WED, AUG 14, 2019 11:00 AM - 11:45 AM CST

Business managers at all levels of an organization understand the challenges involved with the balancing act between capacity and resource planning. In this webinar, Praecipio Consulting’s Senior Solutions Architect, Shannon Fabert, shares her capacity and resource planning expertise and provides warning signs of potential pitfalls.


Joseph: Welcome back! This is best practices of capacity and resource planning. Let's go ahead and get started! Join us for our next webinar: Plan Your Jira Server to Cloud Migration, with Isaac Montes. It'll be on September 11 2019 at 11 a.m. Central.
Let's do some quick housekeeping: no doubt you'll have some questions and when you do use the control panel on the side of your screen to ask them. We'll get to your questions as fast as we can. If we can't get to all the questions during the webinar, we'll follow up with answers as soon as possible.
We have hundreds of clients across the United States, ranging from small and medium businesses all the way to the top fortune five. Our clients include the world's largest retailer, the top media company, and the top automotive retailer. This also includes the largest healthcare services company and electronics manufacturer.
Let me first take a moment to tell you about us here at Praecipio Consulting. We're an Atlassian Platinum Solution Partner, and we've been doing this work since 2008. Over 99% of our projects are Atlassian related; this includes work around DevOps, IT ops, Agile and Scaled Agile. We do pretty much everything there is to do in the Atlassian world, everything from implementation and training to custom development, licenses and upgrades in managed hosting and services.
Today's presenter is a member of my leadership team and is responsible for our managed services organization. I'm really happy to present to you guys Shannon Fabert!
Shannon: Thank you for the introduction! As stated, I'm Shannon Fabert, principal of Managed Services. I have over a decade in consulting and continuous improvement experience in a variety of business sectors, from energy to transportation. That includes resource and capacity planning for industries from aerospace engineering, and warehousing and distribution, to casino gaming.
But what are we here to talk about? What is the right number in capacity and resource planning? We all want to know the triggers to making sure our company is right size at all times. First we will talk about the components: what is the Iron Triangle? Why is the Iron Triangle important to the business of planning? And what variables affect decision-making in capacity and resource planning?
Next we will work through a brief history of estimation in project management. What are the pitfalls in estimation in hours? How do you use the continuous improvement cycle and capacity and resource planning?
And third using modular methods for planning. Here we will discuss other methods besides time estimation as a tool to drive capacity and resource planning on any scale. And of course, we'll save the questions till the end so.
What is the Iron Triangle? The Iron Triangle, also known as the triangle of objectives, was developed by Dr. Barnes in the 1970s. Dr. Martin Barnes was an engineer by education, and the president of the Association of Project Managers. He was also the tenth member of the Association of Project Managers. The triangle of objectives was developed as a mechanism to demonstrate the interrelationship between cost and quality and time. Many people might be familiar with the concepts of the Iron Triangle, as this is the same ideology that can be found in quality methods such as TQM.
Over time the triangle of objectives transformed into the current constraints of the iron triangle as we show here. First, scope. Scope is the work to be done, such as features and functionalities to deliver a working product. Scope is often presented by a statement of work which includes goals, deliverables, tasks, cost and deadlines. It is here you will define what good looks like.
Resources include all the things that aren't time required to deliver and execute. This includes raw materials, equipment, facilities and money. It can also include the collective team members as your resource pool to get the work done.
Time is when teams will deliver their product to the market. This is often overlooked at as is set in scope, so we look at the end date, and we say got it! And we walk away from it. Effective time management will have defined increments in success or checkpoints, often in milestones or in the case of Agile, Sprints. In the grand scheme of things, time is an excellent customer service asset because it helps control what you can between you and your customer.
So why the iron triangle it is designed to show the interrelationship of business factors and show the compromise required between those factors. As you heard earlier, scope will include time constraints and resources include people, so it is clear that these constraints are not so silent. The short answer to why this is such a powerful representation, is it demonstrates how these items affect your business. Depending on your process management, either waterfall or Agile based, either scope or time are fixed.
