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7 Capacity Planning Steps to Avoid Project Management Nightmares

7 Capacity Planning Steps to Avoid Project Management Nightmares

UPDATEDMay 23, 2023

Most individuals think of capacity planning in terms of supply and demand in product-based industries; it equally applies to service industries and is a critical component of project management. Here are some steps companies and project managers can take to avoid nightmares.

What Is Capacity Planning?

Capacity planning is the process of matching work to be done with the resources available to meet the work, and this is applicable to any industry or project. Resources can be tangible or intangible and refer to people or other resources.

Why Is it So Vital to Project Success?

efProject success relies heavily on the ability to deliver on-time, on-budget and within the scope defined. The contributions of stakeholders remain the most significant factor in meeting project deliverables. Even though strategy should be the driver that moves projects ahead, if there are insufficient resources to effectively execute a project, it simply should not proceed. Doing otherwise significantly risks the outcome of the project, and wastes time, energy, and financial resources. It further risks the success of other projects if resources are overextended unnecessarily. Despite the significant need for sufficient capacity planning, businesses still struggle to ensure they have the necessary and correct resources available to service project needs.

7 Capacity Planning Steps to Avoid Project Management Nightmares

Capacity planning does not need to be onerous, but it does involve carefully thought-out steps to ensure businesses have the right amount and type of resources at the right time. Moving through these steps should involve company leadership, sponsors, and the PMO. It is essential that all levels of the company, portfolio, program, and project leadership are on the same page.

  1. Determine the state of your organization and barriers. Before companies look at capacity planning for projects, they need to spend time studying the company structure, resources, and culture as this will influence project readiness. Project readiness can be impacted by the existing resources, leadership support, and other factors.
  2. Leverage capacity planning tools to help determine and manage resource capacity; having the right capacity planning tools can help with the heavy lifting and ensure your company has a complete picture.
  3. Take stock of all projects (active and planned) and resource utilization. Without having a solid grasp of the status of each project or where and how resources are being used, it is almost impossible to know what ‘state’ your projects are in as it relates to capacity. Furthermore, it is highly unlikely that you can accurately respond to unforeseen problems or establish a plan.
  4. Determine if and how each project aligns with company objectives. If a project does not have a direct link back to company goals, it should not be started, or it should be scrapped if it is already in progress. Unfortunately, companies all too often choose to proceed with projects even when the project fails to serve a strategic goal, simply because it is already in progress and resources have been allocated. It is better to halt a project and consider costs as ‘sunk’ than continue to pour precious resources into it while risking more business critical projects.
  5. Prioritize projects with goals. Determine which projects should come first and why. Make sure to identify the benefits and risks of each project whether proceeding or not proceeding. Keep in mind that the success of some projects may depend on the completion of others. Consider at least these factors:
    • The resources that are required, the quantity, frequency, and timing,
    • Resource availability, knowledge, skill levels, and location, and
    • Built-in assumptions and what-if scenarios.
  6. Identify the best use of resources and allocate them appropriately. Companies seldom have unlimited resources, making it critical to accurately identify each one and allocate the use of each carefully and sparingly. Misidentification and over-allocation is a common problem for companies as they try to do more with less.
  7. Develop company-wide best practices and repeatable processes to identify, catalogue and rate resources, projects, goals, strategic alignment, prioritization and resource allocation.

Factors That May Impact Capacity Planning

There are multiple factors to consider that can impact the success of your capacity planning and ultimately your projects. Some will be within your company’s control and others will not, but all of them need to be considered and evaluated closely. Keep each of these in mind and identify ways to address each one. Internal factors

Internal Factors External Factors
  • Company structure and composition
  • Leadership commitment and support
  • Level of awareness and communication
  • Nature of a product or service
  • Other active or planned projects
  • The length of a project
  • Available resources
  • Timing and dependencies
  • Resource reliability
  • Organizational changes (turnover, attrition, culture, etc.)
  • Vendor commitments to other companies
  • Contractual obligations and terms
  • Changing environmental factors (legislative, legal, resource pricing, exchange rates, and taxation).

Insufficient Capacity Planning: What Are the Risks?

Insufficient capacity planning is not without real risk. Companies can pay a hefty price for this through budget and schedule overruns, wasted resources, deficiencies, team burnout, resource shortages, and missed objectives. Here is more on the associated risks.

  1. Budget overruns are a frequent reality for projects as project managers struggle to meet deliverables when additional requirements or goals are identified but were not identified at the beginning of the project scope.
  2. Wasted resources are another reality of insufficient capacity planning. Companies allocate valuable resources to projects and tasks that simply do not meet intended goals, incurring unnecessary waste in various areas of the business.
  3. Quality deficiencies are another common concern as project managers try maintain quality with scarce or incorrect resources – trying to do more with less.
  4. Schedule overruns are also another casualty that occurs if either finances or human resources are out of line.
  5. Team burnout is often an area overlooked and undervalued. Burnout actually leads to decreased interest and productivity as individuals eventually lose motivation due to fatigue.
  6. Missed objectives become a reality when people lose motivation, and quality, cost, or schedules are sacrificed.
  7. Insufficient resources for vital projects can have the largest impact on whether businesses reach intended goals or miss them. When resources are allocated to non-mission-critical projects, companies suffer losses in terms of missed opportunities.
  8. Failed vital or non-vital projects can be the end result when some or all of the previous issues arise.

    After capacity planning has been conducted, it is equally important to effectively monitor and manage capacity throughout each phase of a project.

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