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If you’re doing resource planning in spreadsheets, you’re going to run into this problem sooner or later.
Research from McKinsey showed that strategically shifting resources is the best way to supercharge a company’s growth. But you don’t need research to know that the better you are at resource planning, the stronger your business becomes.
How do you do resource planning?
How do project managers and COOs at software companies assign the right people to the right projects?
Many of them still use multiple spreadsheets where they keep data about bookings, availability, and employee skills. Sometimes they use manually generated Gantt charts or simple Gantt tools.
The problem with these approaches is that they give you fragmentary knowledge about what’s happening at your company.
And how are you supposed to make the right staffing decisions when you have no real-time visibility and need to calculate project profitability manually?
If you don’t know what your people are doing and constantly need to ask other project managers whether a developer is free to work on your project, keep on reading.
Here’s everything you need to know about resource planning done right.
What is resource planning?
Let’s start with a definition. According to PMBOK®, resource planning is all about “determining what resources (people, equipment, materials, etc.) and what quantities of each should be used to perform project activities.”
Let’s focus on people.
Resource planning is basically the process you use to identify the team members you need to allocate for your project.
You need to know:
- when you’re going to need them,
- for how long,
- how much they earn or what is their expected profitability,
- and what particular skills they should have to bring value to the project.
In its essence, resource planning is based on resource availability.
It’s simple - before assigning resources to projects, you need to know their availability. Otherwise, you face issues like double bookings, a growing bench, or last-minute hires.
Note that resource planning looks at projects happening at your company from a long-term perspective. This is the cardinal difference between allocating people to projects and planning project tasks.
Key resource planning tasks:
- Identifying the availability of your people at any given point in time (including forecasting their future capacity),
- Planning available resources across multiple projects,
- Handling dynamic schedule changes,
- Creating resource management plan,
- Knowing the employee performance, skills, and expertise,
- Assigning the right people to the right projects (considering many factors, from project profitability to professional interests of the person),
- Forecasting the demand for different resource based on the current work and tentative projects that might be scheduled in the future,
- Managing and allocating people to keep them happy and satisfied.
Resource Planning vs. Capacity Planning
Resource planning is the process of finding the right specialists for the right projects. A smart project manager takes many things into account - from the person’s availability and hourly rate to their seniority and professional interests.
Capacity planning, on the other hand, is the process of mapping out what each specialist is currently up to across the entire company.
Resource planning and capacity planning are strongly tied because the latter is about estimating your current capacity utilization. If you note that your frontend developers are constantly 100% utilized, you may need to hire more people (or risk your team burnout).
This is how you calculate your available capacity - information that is crucial for resource planning and allocating your people to projects like a boss.
Here you can find more information about Capacity Planning: 5 best practices for capacity planning in project management
Key terms in project resource planning and management
Before we dive into best practices, let’s go over some key concepts you need before dipping your toes into resource planning.
Utilization is the percentage (%) of a specialist’s time used for the selected time slot. One of the key goals of resource management is to maximize resource utilization effectively. But don’t plan 100% of your utilization - planning for less will give you some space for addressing issues, applying changes, or handling unexpected workloads.
How to calculate your utilization rate? Here’s the answer: What is the utilization rate formula for software companies?
You need to prepare a rough resource plan to understand which resources are needed to complete the project. Make sure that your project scope is accurate. This is how you can avoid overloading or missing resources while it’s running. If you do it right, you’ll make your project more cost-effective in the long run.
One very helpful activity is to create a WBS (work breakdown structure) that allows for more accurate project estimates.
Just remember that resource planning is all about a long-term perspective, so don't go into micro management.
As your project grows, you will be able to plan more carefully - you need some rough information to get started.
When creating project estimations, consider them open-ended.
Today, most software companies realize agile projects that don’t have a clearly defined deadline but a series of milestones. By keeping it open, you can add new phases and track how the project is changing in the long term.
The project’s duration takes into account not only working days but also weekends and public holidays.
Learn more in this article: How to build a project planning process for a software company
Here’s why resource planning is essential
Smart planning reduces project costs
Allocating the right people to the right projects ensures timely delivery and gives you full control over their budget. Planning helps to avoid adding over-skilled resources that can spike project costs. At the same time, you also eliminate delays by not allocating under-skilled specialists.
Assigning two junior devs instead of one senior dev to the project isn’t going to get you the same effect, right? Most likely, it will cause missed deadlines.
Forecast resource utilization
Both resource planning and forecasting offer insights into employee utilization within a project. A smart resource plan helps to mobilize resources from non-billable to billable projects to increase your bottom line. You also get to avoid under or overutilization of your people to keep employee satisfaction in check.
Keep your projects profitable
A project’s profitability is directly related to which resources you pick to complete it. By scheduling your team’s time accurately, you’ll control project budgets and get the profitability you want. Most software companies opt for the profitability of around 30%.
Make smart hiring decisions
During resource planning, you might spot gaps in your skills on board. Or it might become clear that you need to recruit some new talents. In either case, your HR department will have clarity on what skills you need to complete tentative projects and get to work on sourcing them. This will become even more valuable once you start forecasting your capacity more accurately.
Planning means learning from the past
Just like any other planning activity, resource planning takes advantage of historical data to make informed predictions about the future. While reviewing past projects, you can learn a lot about your mistakes and make sure they never happen again. For example, you can examine in detail why you went over budget on a project and learn what to do differently next time).
Resource planning best practices
1. Cover the basics of planning projects
Your first step is to estimate the project’s scope and duration. How else will you know which specialists are needed and for how long? To do that, consider using the work breakdown structure (WBS) approach. To make your plans more reliable, use historical data from past projects.