The variable becomes resources plus. Understanding the concepts of the Iron Triangle allow for planners to understand the depth and complexity of the trade-offs required in capacity and resource planning.
So how does the Iron Triangle work? As stated earlier, how a business runs its daily process will dictate what is fixed. In a more traditional project management model or even production environment, scope is the fixed component. Imagine if you were producing cars: in order to produce cars on mass, the scope must be laid out succinctly. Going back to the first mass production of cars with the Model T, capacity was maximized by decisions such as having your car in any color you wanted, as long as it was black.
While there are some options those options are controlled, thus narrowing your scope. Conversely, when using using an Agile methodology, it is your time that is controlled. Sprints are finite blocks of time, as we get into more complex issues or recognizes the reality of the unknown, as you cannot scope something that you do not have a solution for yet. In order to stabilize at least one part of the Iron Triangle time becomes the constant in the form of increments that show progress. Some might include resources as a fixed component in Agile, especially when working in scrums. The capacity of the team in terms of size and time are set, as we can see. What is left is usually resources plus another component. In business it is how you manage those resources that will determine success.
So how do the decisions around the Iron Triangle affect your business? Identifying the right scope is your first critical step; it will drive expectations of your business both internally and externally. Failure to meet that becomes an over-promised, under-delivered situation. When the scope is vague invariably expectations between the customer and your business will not match. Moving targets in scope creep will leave you and your client feeling frustrated, because it feels as if nothing is getting done. Lastly, promising the world of a product can strain not just your skills but also your time on the opposite end of that under-promise over-deliver, you might be giving away a product or feature that you should actually be charging for for free.
Delivering on time seems like the simplest of terms and agreements, but missed deadlines can give your company a bad reputation quickly. There's a saying in the engineering world that 5% of the work is done using 95 percent of the time, and 95 percent of the work is done in the last 5% of time. This can lead to disasters on many fronts when you don't have set expectations or milestones, or those milestones aren't being met.
Additionally if you've bitten off more than you can chew in your scope, you will strain your resources so you complete on time or miss the mark. Either can be an expensive proposition. And we should note that there is a consequence delivering too early as well; regardless of if the job is completely done, according to the scope, the perception from the client could be that they lost on quality or the job was overpriced.
Ensuring that you have the right skill set to do the work highlights your team's capabilities. A common issue within organizations is the person planning the work is not the person completing the work. Without some sort of estimation tool in place, the person planning could be in danger. If your planner sets a job for an expert and then assigns it to a novice or even somebody who has lesser skills than the expert, your organization could lose time and rework, and quality issues, frustrate the new talent, or just lose opportunity because the time required is just more than what the expert would have taken.
Additionally in terms of capacity committing an expert to an easier - easier work is potentially hamstringing your organization for exploring new paths of revenue. In worst case it can demotivate your best team members for lack of challenging growth.
And then the fourth point, there's a prevailing thought that people will pay more for quality but what is the effect of poor quality? Poor resource planning can lead to poor quality. Or as it was once said, a failure plan is a plan to fail as stated mismatched skill sets can cause an issue, but if the work was rushed or incomplete, due to an impossible timeline or just sloppily done, you could be looking at a host of cost of quality issues, including rework up to a very unsatisfied customer.
So now let's talk about a brief history of Estimation in Project Management. The development of estimation of work goes hand-in-hand with the Industrial Revolution and mass production. From the fields of engineering, group management consulting, project management and many management techniques that are still used that are used today, so Resource Planning has always had its roots in time based methodologies.
The term management has many facets, but here we're gonna focus on those time-based methodologies. Roughly between 1910 and 1917 a man named Henry Gantt developed a charting technique using bars to represent time. One of the first major applications of the Gantt chart was by the United States in World War One. Little did we know when we were children though, that we were preparing for our lives capacity and resource planning by playing with LEGOs.
