Resource forecasting helps optimize project performance through effective resource planning. This includes skills, materials, equipment, human resources, and a budget. To forecast your resources effectively, you need to analyze project requirements, risks, budget, and timelines to ensure resources are available when needed to deliver your project successfully.
The outcomes you achieve will have a meaningful impact: team assignments are visible, workloads are balanced, fewer bottlenecks, costs are easier to manage, and your projects are delivered on time because you thought about what was needed, for how much, and when, in advance.
What Is Resource Forecasting?
Resource forecasting is a tool and technique in project planning. It involves estimating the demand for future resources required by a project from initiation to closure or from sprint to sprint.
It’s typically done using resource management software.
What Factors Affect Resource Forecasting?
When planning a new project, start with a clear understanding of its type and scope and the delivery framework. This information will inform your capacity planning decisions around available resources. Factors that inform optimal resource utilization decision-making include:
- Budget: Knowing your budget allows you to prioritize return on project investment by allocating resources strategically to different activities. A healthy budget is clear on strategic priorities and has an appropriate risk buffer (between 10 and 20 percent).
- Scope: A well-defined scope informs and guides the identification and selection of project resources. It is the compass to reference for scope creep, which can negatively impact resource forecasting accuracy.
- Team member skill and experience level: Team members are allocated different tasks, and the level of effort (LOE) each requires to complete their tasks will vary. To ensure a healthy resource forecast, align high-skill/high-experience team members with critical tasks, low-skill/low-experience team members with less essential tasks, and appropriate redundant/recurring tasks.
- Vacation time and unexpected absences: Attendance dramatically influences the accuracy of resource forecasting if planned time off or estimated unplanned time off percentages are not included. To mitigate unexpected absences, build strong connections based on positive and consistent communication, trust, transparency, and psychologically safe leadership practices.
- Full-time vs. freelance or part-time team members: Your resource forecast strategy can be optimized by strategically evaluating how best to use the existing resources in-house (full-time staff) and when outsourcing is required (part-time or freelance hires). Full-time employees are an economical choice for tasks that last a long time. A part-time or freelance team member is a good option for tasks requiring specialized skill sets for a short duration.
- Upcoming and unexpected projects: Having clarity on what is critical and not and building flexibility into your resource forecast allows you to anticipate future resource needs to support project schedules within the portfolio. Keep your team flexible by giving them enough work to fill 80% of their week. If your team members are at 100% capacity, your ability to remain agile in the face of risk or competing demands is nonexistent, and your resource forecast will become irrelevant. 80% is the new 100% to avoid burnout.
- Organizational tools and technology determine your access, visibility, and capability in planning your resources to make strategic decisions that will optimize project performance. The right resource management tools enable you to mitigate risk and ensure profitability.
Why Is Resource Forecasting Important?
Resource forecasting is a critical planning effort directly linked to project health and successful completion. Optimizing how you plan projects enables you to control the outcomes of projects more effectively.
Accurate resource forecasting leads to successful project results, such as timely deliveries and strong financial performance. Forecasting resources will account for resource demands at the portfolio level, mitigating delays due to scheduling.
Repeating this best practice will provide you with access to knowledge benchmarks for future projects to ensure project health. A resource forecast provides stakeholders and project managers with what they need to make informed decisions.
How To Forecast Project Resources
Here’s how to forecast project resources and make it a regular resource management practice:
1. Review Your Project Pipeline (The Project Program Portfolio)
Reviewing the portfolio will clarify which shared resources are involved with other projects. Communicate with other project managers to collaborate on how to integrate your project into the portfolio effectively without disrupting other projects.
Doing this will give you a sense of when your project can happen and a realistic duration based on shared human resource capacity. Once you have reviewed the pipeline or portfolio, you can determine the complete resource requirements and skills needed for the project to estimate time and budget.
2. Determine Resource Requirements & Skills Needed For The Project
Apply your working knowledge of the resources and skills needed by creating a resource breakdown structure (RBS). Think about the project scope and build in the skills, experience levels, employment type, equipment, software, and materials (including office space) required.
