5 Best Practices for Capacity Management

Last updated on September 20, 2021

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Human resources are the success drivers of an organization. After all, their talent, skills, and efforts lead to the project’s success which in turn enhances your firm’s reputation and gives you a competitive edge. That being said, recruiting the right people for the right job is only the beginning. Additionally, it is required to manage and utilize the existing capacity of the organization as it enhances the profitability and sustainability of any business.

The entire process of matching the right skill set to the right job, ensuring optimal utilization of the workforce, and minimizing hiring/firing cycles constitutes capacity management.

This article entails what is capacity management, its significance, and the best practices to help you join the ranks of a well-managed business.

Minimize the Capacity vs. Demand Gap
Let’s begin with answering the first question,

1. What is resource capacity management?

Resource capacity management is essentially a strategy that accounts for the resources that are required to meet the project demands. It is the practice to optimally utilize the existing capacity before adding or hiring new resources. It enables you to:

  1. Provide the enterprise-wide visibility of resource capacity
  2. Make real-time data-driven decisions to bridge the capacity vs demand gap in advance
  3. Increase profitability by forecasting billable utilization of resources
  4. Reduce bench time with advance strategic planning

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Now that we know what capacity management is and its functions, let’s understand the important metrics.

2. What are the resource capacity management metrics?

The following resource capacity management metrics are an integral part of intelligent capacity management. They enable resource managers to take resource treatment measures well in advance.

  • Capacity vs demand

    Capacity vs demand is a critical metric that tells you about the shortage or excess of resources. Resource managers can bridge the gap proactively and ensure that neither the excess capacity is wasted nor the project have vacancies.

  • Resource utilization

    Resource utilization is a way to measure how effectively the resources are utilized against their available capacity. It helps you ensure uniform utilization of the workforce and keeps over or underutilization of resources in check.

  • Forecast vs actual time

    The forecast vs actual time lets you compare the booked hours against the actual time spent on specific project activities. It will help you protect your project costs and safeguard you from billing loss.

  • People on the bench

    Effective bench management is the cornerstone of a capacity planning strategy. Forecasting people on the bench is therefore a crucial aspect to allocate projects and tasks to the workforce in advance.

  • Project vacancy

    Project vacancy is an important metric that allows mobilizing your resources from non-billable or BAU tasks to billable projects. It also gives you enough lead time to retrain resources or hire new recruits.

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3. 5 best practices to better resource capacity management

3.1 Use a centralized platform to track competency across the matrix organization

It’s imperative for resource managers to stay up-to-date with the workforce’s competencies in a matrix organization. It helps them allocate the right resource with the right skills, experience, qualification, and expertise to the project tasks. However, with many businesses still relying on basic, outdated tools like spreadsheets for a crucial task like this, it becomes challenging. A centralized platform is critical to accomplish this task.

Enterprise-wide visibility helps you identify required skill sets and book the specific resources based on their availability.

This approach of using a centralized platform helps you plan new strategic projects that require niche skills. Since there is a significant lead time to acquire these resources from external channels, one can look for these skills internally. Once identified, outrotating the concerned resource and backfilling with a less qualified resource maintain the success of both projects.

3.2 Use effective capacity planning strategy to manage Pipeline Projects

Efficient capacity planning implies reduced hiring/firing cycles and intelligent fulfillment of short term/long term future demands. Resource managers should stay forewarned of future potential projects and subsequent resource demands. It will help you balance your resource pool with the right skills for the fulfillment of any open position.

In case there is a gap in skill set within your existing resource pool, you can proactively apply resourcing treatments. Some of these techniques are retraining or upskilling the existing employees or hire a permanent or contingent resource. These practices enable you to stay ahead of the curve and eliminate future project bottlenecks.

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3.3 Forecast your future capacity to maximize billable utilization

Utilizing your existing capacity to their maximum potential is at the crux of efficient and intelligent capacity planning strategy.

Having said that, only scheduling and allocating resources to any tasks does not complete the job. Resource managers need to ensure that maximum resources are booked for billable projects.

Centralized visibility in a capacity planning solution enables managers to mobilize resources from non-billable to billable and strategic projects.

Moreover, foresight into resources’ utilization will help managers take a proactive approach to increase billability instead of a reactive one.

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3.4 Implement a workflow for resource requisition and allocation

Resource requisition and resource allocation are two of the most crucial steps of channelized capacity planning. However, if this is carried out via email or phone calls, it can lead to chaos. This is because the process will require a trail of emails to concerned department heads, team managers, and so on to pull out the resource. By the time you get the right resource, the project might have already started leading to billing loss.

Thus, a well-crafted workflow is vital to get the resource on time, keep it documented and auditable. It will also keep everyone in the loop. The stakeholders will stay informed about their resources along with their allocations avoiding any unnecessary discrepancies.

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3.5 Increase profitability by reducing bench-time with effective capacity management

An exceeding number of benched resources is a nightmare for resource managers. For one, it’s incurring unnecessary overheads to the firm and for two, it’s hampering the productivity of the resources. Forecasting bench-time is therefore the right measure to take corrective measures ahead of the curve. A robust capacity planning solution provides intuitive people on the bench and vacancy related details.

Leveraging real-time data, resource managers can proactively fill the vacancies with resources likely to end up on the bench.

Using Capacity planning, resource managers can forecast excesses or shortfalls and take remedial actions beforehand.

They can get foresight into the capacity vs. demand gap to take the right resourcing measures.

4. The takeaway

Resource capacity management is the hallmark of organizational success and business sustainability. The above mentioned best practices of capacity planning will help minimize project risks and bottlenecks while ensuring the optimal workforce utilization.

5. Saviom Solution

SAVIOM is the market leader in providing an Enterprise Resource Capacity Planning solution. With over 20 years of experience as a market leader, Saviom is actively used by many highly-esteemed global companies. Some of the components of the tool include enterprise resource management, professional service automation, and workforce planning software.

Capacity planning template
Free Template

The Capacity Planning Template for Smart Pipeline Management


Anuradha Mansinghka & Aakash Gupta

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