In the 1950s, Peter Drucker wrote The Practice of Management. In it Drucker, discusses Management By Objective or MBO. It is goal-setting and action planning by an organization as a great upon by both management and employees. It creates a common understanding for all involved. Let's call this the user experience side of capacity and resource planning: when done properly MBO and Resource Planning is derived from the same data.
And in 1985, the Agile framework was officially recognized as a Project Management methodology. Introducing Relative Estimation versus the traditional Time Estimation Methodology. All of these moments in history have influenced how we resource plan today. All have the same objective of understanding the work to time ratio.
In the frame of a business, the work to time ratio is the measurement that tells us if we are winning or losing. In its simplest form, it is productivity which is Output divided by Input. For estimation the first step in understanding the components of output and then we can determine how long it will take. As we saw in the previous slide, on the history of management, many industries have spent a lot of time and a lot of effort to determine what it takes to optimize input to get output. With any output activity, we can watch the process or record how long it takes to complete the task that make up the work, and this is where our estimations should be coming from.
Looking closer at the equation for productivity, which is output divided by input again, we begin to see the interrelationship of the Iron Triangle. Output is the completed work, the realization of the scope. Input therefore, is the time and resources used to produce that work.
So back to estimation while we're working through the work to time ratio. Estimation starts first with a number: many we'll call it a wag. In truth, there are many ways to get the first number, so what number do we use? You could guess, you could pick any number you want. So that's gonna take a little bit more time whittle down to get down to the right number. So how can we get there faster?
First there's observation: if you have an opportunity to watch the work it is sometimes the fastest and easiest methodology of collecting data. Make sure you get a large enough sample size to feel comfortable with the results, and understand the anomalies. This allows for some fluctuation of the work to be accounted for, and provides one of the greatest amounts of confidence as seeing is believing. It allows you to identify the best demonstrated depending on the curve of your data, and the standard of deviation, this can be an unrealistic expectation, so you need to be a little leary of that.
Historical data can be used as your work logs provide an actual accounting of the work you've completed. It will include waste, as normally we track tasks from the beginning to the end including any barriers we had to eliminate to get work done, so we need to recognize the waste, especially in this type of estimation. It is important also that we recognize any changes in the process that affect time as you don't want data that is irrelevant to new efficient standards.
Best demonstrated: we talked about this earlier as a potential pitfall. It is a real number and a real goal, but it is hard to schedule off of because you risk missing schedule or scope or both. When using best demonstrated, it is recommended that you look closely at your variances and range and mode to identify a number that is best demonstrated plus, because you want your resources and capacity planning to reflect reliable and repeatable expectations.
But let's talk about what can happen when using best demonstrated: if everybody is not at the same standard as the best demonstrated model, you will create an environment for your team members that is untenable. They will find work hard, they will find it impossible, and their spirits will be deflated. In addition to that, best demonstrated will create shortcuts. There's a potential for a team member to sit there and say they need to get something done quickly, and that will cut, they need to get it done quickly because they need to meet the time and they will cut corners which will cut quality or potentially create a safety hazard.
Lastly reasonable expectations: however it is that you collect the data you will need to pick a number with which you and your organization feel comfortable with, something that is reasonable. The magic number conveys the confidence in your team, but you do not expect them to be machines but you do want them to push themselves in the cycle that is continuous improvement. This is a good way to level set expectations with within your organization: reward the top performers and coachup the bottom performers. Most importantly, when scheduling resources, the organization feels confident that the targets can be met with success, and thus meeting your clients’ expectations.
It is important to note that estimation is an iterative process. As I said at the beginning, you can pick any random number you want to but, whittling that down to a real number that affects your business positively? As you see, your business improves and you find new ways to do the work, you will want to incorporate these new numbers to continue to maximize utilization.
