Best Practices For Resource Capacity Planning

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Best Practices for Resource Capacity Planning

FEBRUARY 22, 2021 | IN PROJECT MANAGEMENT OFFICE (PMO), PROJECT PORTFOLIO MANAGEMENT (PPM), PPM SOFTWARE | BY
TIM WASHINGTON
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Introduction to Capacity Planning

Resource capacity planning is one of the most commonly cited functions of project portfolio management. Senior
leadership rightly wants to understand whether they have adequate resources to take on more project work and
whether their existing work will get done on time. Most companies recognize the scarcity of resources to do project
work and thereby look for portfolio capacity views to answer these two important questions:
1) When can we take on new projects?
2) Can we get our existing work done?
As we have covered in our earlier article, resource capacity planning may sound simple – compare resource estimates
against available time to work. In practice, however, it is one of the hardest components of project and portfolio
management to do right. Companies that can successfully manage resource capacity can also effectively optimize
their portfolio value. In this post we will cover the best practices of how to get started with resource capacity
planning.
Quick Review of Resource Capacity Planning

Resource capacity planning is about comparing forecasted resource utilization (future-looking view) of project
resources against available capacity to get project work done. Forecasted utilization is the level of effort an individual
spends on work (project work, operational work, etc.) over a course of time. Capacity is the standard amount of time
an individual is available to do work.
We can also differentiate portfolio capacity planning from project resource planning with simple definitions.
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Capacity planning: focused on organizational availability (supply and demand) of project resources to get project
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work done.
Resource planning: focused on allocating people to projects based on their role and skills to get work done.
In practice, however, capacity planning and resource planning must come together to effectively manage portfolio-
level resource capacity.
We covered the components of resource capacity planning shown in the diagram below in far more detail in our
other article and video. Now let’s turn our attention to best practices on how to get started with resource capacity
planning.
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The Project and Portfolio Components of Resource Capacity Planning
Best Practices in Getting Started with Resource Capacity

Planning
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Fundamentally, resource capacity planning begins with project planning. Once reasonable project planning has been
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conducted, a portfolio management team or PMO can aggregate project planning data to evaluate portfolio level
resource capacity. In this section we want to review best practices related to project planning and portfolio capacity
reviews.
Initial Setup – Define What You Are Measuring

Resource capacity planning requires some up-front setup to get started. Following this, there is ongoing maintenance
and support, which is covered below in greater detail. Firstly, we will outline the recommended best practices for
setting up resource capacity planning.
Best practices for resource capacity planning (initial process setup)
Define the resource pool: before trying to capture resource information for every possible project resource, focus
on capturing resource estimates for your most critical resources. Companies do not need to estimate the resource
utilization of every project resource for every project. In practice, there are usually a limited number of people in
high demand across projects. These are your critical resources (also known as bottleneck resources in relation to
critical chain project management). Capturing the resource forecasts for this smaller resource pool will still yield
high value with less effort while filtering out the noise. If these critical resources are over-utilized, it often doesn’t
matter if everyone else has availability; those key resources really control the flow of work and the ability to get
project work done on time.
Define level of granularity: we strongly advocate that monthly resource forecasts be collected at the project level.
Collecting quarterly estimates may not yield good enough data, and most companies do not have the
organizational agility to truly utilize weekly estimates. Furthermore, trying to get more granular data at the task
level is a waste of time and a nightmare to maintain. Understanding the relative utilization month over month is
good enough. We also believe that it is relatively easy to identify the named resources working on a project. In
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Carve out operational time: very few people spend 100% of their time on project work, so to get a reasonably
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accurate resource picture, you need to account for the amount of time each person does operational work (e.g.
day to day work, emails, meetings, etc.).
Define when to collect resource information: the initial resource plan should be developed during the project
initiation phase (or planning phase at the latest). This may also coincide with a Work Intake process or Gate Review
process.
These are the recommended best practices for getting started with resource capacity planning at a project level. The
next section will cover the matter of project planning. There is another set of work to define the processes for
resource management and senior leadership involvement that will be covered in the section on reviewing portfolio
resource capacity.
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Best Practices for Resource Capacity Planning
Effective Project Planning

