Resource Capacity Planning: The Definitive Guide

Lucija Bakić

February 13, 2024

Screenshot of a resource capacity planning software displaying a project management dashboard with lists of tasks, statuses, start and due dates, assignees, and priority indicators.

Resource capacity planning can be challenging, even for the best-organized agencies.

This is no surprise, as it’s a complex process that requires reliable data to do effectively. Resource capacity planning includes analyzing your real capacity, understanding how to best allocate resources across various projects, and forecasting future demand.

In this article, we’ll cover the capacity planning process step-by-step, with best practices and insights into top software for successful agencies.

Key Takeaways

  • Resource capacity planning is essential for aligning an agency’s resources with its current and future demands. It involves predicting demand for potential projects, identifying resource gaps, and developing and implementing strategies.
  • Effective capacity planning allows for optimized resource utilization, efficiency, and financial management. This leads to enhanced outcomes for current projects and supports alignment with strategic agency goals.
  • Some of the key challenges for successful resource capacity planning include data inconsistency, lack of visibility into future demands, and resistance to change.
  • Capacity planning software, such as Productive, is key in streamlining the resource planning process. Modern solutions can provide real-time utilization insights, reliable KPI forecasting, and automated data collection and analysis.

What Is Resource Capacity Planning?

Resource capacity planning is a key part of an agency’s ecosystem. It ensures that a business has the necessary resources for current and future needs. It involves processes such as:

  • Predicting the gap between future demand and current workforce capacity
  • Identifying resource shortages or excess
  • Developing an in-depth plan to establish a balance between supply and demand

Capacity planning can be performed by a specialized resource manager or capacity planner role, or the duties can fall to the project manager in smaller organizations.

Screenshot of a resource capacity planning tool screenshot showing a calendar view with individual employee schedules, project tasks, and allocated hours.


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This role fosters stakeholder collaboration, keeps resource capacity plans up-to-date, and ensures resources are well-positioned to satisfy demand. Capacity planning software and tools play a key role in helping to keep this process effective and efficient.

Key Benefits of Resource Capacity Planning

Resource capacity planning supports both short and long-term agency initiatives. It helps project managers make informed resource allocation decisions for a single project but also ensures that performance is aligned with overarching business strategies and objectives.

Some of the main benefits of this process include:

  • Optimized resource utilization
  • Enhanced efficiency and productivity
  • Better project financial management
  • Improved project outcomes and customer satisfaction
  • Strategic decision-making and increased business agility

Resource Capacity Planning for Client Projects

Capacity planning is a broad term that can apply to various industries, such as construction or manufacturing. In this context, the resource capacity planning process involves overseeing material resources, such as facilities, machines, and tangible products.

In a professional services context, the main resources that are being managed are people and the results of their labor. Many of the qualities associated with service-providing businesses can be intangible, such as skills and expertise, team dynamics, client relationships, and brand reputation.

It’s also a critical aspect of strategic planning in professional service firms, as resource capacity management ensures agency goals and objectives are aligned with resource allocation. It also ensures agency success by forecasting and prioritizing resource needs.

Learn more about capacity planning in manufacturing industries with our Guide to Finite Capacity Planning.

Resource Capacity Planning vs Related Concepts

Let’s consider the main difference between capacity planning and its related terms:

  • Resource Capacity Planning is a process that focuses largely on the strategic aspect of managing resources, with processes that identify future resource gaps to ensure that an agency also has the necessary resources available when needed. It is a forward-thinking approach supporting short-term project needs and long-term organizational goals.
  • Resource Management is usually considered a broader term that encompasses the management of all agency resources on a day-to-day basis to ensure that projects are completed efficiently and effectively. The main goal of resource management is to minimize waste and ensure that project objectives are met within the constraints of time, budget, and quality.
  • Project Management covers a wide range of tasks from the initial project conception and planning through to execution, performance monitoring, and project closure. Its aim is to ensure that the specific objectives set out at the beginning of the project are met, delivering value to stakeholders and meeting customer requirements.

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Main Steps of Resource Management

The main steps of resource capacity planning include:

  • The identification of resources
  • Demand forecasting
  • Capacity analysis
  • Monitoring and adjustment

1. Identifying Resources

The main types of resources in agencies include:

  • Human resources: This includes your project teams, their skills, availability, and capacity or time.
  • Financial resources: Involves allocating the project budget, direct or indirect costs, and the management of cash flows.

In other types of agencies or industries, other resources might be more important. For example, in IT capacity planning, managing tech resources such as infrastructure and networks is crucial. In manufacturing, resource planning would consider materials and facilities.

How to Assess Current Resource Capacity?

For human resources, consider factors like the number of employees, their focus on different projects, and the time spent on administrative tasks. Historical reports for metrics such as estimated vs. actual completion time help drive more reliable analyses and improve understanding of actual project availability and potential future capacity.