Consider anything that is a hard or soft cost, including travel expenses, permits, tools, and other fees to help you estimate a resource budget forecast. Now that you have determined the resource requirements and skills needed, you can review data from similar projects to inform planning your resource forecast to mitigate project risk(s).
3. Review Data From Similar Past Projects
Benchmark similarities between historical project data and your known project need based on your defined project scope. What went well, and what needed improvement? Which resource estimates to actuals varied the most? What contributed to project health? What needed damage control?
Once you review the data from similar past projects, write a short line on how you, the project manager, will improve this for your project. Please take note of building in risk items at crucial points in the project's timeline where they might arise.
Once you have reviewed data from similar past projects, you can determine resource availability and skills to add reliable structure to your resource forecast.
4. Determine Resource Availability & Skills Your Team Has
Explore existing team member profiles in your workflow management software. If you do not have this, exercise this as a project onboarding best practice, as the profiles will benefit future projects. Identify team members with the skills your project requires and then examine their availability.
If certain team members are unavailable, it is worth having the right conversations to learn if they have some flexibility built into their capacity. Once you know which team members have the skills needed and have confirmed their availability, you can match them to project assignments.
For all other resources, identifying the time, price, and path to access them will vary. It is essential to document time, price, path, and other variables in your resource forecast to track the acquisition and usage of all resources on a project. Once you have determined resource availability and skills, you can formally match team members to assignments.
5. Match Resources To Assignments
Review the required assignments that will produce the project deliverables. Talk to the team members you hope to assign to understand their length and complexity; they are your go-to subject matter experts.
They may have insights regarding task length, skill, resource, and time gaps. Fill the gaps through communication and planning. Once you match resources to assignments, you can estimate the time and effort for each task.
6. Estimate Time & Effort For Each Task
Now that you have completed the efforts to build your resource forecast effectively, you are well-equipped with a detailed understanding of resource availability that covers your project's resourcing needs. Review your learnings and data, and estimate each task's time and effort in your resource forecast.
7. Consider Unexpected Absences, Attrition, & Hiring Trends
It is a non-negotiable in resource forecasting to account for unexpected or planned absences, attrition, and hiring trends. In doing so, you will ensure project health by proactively mitigating the potential impact of these factors on project timeline and budget.
Project managers may use buffering techniques and contingency planning to account for absences. Succession planning is a useful, internal way to navigate attrition in addition to having a proactive hiring strategy in place while being mindful of industry trends by staying up to date with the latest industry reports and subsequently updating your resource forecast.
Here are some techniques to help you prepare:
- Fill the planned time off gaps during the planning phase (arrange a back-up project manager to brief into the project if you have planned time off)
- Hire early on and give time to this effort
- Address resource skill gaps early
- Ensure frequent and purposeful communications between yourself and the team
- Cross-train project team members who are interested in the skill area and who could offer support in the event of an absence
- Leverage workflow automation tools
- Embrace flexible work wherever possible as this allows people to work from anywhere based on their needs
8. Monitor & Adjust As Needed
A resource forecast is just one component of a stellar project resource management plan. With a complete project resource management plan, you can run your project effectively, ensuring a successful delivery.
I recommend using project management software or a workflow automation tool to monitor and adjust project activities as needed. Project management software is your trusted companion in providing visibility to people, timelines, and activity status. The benefits of cross-functional collaboration are made simple and accessible.
With enhanced centralized communications, you, the project manager, can remain flexible and respond to change quickly.
Resource Forecasting Example
Here’s an example of you might do resource forecasting on a sample project.
1. Project Overview
- Name: The Fun App
- Duration: 4 months
2. Resources Overview
Based on the scope definition, you will have an idea of what will be required. However, this will only partially inform the resources list. You must break your scope into a work breakdown structure (WBS).
In your WBS, you will see the tasks and activities required to complete the project. You can then ask yourself what is required for each deliverable and conduct a skills analysis. With a clear idea of what’s required, you may estimate the resources for each task.
Next, calculate the length of time (duration) of each task in the WBS. With this information, check the availability of your team members and other resources. Do any risks arise?
