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Resource Forecasting for Success: Best Practices for Professional Services Firms

Resource Forecasting for Success: Best Practices for Professional Services Firms

UPDATEDAug 31, 2023

Resource forecasting is an essential part of running a successful professional services firm. With the right resource forecasting tools, you can ensure you have the capacity to meet client demands without over- or under-allocating staff.

Are you looking to make resource forecasting an essential part of your business or are considering revamping how your business forecasts? In this blog post, we’ll cover the best practices for professional services firms to ensure they are accurately forecasting resources and utilizing their resource forecasting tools to maximum efficiency.

The Importance of Accurate PS Resource Forecasting

In the world of professional services, resource forecasting is an essential component of resource management. The ability to accurately predict demand and capacity is vital for meeting client expectations, maintaining employee productivity, and maximizing profitability. Without accurate forecasting, firms may over- or under-commit resources. Under-committing can result in wasted capacity, underutilized employees, missed deadlines, and unhappy clients while overcommitting can lead to burnout and high employee turnover, further eroding a firm’s productivity and profitability due to a compromised team.

To prevent these issues, firms need to use a variety of forecasting techniques to analyze their capacity and identify potential bottlenecks. This includes collecting data on workforce productivity and billable utilization, tracking employee performance, and developing accurate demand forecasts based on historical data, market trends, and the company’s sales pipeline.

Building a reliable resource forecasting process requires a firm to establish a baseline for resource capacity and availability to understand the average performance of their team, including how long it takes to complete a project to better understand how much time future projects will need. Once this is defined, companies can assess the impact of different project types on resource utilization to understand how upcoming work will change capacity, and then create a system for allocating resources effectively.

Professional services resource management is complex and impacted by constant changes to the business, but accurate resource forecasting is the foundation upon which firms can build successful projects and deliver quality services to their clients. With an effective resource forecasting process in place, firms can improve their project management and achieve greater efficiency and profitability.

4 Best Practices for Resource Utilization Data

One of the biggest challenges in resource forecasting for professional services firms is gathering accurate and reliable resource utilization data. Without the right data, it’s impossible to make informed decisions about how to allocate resources and manage capacity.

To gather the right data, there are a few best practices that professional services firms should follow:

  1. Standardize Data Collection: Make sure that every team member is collecting data in the same way, software solutions export data under specific guidelines, and data is analyzed using the same metrics. This will ensure consistency and accuracy in the baseline data being used by your forecasting system.
  2. Use A Time Tracking System: A time tracking system will allow you to capture how much time is spent on each project or task by workers across your organization. Being able to see how every hour is spent by your team members is critical for understanding resource utilization.
  3. Collect Data at the Individual Level: Businesses should collect data on individual resource utilization rather than only on the broader team or project level. This person-by-person insight will help you understand which individuals are underutilized or overutilized and can help with future resource allocation decisions.
  4. Use Purpose-Built Software: There are many software tools available that can help automate data collection and analysis. Instead of using Excel spreadsheets for time-consuming data processing or extensively modifying project management software not designed for your business needs, using dedicated resource forecasting software can greatly save time and improve forecasting accuracy.

By following these best practices, professional services firms can gather the data they need to make the right decisions about resource allocation and capacity management. The next step is to create a baseline for resource capacity and availability, which we’ll discuss in the next section.

Creating a Resource Capacity and Availability Baseline

Once you’ve created a comprehensive collection of resource utilization data and have a good understanding of the time and demands needed for your project types, it’s time to create a baseline for your resource capacity and availability.

So what is a baseline? This is a benchmark for the amount of time, the number of resources, and the project capacity that is regularly available at your business, which will help you know what new projects you can take on in the future.

Start creating your baseline by looking at historical data and analyzing trends in your resource utilization — the more robust the data and the larger the span of time it covers, the more reliable the average will be. Use this information to determine the maximum capacity of each resource and the total capacity of your entire team, then factor in any regular and recurring projects that your resources will be assigned to from week to week or month to month. This will allow you to see how much work your team can handle at any given time.

With this baseline established, you can now better forecast your resource needs for upcoming projects. It’s important to continuously monitor your actual resource utilization against your baseline, so you can make any necessary adjustments and ensure that you’re not overcommitting your team. Be sure you also compare your baseline with industry standards by benchmarking your business against other similar businesses — reports like the annual Professional Services Maturity Benchmark from Service Performance Insight (SPI) can be invaluable tools in helping you understand what standards other businesses use for resource utilization and capacity and where your business might be leaving money on the table

By creating a solid baseline for your resource capacity and availability, you can ensure that you’re not taking on more work than your team can handle, and that you have the resources you need to deliver high-quality work on time and within budget.

How Projects Impact Resource Utilization

Professional services firms work on a variety of projects, each with unique requirements that impact resource utilization. As such, it’s essential for organizations to understand how different types of projects impact resource availability, so they can plan and allocate resources more effectively.

