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Capacity planning – what it is, how to do it well

Last updated on
September 24, 2021

People rarely talk about capacity planning—perhaps because it’s seen as one of the least creative parts of project management. Nonetheless, it’s essential you get it right. Without solid capacity planning, you can’t realistically hope to deliver projects on time without compromising others or exhausting your team. Here’s how to nail capacity planning every time in just five simple steps.

What is capacity planning?

At its most basic, capacity planning means mapping out all the project work you have to do and calculating how long it’s going to take you, within the constraints of time and manpower. That includes fitting new work harmoniously alongside existing plans, staff leave and client commitments. So, very simply: capacity planning is about understanding the limits of your available resources and working effectively within them.

But it’s also about distributing work intelligently to get the most from your team. Assigning too much work to a select few team members is quick road to stress and burn out, which limits your productivity and the quality of project output. Conversely, assigning too little work to each employee is an inefficient use of resources, which will limit project profitability and disengage your employees.

It's a fine balance to strike, which is where having a solid capacity planning process comes into its own.

Capacity planning in 5 steps

Good capacity planning essentially boils down to effective knowledge sharing—keeping all team work visible, sharing insights and experiences from previous projects, synching schedules and monitoring workloads once projects go live. At the backbone of all of that lies a solid project tracking tool, which helps project teams to keep the entire process efficient, accurate and effortless. Using Timely as an example, here's how capacity planning works in five steps.

Step 1 – map resources required for all deliverables

Firstly, you need to get an overview of all the work required for your project. The best way of doing this is to look at data from similar past projects to understand the people, tasks and time you'll likely need. There’s a long-winded and fast approach to doing this.

The long-winded one requires you to ask each team member to write down everything they did on a previous project and estimate how long each individual task took, using the formula: X hours per week to do Y task. Employees need to think carefully about all the tools they use, since administrative project tasks – like emailing clients, traveling to meetings or having a quick project catch-up – often go unreported when using this method.  

The fast approach outsources this task to an automatic project tracking tool. It will automatically capture the time each team member spends on different tasks and tag them to the right project, providing a complete account of everything that goes into your projects. As a result, it’s also far more accurate – capturing hidden project tasks that manual reporting frequently overlooks.

project activities@2x
👉 Learn more about automatic project trackers

Step 2 – Total your estimates

Next, you need to compare all your team’s estimates to gauge all the total time required for a particular project. This process will again vary depending on whether you’re doing everything by hand or enlisting the help of a tool.

If you’re going manual, draw up all your team’s estimates in a table, grouping them by role. For each role, list individual tasks and the total time spent on them. After you’ve recorded everyone in your team, calculate the total hours spent. Compare them against the actual duration of the past project in question to see whether your total adds up.

If you’re going automatic, your project tracking tool can do this all for you. Just head to your project’s dashboard for a full rundown of the total time you spent on it. Timely, for example, provides an overview of budget milestones, activities, hours and reports for your past projects.

Individual project tabs
📈 How Timely’s project dashboards work

Step 3 – Create and assign project tasks

Using those estimates, you're now ready to create time-bounded tasks for each piece of project work. This will help you understand your team's progress once your project is live, so you can proactively manage your team to stay on track.

There are plenty of task management tools on the market to streamline this step, but if you are interested in accurately following project progress you'll want to map tasks directly inside your project tracking tool. In Timely, you can create and assign tasks for every piece of project work—adding deadlines and estimated effort required for each.

User-uploaded Image

This effectively creates a prioritized to-do list for everyone on your project team. These tasks can then be scheduled into a practical plan of action with a simple drag and drop to a colleague's calendar.

Step 4 – Consider a capacity strategy route

While not always appropriate for smaller projects, having a capacity planning strategy can help you quickly adapt to meet any unforeseen changes during project execution. Consider the following approaches against your you team productivity, stakeholder input and market variables:

  • Lead strategy – this means adding capacity in anticipation of increased demand, with the goal of improving service level and reducing lead time
  • Lag strategy – a more conservative approach than lead strategy, where you add capacity after only the organization is running at full demand
  • Match strategy – adding capacity in small amounts in response to changing market demand. This is more adaptable for businesses in varying markets.

Step 5 – Track task progress and team workloads

Crucially, capacity planning doesn’t end once projects go live. You need to be able to monitor how work pans out against your plan to ensure employees aren’t overloaded, keep everyone working to your priorities, and ensure tasks stay on-schedule. It’s also helpful for improving future project estimates – documenting learnings from every project to help inform the next.

Tools like Timely again help you here by visualizing where everyone on your team is against their weekly capacity—including project hours worked, hours planned and any overtime. You can even review the billable status of project hours, to keep an eye on internal costs. It’s the easiest way to stay updated on how your team is doing—rebalancing workloads and providing direction where necessary.

Timely also provides you with a real-time status of work in progress as people plan and log their hours—you just need to glance at each task's progress bar to understand where it is. Timely will even flag work that is at risk of falling behind schedule, reducing the risk of expensive project surprises.

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