From chaos to clarity: a complete guide to capacity management

<sme-box>

<sme-color=“pink”>

<sme-quotes>

Summary: mapping out your organization’s capacity and managing your plan in a centralized tool helps you deliver projects successfully without overspending on resources (bad for your business) or overallocating your team members (bad for your people).

</sme-quotes>

</sme-box>

On the surface, capacity management is as simple as overseeing the number of hours your team has available in the work week, and how those hours are spent.

But as the operations, traffic, people, or resource manager in charge of your team’s capacity, you understand better than anyone that no human being can be distilled into 40 hours of project-based productivity.

You’re managing individual inputs—like current availability, work hours, scheduled work, regional holidays, and time off (both planned and unplanned)—for dozens or even hundreds of people. And you’re working within constraints, like project budgets, timelines, and team members’ skill sets. 

It’s no wonder that getting it right is one of the most difficult jobs out there. It’s even harder when you’re trying to do it without the three essential components that take your capacity management from 😱 to 🧘:

1. A tailored strategy
2. A proven process
3. A centralized capacity management tool

What is capacity management?

In the context of resource management and the people planning process, capacity management is the process of ensuring an organization has an adequate number of skilled people to successfully deliver projects, on time and on budget. A capacity manager monitors and plans their team’s workload, making adjustments as needed to prevent under- or overallocating team members.

<sme-box>

<sme-color=”green”>

<sme-image>

</sme-image>

<sme-author>

Jacquie Ford

</sme-author>

<sme-position>

Head of Consumer Operations at News Corp

</sme-position>

<sme-quotes>

Capacity is critical for understanding your resourcing and business needs. Understanding capacity means you’re going to be on the front foot when you need to either scale up or down based on volume and forecasts.

</sme-quotes>

</sme-box>

2 types of capacity management 

👥 Workforce capacity management ensures you have the right skills available to complete tasks, balance work schedules sustainably, and quickly determine if more staff might be needed.
⚖️ Capacity utilization management balances work in the pipeline with your team’s availability.

Speaking of availability, here’s a quick pro tip: a healthy utilization target should account for internal meetings, non-project work, sufficient context-switching time, and a realistic number of projects.

Keeping to a comfortable resource utilization level for your team and business demands, whether 75% or 90%, allows your team members to take on new projects without burning out.

A real-life capacity management example

Global agency Scholz & Friends manages capacity for 200+ distributed team members and freelancers. Capacity planners create tentative project plans, manage team workloads, and maintain a reliable freelance pool.

The team outgrew their spreadsheet and moved to Float (hello! 👋) to streamline capacity management and gain instant visibility into team members’ availability, making it easier to predict capacity and allocate their resources.

Their rigorous capacity management plan, mapped out in Float, helps them take quick actions, like lending a team member from their Hamburg office to the Berlin one or assembling the perfect project team in minutes.

During weekly virtual capacity planning meetings with account managers and creative directors, the capacity planning team consults the team’s schedule in Float to answer questions like: 

• Is this project properly planned? 
• How much time can we allocate to tentative projects without causing bottlenecks for confirmed projects? 
• Can we predict how much work is coming in?

<cta-box>

<image-color="yellow">

Get a live and accurate view of your team’s capacity today

Float is the #1 rated resource management software on G2 that gives you the most accurate view of your team’s capacity to plan projects and schedule tasks with confidence.

<cta-button>Get your free trial</cta-button>

</cta-box>

How to calculate team capacity

Calculating your team’s current capacity is essential for project management: you need to know what they can take on based on current and future resource allocation. At its most basic level, the capacity planning equation looks like this:

Number of team members x Number of work hours = Total capacity

If an agency has 50 employees or FTEs (full-time equivalent employees), each working 40 hours per week, that equates to 2,000 hours of weekly capacity.