Capacity planning is based on effective project planning. Sound project planning is a best practice (and essential
practice) for resource capacity planning. In order to effectively collect the right data to manage resource capacity,
organizations must have fundamental project planning processes in place. These planning processes do not have to
be advanced or elaborate, but they do need to be consistent.
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Plan the Work
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Effective project planning requires teams to understand what work needs to be done; specifically, what is in scope
and what is out of scope? Good project planning requires managing project scope. When project teams do not
understand the boundaries of their project and what they are trying to accomplish, the likelihood of success
decreases. Scope management is critical for successful project management.
The first best practice in resource capacity planning is to conduct adequate project
planning; planning processes do not have to be advanced or elaborate, but they do
need to be consistent.
Scope planning in the initiation phase of a project should be conducted regardless of methodology. A project team
should have some high-level understanding of what the project is doing and what it is not doing. Some companies
believe that Agile project management means that this level of project planning is unnecessary. Lower-level features
and functionality may be planned at the sprint level, but a project team needs to know at some level of detail what
they are developing. Agile project management is not an excuse to ignore up front planning. Scope management
and high-level project planning are best practices regardless of project methodology.
Once the scope is well understood, teams can begin planning major activities. This involves estimating the duration
and effort of those activities. The more experience Project Managers and their project teams have with project
planning, the most detailed they can be and the more accurate their estimates become. However, many companies
do not have enough trained Project Managers and should therefore focus on fundamental practices without worrying
about getting overly detailed estimates.
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Estimation is an important topic even of itself. There are different methods of estimating that project teams should
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learn to utilize. The key is to find tools and techniques that help the team build an effective project plan. One of the
best practices of project planning is to get the people who will do the actual work to help with estimation.
Best practices for resource capacity planning (project planning):
Conduct consistent planning across projects

Regardless of methodology, clarify high-level scope for every project
Involve project team members in planning and estimation
Learn techniques that will help improve estimation over time
Communicate with Resource Managers about team assignments; never rely on software to replace good old
communication
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Best Practices for Resource
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Project Resource Planning
Once a project plan is reasonably developed with a project schedule; the team should also develop a project resource
plan. This involves knowing which roles are needed for the project, the specific people who will fill those roles, and
the amount of effort needed across a period of time to get the work done.
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Project resource plans do not need to be as detailed as a project schedule. In fact, companies getting started with
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resource capacity planning should not try to manage detailed resource utilization at the task level; this is a trap that
companies fall into. It is logical to think that the more granular the resource estimates come in, the more accurate the
data. In reality, the opposite ends up happening. Instead, have each team member estimate their monthly forecasted
utilization based on their understanding of the work. These top-down resource estimates will often be ‘good enough’
for portfolio level capacity planning. Remember, the goal is to understand relative utilization across all projects in the
portfolio in order to answer our two key questions mentioned above.
Another recommendation is to capture named resource utilization. Some people may advocate that capturing role-
based information is sufficient, but when we try to use this data for portfolio capacity planning purposes, it is not that
useful. The fact is, Project Managers should know the names of the people actually doing the work, so why not
capture it? By keeping project resource plans at the project or phase level, it makes it easier to maintain named
resource forecasts.
Best practices for resource capacity planning (project resource planning):
Keep it simple
Estimate resource time at the project level (or phase level if appropriate)
Do not try to capture granular task-level utilization
Do not try to capture skill-based information to start; knowing key roles is good enough to get started
Start with simple ‘top-down’ resource forecasts across the needed time frame and adjust the utilization as needed
(also known as resource profiling)
Monthly utilization is often good enough for portfolio capacity planning
Do not try to estimate everyone’s time; focus on those critical resources who are in high demand. This will still yield
high value from a portfolio capacity perspective.
Resource plans should be developed in the initiation or planning phases of a project
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During project execution, the resource plans should be updated periodically (keeping the resource plan simple
makes it easier to maintain) Products
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The goal is ‘good’ data, not ‘perfect’ data
Portfolio Capacity Planning Review