Other, more individual-specific concerns, such as employee affinities or preferences, may also be useful when considering the most efficient allocation.

To assist in this assessment, consider using capacity planning tools and solutions. These tools provide insights into resource utilization and potential resource constraints.

From a business level, now we make better decisions regarding our utilization. I’m understanding new things about profitability. I’ve made certain assumptions before, and some of those assumptions have proven to be wrong. For some projects, we weren’t sure how far over budget we were, and now we can really see.

Roberto Ciarleglio,
Co-founder and Managing Director AT Contra Agency

How to Calculate Resource Capacity

  • Identify the total available hours for each resource, daily, weekly, or monthly
  • Deduct non-billable time, including internal meetings, administrative tasks, etc.
  • Factor in employee absences such as scheduled time off or sick leave
  • Consider individual efficiency and characteristics, such as skill, experience, and productivity

For example, if an employee is available for 40 hours a week, after subtracting 5 hours for meetings and adjusting for a 90% efficiency rate, the realistic productive capacity might be closer to 31.5 hours per week.

2. Demand Forecasting

By evaluating future project demands and the necessary skill sets, you can effectively manage and bridge the gap between demand and available resources.

Screenshot of a design team's resource capacity planning software for October 2021, indicating overbooking with capacity and hours allocated per team member.


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Demand forecasting allows you to predict the types and quantity of resources needed for upcoming projects, ensuring that you have the right resources in place to meet future demand. This includes considering skill shortages and identifying any resource gaps that may exist.

Here are key steps for assessing the expected future demand for resources:

  • Analyze the pipeline of upcoming projects
  • Consider resource requirements, including duration, complexity, and necessary skill sets
  • Evaluate expected workload demands against current capacity
  • Identify potential bottlenecks and resource shortfalls
  • Consider the impact of external factors such as market trends or customer demands

3. Capacity Analysis

  • Resource utilization and cost optimization: By analyzing the utilization of resources and identifying potential bottlenecks, organizations can optimize their resource allocation and reduce unnecessary costs. In a professional service environment, this would include monitoring your billable utilization rate. Cost optimization means avoiding excess staffing or cutting down on overhead. The goal is to ensure that project work contributes as much as possible to the agency’s revenue.
  • Applying strategy and allocating resources: Once your agency’s needs are identified, additional resources can be added through various different strategies. This includes lead strategy, which takes a proactive approach to staffing, and lag strategy, which adds resources only when gaps are determined. Allocation involves assigning key roles and responsibilities to project resources and ensuring their availability when needed.

4. Monitoring and adjustment

For effective capacity planning, you must continuously monitor progress and make necessary adjustments. This includes referencing your initial capacity planning strategy to identify discrepancies between planned and actual resource utilization. It also includes spotting potential bottlenecks and resolving them by reallocating resources.

Resource management tools can help you handle these crucial concerns. For example, with Productive, you can forecast your key financial metrics according to how your resources are allocated. Depending on your cost rates and overhead, you can monitor budget burn, profit margins, and revenue across the project timeline. This process helps your agency stay flexible and adaptable.

Screenshot of a graphical dashboard of a rebranding campaign from a resource capacity planning software showing weekly progress in hours and budget, with time tracked, budget allocation, and invoicing details.


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Best Practices for Creating a Capacity Plan

  • Work Prioritization: One of the biggest pitfalls for agencies is treating all projects equally. Agencies adopting this strategy often find themselves lacking necessary capacity, resulting in potential losses on their most profitable projects or overservicing certain clients. Having in-depth, real-time insights can help streamline resource planning for multiple projects.
  • Flexible Allocation: Make sure that you have efficient change management processes in place, so you can reallocate resources according to shifts in priority and demand. Investing in employee skill-building and training can be an important factor, as it supports key strategies like succession planning. This solidifies agency resilience, ensuring that leadership and critical positions remain strong under changing business needs.
  • Use of Technology: Implement advanced tools to gain comprehensive visibility into key resourcing insights. Modern software solution can enable real-time tracking, forecasting, and analysis to enable improved efficiency and flexibility. This helps agencies maintain resilience in face of internal and external challenges, while ensuring optimal resource deployment.

Capacity Planning Methods for Client Projects

We can separate resource capacity planning methods into two distinct initiatives: short-term planning, which focuses on immediate needs, and long-term planning, which prepares agencies for future growth and strategic objectives.

