Is There a Formula for Resource Planning?

Tactical resource management includes 3 core tasks: staffing, notification, and operational control.

Why are some project teams often overloaded, while others only twiddle their thumbs? How can it be that some employees feel chronically overwhelmed, or their milestones are never achieved on time? Is it due to a lack of skills – or rather a systematic over-planning of resources?

Project staff are not machines. They demand vacation days, get sick or chat around the coffee machine. The remaining time is still not 100% used for the project work – other work related obligations such as meetings, administrative activities or seminars reduce the actual working time.

Which leads to the question: What is the actual capacity of your human resources? What variables and numbers should PMOs use to create a realistic project portfolio, without resource bottlenecks, delays, and employee dissatisfaction?

Resource-Based Capacity

Depending on location and industry, your employees may follow different work calendars. Business location and management determine which days are considered working days, which days are holidays and how many hours a day people typically work.

Every PMO member is familiar with full-time equivalent (FTE), which is the standard capacity of a resource for a particular time period in a planning unit (i.e. company).

It is important to review the following formula for resource planning:

Ressourcenkapazität in FTE (Zeitabschnitt) = Ressourcenkapazität in Stunden (Zeitabschnitt) / Arbeitszeit des Standard-Kalenders in Stunden (Zeitabschnitt)

The resource capacity in FTE is always based on the company’s standard calendar. If a certain employee works a 45-hour week instead of the usual 40-hour week, the employee has a correspondingly higher FTE value. Of course, the capacity of a resource can also be less than 100% (1 FTE). This is always the case if the employee is part-time (e.g. 0.5 FTE for half-time employees), or temporarily the case if an employee is on partial leave.

Let us illustrate this by an example:
Mr. Brown, according to the calendar, works five full-time days (40 working hours) but during one week, he takes a day off. He, therefore, only works only 32 hours for that week, and his capacity is 0.8 instead of 1 FTE.

In the best case, of course, the capacity of a resource corresponds to his/her actual utilization for or allocation to ongoing projects. If an employee is assigned to three projects at the same time and has to cope with tasks that exceed his/her capacity (e.g. 1 FTE), an overload situation due to overplanning occurs. How can we avoid this?

Formula for resource planning prevents overloaded employees

What Is a Realistic Capacity for Project Staff?

A significant mistake in project portfolio planning is to assume 100% capacity per resource. In fact, a considerable proportion of working hours are lost to recurring administrative activities and the like. To determine the extent in detail, of course, requires a separate, corporate internal analysis. According to our experience, we assume the value lost is about 20%. This means that you should assume a capacity of 80% per employee in your resource plan.

You may ask yourself, “What is the benefit of a theoretical, average availability of 80% when my employee is spending two weeks on vacation during my short project?” The average professional employee takes approximately three weeks of vacation per year. However, you should NOT include this in the formula for resource planning formula at the resource level. Instead, you should manually enter the absence of the employee in your PPM tool for the appropriate period. For a full week of vacation, the FTE value would be 0%.

Even sick days – which average approximately 5 per year – should not be included in the formula. Projects usually can cope with short, spontaneous absences. If these extend to several weeks, your project is at risk, and an ad-hoc solution is required.

In other words, if you are planning on a resource level in your PPM tool, you will make little mistakes with a capacity of 0.8 FTE (based on full-time employees and a full-time working period).

How Many Project Employees Does a Project Need?

Man days (MD) is a figure that measures the effort of a project. This key figure indicates the number of days a person would need to complete the respective task. If you know this and the project duration, it is very easy to calculate how many employees you have to use in this case:

Number of FTE = Effort in person days (MD) / Time period in working days

With 1 FTE, you need exactly one full-time employee to perform the effort in the desired time period. If the time period is smaller, you need more FTE, so that the equation is still valid.
For example, if you estimate 10 MD for the creation of the new website and you have five working days, you need 10/5 = 2 FTE. This would – if you want to risk an overload – equate to two full-time employees or four half-day workers. However, if you use the more realistic value of 0.8 FTE per employee, you need 3 employees:

Number of employees (project) = (effort in PD / project duration in days) / 0.8

Role-Based Capacity

Resources should be assigned to roles. A role describes the primary task area of a person on a project. The PMO especially of larger companies often does not plan with individual employees, but only with roles such as the project manager, the junior consultant, the senior consultant and the software developer. Roles can, therefore, also be aggregation levels onto which the capacities and allocations of the assigned resources are accumulated. For example, if there are 38 Junior Consultants in a company with a realistic capacity of 80%, the FTE value for the Junior Consultant role is 30.

In addition to the roles, you can also plan on other aggregation levels, such as the team level (marketing, product development, customer support…) or the site level (New York, Munich, Chicago…).
The concrete staffing is then performed by the team leaders.

Formula for resource planning for teams or roles

The formula for role-based resource planning – as opposed to resource-based planning- takes average absences such as vacation and sick leave into account. This is because the effort to adjust the FTE value for a role in response to the absence of a single employee is simply too high.
You can learn the average amount of absences in your company from your HR department. If necessary, you can also access relevant statistics. In fact, you should decrease the actual capacity of the roles during the peak vacation periods in the summer and over Christmas and anticipate slightly higher capacities in between. In your PPM tool, you therefore work with a role capacity of less than 80% in order to ensure realistic and risk-free resource management.

There is no universally applicable formula for resource management. The golden rule is never to assume 100% capacity for project work. If you have the relevant data, it is best to estimate the average resource capacity based on your company’s experience. Otherwise, use resource-based planning at approximately 80% capacity and less than 80% capacity when using role-based planning, since vacation and sick days are also included. This way your plan will be as realistic as possible.

If you have not yet experienced how quickly and conveniently Meisterplan can improve your resource management, start your free trial or request a demo today!

By | 2017-05-10T08:48:00+00:00 May 5th, 2017|Categories: Resource Planning|Tags: formula for resource planning, FTE|

About the Author: Annegret Widmer

Annegret Widmer has ended her years-long love-hate relationship with Excel as a PPM and RM tool for an agency and now helps companies and organizations discover Meisterplan and best practices for resource planning and project portfolio management. When she’s not moving pixels or resources as marketing manager at Meisterplan, she’s moving game pieces across one board or another.

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