Of course, in the real world, it’s not quite so simple (unless you’re reading this in the year 3050, and the robots have officially taken over 🤖). Other considerations impact your team’s true capacity, such as:

• What utilization rate your team is working at
• What utilization rate you want (or need) them to be working at 
• How many billable hours should be utilized
• What non-project-related work to account for, like meetings, training, and admin tasks
• Whether team members have any upcoming PTO, sick days, and parental leave

With all this information visible in a capacity management tool, you have an accurate idea of how many projects the team can effectively and realistically complete in one week.

4 capacity management strategies

1. Lead strategy

The lead strategy requires having excess capacity to safeguard against future demands. 

• 👍 The good: when an influx of new work comes in, your team isn’t left scrambling to find nonexistent availability for new projects, and is able to match demand
• 👎 The bad: if actual demand doesn’t match predictions, businesses might end up having extra team members sitting on the bench—and potentially no budget to pay them
• 👀 The example: an agency is in the final stages of pitching for a huge project. Anticipating increased resource demand, they start the hiring process for three new team members.

2. Lag strategy

The lag strategy involves waiting until a team’s current capacity is stretched to its limit before adding more people.

• 👍 The good: the lag strategy drastically reduces the risk of hiring staff you don’t need
• 👎 The bad: but it increases the risk of not hiring staff you do need—you might lose prospects to competitors with more capacity, deliver projects late, cause your team to burn out, or—worse—all of the above in one go
• 👀 The example: an agency’s entire creative team is at 95% utilization and fully maxed out. Only when a new client is signed do they start looking for additional contractors to work on the project.

🔥 How people planners use lag strategies for right-time hiring

Consultancy firm Accounts and Legal uses their capacity management tool (it’s Float!) to execute the lag strategy without overstretching their team.

During planning meetings, they consult Float for a visual, bird’s-eye view of team members’ workloads.

<pull-quote>

<quote>

We see more clients, and timelines getting tighter and tighter—for us, that expresses the need to recruit.

</quote>

<pull-quote-author>Clara Tooth, former manager at Accounts and Legal</pull-quote-author>

</pull-quote>

By assigning roles to each team member in Float, managers like Tooth can see when the capacity for a certain role is almost full; this usually indicates the need to liaise with the human resources department and start making plans for hiring and onboarding new people.

3. Match strategy

Somewhere between lag and lead, the match strategy considers your team’s current availability while keeping a close eye on future capacity requirements. It tracks your capacity and resource utilization, and gives you the option to increase capacity when you have resource constraints.  

• 👍 The good: you aren’t hiring talent without a proven need for it
• 👍 The better: it gives your organization room to grow—you can comfortably take on new work and be confident your team will handle it
• 👀 The example: as an agency’s creative team’s utilization rate creeps up from a comfortable 80% to a less comfortable 90%, the company starts hiring more freelancers

For the record, we recommend always planning projects in advance, even if they’re not confirmed yet. A robust capacity management tool should let you create tentative projects, schedule them, and set all their phases, milestones, and resources, so you can quickly see if the right resources will be available when you may need them.

4. Adjustment strategy

The adjustment strategy involves adding or reducing capacity based on client demand or significant changes to your product or service structure.

• 👍 The good: since this is based on current demand or actual changes to your business offering, it’s much more accurate for your capacity planning process, and avoids resource shortages or surpluses
• 👎 The bad: it’s fairly complex to execute, and relies on having accurate data to do efficiently‍
• 👀 The example: an agency is working on a project for a client who suddenly and unexpectedly requests additional deliverables and a tighter timeline. They use their capacity management tool to easily adjust capacity in a live schedule based on real-time data

<cta-box>

<image-color="yellow">

Execute your capacity management strategy in Float

Start your 14-day free trial in just a couple of clicks!

<cta-button>Try for free</cta-button>

</cta-box>

A simple, 3-step capacity management process

Step 1: measure

Before you kick off any project, identify the roles you require to deliver the work (for example, a video production agency might need to bring on two new videographers and an editor for an upcoming project). 

