Essential Elements of Services Success: How to Assess Resource Capacity Planning
This is the second in the “Essential Elements of Services Success” blog series focused on helping professional services organizations strengthen the core of their business processes. Read the first entry about resource management plans here.
The key to success in the professional services industry is ensuring decision-makers across your business understand this fact: your profits rely entirely on your people. It’s no secret that effectively balancing the supply of resources and the demand for services can be a challenge. One way to get ahead of this hurdle is with a streamlined, strategic, and proactive resource capacity planning process. This blog breaks down the basics for improved capacity planning — and ultimately increased profits — at your business.
What is Resource Capacity Planning?
Resource capacity planning is the process of defining the amount of work that is able to be done by resources at a company, determining the tasks and projects that can be completed by said resources, and matching work to be done with available resources to meet current and future demands.
According to Tech Target, “Resource allocation is the process of assigning and managing assets in a manner that supports an organization’s strategic planning goals. Resource allocation includes managing tangible assets such as hardware to make the best use of softer assets such as human capital.”
Five Key Benefits of Optimized Resource Planning
A streamlined resource planning and allocation process has a significant impact on profitability, scalability, and success. There are five key benefits that come from optimizing resource capacity:
- Understanding your current demand
- Detailed insights into maximum capacity
- Reliable forecasting of future demand
- Effective resource management and staffing
- Fast scaling for demand fluctuations
How Poor Capacity Planning Reduces Profitability
Poor capacity planning often stems from a misunderstanding of an organization’s supply and demand equation. When demand is greater than supply, resources (through no fault of their own) are rushed from one assignment to the next — oftentimes brought in too late, or provided too little information to be as effective as they could be. On the other hand, when supply outweighs demand, you find resources under-utilized.
If utilization rates continue to degrade, the cost of resources quickly eats into margins and overall profitability. Even the slightest imbalance in the supply and demand equation will cause an inevitable domino effect leading to reduced profits and negative impacts on overall business success – poor capacity planning also frustrates clients and has the potential to contribute to employee turnover.
It’s easy to see the immediate effects of capacity and demand being mismatched in an organization. But the effects grow over time, with the disparity slowly increasing until it’s difficult to maintain profitability.
How to Assess Resource Capacity
While demand may fluctuate due to changes in the market, a company will always have far more control over its capacity. By understanding current capacity and then optimizing it, a business can better handle downturns in demand and be prepared for sudden increases. As a result, a services organization can consistently perform at a high level and keep their margins both consistent and predictable.
The business that understands its capacity will know when to take on more clients while those unaware of actual capacity will agree to new projects that cannot be properly staffed. Proper capacity planning ensures that no opportunities will be missed — even if there is a sudden increase in demand.
Why is Capacity Planning Important for Services Success?
Put simply, a profitable services organization understands how to assess resource capacity and manage the constant tug-of-war between having too few projects in the pipeline or too many resources sitting on the bench. Selling valuable services hinges entirely on how well resources can execute on the promises made to the customer.
Setting resources — and ultimately the business — up for success requires proactive capacity planning and strategic resource allocation before a project is live. A business that fails to do so will quickly see the impact of theseblindspots.
The concept of a 40-hour work week does not apply to the services industry. According to Software Advice, “If we ask how many hours on average a full-time employee can dedicate to a project each week, “40” wouldn’t be the accurate answer. This is because overestimating an employee’s availability is a common mistake project managers can make when planning project resources.”
The Benefits of Capacity Planning Tools
Improving resource allocation and capacity planning starts with adjusting processes and adopting purpose-built tools. Technology solutions that enable a streamlined resource planning process — like Kantata — support services businesses along the entire journey of optimization. Kantata is created specifically to give services organizations the clarity, control and confidence they need to balance capacity and demand.
Want to Learn More about Kantata?
See how The Kantata Cloud for Professional Services is purpose-built to take your resource management and capacity planning to the next level.