So now let's put all these things to work. Once you understand how long the work will take in total amount of time, you can move to scheduling your resources. Let's talk about how we use time to our advantage first. The easiest methodology is to lay out time as a linear entity. While it's the easiest method, life usually tells us it won't be that easy. If you can imagine changing four tires: how long would it take you to change four tires? It would probably personally take me two to three hours. I don't own a power jack or an air tool that would take the bolts off the wheels quickly. I've maybe changed a tire two or three times in my life, so you could probably still call me at novice. Compare that to a NASCAR pit crew. We're talking seconds! They have mastered the techniques such as single minute exchange of die to improve their workflow to meet the goal of getting in the car and the driver on the track as quickly as possible.
For an organization, being able to stack resources to do work simultaneously allows for increased throughput in a shorter period of time. In terms of critical path, this might not be possible: When looking at scope, you need to consider this, because while it does allow for things to be scheduled around critical activities, it might not allow you to interfere with the actual timeline of critical path.
One of the biggest pitfalls in this instance is throwing more people at it. You should only do this when there's a clear delineation of work and rules, otherwise we could have redundancy. We could also set the project back further, because new members are playing catch-up. And lastly we have to accept that if we do something like that we're absolutely increasing costs /resources.
When there is a hard stop to an end date, or your timeline to completion just does not match, it is imperative that you speak with and communicate with all of your stakeholders.
So what does this mean for capacity? In terms of capacity planning, the ultimate goal is to build a plan that utilizes all of your resources with as little waste as possible. In production, we often speak in terms of materials and then time. In the service industry, we view capacity in terms of time and then time. I know that sounds a bit redundant but let me explain: in terms of service we have both the time of the allocated resource and team members and then we have the required time it takes to get a task or job completed. Thus we have time and time.
The other portion that we need to recognize in Capacity Planning is waste. When it comes to capacity planning, your waste is going to be those pockets of time that aren't actually used because you can't get those back. The basics of how this affects capacity planning includes understanding the requirements to complete the job. We need to understand questions such as: Do we have the right skill set to complete the job? and are our team members experts or are they novices? This is a critical nod to utilization, as all resources are not equal.
In the skills assessment, it is important to identify skills and then provide grades and levels to your team members. When we think of it like a Tetris game: each piece is a level or skill. Utilization, therefore, is how we connect those pieces without gaps. Losing the game of utilization means we've underutilized resources and that's time that you can never get back.
There are many ways to plan an estimation as one of the building blocks to capacity and resource planning. As you develop your business patterns and work appear. New insights and innovation take hold on the operation. We become faster and we become smarter, and other methods can be used.
Relative estimation has been popularized by the Agile methodology. As it pertains to capacity and resource planning, this tends to be considered a more complex estimation process. Since the process is not linear, relative estimation allows us to same scope is flexible and time is our constraint. Methods such as story points, t-shirt sizing and weighted shortest first job first are all relative estimation tools. They allow team members to understand the components of the work and compare them to each other to determine a value. To each piece of work they then line those pieces up and accept them under certain criteria so that they can say: here is my block of work in this process, and my oversimplified example the team's work together to develop a theme for the work they will take on, in this manner they are setting scope. And by saying this is how much work that we can accomplish in a specific time line they've created their Iron Triangle,
often considered a sprint.
Capacity is built by evaluating increments of completed work against the backlog of work. Modular builds or recipes almost feel like an evolution and estimation, for example when scoping out a project or work we state it will take three widgets, two thingamabobs and four sprockets, all highly technical terms. In terms of time, each item or task represents a specific amount of time. You add them up, and you have a total amount of time required to complete the work. It does not account for any efficiencies gained and doing multiple items of work. It can be particularly useful in sales as the cost of doing work is already determined upfront. Thus you have a clear negotiation window from a margin perspective.
Lastly, reverse engineering. My old boss used to call this setback logic: the idea being for a project, once a client's once a client sets a date of when they expect the work to be done, a project manager or planner could go back and fill in the plan for completion by setting acceptance / milestones in between the start and finish date of the project. This one can be tricky because again without clear estimation or clearly understanding critical path you could be committing to the impossible. I've actually seen where setback logic actually has created infinite loops in project plans based off of when work was supposed to be completed where, so we want to make sure that we don't commit ourselves to work without clearly understanding the parameters of which we need to get them done.
