5 Powerful Benefits of Capacity Planning in Professional Services Organizations
Finding it difficult to mitigate skill shortages in your professional service firms?
Are you constantly struggling with frequent hiring/firing cycles?
Is a pertinent mismatch of skills affecting most of your projects?
If yes, then it’s high time for your organization to create an efficient resource capacity planning framework. It is key to bridging these skill gaps proactively and ensuring the availability of best-fit consultants for the right projects at the right time. This also enables managers to utilize the professionals effectively and ensure successful project delivery.
This informative article explains how SAVIOM’s ERM tool helps in effective capacity planning in professional service organizations.
But first, let’s understand the consequences of poor capacity planning.
Consequences of poor capacity planning in Professional Service Firms
When professional service firms lack visibility into skill requirements for pipeline projects, they find it difficult to initiate proper resource procurement measures to meet the demands. As a result, it leads to last-minute firefighting and costly recruitment practices, impacting the firm’s financial performance.
Moreover, ineffective capacity planning can lead to the under/over-allocation of consultants to projects. This can result in poor deliverable quality, cause cost/schedule overruns, and affect customer retention.
Furthermore, when managers lack foresight into future skill needs and are unable to estimate the number of resources needed, it leads to unnecessary hiring. However, once the assignment is complete, these excess resources are no longer required, forcing PSOs to terminate them. It gives rise to frequent hiring/firing cycles, hampering the company’s reputation.
The lack of real-time visibility into the workforce’s schedules prevents managers from anticipating the release of resources from ongoing projects, leading to an increase in the bench size. Consequently, when these benched employees cannot be efficiently engaged, it triggers disengagement and unplanned attrition.
Given the adverse consequences of inadequate planning, the following section delineates effective strategies to proactively address these challenges.
How does effective capacity planning benefit professional services firms?
A proper capacity planning process is significant for service-based firms in multiple ways.
Let’s see how:
1. Provides foresight into pipeline consultancy projects
When consulting managers are unable to assess skill demands in advance, they resort to reactive resourcing measures. This results in an excess or shortage of consultants in the PSO. An effective capacity planning process helps managers gain foresight into the pipeline project demands and determine the skill gaps ahead of time.
They can then take appropriate decisions to bridge the gap. If there is a consultant shortage, managers can implement an out rotation and backfill strategy or initiate training programs. Further, they can go for planned hiring and create the right blend of permanent/contingent workforce. Contrarily, to address resource excess, they can bring forward project timelines, redistribute the extra capacity among other projects, or sell them at discounted charge-out rates.
2. Enhances billable utilization of consultants
PSOs frequently struggle to achieve optimal utilization rates for every professional, decreasing overall efficiency. When consultants are underutilized, it negatively impacts their motivation and commitment, consequently affecting their productivity. Conversely, overutilization leads to burnout and stress, compromising the service quality.
Efficient capacity planning enables managers to anticipate and manage consultants’ utilization. This allows them to implement various strategies, such as resource smoothing and leveling to ensure uniform workload distribution. Moreover, managers can mobilize the consultants from non-billable to revenue-generating work, enhancing their billability. It helps improve the overall productivity of consultants, resulting in increased profitability.
3. Facilitates diversification of consultants’ skills
In today’s hyper-competitive business environment, PSOs heavily rely on their workforce’s expertise for continued success and expansion. Thus, maintaining a proficient and skilled pool of consultants is crucial. Moreover, fostering new skill sets becomes imperative when a company aims to explore new business domains to drive revenue growth.
A proper capacity planning framework provides detailed insights into the skill sets necessary for new service areas or projects. This enables managers to identify existing skill gaps and implement upskilling/training programs as per requirement. In addition, they can also initiate on-the-job training and shadowing opportunities to help consultants gain hands-on experience. This helps create a talent pool with diversified skills and expertise.
4. Helps in effective bench management
In a firm, projects usually experience sudden ramp-down activities once they reach the maintenance/closure stage. The lack of visibility into the resource ramp-down makes it challenging for managers to identify consultants who will land on the bench. As a result, it increases the bench size, which leads to escalated overhead costs and reduced billability.
An effective capacity planning process helps managers identify the resources that will be released in advance and assign them to suitable projects accordingly. In addition, the benched consultants whose skills partially match project vacancies can be given on-the-job training or shadowing opportunities. This way, organizations can effectively maintain the billability of benched resources and reduce the hiring/ firing cycles as well.
5. Ensures project delivery within time and budget
Inadequate capacity planning poses challenges for the delivery team in securing appropriately skilled personnel, potentially necessitating last-minute wrongful hiring. This leads to skill mismatches or the onboarding of costly consultants. Consequently, it can compromise the quality of deliverables and cause budget overruns, resulting in client dissatisfaction.
Effective capacity planning empowers the delivery department to evaluate the skills required for project deliverables ahead of time. This helps managers make proactive decisions, such as hiring or implementing training/development programs. Further, they can use the out-rotation and backfill strategy to ensure the availability of niche-skilled resources for the project initiation. This enhances the firm’s ability to deliver projects within designated timelines and budgets, increasing profitability.
Given the benefits of capacity planning, the next section explains how a resource management solution can come in handy.
How can modern resource management software help?
Saviom’s advanced resource management tool helps managers create an efficient capacity planning process for professional services firms and reap the benefits.
It facilitates 360-degree visibility of all resources and their attributes, such as skills, experience, capacity, availability, etc. This allows managers to find the best-suited resource with the right skills for the projects.
Further, the tool’s multidimensional forecasting capabilities and capacity-vs-demand report help foresee and fill skill gaps proactively through appropriate internal and external channels. It, thus, reduces the last-minute resourcing hassle.
Moreover, in a resource-constrained environment, managers can leverage modeling and simulation techniques. The what-if analysis functionality helps create and compare various scenarios by changing metrics such as availability, cost rate, etc. Therefore, it allows them to determine and implement the most feasible outcome on the actual plan.
Capacity planning is pivotal for managing the workforce within professional service firms. It serves the crucial purpose of detecting and reconciling disparities between workforce availability and demand, guaranteeing timely project deliveries within budgetary constraints.
For this, professional services firms can adopt an advanced resource management solution that will help them create a future-ready workforce, thereby ensuring profitability and sustainability.