Short-term planning includes:

  • Billable hours tracking to optimize day-to-day workload and efficiency
  • Resource allocation which matches current resource available with project demands
  • Demand forecasting which predicts short-term resource needs to adjust allocation
  • Strategic capacity management for planning long-term requirements with consideration to agency goals and growth
  • Scenario planning to develop flexible strategies that help agencies adapt to various potential states
  • Gap analysis which guides long-term development and recruitment strategies

Resource Capacity Planning Strategies: Pros and Cons

There are many different ways to approach your resource capacity planning. Let’s compare the benefits and downsides of three possible strategies, starting with:

1. Top-down vs Bottom-Up

Top-down capacity planning considers strategic concerns at the top-level of the agency as the basis for conducting resource capacity planning. The benefits of this process is more alignment with organizational goals and relatively simpler implementation time, but the cost is that it might lead to mistakes on the minor task level.

On the other hand, bottom-up planning builds up the process by taking into account the needs of specific projects and teams, which can lead to more accurate allocation at the cost of being more time-consuming.

Screenshot of a resource capacity planning software with a Gantt chart for a blog post project showing tasks such as 'Visual direction', 'Explore concepts', and 'Create moodboards' with their respective timeframes.


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2. Lag strategy vs Lead Strategy

Lag strategy adds resources once a gap between availability and future business requirements has already been spotted. The benefit of this process is the fact that you’ll never find yourself with excess capacity. However, if approached without necessary precaution, it can also lead to insufficient resources and bottlenecks.

Lead strategy is a proactive approach that adds capacity to stay ahead of demand. The downside is an increased risk of having unutilized employees in your resource pool. However, a successful application can increase your market share with a highly trained and sought-after workforce.

3. Excel vs Workforce Planning Software

While Excel can be a useful tool for creating resource plans, the downside of this process is that it’s largely manual and can lead to significant errors both while gathering and interpreting data. On the other hand, workforce planning software can automate this part of the process, providing a more user-friendly interface for beginners to project management.

They require a bigger investment and usually some customization of your workflows, but the benefits usually outweigh the costs.

The great thing about decision making at Infinum is that thanks to Reports, each decision is based on data. Our business decisions are never made on an inner feeling or intuition. Productive gives you answers to questions like what’s the profit, how much are the expenses, what’s the projected revenue, what’s the utilization? That entire set of key metrics is what gives management a basis to move forward.

Ervin Jagatić,
Head of Client Services AT Infinum

The Risks of Unoptimized Resource Planning

Inadequate resource capacity planning can lead to the following downsides:

  • Overallocation of resources or availability gaps
  • Employee burnout or decreased productivity
  • Missed project deadlines or subpar quality of project deliverables
  • Increased agency costs and decreased profitability
  • Impacted ability to scale and grow your agency

To mitigate these risks, it’s crucial for agencies to get a stronger grip on their resources and ensure that project plans are aligned with strategic goals.

Measuring the Effectiveness of Resource Planning

Measuring the effectiveness of resource planning involves evaluating how well resources are allocated and utilized against project outcomes and organizational goals. Key performance indicators (KPIs) can provide insights into planning efficiency.

These include:

  • Project completion rates
  • Budget adherence
  • Resource utilization rates
  • Employee satisfaction levels

If you have high project completion rates and adherence to budgets, this suggests effective planning efforts. Optimal utilization rates indicate resources are neither overburdened nor underused, while high employee satisfaction means that workload management is well-balanced.

Regularly assessing these metrics allows organizations to identify areas for improvement, adjust resource allocations, and enhance overall planning strategies for better future performance.

See more: Capacity Planning Metrics: Tracking and Optimizing Agency Capacity Management

Optimizing Resource Utilization for Project Planning

Managing your resource utilization can be a complex process. Industry benchmarks indicate an optimal rate of between 70 to 90% utilization for production-level staff and 60 to 80% for account management (Promethean Research). Another thing to keep in mind is that utilization might vary significantly across departments and even from individual to individual, depending on their specific tasks and seniority level. It can also ebb and spike on a monthly or quarterly basis.

Screenshot of a resource capacity planning software displaying a summary of billable versus worked hours by department and individual team members with percentages, highlighting efficiency in time management.


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The most crucial thing in managing billable vs non-billable time is achieving the right balance between the two. Overoptimizing your utilization can lead to burnt-out employees and missed opportunities for your agencies. On the other hand, too much time invested in non-billable activities can signify inefficient processes.

Consider your agency’s own context, as well as industry benchmarks, when planning out your target utilization rates.

Overcoming Common Challenges in Capacity Planning

Resource capacity planning can present challenges such as data inconsistency, lack of visibility into future demands, and resistance to change. These issues can hinder effective resource allocation and utilization, but there are strategies that can help manage and mitigate these challenges.

1. Inconsistent Data

Inconsistent data can lead to flawed capacity planning, causing overallocation or underutilization of resources, significantly impacting project success and operational efficiency. A good solution is to implement a centralized data management system, such as modern agency management software, to make sure all your key information is accessible in one place.

When you’re split across lots of tools you don’t feel as confident as to what’s in there. Is it capturing all the information that needs to be captured? With Productive, it’s all in one place, for the most part.