So the last portion I want to talk about the continuous improvement cycle. The most important part of capacity and resource planning is the improvements is the continuous improvement cycle. We tweak and adjust as we go along. Capacity and resource planning allows us to see where we have opportunities to grow in skill set and business offerings. As we find newer faster techniques to complete work, we want to account for that work in our planning. It provides us with a new level of flexibility within our organization. As the organization gets smarter, confidence and the right numbers emerge. What is the right number? It is what your organization feels this feels comfortable establishing that keeps you prosperous and doesn't exhaust your resources.
Growing pains are real and can be felt, but the right number also helps you establish your future and times of expansion and retraction.
Joseph: Cool, thank you very much! That was great! It's time to take some questions. Now some questions have come in the chat window as you've been talking and a reminder to everybody here if we don't get to your question go ahead and send it over to contact at Praecipio Consulting and we'll get back to you. The first question that we have is: what happens when you don't have enough resources to fill all of the jobs?
Shannon: So we have to be careful when an influx of work comes in. First we need to identify if it's a hot trend or spike or if this does represent long-term growth. Evaluating your skills and your runway are gonna be extremely important at this time. The short term answer might be that your team members are gonna be pulling overtime hours, but that shouldn't be a long-term solution, especially if there's no break from that they'll burn off your team members and create an environment conducive to quality errors and safety incidents. Long term you need to evaluate what skills need to be hired and what type of onboarding is required to get your new team members contributing to the business.
Ok, cool, thanks! Our next question here is: where do you start an estimation? That's a great question! I always said go straight to the source. Wherever and whomever the work is being completed that's where you want to be. You can do observations, you can do interviews, there is historical data to be had, but as we talked about a few slides ago just picking a random number is a bit of a folly, it does need to be an educated guess at minimum.
Okay moving on: how can I avoid overestimating my team's capacity? So we're gonna get a little philosophical here and we're gonna talk about the time-space continuum. I'm completely joking we talked about the 40-hour Work trap versus a full week's worth of work. So when we talk about the 40-hour work when you commit to 40 hours especially when you're thinking along some time and material the truth is a team member isn't necessarily working 40 hours a week unless that is the expectation that they're working somewhere around 45 to 50 hours that can totally be the acceptable answer, but in the normal space of a 40-hour week there are breaks, there is time off, there are meetings, there are emails, there's administrative items to take care of that interfere with the full 40 hours. We're literally usually looking at roughly 80% utilization of a team member or 85% is considered world class.
Cool and the last question that we have time for: what is the difference between capacity planning and resource planning? So capacity planning, the short and simple of it is capacity planning is about supply and demand and resource planning is people resource utilization. So to backup about capacity planning, it's the process designed to help your organization utilize your skill sets and your resources with the least amount of waste. It's a decision-making process that helps drive your resource hiring and also business contraction. Resource planning on the other hand is how you're actually going to get the work done: it's the process that coordinates and allocates the resources to the work based on the skills required. So one is about getting the work done currently that's resource planning, and then capacity planning is about making sure that all of your work is being done by all of the right people at the right time.
So that's all we have for questions, if you have any additional questions please feel free to reach out and contact us at contact at and don't forget our next webinar is going to be Plan your Jira server to cloud migration, with Isaac Montes on September 11th 2019 at 11 a.m. central. We really look forward to seeing you again, thank you for your time today. We here at Praecipio Consulting love nothing more than to help our customers along their adoption journey with the Atlassian product suite! Please reach out to us at contact at with any questions or comments! Take care.

Shannon Fabert

Written by Shannon Fabert

Shannon Fabert is the Principal of Managed Services. Her first adult job was as a supervisor at FedEx. It didn't take her long to figure out that she had a passion for process and continuous improvement. Today, this extends to a love of forecast model and scheduling as well as organizational behavior.

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