Identify potential risks to inform your risk management plan—consider absences, markets, and technology. Assess how these factors may impact the project and adjust accordingly.
Establish your resource forecast plan by clearly describing how all project resources will be allocated and managed throughout the project's duration. Define roles and responsibilities clearly and openly, and have your contingency plan ready—it is your closest tool to a crystal ball.
Here’s what this exercise returns:
Project team: consists of in-house staff plus one copy freelancer
- Project Manager x1: responsible for project health, delivery, and client needs discovery
- Application Designer x1: responsible for user journey, wireframing, design for code requirements, and complete visual prototype
- Application Developer x1: responsible for successful functionality of app scope, complete, fully functional prototype, and successful product launch
- Visual Creative x1: responsible for all visual content
- Copywriting freelancer x1: responsible for all written content
- Quality Assurance Tester x1: responsible for testing and mitigating issues/bugs in the app
Other resources:
- Design and development software licenses x2 @100 per license
- Freelancer fees x1 @ $50 per hour
- Equipment: existing, no new hard costs
- Materials: office space existing, no new hard costs
3. Resource Breakdown
- Phase 1: Design
- Designer, Project Manager
- Phase 2: Content Creation
- Visual Creative & Freeland Copywriter, Project Manager
- Phase 3: Development
- Development, Project Manager
- Phase 4: Testing & Revisions
- Quality Assurance Tester, Project Manager
- Phase 5: Launch
- Developer, Project Manager
4. Contingency Plan
- Absences:
- A roster of contract contacts to backfill in the event of an absent copywriter.
- In-house staff with overlapping skills who can step in for absent designer, developer, or project manager
- The client can provide feedback once at the start and end of each phase.
5. Monitor and Adjust
- Review project progress in workflow automation (project management) software and adjust tasks, allocations, or time as required to ensure project health.
- Utilize risk tolerance gaps to adjust based on unforeseen circumstances.
Resource Forecasting Best Practices
Best practices in resource forecasting for project management will help you optimize and standardize practices to ensure many successful project deliveries.
- Plan ahead: Explore what is required, when, and for how long using the steps mentioned above.
- Optimize resource allocation: Spend more time on billable or high-value efforts and less "work about work."
- Be prepared to adapt: Change is inevitable. Build flexibility into the time and budget of the project, especially where forecasting has come short in projects historically.
- Use project management software: Workflow automation and forecasting tools are called different things and provide similar features across the board. Choose one to optimize project and team performance.
- Communicate and collaborate: With the project team, throughout the business, with your stakeholders, and in your network. Appropriately and consistently communicate to build relationships. Communication and collaboration will help you access resources, fill gaps, and leverage your network to see challenges, whether a deal on software licenses or backfilling an absent employee.
- Regularly check and update the resource forecast: This will help you stay on track, mitigate risk, and respond promptly if other business units or project teams need to borrow resources.
- Practice: Try new skills in resource forecasting and practice consistently. It is a skill; each time you practice, you will see more results.
Find more resource management best practices here.
Common Challenges In Resource Forecasting
Never fear if you encounter challenges in resource forecasting. They will come up. It is not about how to avoid a challenge, but rather about being prepared with a plan when a challenge arises. Embrace challenges bravely and with tact.
- Resource scheduling: Plan to backfill for team members with planned time off and cross-train in-house employees to step in to avoid hiring fees and delays. Never overbook employees and use a tool to monitor capacity.
- Client delays: Clients can delay progress if they are slow to communicate. Consider building feedback requirements into the contract.
- Inaccurate project timelines: To avoid strained resources or even project failure, consider the project portfolio and the needs of your project, and work with team members to insert projects while ensuring a balanced portfolio. Communication and negotiation skills are critical.
- Budget transparency: Ensure you have access to the complete list of all items in the project budget and their budget estimates rolling up to the total project budget. As spends come in (actuals), add them to the budget and track the variances. Ensure budget health by cross-referencing quotes to invoices, ensuring accuracy and only reasonable variances.
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