The hardest work in the capacity planning process is to collect solid resource plans across all projects. Once these
resource plans have been created, the next step is to aggregate and analyze the data in order to evaluate the
portfolio. Even basic capacity planning takes time and effort to be successful. We will help you avoid common pitfalls
that organizations run into, but resource capacity planning still requires some level of effort to be useful and
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effective. We will look at three key roles involved at the portfolio level: the Portfolio Manager, the Resource Manager, English
and the Portfolio Governance team. Please note, that we will save our conversation on capacity planning tools until
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the end.
The Role of the Portfolio Manager
Capacity planning does not happen by itself. You need someone who will develop and shepherd the capacity
planning process and support Project Managers to create resource plans. You also need someone who can analyze
the data and provide timely recommendations to the Portfolio Governance team; this is the role of the Portfolio
Manager.
While the PMO directly owns project management processes, the Portfolio Manager (or PMO Director) is the process
owner for the resource capacity planning process. The Portfolio Manager(s) work with the PMO and the Project
Managers to aggregate resource data. This may require the Portfolio Manager to take an administrative role to
remind and guide the Project Managers to develop and update their resource plans according to the process.
The Portfolio Manager also needs to have adequate analytical skills in order to analyze resource data and assess
resource capacity at the portfolio level. Resource analysis takes into account:
Role-based utilization
Individual utilization
Project priorities
Start/end dates
Based on resource analysis, the Portfolio Manager should develop recommendations to bring to the Portfolio
Governance team. It is not enough to do the analysis and develop the appropriate charts and reports. The Portfolio
Manager should synthesize current priorities and strategic goals against resource availability in order to develop
recommendations that assist the Portfolio Governance team make better decisions.
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Best practices for resource capacity planning (Portfolio Manager): English
Identify at least one person responsible for coordinating and analyzing resource data
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Give the Portfolio Manager oversight of the process
Data analysis skills
Soft leadership skills for working with Project Managers
Develop recommendations for the Portfolio Governance team based on resource analysis
Share resource capacity analysis as part of the portfolio communication plan
Many people associate the need for resource capacity planning with the additional need
for time tracking, thinking that they cannot measure resource capacity unless they also
track time. This is one of the most common misunderstandings with resource capacity
planning. Time tracking looks back to the past, resource planning looks forward to the
future (forecasts); do not mistake these two.
Resource Data Analysis
The goal of resource analysis is to answer our two key questions: can we take on new work? And, can we get our
existing work done? The most common trigger for this analysis is new project requests. Before new project proposals
come to the Portfolio Governance team, there should be some analysis on the resource impacts due to the new
requests to determine whether there are available resources to support the requests and whether existing projects
would be negatively impacted. Based on this analysis, the Portfolio Manager can make specific recommendations
back to the portfolio governance team.
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Best practices for resource capacity planning (Resource Data Analysis):
Use simple resource utilization categories such as “Available”, “At Risk”, “Over-Utilized”
Define thresholds for when roles and individuals are “available”, “at risk”, or “over-utilized”; this will make the
analysis much easier.
Start by looking at the over-utilized roles and then drill down to specific people. It is possible for a team to be
over-utilized yet have at least one person who can take on more work (this usually means that someone else has
too much work that needs to be re-assigned).
Resource teams with an average utilization that puts them “at risk” or “over-utilized” represents a real resource risk
to the portfolio.
Keep it simple; filter out noise by focusing on key resource roles and a few specific individuals; too much data will
over-complicate resource analysis.
The Role of the Resource Manager
A Resource Manager is often a first-level manager responsible for a team of people who is responsible for
maintaining oversight of the team and allocating them to project and directing operational work. In many cases,
before an individual can support a project, the Resource Manager has to approve the assignment. Hence, the
Resource Manager has an important role in resource plans and capacity planning in general.
Best practices for resource capacity planning (Resource Manager):
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Talk with resources on your team to match skills and interest with the project English
Monitor operational work for your team to help determine project capacity
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The Role of the Portfolio Governance Team
The senior leaders on the Portfolio Governance team are the ones to make key decisions about the portfolio. These
decisions center around: approving new projects (Work Intake), gate reviews (Phase-Gate), prioritization, and
portfolio planning. Resource capacity is a major input to these decisions. The Portfolio Governance team should only
approve projects based on priority and resource availability. This is one reason why a good Work Intake process is so
critical to making portfolio management work.
In general, do not merely share resource capacity information with the Portfolio Governance team. These senior
leaders do not have the time to study the data and will not often be able to synthesize the information during a
governance meeting. Instead, provide options for them to select and let them discuss and decide the best action to
take based on the information provided. There are a few fundamental actions the Portfolio Governance team can
take to address over-utilized resources:
Proactively re-negotiate new completion dates (adjust project/portfolio schedules)