2. Make sure to have full visibility
Don’t make the mistake of allocating resources without having complete visibility of their skills, competencies, and scheduled or tentative bookings. Getting the right person to join the right project will become very difficult.
3. Don’t shy away from planning tentative projects
Resource planning for future projects is often something a project manager does at the last minute. Planning and allocating people to projects needs to be done even before signing the deal. In an ideal scenario, it takes place right after the prospect reaches a certain probability of closure.
This will give you a headstart in planning your project and enough time to address the resource requirements of the project. You won’t have to struggle with last-minute hires that might compromise the quality of your project output.
4. Mix permanent and contingent employees
Using full-time employees seems to be more cost-effective. It is, but only for long-term projects. For shorter ones, hiring someone full-time might reduce your bottom line later on. How are you going to redeploy this resource once the project is over? That’s why it makes sense to get the right mix of permanent employees and specialists who can step in and contribute to the project for a limited amount of time.
5. Match the skills to projects during planning
One of the common pitfalls of resource planning in project management is assigning under or overqualified people to projects. Under-skilled resources cause delays; over-skilled, over-skilled ones increase project costs and impact your profitability.
But that’s not everything. If you fail to take into account the individual interests and skills of employees, you might assign them to projects they’re not interested in. As a result, you’ll see a lack of engagement and loss of productivity.
6. Don’t hire at the last minute
Things can go wrong in many ways in project management. Resource planning might be inaccurate; you’re bound to be forced to hire people last minute to match the project requirements. This will impact the overall quality and later lead to a large bench of poorly matched skill sets.
Analyzing the project’s demands with matching skill sets in mind enables you to make informed hiring decisions well in advance.
7. Stop using spreadsheets
Despite their limitations and propensity for errors, many companies are still using spreadsheets for planning their resources. Most of the time, it’s because they’re accessible and people are used to them.
Using spreadsheets comes at a price - from improper allocation and double booking to creating additional work for a project manager and HR department.
An additional problem I encounter when talking to managers is fear and uncertainty whether everything has been completed in Excel, and this information determines the right allocation decisions.
Moreover, Excel files often do not provide enough clarity for what is happening from the bird's eye view.
Why you need resource planning software
A well-designed and executed resource planning software has a huge impact on allocation and scheduling. It can help you:
- Find the people you need for a project
- Forecast resources required for every day/week/month of the project
- Create a project timescale and resource scheduling plan
- Track resource costs to avoid overrunning your budgets (PMI found out that less than 60% of projects are completed within budget)
- Schedule resources to test how they impact project profitability
- Keep your budget in check thanks to automatic hourly rate calculation
- Get a real-time view into the available capacity and utilization of your resources (did you know that 55% of companies say that they can’t track their project performance in real time?)
- Balance your team’s workload to keep people engaged and happy
- Automatically calculate actual vs. planned project costs for more insights
- Keep up with the team’s hours worked thanks to automatic timesheets
Check out this case study that shows how one of our clients who reduced annual costs by over $200,000 thanks to a streamlined people planning process.
A real-life example of using resource planning software
1. Make preliminary project estimates
Prepare a rough project quote, estimating how many hours would be required to complete the whole project or a certain process, such as the Discovery Phase.
Define the skills needed to carry out the project.
You should also consider the hourly/daily/total expense that you don't want to go over, as well as the expected revenue at this stage.
2. Determine the project's resource needs
Learning what unique expertise and knowledge the project requires is the first step to successful resource allocation.
You can't put three junior Python developers in place of one senior Python developer and expect that their combined abilities add up.
Take into account not only hard and soft skills but also seniority and other related qualifications (for example, location or time zone).
3. Locate resources with skill sets that fit the requirements.
You can use the budget allocation to get a Gantt-chart view until you know the necessary time needed to finish the project. You're now going to select the best candidates for the role.
Once you’ve determined the skill set, seniority, and availability, you probably have a pool of talents and knowledge combinations from which to select your candidates.
Now is the time to examine the project's finances. Which candidate matches your financial projections best? You will improve the project's margin by assigning the developer who is a salaried employee.
I now recommend creating a so-called "soft allocation" or an employee reservation. As a result, you should assign them to the project at first, but keep in mind that the booking isn't guaranteed. Many of our clients have set up "draft allocations" for programs that are unpredictable.
This allows you to make various estimates based on different factors. You can, for example, verify employee availability without any preliminary tasks or soft allocations.
4. Contrast the original project estimates with real results
Once you've built your original/soft allocations, you can compare them to your initial projections and refine them to ensure the data is as accurate as possible. This is a smart move that is bound to improve your resource management. When you're certain about these allocations, set them to "active" (the so-called “hard” booking - 100% confirmed).
5. Assign resources in line with demand
It's time to delegate your resources to the project. Have a contingency plan in place in case a resource becomes inaccessible unexpectedly (for example, due to illness) or a potential candidate receives a stronger last-minute bid.
Make sure that a new specialist arrives a little earlier - especially if they fill crucial roles. This is how you ensure that they are ready before the project begins.
6. Keep track of resource utilization
You can monitor the real resource utilization rate when the project begins. You'll be able to see how the plans are carried out and spot any inconsistencies right away.
For instance, you may have underestimated the number of hours needed to complete a project process, or someone may have forgotten to record their working time (trust me, it happens!).
Resource planning can get easier when you have the right tool at hand.
Try Primetric to see what it's like to plan and allocate resources with full confidence and access to real-time data.
Sign up for a demo and start planning like a pro.