Why are some project teams regularly overloaded, while others have extra capacity? How can it be that some employees feel constantly overwhelmed, or their milestones are never achieved on time? Is it due to a lack of skills – or is it a systematic over-planning of resources? Your project employees are not robots. They go on vacation. They get sick. They spend some time chatting with coworkers around the water cooler. There are plenty of other obligations (meetings, administrative tasks, continuing education, etc.) that also takes time away from project work.
This all leads to the question: What is the actual capacity of your employees? 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 resource planning?
Depending on location and industry, your employees may follow different work calendars. Business location and management determine which days are considered work 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%. This is always the case if the employee is part-time (e.g., 0.5 FTE for half-time employees). If an employee is on partial leave, their capacity may be reduced temporarily.
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 an ideal world, that person’s capacity corresponds to their actual allocation to ongoing projects. If an employee is assigned to three projects at the same time, then there is a good chance that the planned projects will exceed their capacity (>1 FTE). The question is how can we avoid this?
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 that employees use approximately 20% of their capacity on tasks that are outside of project work. This means that you could assume a capacity of 80% per employee in your resource plan.
Now how do you handle absences such as vacation and sick leave when using resource-based planning? The average professional employee in the US takes approximately three weeks of vacation per year, and approximately 5 sick days per year. We recommend entering or uploading employee absences in your PPM tool as they are planned. For a full week of vacation, the FTE value would be 0. Projects can usually cope with short, spontaneous absences. If absences extend to several weeks, and your project is at risk, then you may need to find another solution such as temporarily replacing the employee on that project with one who has available capacity.
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 need:
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 to build a 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. Since we already established it is not realistic for a person to have 100% capacity available for project work, let’s use the more realistic value of 0.8 FTE per employee, which means you would need 3 employees:
Understanding Role-Based Capacity
Each employee has a specific role, and similarly within your PPM tool, 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 plans with roles such as project manager, junior consultant, or senior consultant instead of planning on a resource level. 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 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 actual staffing would then done 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 makes resource management easy by starting a free trial.
“There is no other product that does what Meisterplan does in terms of portfolio management and resource management without unessential extra features. If there were another product that does what Meisterplan does, I would have found it, because I tried them all.”
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