Hire more resources (adjust portfolio budget)
Put lower priority work on hold (or defer) to free up resource time or stop new projects from entering the portfolio
(adjust portfolio scope)
Do nothing (accept over-utilization and ask teams to work around it)
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The best approach is for the Portfolio Governance team to ensure that resources are available when approving new
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projects. This protects resource capacity and protects portfolio delivery. English
Best practices for resource capacity planning (Portfolio Governance Team):
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Utilize resource capacity information during key decision-making meetings such as reviewing new proposals or
Phase-Gate reviews
Let the Portfolio Governance team review options based on resource capacity information in order to make better
decisions
Define the Process and Timing for Collectively Reviewing Resource Information
In order to make the resource management process run more smoothly, define the process for collectively reviewing
resource information with the PMO, Resource Managers, and Project Managers before sharing this with the Portfolio
Governance team. This is an emerging best practice for resource capacity planning to ensure that managers and
senior leaders have timely visibility of resource data. Structuring your project review process so that there are several
projects to review will actually help with establishing resource capacity planning, because Senior Leaders will have to
review multiple projects at one time. Furthermore, a periodic resource planning meeting with impacted Resource
Managers can provide timely collaboration and help surface resource risks (and solutions) before meeting with the
Portfolio Governance team.
Best practices for resource capacity planning (timely reviews):
Establish a regular time to meet with Resource Managers to collectively review project resource information
Let Resource Managers adjust estimates based on other work that is going on (i.e. adjust estimates based on their
understanding of project priorities)
Use the meetings to help plan when resources will be available to start new work
A Word About Time Tracking

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Many people associate the need for resource capacity planning with the additional need for time tracking, thinking
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that they cannot measure resource capacity unless they also track time. This is one of the most common
misunderstandings with resource capacity planning. Time tracking looks back to the past, resource planning looks
forward to the future (forecasts); do not mistake these two.
There are legitimate reasons to track time, but your organization does not have to track time in order to begin
assessing resource capacity at the portfolio level.
Another common myth is that time tracking will help improve future estimates. Very few companies have the luxury
of going back after several months on a project to compare their forecasts with the actual time spent. Unless you
track time at the task level, it is not likely going to help improve forecasting. There are other tools and techniques
that teams can utilize to improve forecasts (e.g. planning poker).
One area where time tracking can be effective is to track how much time is spent on operational work. With this data
you can then determine what the actual project availability is for individuals and teams. I have applied a 6-month
moving average to operational time in order to estimate actual project availability. I saw one other Tech company
apply this technique successfully as well.
Resource Capacity Planning Software and Tools

This last section covers the tools for effective resource capacity planning. We will compare common spreadsheets
with dedicated portfolio management software.
Spreadsheets for Resource Capacity Planning

The short answer is – do not use spreadsheets for resource capacity planning. Watch our video on the challenges of
using spreadsheets for project portfolio management to learn more. There are significant challenges with the use of
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any spreadsheet. With a VERY small set of resource data, you can track a few key team members across projects, but English
without a dedicated PPM software solution, it will be difficult to analyze and pivot the data to get the information
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you need.
Dedicate PPM Software for Resource Capacity Planning

Most project portfolio management software will allow you to capture resource data and analyze resource capacity.
Many dedicated project management tools will not allow you to do this across the portfolio, which is why portfolio
management software is valuable. However, some resource capacity planning software is difficult to use and comes
with a poor user experience. You do not need complex PPM software in order to get started with resource capacity
planning. Most organizations will benefit from lightweight PPM software such as Acuity PPM.
A resource capacity planning tool will help you better manage resources at the portfolio level. Keep in mind that
some solutions will be more user friendly than others. Some PPM solutions required in-depth resource tracking and
should only be used if you are an advanced and mature PMO. Otherwise, for organizations getting started,
lightweight PPM software is not only adequate but it will quickly help you make progress.
Best practices for resource capacity planning (resource capacity planning tools):
Keep it simple
Use a resource dashboard to quickly identify how many teams are available, at risk, or over-utilized
Capture resource plans at the project level (or phase level)
Use a heat map to quickly identify months that are at risk or over-utilize
Tim Washington
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Tim is a project and portfolio management consultant with 15 years of experience working with the
Fortune 500. Products
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He is an expert
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in maturity-based PPM and
helps
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PMO to unlock more value for their company. He is one of the original PfMP’s (Portfolio Management
Professionals) and a public speaker at business conferences and PMI events.
LEARN MORE
What is the difference between capacity planning and

