How To Do Resource Demand Planning: 5 Key Steps
Capacity Counts: Resource demand and capacity are not the same—knowing demand helps you find team members with the capacity and skills to match it (or bring on more team members if needed).
Estimations Are Everything: Create accurate estimates by basing them on past experiences or stakeholder consultations—you can use this to calculate resource demand and make sure the team is managing their time effectively.
Use Software Tools: Resource management software tools can help you save time and easily create accurate estimates, calculate demand and capacity, and assign tasks to the team.
One of the biggest challenges in project management is assembling the right team with the right skills to achieve agreed-upon goals. Equally important is accurately identifying resource demand—the hours needed to complete project activities.
In this article, I’ll explain how to forecast resource demand for your projects and share some resource management tools and best practices to simplify the planning process.
What Is Resource Demand?
Resource demand measures how many people with what skill sets you need to execute your project objectives. In addition to labor considerations, resource demand also includes any equipment and materials that may be required for project execution.
For a website project, resource demand includes designers, engineers, and salespeople needed for a successful launch. Without designers, the team may lack the skills required to meet project requirements.
Resource demand also includes things like the cost of domain rentals, licenses for any required software, and any needed hardware (e.g. testing devices.)
Resource Demand vs Resource Capacity
The resources required to successfully achieve project objectives (resource demand) may not match up with the amount of time that these resources have available to dedicate to your projects (resource capacity).
Resource capacity refers to how much time existing resources can allocate to your project without overcommitting themselves. It’s important to note that resource capacity is slightly different from resource availability.
That is, even if someone is available to work on your project full-time, their output is still limited by practical considerations (e.g. paid time off, sick leave, bathroom breaks, sleep.)
Keeping in mind these constraints, it’s best to think about resource capacity as the output that a team member can produce within a given period.
For more about capacity planning, check out our complete workload capacity planning guide and list of capacity planning software.
Why Is Resource Demand Planning Important?
Resource demand planning helps a project manager to:
- Staff projects appropriately: Understanding the resource requirements of your existing project portfolio helps you identify the team members that are best suited to execute the work. If there are skill gaps, you can make a plan to address those—whether through full-time hiring or contracting out via a professional services firm.
- Forecast future resource demand: Anticipating future resource needs helps you get ahead of potential staffing shortages and avoid issues with resource utilization and/or overallocation. When done well, it also helps you avoid potential conflicts. Use resource forecasting as an excuse to connect with your stakeholders about the project pipeline and make sure you have the right resources to support upcoming needs.
- Foster employee motivation and improve performance: Assigning tasks based on skills and career goals boosts motivation, engagement, and performance. This also improves retention and profitability.
How To Forecast Resource Demand
If you invest time in setting up your planning process, you’ll be able to use the data you’ve collected to support both future scenario planning and real-time decision-making in the course of project execution. Resource demand planning has five key steps:
1. Identify Tasks
First, identify what activities must be completed to satisfy project objectives. To generate a comprehensive list, draw upon prior project experience (both your personal experience and any organizational lessons learned), critical thinking skills, and conversations with your stakeholders.
For a mobile app launch, sample activities might include designing the app’s user interface, writing the code, testing it, and developing a marketing campaign to promote its release.
2. Estimate Duration For Each Task
Once you’ve got the list of activities nailed down, estimate how long each activity will take to complete. You’ll also want to understand what types of human resources are needed to complete each activity.
For example, a mobile app launch may need 80 development hours—65 for a junior developer, 10 for a senior, and 5 for QA.
If available, use past project data to inform your project estimates. If you don’t have historical data, consult with your stakeholders to develop a range.
3. Calculate Demand
Add up the estimated duration across project tasks to come up with a demand forecast. If you are responsible for portfolio management, summarize duration across each of the projects at your organization to calculate resource demand at the portfolio level.
It’s a good idea to come up with an aggregate demand figure (total number of hours) and a breakdown of how many hours are needed by role or skill set.
4. Add Buffer
If you didn’t build some cushion into your task duration estimates back in step 2, then you’ll want to incorporate contingency at the project level.
10% contingency is a good rule of thumb to account for any unforeseen resource scheduling issues that might throw off your estimates.
5. Set Placeholders
Once you’ve got a preliminary view of resource demand across your project, come up with some placeholders for who will complete the tasks you’ve estimated.
You can compare resource demand and project timelines for this project with the available resources at your organization to generate an initial view of resource allocation.
Tools For Forecasting Resource Demand
Resource management software can be a powerful tool to help project managers with resource demand planning. For example, once you enter data on expected demand, scenario planning functionality can help you experiment with different resource allocation strategies.
Once you’ve staffed your projects, you can create dashboards showcasing resource utilization metrics and set up automation that flags when you’re approaching a potential resource bottleneck.
Instead of spending your energy on manually monitoring countless spreadsheets, you can step in, as needed, to solve tough problems that require human intervention.
Best Practices For Managing Resource Demand
Here are some best practices to keep in mind when managing resource demand:
1. Document Your Assumptions
A plan that lives in your head isn’t a useful communication tool when dealing with project stakeholders who can’t understand why you can’t finish their project by the end of the week.
In addition to presenting hours estimates by resource to generate costs, document the logic you used to come up with these estimates in the first place. This helps you avoid pesky billing questions later in the project life cycle.
2. Build in Buffer
No matter how much time you spend planning, some project activities will inevitably take longer than expected. Budget extra time into your task estimates to account for any unforeseen delays.
3. Involve Your Team Members
Resource management isn’t purely a mathematical equation. As you’re planning project work, keep in mind which team members would benefit from taking on a given task.
Assigning team members to work on tasks that they have expressed interest in undertaking increases the likelihood that they will stay motivated and perform quality work.
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