5 Best Practices to Help SMBs Perform Resource Capacity Planning

By: on September 23, 2016

If I ask you how many hours on average a full-time employee works each week, you’ll likely say “40 hours.” And, you would be right—this is a standard timetable across industries and comes from the fact that most employee salaries are calculated based on this assumed schedule.

However, if I ask you how many hours on average a full-time employee can dedicate each week to a specific project, and you answer “40 hours” again, you’d be wrong. But you wouldn’t be alone: Overestimating an employee’s availability is one of the most common mistakes management can make when planning project resources.

According to a report titled “Project Resource Capacity Planning for PMO Leaders: Crawl Before You Walk” by research vice presidents Donna Fitzgerald and Robert A. Handler at Gartner, the answer is closer to 16 to 20 hours. (This content is available to Gartner clients).

The strategy for juggling resource availability, or supply, with a high project demand is called “resource capacity planning.” In this guide, we’ll explain how SMBs can use this strategy not only to more effectively staff projects, but also to improve project success rates.

For real-life examples on how different organizations approach this strategy, we spoke with industry experts and took down their tips for effective capacity planning. With their insights, we’ve created the following list of resource capacity planning best practices. (You can find a downloadable checklist of these best practices here).

Jeff Diecks, chief operating officer at Mediacurrent, a leading digital agency focused on creating Drupal websites that accomplish business and brand objectives for organizations. Brian Bargmann, engineering project manager at Rocana, a vendor of AIOps technologies. Included in Gartner’s 2016 report: Cool Vendors in Availability and Performance (this content is available to Gartner clients).

Five Resource Capacity Planning Best Practices

According to Gartner, resource capacity planning is simply practical resource management. Without this practical approach, an organization risks overestimating its employees’ availability and thus overcommitting resources. This can have detrimental effects on the project portfolio.

In fact, Fitzgerald and Handler state:


Of course, Gartner recognizes that the size and PPM maturity of an organization play a large role in how that business should approach resource capacity planning, which they illustrate with a “crawl, walk, then run” metaphor.

In short, organizations just starting out should focus on simply putting resource management processes in place and establishing an open and collaborative environment (crawl).

Then as they grow and advance in maturity, they can shift their focus toward refining their strategy (walk). Eventually they can optimize processes (run), with the use of enterprise-level tools.

As most SMBs lack the organizational numbers and PM sophistication required of Gartner’s “walk” and “run” stages, this article will focus on helping them master the “crawl” stage of resource capacity planning.

Gartner describes this phase as “emerging disciplines.” This is equivalent to a level two PPM maturity.

1. Establish A Cross-Functional Team

The first step toward effective resource capacity planning is opening the lines of communication between executives, project management leaders and internal stakeholders.

This group is responsible for the following:

  • Identifying employee skills and any potential gaps that may threaten current and future initiatives
  • Evaluating resource capacity
  • Ranking portfolio of work

Mediacurrent’s Diecks notes that it’s important for this team to maintain constant communication. He recommends weekly planning sessions as well as daily communication using real-time collaboration tools to quickly address any day-to-day changes that may arise.

This collaborative approach allows organizations to allocate the right talent to the right assignments, while remaining flexible, should new opportunities present themselves.

Rocona’s Bargmann recommends a cross-functional team (described in the use case below) for a technology-driven startup working within a Kanban framework:

Use Case: Establish a Product Team to Evaluate Portfolio

“Our recommended approach is establishing a Product Team (likely made up of product management, key stakeholders, technical leadership and project management) to prioritize work/projects and continuously evaluate the portfolio of work as new market drivers and customer needs arise.

“Maintaining this ranked backlog of work (initiatives in progress and priority efforts in ‘the queue’) and making it available to the development team members and stakeholders provides several benefits, including visibility of what teams are currently working on, team member availability and/or tradeoffs necessary to take on new priorities.”

2. Calculate Resource Capacity

You learned in the previous step that one of the key responsibilities of the cross-functional team is evaluating resource capacity and then strategically staffing projects according to priority. But what is resource capacity and why is this important for SMBs?

“Resource capacity” is simply the number of people you have multiplied by the amount of time they have to dedicate to working on projects. The result being how many full-time equivalents (FTEs) you can dedicate to a project.

Appropriately estimating employee availability is critical for SMBs, as they have fewer resources at their disposal. What’s more, these employees tend to have more responsibilities and thus a greater impact on project success.

Miscalculating an employee’s availability can be detrimental, not just to the success of the project but to the business as a whole.

It’s easy to overestimate employee availability. In Gartner’s experience, your employees will realistically only be able to dedicate 20 to 50 percent of their time to project work.