resource planning?
Capacity planning is focused on organizational availability (supply and demand) of project resources to get
project work done. Resource planning is focused on allocating people to projects based on their role and skills to
get work done.
What are resource capacity planning best practices related

to project management?
Conduct consistent planning across projects; regardless of methodology, clarify high-level scope for every
I Agree
project; involve project team members in planning and estimation; learn techniques that will help improve English
estimation over time; communicate with Resource Managers about team assignments; never rely on software to
Products
Services
Company
replace good old communication.
What are best practices related to project resource

planning?
Keep it simple; Estimate resource time at the project level (or phase level if appropriate); Do not try to capture
granular task-level utilization; Do not try to capture skill-based information to start; knowing key roles is good
enough to get started; Start with simple ‘top-down’ resource forecasts across the needed time frame and adjust
the utilization as needed (also known as resource profiling); Monthly utilization is often good enough for
portfolio capacity planning; Do not try to estimate everyone’s time; focus on those critical resources who are in
high demand. This will still yield high value from a portfolio capacity perspective; Resource plans should be
developed in the initiation or planning phases of a project; During project execution, the resource plans should
be updated periodically (keeping the resource plan simple makes it easier to maintain); The goal is ‘good’ data,
not ‘perfect’ data.
I Agree
English
What are best practices related
Products
Services to resource

Company
Pricing capacity data T RY IT N OW
analysis?
Use simple resource utilization categories such as “Available”, “At Risk”, “Over-Utilized”; Define thresholds for
when roles and individuals are “available”, “at risk”, or “over-utilized”; this will make the analysis much easier;
Start by looking at the over-utilized roles and then drill down to specific people. It is possible for a team to be
over-utilized yet have at least one person who can take on more work (this usually means that someone else has
too much work that needs to be re-assigned); Resource teams with an average utilization that puts them “at risk”
or “over-utilized” represents a real resource risk to the portfolio; Keep it simple; filter out noise by focusing on
key resource roles and a few specific individuals; too much data will over-complicate resource analysis.
PORTFOLIO GOVERNANCE
PORTFOLIO OPTIMIZATION
RESOURCE CAPACITY PLANNING
RESOURCE CAPACITY SOFTWARE
RESOURCE CAPACITY TOOLS
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Introduction to Capacity Planning

1) When can we take on new projects?

2) Can we get our existing work done?

Quick Review of Resource Capacity Planning

The Project and Portfolio Components of Resource Capacity Planning

Best Practices in Getting Started with Resource Capacity

Initial Setup – Define What You Are Measuring

Best practices for resource capacity planning (initial process setup)

Best Practices for Resource Capacity Planning

Effective Project Planning

Best practices for resource capacity planning (project planning):

Conduct consistent planning across projects

Project Resource Planning

Best practices for resource capacity planning (project resource planning):

The goal is ‘good’ data, not ‘perfect’ data

Portfolio Capacity Planning Review

The Role of the Portfolio Manager

Resource Data Analysis

Best practices for resource capacity planning (Resource Data Analysis):

The Role of the Resource Manager

Best practices for resource capacity planning (Resource Manager):

The Role of the Portfolio Governance Team

Proactively re-negotiate new completion dates (adjust project/portfolio schedules)

Best practices for resource capacity planning (timely reviews):

A Word About Time Tracking

Resource Capacity Planning Software and Tools

Spreadsheets for Resource Capacity Planning

Dedicate PPM Software for Resource Capacity Planning

What is the difference between capacity planning and

What are resource capacity planning best practices related

What are best practices related to project resource

RESOURCE CAPACITY TOOLS

Don't take our word, listen to what others are saying:

"I find value in all of your articles."

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