the portfolio
2) The forecasted utilization for that role for each project in the portfolio for a given timeframe (e.g. monthly)
3) The amount of non-project work time for that role for a given timeframe (e.g. monthly)
4) The standard available working time for that role (typically 40 hours per week)
What is the purpose of resource capacity planning?
Managing resource capacity helps us 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)
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:
When do we have capacity to commit to additional work? (portfolio-oriented)
Are resources available to complete our committed work? (project oriented)
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. 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 second question “are resources available to complete our committed work?” is a project-oriented view. The focus is on a single project. 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. 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.

[@Amazing4u]

Simple, clear, and direct to the point. Thank you for posting, keep it up.

[@AcuityPPM]

Thank you, Ali! If you haven't already viewed it, we published a new video on best practices for resource management.

[@davidcchambers]

Well thought out presentation accurately describing the complexity of the topic. I'm a new subscriber!

[@AcuityPPM]

Thank you, David. We appreciate that. Yes, capacity planning sounds simple in theory, but is very tough to do in practice. Measuring capacity and utilization at a higher level (and for critical resources) is a great way to get value quicker.

[@CenfJ]

Awesome video, as a junior PM I’m up against this right now. Everybody scrambling for engineers and myself trying to provide justification at why we can / can’t take on more work. Then a director comes in and plucks someone out of thin and knocks everything out of kilter! We don’t use 3rd party resource solutions, there’s MS Project but not enough PM presence to have a schedule for everything which would roll up to a complete view. We have to get by in opinion and levels of effort most times, the phasing you describe is the view I provide at the minute. Refreshing to see a pinpoint succinct explanation, thanks man

[@AcuityPPM]

Hi Colum, thank you for your feedback. We appreciate that. Resource capacity planning is one of the most difficult pieces of portfolio management due to all the moving parts. One place to start is to identify some of the key bottleneck resources (such as Engineers) and put a mechanism in place to review resource requests for those key groups. In a sense, people will think such a process will slow everything down, but in actuality, that coordination will enable the higher priority projects to continue with fewer resource risks. Feel free to contact us to keep the conversation going: acuityppm.com/contact-us/ Thank you!

[@mi98joni]

Thanks hopefully a lot to get started

[@AcuityPPM]

Thank you, Niclas. Yes, resource capacity planning is one of the hardest components of project and portfolio management. It takes time to build up this skill. Two quick recommendations - help the project teams improve their planning and estimation and on the portfolio level don't collect too much data. Collect enough data to make better decisions.

[@selflove96]

Thank you for sharing