Bryan Casler,
Vice President of Digital Strategy at 4Site Interactive Studios

2. Lack of Visibility

Without clear visibility into future demands, organizations risk either falling short of or exceeding capacity needs, leading to missed opportunities or wasted resources. Utilize forecasting tools and techniques to predict future resource requirements based on past data and market analysis, allowing for proactive capacity planning.

Consider this testimonial from the CEO of Clear Launch, a US software development agency:

We’ve always known, on a monthly basis, how we’re doing as a company. But knowing on a per project level, in real time—we never really had that visibility. You guys do a good job of providing that. If you look at it on a yearly basis, it does give us the ability to look, per client and per project where do we really stand.

3. Resistance to Change

Resistance to change can stifle the adoption of more efficient capacity planning practices, which negatively impacts an organization’s adaptability and innovation. Resistance to change is also one of the key factors in failed software implementation. Getting management buy-in is especially important for making sure that new initiatives stick. Additionally, foster a culture of flexibility and continuous improvement through training and communication.

Software Solutions for Capacity Planning

According to research by Wellingtone, 17% of agencies don’t use any software tools to manage their project resources, while as many as 35% manage them with Excel. Only about 20% of respondents use dedicated enterprise resource planning (ERP) or resource management software.

In comparison to time-intensive and error-prone methods such as using spreadsheets, modern software helps you automate tasks such as collecting data or generating reports. According to the 2023 Benchpress Report by The Wow Company:

The agencies that have moved from using spreadsheets to dedicated software to oversee project and resource management have higher non-director utilisation rates and make more profit. The extra information they have helps them feel more in control too – they’re less likely to experience stress and anxiety than those that use spreadsheets.

Overview of Tools

Nowadays, finding the right type of tool for your agency can be a difficult task, as there are many available types of solutions:

  • Cloud-based vs Enterprise: Cloud-based solutions offer scalability and accessibility, while enterprise solutions provide high security for sensitive data.
  • Generic vs Agency: Generic software caters to a wide range of industries, whereas agency software is tailored to the unique workflows of agencies.
  • Specialized vs All-in-One: Specialized software focuses on delivering a single functionality, whereas all-in-one solutions offer a comprehensive suite of tools.

Consider the benefits of all-in-one solutions for agencies. These types of tools can help you achieve numerous benefits, such as standardized data, simpler workflows, and reduced IT overhead.

The main benefit we get from Productive is planning, clarity, everyone working towards one system. It facilitates reporting, hugely. It’s very easy to use. Also, I think one of the biggest things for me is the fact that it’s constantly improving.

Andrew Harb,
Program Director at Saffron

Productive – The All-in-One Agency Management Software

Productive is a comprehensive tool designed to become the single source of truth for your agency operations. It’s tailored specifically to support workflows for agencies of all shapes and sizes, including consultancies, marketing agencies, and design and development companies.

Screenshot of an interface of a resource capacity planning software showcasing social media posts in various stages of completion, with options for layout views such as board and calendar


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Key Features for Resource Capacity Planning

  • Resource allocation: Assign hours day-by-day or input percentages of overall employee hours and let the software do it for you. Reallocate by drag-and-dropping, split up bookings, and switch up your views with custom filters. Additionally, you can use tentative bookings to plan out different scenarios or use placeholders to account for external or potential staff.
  • Utilization tracking: Productive supports advanced billable hours insights. You can visualize your utilization across various metrics, such as department and seniority, to get a full overview of your actual resource capacity. By forecasting this metric, you can check your future capacity and make data-driven business decisions.
  • Financial forecasting: By scheduling your resources, you also get the advantage of forecasting key performance indicators for project financials. These include budget burn, profit margins, and revenue. When you reallocate your resources, these metrics will be updated in real time.
  • Time tracking: Productive’s Time Tracking supports automatic entry creation by syncing your timesheets to your resource scheduling. Additionally, Productive supports time off management, so you can create agency-specific categories of leave, approve requests, and view them in your resource plan.

Additional features include: Project Management, Sales, Billing, Docs

Wrapping Up: Optimizing Your Capacity Planning

Resource capacity planning is one of the fundamental processes of successful agency operations. By getting a full understanding of your resources, identifying your limitations in time, and balancing your allocation, you can drive significant improvements across all levels of your agency management.

This process can be complex, as it includes a number of interconnected steps, such as identifying resources, gap analysis, and forecasting demands. All are associated with their particular challenges, risks, and potential strategies to address them.

In all of this, resource capacity planning software plays a significant role. These tools can help standardize your data, deliver insights in real time, and simplify your daily workflows.

If you want to invest in comprehensive software for agency management and resourcing, consider booking a demo with Productive to learn more.

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Lucija Bakić

Content Specialist

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