The Focal Point Blog // Resource Management // Tom O'Neill // January 13, 2021

Resource Management vs Capacity Planning: Do You Know the Difference?

Digital agencies spend a lot of time on the day-to-day management of resources. Resource management is the coordination of resources — the efficient assignment of the right people to projects. It helps agencies understand what skill sets their current employees have and what services they can deliver today.

The goal of resource management is often to maintain high utilization across all skill sets and roles. When agencies see a dip in utilization, their immediate response may be to push employees to find a way to bill more. Many agencies also rely on resource management to tell them when it’s time to hire. They use the information to determine which roles they need to hire for or outsource to freelancers, contractors, or other agencies.

But too often, agencies make hiring decisions without considering trends in customer demand. They’re managing their resources logistically, but they aren’t forecasting future demand for the mid- and long-term. Capacity planning helps agencies understand what their customers want now and predicts what they will want in the future. Knowing this can be the difference between investing in resources that support the agency’s future — or investing in ones whose skill sets you’ll have little need for down the road.

Why both resource management and capacity planning are important

It’s critical agencies know the difference between resource management and capacity planning and adopt behaviors that enable them to do both well. That way, they have the information needed to hire the right people and train for the right skill sets.

Most agencies treat resource management and capacity planning as an either/or equation. In reality, agencies should address them as complementary parts of the same process that seeks to clarify and solve capacity challenges. You’re in trouble if resource management and capacity planning activities aren’t informing each other. You could end up hiring people who don’t have the skill sets necessary to support the agency’s future growth. 

To properly manage resources and hire for the right skill sets, you must also capacity plan. Capacity planning helps agencies read the tea leaves earlier by planning for future wants, needs, and social, cultural, and industry trends. This helps you 1) predict how customer demand is changing, 2) understand how your services have changed over time, and 3) assess the future of your services based on industry direction and customer demand.

How agencies lose when they don’t predict demand

Let’s consider a hypothetical scenario at an agency that spent so much time focused on resource management that they forgot to consider what was happening with customer demand (i.e., they weren’t capacity planning). Warning: This situation might not feel all that hypothetical. It’s happened to us in our previous lives as agency leaders, and we know it happens at other agencies.

A mid-sized digital agency had a talented Flash developer on staff. He was a significant asset to the company, not just because he was highly skilled, but also because he represented the agency culture well. Other employees admired him, and he kept getting raises. As he made more money, the demand for Flash plateaued. But the agency wasn’t really paying attention; this employee had become such an essential part of the company culture. No one questioned his role or position in the agency.

But, eventually, he became too expensive. The agency couldn’t sell Flash Development like it once could. The industry had moved on  —  front end development moved to HTML5 and Javascript! Those skill sets were in high demand, but the employee hadn’t learned those programming languages because the agency hadn’t invested in his training. The business couldn’t justify what it was paying him, and at that point, it was going to be too expensive to cross-train him. They lost a super valuable resource because no one took time to understand how customer demands and industry trends would affect the agency’s resources, specifically this employee’s role. The agency failed to anticipate shifts in demand and value — and lost out big.

The business and human impact of staying ahead of demand

The employee detailed above was a valuable human asset to the agency, but leaders lost touch with the business impact of his role. Capacity planning to understand and anticipate customer demand doesn’t just support the business; it also ensures you keep the best talent. When you shift from simply managing resources to planning for resources, you can:

1. Sustain the business.

Just like with Flash, eventually, certain types of work become commodities. This changes the value and the demand for work, and agencies have to be ready to innovate and adjust so they don’t become irrelevant.

Capacity planning helps you sustain your business by considering the capacity you have available from individual skill sets on your team and how that stacks up to customer demand. It enables you to translate customer demand to your ability to deliver on it. You get a clearer understanding of your capacity to take on new types of work (the stuff that supports innovation) and what’s your capacity to keep doing your bread and butter work (the stuff that’s profitable today). 

2. Invest energy and resources in the right places.

Capacity planning helps you identify which of your team’s skill sets are becoming less relevant and profitable, so you know when to invest in professional development and training. Investing in the right employees at the right time ensures your people work toward a skill set that’s more valuable for the business’s future.

This not only keeps your employees engaged because they feel supported, but it enables you to invest in the right place to support future business growth. You’ll feel better about an employee having a lower billable capacity as they’re training when you know they’re working toward something that will support the business’s future.

3. Maintain your best people.

Investing in the right people at the right time based on what capacity planning tells you also helps you retain your best people. Keep your key employees in the loop about how demand is changing in the organization, so they can see where they’re most valuable to the business today — and where they will be in the future.

At the end of the day, everyone just wants to have an impact, and capacity planning with an eye toward demand paints a clearer picture of how each employee can support the business.

Parallax can help your business understand capacity beyond total hours and headcount of your resources. Our product’s capacity planning tool gives you a clearer picture of customer demand, so you can make strategic investments today to keep your business competitive and relevant tomorrow.

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