We’ve created the following interactive tool to help you calculate your team’s’ average resource capacity:

Let’s say you have 10 employees and your team can dedicate an average of 30 percent of their time to work on projects. In this example, your resource capacity is equivalent to three FTEs. If 30 percent of 10 employees’ time can be devoted to the project portfolio, the maximum reach of your resource capacity is equal to three FTEs.

If this number seems low to you, you may have been using the abstract term “resource” a little too often when referring to your employees. Mediacurrent’s Diecks advises that it’s important to remember that “resources” are people, and as such there should be a personal element involved with evaluating their availability.

“Automated tools and processes have their place, but somewhere in the process you have to have discussions with the individual team members being forecast. What types of work do they feel challenged and stimulated by? What intangible assets do they possess, and where will they be most effective? The better you know your people, the greater chance you have of creating a plan that gives the team a chance to be successful.”

Jeff Diecks, chief operating officer at Mediacurrent

Diecks gives the following example of resource planning at Mediacurrent:

Use Case: Mediacurrent’s Resource Planning Strategy

“We provide our team with weekly billable targets with a maximum number of hours per week that can be reserved for a person, and reserve time in blocks of four (half-days). The rest of the hours are held back for internal time.

“As a company focused on Open Source Software (Drupal), we allow time for the team to contribute back to the community, as well as general administrative time or internal company projects. This also provides a bit of buffer for the unexpected, such as sick days or when extra work is needed on a project.”

3. Determine Resources Required for Each Project

Step three involves the cross-functional team performing the following:

Review each project’s work breakdown structure. This allows you to identify project requirements and deliverables and start to map out the tasks (and thus resources) required to achieve those deliverables.


Reviewing the Work Breakdown Structure

Reviewing the Work Breakdown Structure

Additionally, this will allow you to identify internal and external dependencies as well as high-level risks that might impact resource requirements.

“Work with teams to identify and address anything that may prevent successful completion of tasks/features in a timely manner.”

Brian Bargmann, engineering project manager at Rocana

Identify the roles and responsibilities required for each project. It’s important to estimate how much time is required from each role versus how much time key staff has available.

For example, developing a new software application requires 100 percent commitment from software development staff. However, your key developer can only dedicate 35 percent of their time due to other commitments.

You have three choices:

  1. Postpone the project until the key resource is able to give 100 percent commitment.
    1. Choose not to postpone the project and schedule one or more secondary (and likely junior) developers to fill in the gaps.
      1. Choose not to postpone the project and instead contract/outsource the 65 percent of the work not able to be completed by your in-house development staff.

      Each of these solutions will impact resource requirements differently, which in turn will impact the project’s budget and/or timeline.

      4. Prioritize Projects

      This step involves looking at the entire project portfolio—both ongoing projects and potential initiatives—and ranking them according to the value they are expected to deliver.

      Gartner recommends using a simple “high, medium and low” evaluation system, but you can use a numbered system or weight projects according to your organizational needs.

      If your organization is following portfolio management processes, you can borrow the project evaluation criteria you use for new project initiatives to prioritize the projects in your portfolio.

      This criteria likely includes:

      • To what extent does the project drive business goals?
      • What tangible outcome is the project expected to deliver?
      • Is this project unique?
      • How does the project’s risk-return profile compare to the rest of the portfolio?

      This prioritization will inform how and when you allocate resources to a project.

      5. Allocate Resources Based on Project Priority

      The final best practice involves ordering projects according to their ranking from step four, and staffing the highest priority projects first based on the capacity you calculated in step two.

      For example, both project A and project B require two FTEs, but project A is expected to deliver a greater financial benefit for your organization. So, project A takes precedence over project B and receives appropriate resources.

      SMBs should be especially concerned with delivering the projects that yield the most value first, simply because they are more focused on establishing consistent revenue and ROI. Larger organizations have greater resources at their disposal and have more opportunities for trial and error, whereas SMBs have less room for mistakes.

      “Aggressively pursue ways to minimize distractions so team members can maximize focus. Start by limiting unnecessary meetings and providing clear priorities (so team members do not spend valuable time on lower priority items).”

      Brian Bargmann, engineering project manager at Rocana

      Next Steps: Download Best Practices Checklist

      If you’re interested in learning about the tools available to help project managers and leaders perform resource capacity planning, head over to our buyer’s guide for more information. You can read reviews of leading solutions and see how your peers have rated products for qualities such as ease-of-use, depth of functionality and customer support.

      And, don’t forget to download your copy of the best practices we’ve discussed here:

      Download Checklist

      If you have questions or ideas about how to improve our list, email me at eileen@softwareadvice.com.

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