Next, look into any additional resources you need to deploy (and by ‘resources’ here, we do mean things like new editing software, an extra camera, more studio space, or additional IT services) and how much of each you’ll need.

Step 2: analyze

During the project, analyze the accuracy of your initial resource allocations and make changes if needed. You want to ensure team members aren’t taking on too much (or too little), and that work is fairly distributed, reducing bottlenecks.

Capacity management tools like Float give you real-time analytics of your team’s schedule, so you can view workload and availability within a selected period and reallocate available resources accordingly.

Step 3: track

Monitor your team’s scheduled hours and compare them to the actual hours spent on the project. Effectively tracking your team’s hours throughout a project’s completion helps you manage capacity better for your future needs, so you won’t run the risk of overspending on resources or overallocating your team members.

<tip>

Pro tip: choose a planning cadence that works for you

Depending on the nature of your projects and business requirements, you may need to perform the steps above on a daily, weekly, or monthly basis—or any other time period that makes sense!

Global agency Scholz & Friends holds weekly meetings to monitor resource capacity in Float, while consultancy firm Accounts and Legal conducts monthly sessions to check team members’ workloads against their actual capacity. If your team uses the agile methodology and plans work in sprints, this process should ideally happen at bi-weekly intervals.

</tip>

5 capacity management best practices

1. Track capacity in a visual resource management tool

As you already know, capacity is an absolute beast to manage, especially in a growing or larger company where project scope and allocations change every day. You’re working with many tricky (and changing) variables, like *inhales*:

• Work hours
• Time off (both planned and unplanned)
• Current and optimal utilization rate
• Skill sets and strengths
• Billable vs. non-billable hours
• Current and upcoming projects
• Client budgets
• Project scope
• Task dependencies
• Project timelines and due dates

That’s why it’s highly recommended that you track it all in one centralized platform. Visualizing capacity in one single space that everyone has access to helps you correctly allocate the right team members to the right tasks.

Overly simple lists or complicated, multi-tab spreadsheets make this process ultra-complex and leave room for human error. Acquiring the right resources and team members with the required skill sets and experience might take a long time, so it’s important to make it easy for capacity managers to identify missing skills in time and reduce bottlenecks. 

The bottom line: when you automate capacity management to some extent, you improve your chances of delivering projects on time, on budget, and within scope.

<sme-box>

<sme-color=”green”>

<sme-image>

</sme-image>

<sme-author>

Emily Feliciano

</sme-author>

<sme-position>

Senior Creative Resource Manager at Atlassian

</sme-position>

<sme-quotes>

One of my favorite things about Float is that it’s really easy to digest. I work with creatives, and they don’t want to look at an Excel sheet trying to tell a very specific story. 

Being able to look at the schedule and immediately understand what’s happening, what projects are ongoing, and at what point people are starting to go over capacity under capacity is great, because creatives are very busy.

</sme-quotes>

</sme-box>

2. Create a capacity planning system to manage projects

An efficient capacity plan helps you meet capacity requirements by fulfilling short and long-term demands. It involves setting up an efficient system in a dedicated resource management tool (guess which one we recommend? 😏)  to track and monitor capacity, so you can prioritize projects and allocate the right people to high-impact tasks and initiatives. 

A live, always-on view of your resources helps you manage multiple projects simultaneously. It also enables you to determine feasibility, costs, and role requirements, so every project is a profitable one.

<tip>

Pro tip: give everyone access to your shared capacity planning schedule

The capacity and resource planning process should never happen in a silo: your entire team should be involved in the process and have access to relevant data about existing resources and upcoming requirements. For example, using Float, you can save your go-to filters as shared ‘Views’ so you and your team can see what’s important to you, faster. If you’re planning capacity for a 30-person design department that’s part of a 200-person team in Float, create a ‘Design team’ View to revisit in your design capacity planning meetings.

