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. Your project employees are not robots. They demand vacation days, get sick and chat around the coffee machine. The remaining time is still not 100% used for project work – other work related obligations such as meetings, administrative activities or seminars reduce the actual working time.
This all 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? Is there a formula for resouce planning?
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).
To calculate FTE, the following formula is used:
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.
Here’s a common example of how FTE can change depending on availability:
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 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 allocation to ongoing projects. If an employee is assigned to three projects at the same time and due to overplanning has to juggle tasks that exceed his/her capacity (e.g. 1 FTE), then an overload situation occurs. How can we avoid this?
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 tasks and other activities. So how much capacity do employees really have? To determine this usually requires a corporate internal analysis. However, we at Meisterplan assume the resources lose about 20% of capacity. 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 a different solution is required.
In other words, if you are planning at a resource level in your PPM tool, you will make fewer 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:
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:
Understanding Role-Based Capacity
Resources should be assigned to roles. A role describes the primary task area of a person on a project. The PMO (particularly in larger companies) often does not plan with individual employees, but only with roles such as project manager, junior consultant, senior consultant and software developer. Roles can be aggregated based on the capacities and allocations of the assigned resources. 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 final staffing is then performed by the team leaders.
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 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% in order to ensure realistic and risk-free resource management.
So What’s The Resource Formula?
We understand you probably wanted a simple and straightforward answer to the resource formula question. But let’s be honest, that doesn’t exist (and you probably already suspected that). There is no universally applicable formula for resource management. However, if you take anything away from this article, it should be this: never assume 100% capacity for project work. If you have the relevant data, it’s 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.
Take The Headache Out of Resource Planning With Meisterplan
With Meisterplan, you can realistically plan your portfolio with a complete view of resource data including individual employees, roles, skills, capacity and availability. We make it easy to visualize the big picture of your organization’s staffing situation, see employee skills and availability at a glance, and update availability through our calendar function. You can see how Meisterplan takes the headaches out of resource management yourself by starting a free trial.