Why is Capacity Planning Important in Project Management

May 26, 2022 | By Samantha Varner


Companies that view resources as pieces that make up a project can easily fall into the trap of believing that traditional project management will be enough to successfully deliver on a company’s strategic initiatives. Unfortunately, they’re missing the big picture.

Projects do not happen in silos. Resources with unique skills are often needed on more than one project, and these shared resource interdependencies can cause bottlenecks that lead to serious delays. Meanwhile, other resources with the right skillset may be underutilized where they could be the key to getting a project back on track.

The reality is that successful portfolio management comes down to capacity planning. Let’s take a look at exactly why portfolio, program, and project management must incorporate capacity planning and resource management in order to be successful.

What is capacity planning? Capacity planning is the step before resource planning. Capacity planning looks the bigger picture. Does your organization have the person capacity and skill sets required to fulfill the demand of the programs and projects? This is typically a strategic planning process that looks months or years ahead, taking time, skills, and demand into consideration.

Successful projects start with strong planning

The goal of the planning process is to build a roadmap to deliver projects on-time and on-budget. Equipped with the right tools and software, a resource manager can factor all resources—people, capital and material—into the capacity planning process. Visibility into all portfolios as well as their project interdependences means bottleneck resources can be put to use most effectively without being overallocated.

Inevitably, project changes will happen along the way. Resource management software that offers features like Tempus’s What-If analysis allow resource managers to explore options ahead of time. By seeing the impact of the proposed work on their people, managers and executives can determine the order in which projects start and if they need more people to accomplish the work. This analysis can be done during the capacity planning phase and the in-flight phase to identify bottlenecks and risks.

How is capacity planning different than resource planning?

Capacity planning involves looking at a company’s strategic initiatives and developing a long-term plan to accomplish said initiatives. That means evaluating the projects that will make up the portfolio months or even years in advance to determine the resources that will be needed to execute the portfolio successfully.

Resource planning is still part of the planning phase, but is more closely tied into execution. Specifically, it involves matching resources to projects to maximize portfolio efficiency. It considers all current and planned projects as well as the skills and experience each team member brings to the table. This means resource managers can assign people to projects based on more than just their role to get the right people to the right work at the right time.

Why portfolios fail without capacity planning

The benefit of capacity planning is that it enables your company to predict resource bottlenecks or scarcity months or even years in advance. Once you identify potential skills shortages, you can decide whether you need to hire new employees, upskill current employees, or plan to work with contractors once the time comes.

Companies that neglect capacity planning, on the other hand, often find themselves blindsided by skills shortages, people with high task-switching risks, or simply not enough team members to handle all the work at critical junctures in the portfolio. And by then, it’s too late to upskill, hire, or find contractors. A project falls behind schedule because it doesn’t have the necessary resources to get started or move to the next phase, which then delays another project that was contingent on the first, and suddenly, you’re facing the domino effect of project delays that knocks the entire portfolio off schedule. In many cases, off the budget as well.

Unfortunately, many companies try to push past these issues by over-allocating and hoping resources will find a way. But when resources are overallocated, by definition, they can’t feasibly complete all their work within the designated timeframe. Projects will have to be pushed aside, which leads to missed deadlines. On top of that, it can drive people to burnout, which will negatively affect their performance on concurrent and future projects as well. Put simply, overallocation is never the answer.

The power of capacity planning and resource management

We’ve all heard the old adage “If you fail to plan, you plan to fail,” and capacity planning is a prime example. Optimized staff planning is critical for success in both project and portfolio management. After all, it’s nearly impossible to achieve a company’s critical objectives with unrealistic deadlines or a lack of visibility into the consequences of shifting resources due to unforeseen circumstances. Capacity planning is the key to anticipating these issues before they arise.

And when unforeseen circumstances do come up, features like Tempus Resource’s What-If analysis allow resource managers to see how shifting people impacts the portfolio overall. Together, thorough capacity planning ahead of time combined with powerful resource management capabilities that allow you to respond to challenges and changes in real-time are the key to maximizing portfolio

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