</tip>

3. Proactively forecast resource demands

Resource forecasting is the process of predicting upcoming resource demands at the start of a project to help you ensure a project remains on budget. 

We get it: you’re no clairvoyant—but there are some ways you can see into the future 🔮 

For example, if you work in an agency or professional services business, regularly consult your sales department or project managers about customer demand and find out what upcoming deals are in the pipeline. Or, if your company has the goal of 10x’ing its current revenue, you can safely deduce that more work is on its way—and that probably means it’s time to start planning staffing requests or building a solid freelance roster.

Historical data from past projects also points you in the right direction 👉If you’ve been planning projects in a resource management tool, you can refer back to previous project records that paint an accurate picture of all the times you had too many or not enough resources. This way, you can learn from your past project mistakes and successes to accurately plan capacity for new ones.

4. Build shared workflows for resource allocation

It’s time to ditch the email threads, Slack messages, and meetings and replace them with a resource allocation workflow that keeps everyone—that is, both your team members and project stakeholders—in the loop.

We don’t need to tell you that endless back-and-forth messages only lead to confusion and mess; we’ve all been there. 

So, work with your team to create a dynamic resource allocation plan that includes inputs like each individual’s working hours, skills, location, utilization rates, time off, current workload, and tentative projects. Visibility into this data enables you to expertly navigate capacity management challenges like changes in project scope and unexpected unavailability.

A purpose-built tool like Float should also let you filter and sort team members by skills and capacity and be aware of any upcoming time off to determine who is best suited and available for upcoming projects.

<pull-quote>

<quote>

With Float, you can click to find a motion designer or a copywriter, and you immediately have a list of everyone across all offices. You quickly know who speaks English and who speaks Spanish, and you can help out if someone is in need of a specific skill set.

</quote>

<pull-quote-author>Maike Jahnens, Head of Financial Operations and Capacity Management at Scholz & Friends</pull-quote-author>

</pull-quote>

5. Reduce bench time

Too many benched resources is a double whammy: it increases overhead for the business and decreases your people’s productivity. Make it a priority to predict bench time and take any necessary measures early on.

A solid capacity planning system helps you reduce resource underutilization. It also gives managers accurate insight into the capacity and demand gap to plan their resources effectively.

5 benefits of capacity management

• 💡 Make the right project management decisions: capacity management involves continuously gathering and centralizing data about your team’s skill sets and availability, helping you decide who is best fit for certain projects (and spot the need for additional help before it is too late)
• 😮💨 Prevent team burnout: an effective capacity management plan shows you what bandwidth your team has to take on new work, helping you guard against consistent overbooking. PS: it’s worth repeating that your team should have some excess capacity so they can handle unexpected work without being overwhelmed.
• 🛠️ Keep tabs on skill sets: regularly assessing resource capacity forces you to take note of your team’s strengths and skill gaps. When it’s time to assign a task, you can quickly evaluate who’s the best fit based on their skill set.
• 🤝 Hire smarter: not enough resources is one of the most common capacity issues—but too many team members and not enough projects is just as problematic. Knowing how many team members, resources, and skill sets you currently have available for client projects ensures informed decision-making.‍
• 📈 Create more accurate budgets: with effective capacity management, you can predict common scenarios like panic-hiring an expensive contractor when your team unexpectedly hits maximum capacity in the middle of a project. Being proactive about resource capacity ensures you’re neither over budget nor time-strapped.

[fs-toc-omit]Plan capacity with your people in mind

Remember: capacity management is not just about numbers and schedules—it’s about people. By prioritizing a balanced workload and fostering a culture of transparency and collaboration, you’ll inspire a thriving team ready to tackle any project.

<cta-box>

<image-color="yellow">

Manage capacity the right way with Float

Rated #1 for resource management on G2, Float gives you the most accurate view of your team’s capacity to plan projects and schedule tasks with confidence.

<cta-button>Try for free</cta-button>

</cta-box>