Project type is an essential factor in determining the types of resources needed. Some projects require specific expertise, while others may require resources with specialized skills, certifications, or qualifications. Forecasting at the skill-level with enough confidence to make proactive hiring decisions is a particularly prominent challenge for professional services organizations, as revealed in research from the Resource Management Institute

Once all of your regular project types have been defined, you must ensure your team is composed of a broad mix of resources with a range of capabilities to meet these various project requirements. Remember that some projects have more extended timelines than others. Longer projects require a greater commitment of resources and may impact resource availability for future projects. Firms need to balance their resources across projects of varying duration to ensure they are effectively utilized.

Finally, some projects may require significant travel, which can impact resource availability. For example, a project that requires resources to travel extensively for on-site services may reduce the amount of time available for them to work on other projects. Professional services firms need to factor in the potential travel requirements for each project and consider this when planning resource allocation.

Understanding how different types of projects impact resource utilization can help professional services firms better allocate their resources and avoid overcommitting resources on projects that may require additional resources or interfere with other project schedules. By doing so, firms can improve their overall resource utilization and optimize project outcomes.

Developing Accurate Demand Forecasts

Once a baseline for resource capacity and availability has been established, the next step is developing accurate demand forecasts. Demand forecasts predict the upcoming level of demand for specific resources, services, or products.

To develop accurate demand forecasts, professional services firms should begin by analyzing historical data. This analysis should include past project types, their duration, and the resources utilized in each project. This information can help firms identify trends, patterns, and changes in demand over time.

Next, firms should consider external factors that influence demand. These could include changes in market trends, changes in technology, and economic shifts. Firms should also factor in the potential impact of new business development efforts and client retention efforts on demand.

It’s important to note that demand forecasts should be reviewed and adjusted regularly. Firms should take into account any new projects, business opportunities, and changes in external factors as they arise. Continuous monitoring of demand forecasts can help professional services firms stay ahead of changing market conditions and make proactive decisions to allocate resources effectively.

Overall, accurate demand forecasting is critical for professional services firms to effectively allocate their resources and remain competitive in a constantly changing business landscape. By carefully analyzing historical data and continuously monitoring external factors, firms can build more accurate forecasts and achieve better outcomes for their clients and their business.

Creating An Effective Resource Allocation Process

Once you have developed accurate demand forecasts and have a clear understanding of resource capacity and availability, the next step is to create an effective process for resource allocation. This process will determine how resources are allocated to various projects, tasks, and activities.

An effective resource allocation process should involve a balance of flexibility and control. You want to ensure that resources are allocated to the projects that need them most, while also allowing for some level of flexibility to adapt to changing priorities and unexpected events.

Follow these steps when creating your resource allocation process:

  1. Prioritize Projects: Identify which projects are the highest priority based on their strategic value, client commitments, and deadlines. This will help you determine which projects require the most resources and the soonest start times.
  2. Define Roles and Responsibilities: Clearly define who is responsible for allocating resources and who is responsible for requesting them. This will help prevent managerial confusion and ensure that everyone knows what is expected of them.
  3. Establish Resource Allocation Criteria: Develop a set of criteria that can be used to evaluate requests for resources. This might include factors like win probabilities for projects in the sales pipeline, project timelines, budget, and resource availability.
  4. Monitor Resource Utilization: Keep a close eye on how resources are being used and adjust your allocation process as needed. This will help you ensure that resources are being used efficiently and effectively.

By following these steps, you can create an effective process for resource allocation that will help you allocate resources to the right projects at the right time.

How To Adjust Resource Forecasts

Once you’ve established an effective process for resource forecasting and allocation, it’s crucial to continuously monitor and adjust your forecasts to stay on top of any changes that may impact your resources.

To start, set up a regular cadence for monitoring your forecasts. According to the Resource Management Institute, “Interlock meetings are an essential part of the forecasting process, and should be happening at a regular cadence to help ensure the integrity of forecast inputs. Just over a third (35%) have a formalized process in place, indicating an opportunity for process improvement.”

To stay ahead of the curve, institute a weekly or bi-weekly organizational interlock meeting where you review the current forecast and any updates or changes that have occurred since the last meeting. During these meetings, take a close look at any areas where your forecasted demand and actual demand may not be aligning. Are you seeing more demand than anticipated? Are you overestimating resource availability for certain projects? Based on these insights, make adjustments to your forecasts and allocation plans as needed. This may involve shifting resources around, bringing in additional staff, or even reallocating project workloads.

In addition to these regular check-ins, keep an eye on any external factors that could impact your resource availability. Are there industry trends or market shifts that could change demand for your services? Is there new technology or software that could impact resource utilization?

When combined with the previous steps taken to create strong forecasting, you can ensure that your professional services firm is well-positioned to handle any changes that come your way and stay on track for success.

A Purpose-Built Forecasting Solution

The best resource forecasting solutions work in concert with your entire resource and project management system. That’s why the Kantata Professional Services Cloud provides top of the line forecasting as part of a larger purpose-built technology solution. Find out how you can become a stronger business now and far into the future with Kantata.

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