Five Ways Capacity Planning Will Prove Your PMO’s Value

In the Q&A sessions of our webinars we get many questions concerning how to properly budget for resources. These are great questions and we know that every day, executive sponsors pressure the PMO leaders to “pull a rabbit out of their hats” when allocating resources. We hear a lot of angst about tactics that promote using resources to the edge of their value in hope that it is a cost-effective way to safeguard a company’s financial health.

As a PMO leader, you know that skilful project resource management, without pushing your talent to their limits, is a better way to protect the bottom line. But without clear visibility into capacity and a corresponding control of this aspect of your program management, firefighting, excess overtime, ill-advised hiring and rupturing financials could very well be the result. Here are five ways to stop this kind of financial folly before it starts.

1.     Build realistic utilization formulas to connect your people to costs: Your skilled resources can't finish working on one project today and then start something completely different tomorrow at the same speed of productivity and efficiency. It takes a while to adjust-- to drop one piece of work and start a new piece of work. And when team members who are assigned to multiple projects at the same time have to switch gears, that's costly. With the proper utilization percentages, your plans will be realistic and give better visibility into the true constraints and gaps. Managing the financial capacity against your resource plan seems like an obvious thing to do, but many companies just don’t have the visibility to do it.
2.     Analyze the project mix: You have to do your homework and effectively match projects and resources to make the most money and meet strategic goals. A resource with the flexibility to be a project leader, implementation consultant or a developer as required also retains more value as you’re assigning resources to a project array. Identifying what kinds of projects deliver the most ROI is an important exercise toward meeting your deliverables within budget.
3.     Manage gaps appropriately: There will always be resource gaps to manage so make sure you have cost profiles for build versus buy versus rent versus outsource of your resource teams. Compare building or developing employees costs against outsourcing a particular capability or contracting for it. You need hard numbers for each of these decisions when managing gaps or you’ll be spending too much and losing margin or spending too little and losing clients (or sponsors’ trust) due to poorly developed resources or inappropriate expertise on the job.  
4.     View from enterprise level: If you’ve met the three objectives we’ve discussed above for only one department or services delivery silo, you can still lose money. The only way to connect true costs to each of these actions is to do it from the top down. Otherwise, they’ll be the hidden costs inherent in being surprised when the right hand doesn’t know what the left hand is doing. Never mind the dreaded “opportunity cost” of when valuable resources are underutilized or working on a non-business critical project when elsewhere in the portfolio, strategic projects are starving for the value they could bring.
5.     Manage benefits for your particular business model: What is your value proposition when your projects are meeting their goals, both financially and strategically, and how can you measure your resource usage against these winners? How can you avoid applying resources to a loser that you don’t know is a loser because your resource use doesn’t have an assigned cost per project? We’ve seen that capacity planning always has a corresponding cost. If you can identify these costs to make sure the benefit outweighs the financial strain for the short term and investments in the long term, you can be assured your company is headed in the best strategic direction possible. And that means you will be getting the most “bang for your buck.”

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