Is there a formula for resource planning? If you’re asking this question, you’ve likely experienced resource planning challenges. Maybe some of your project teams are constantly overwhelmed while others have extra capacity. Or maybe more projects are falling behind than being delivered on schedule. Key employees may feel overworked and some projects might be completely stalled. So, what’s the secret to making sure this doesn’t happen? Is it possible that the key to properly planning employees to projects is a formula?
While a resource planning formula isn’t a magic wand and can’t instantly transform your planning, we can show you how to better improve your planning process with a few straightforward calculations.
Using FTE and Resource-Based Capacity
A resource planning formula will use several important variables. First, you need to understand the Full-Time Equivalent or FTE of employees. FTE is a unit of measure that indicates the amount of capacity or availability of an individual to work during a specified time period. You’re probably already familiar with FTE, but if you are experiencing a lot of resource conflicts, the issue could be how you calculate FTE.
Calculating FTE involves two things:
(1) what is considered full-time hours for a company and
(2) how many hours an employee is working.
It’s unlikely you are making mistakes regarding how much an employee is working, so let’s break down how a company determines what its full-time hours are.
Depending on location and industry, employees may follow different calendars. A person working in the U.S. likely has a few different holidays than someone in Canada. Certain industries include weekends as workdays while others don’t. To determine full-time hours for your company, you’ll need to know which days are considered workdays, which days are holidays and how many hours a day people typically work. Many organizations in the U.S. follow a 40-hour workweek to represent full-time work, but this might not be the case for your organization. Maybe your office closes early every other Friday or maybe some employees work longer shifts.
Once you’ve defined full-time hours, you can calculate FTE by dividing the amount of time an employee works by your full-time hours:
If an employee works 40 hours a week and your organization has defined full-time hours as 40 hours a week, then that employee counts as 1 FTE. It’s possible that some employees may count as more than 1 FTE while others as less. An individual working 45 hours one week instead of your organization’s full-time 40 hours would count as 1.13 FTE. Inversely, part-time employees will count as less than 1 FTE.
FTE and Availability
When calculating FTE, you also need to consider absences. The average professional employee in the U.S. takes approximately three weeks of vacation and 5 sick days per year. We recommend entering or uploading employee absences in your PPM tool as soon as they are planned. When an employee takes a full week of vacation, their FTE for that week would be 0. You don’t need to worry too much about short, spontaneous absences because most projects can usually cope with this temporary reduction in capacity.
Here’s a common example of how FTE can change depending on availability. Mr. Brown works five full-time days (40 working hours), but during one week, he takes a day off. This means he only works 32 hours for that week, and his capacity is 0.8 instead of 1 FTE. You can now plan for Mr. Brown’s FTE of 0.8 so you don’t overbook him with extra projects by 0.2 FTE.
What Is the Actual Capacity of Employees?
So, you now know how to calculate FTE based on calendars and absences, but there is more you need to consider when it comes to FTE. A significant resource planning mistake is to assume that people work on projects 100% of the time. It's really important to think about what your employees’ actual capacity is. Even if you have an office full of employees that are working full-time hours with no vacations, holidays or absences during a particular week, their capacity for project work is not 100%. People spend a considerable amount of time answering emails, attending meetings and performing other administrative tasks that take them away from project work. It’s easy to see how a person’s capacity for project work can quickly be reduced by these daily activities, so just how much capacity do people really have?
The exact amount of time a person spends on non-project work will vary by company and role. You can conduct an internal analysis to find this number, or you could start your planning with an educated guess and update as needed. At Meisterplan, we estimate that employees spend approximately 20% of their capacity on tasks that are outside of project work. That leaves 80% capacity per employee for project work. This means that each person working full-time hours actually has an FTE of 0.8 and not 1 (because we’ve reduced their FTE by the amount of time they don’t have to work on projects). If your organization experiences a lot of resource constraints, overestimating the real capacity of employees could very likely be the culprit. Using an FTE of 0.8 for full-time employees is a great place to start if you aren’t sure about real capacity in your organization.
How Many Employees Does a Project Need?
Now that you can accurately calculate FTE, you can determine how many employees are needed to deliver projects on time. To determine the number of employees a project will need for completion, you’ll start by calculating the total FTE required for the project. To do this, divide the number of Man Days (MDs) or the number of days it would take one individual to complete the project by the length of the project (also expressed in days):
Next, you’ll take the FTE needed for project completion and divide by the FTE of employees. If you assume full-time employees have an FTE of 0.8 like we do, you would divide the FTE needed for project completion by 0.8.
To use the two calculations above, let’s imagine you have a new project that will require 10 MDs and has a project duration of 5 days. Your project FTE is 2 (10 divided by 5). You then divide 2 by 0.8 to get 2.5. This means you’ll need two full-time employees and one part-time employee for the project. Of course, the number of employees needed for any project can be divided however you like. You could use one full-time employee and three part-time employees or two-full time employees and a third full-time employee for half of the project.
What About Role-Based Capacity?
Depending on your planning needs, you may plan in part or entirely on a role-based level. A role describes the primary task area of a person on a project. The PMO (particularly in larger companies) often plans with roles such as project manager, junior consultant or senior consultant instead of planning on a resource level. The FTE of roles can be aggregated based on the capacities and allocations of assigned resources. For example, if there are 38 Junior Consultants with a realistic capacity of 0.8 FTE, the FTE value for the Junior Consultant role is 30 (38 multiplied by 0.8). 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 actual staffing would then be done by the team leaders.
The formula for role-based resource planning – as opposed to resource-based planning – uses averages for absences such as vacation and sick leave rather than individual planned or actual absences. 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. When using role-based resource planning, we recommend you decrease the actual capacity of the roles during peak vacation periods and anticipate slightly higher capacities in between. In your PPM tool, you therefore work with a role capacity of less than 80% (or less than your accurate FTE) in order to ensure realistic and risk-free resource management.
Putting Your Resource Planning Formula to Work
If you want, you can determine all of the variables and calculate the resource planning formula manually yourself. However, for organizations with a large number of projects or resources, this just isn’t time well spent. With Meisterplan, you can upload work calendars and absences, adjust FTE and automatically calculate how much FTE is available for projects. Meisterplan not only makes it easy to use a resource planning formula, but it also addresses the issue of how to schedule projects without overbooking resources. With a complete view of resource data including individual employees, roles, skills, capacity and availability, you can visualize the big picture of your organization’s project portfolio. To see how Meisterplan can solve your resource puzzle, start a free 30 day trial or contact us for a one-on-one demo.