Capacity Planning

Capacity planning answers a simple question that many organizations skip: do we have enough people with the right skills to do everything we have approved? Portfolios are often built by adding up the projects and initiatives leaders want, with little check against the time actually available. The result is overload. Teams are spread across too many priorities, work queues up behind a few specialists and delivery slows across the board. Capacity planning makes the constraint visible before commitments are made.

In portfolio management, capacity planning works at several levels. At the portfolio level, it compares total demand with total capacity to decide how much work can be started. At the team or skill level, it shows where specific shortages will hold up delivery. Over longer horizons, it informs hiring, contracting and training. For portfolio leaders and IT finance teams, it links investment decisions to the people who carry them out, since most of the cost of change is people's time.

Definition of Capacity Planning

Capacity planning is the forecasting and balancing of available capacity, measured in people, hours or team throughput, against the demand created by current and planned work over a defined period.

It is closely related to resource management, which assigns specific people to specific work, and to resource planning, which forecasts the resources needed over time. Capacity planning focuses on the overall balance between supply and demand.

Measuring Capacity

Capacity is usually expressed as available hours or full-time equivalents for each team, role or skill, after allowing for leave, training and other non-project time.

A share of capacity is also consumed by keeping existing systems and services running. Leaving this out is one of the most common reasons capacity plans are too optimistic.

Agile organizations often measure capacity as team throughput, such as the number of features or story points a team typically completes in a period, rather than hours.

Whatever unit is used, it should be applied consistently across the portfolio so that demand and supply can be compared directly.

Measuring Demand

Demand comes from approved projects and initiatives, planned product work, maintenance and support, and requests still waiting for approval.

Each item of demand is estimated by role or skill and by time period, often in rough ranges at first and in more detail as work gets closer to starting.

Comparing demand with capacity by period and skill shows where there is room for more work and where shortages will occur. Showing this by quarter is usually enough for portfolio decisions, while team leads may plan in weeks.

Importance of Capacity Planning in Strategic Portfolio Management

Capacity planning prevents overcommitment. Approving only as much work as the organization can deliver keeps teams focused and allows each initiative to move at a reasonable pace.

It improves predictability. Delivery dates based on realistic capacity are more likely to be met than dates set without regard to who will do the work.

It also exposes skill shortages early, when there is still time to hire, train, contract or resequence work rather than discovering the problem midway through delivery.

Capacity Planning and Financial Management

People costs make up most of the cost of change work, so capacity plans translate directly into budget forecasts. Knowing how many people are needed, with which skills and when, allows finance teams to forecast spending more accurately.

Capacity analysis helps leaders decide between building internal skills and buying external capacity, by comparing the cost and timing of hiring, contractors and outsourcing.

Showing how capacity is divided among strategic priorities, maintenance and support reveals how much of the organization's spending on people actually goes to new value. Linking these figures to cost data from technology business management gives a fuller picture.

When capacity is the main constraint, adding budget to a project without adding capacity rarely speeds it up, a point that capacity plans make clear to decision makers.

Common Challenges

Estimates of demand are often optimistic, especially for work far in the future, so capacity plans should be updated as estimates improve.

People are rarely fully available for project work. Assuming they are, or counting the same person against several projects at full time, makes plans unreliable.

Data on who is working on what is often incomplete. Simple, consistent time or allocation tracking is usually needed before capacity plans can be trusted.