Capacity Planning Trends
by Jeff Mikes, Zemoga
Capacity Planning is a core challenge for every professional services firm, but especially for agencies given their breadth of offerings and dynamic market demand.
Managing growth is hard work—winning new business while staffing too slowly leads to team burnout and negative impacts to culture. Staffing ahead of the curve puts profitability at risk if new deals don’t materialize. Finding the right balance is key to a well-functioning shop.
Here are insights on what some of the best, most innovative firms are doing to stay ahead:
Agencies sell clients on the value of data driven strategy and optimization and we should heed our own advice when it comes to Capacity Planning. The core inputs—Revenue Pipeline, Resource Allocation, Resource Skills—are too often tracked in disparate systems and manually mashed together in spreadsheets. This lack of integration pushes the data and insights into a corporate reporting function and away from the front-line leaders that need real time data to make decisions. Implementing an integrated stack, whether from best of breed components or an all-in-one solution, can have immediate ROI for the agency through better resource planning and utilization.
Project estimation is both art and science and a skill that can take years to learn and execute well consistently. Many agencies spread this responsibility across multiple groups and team members, with account or project managers gathering input from functional leaders and rolling it up for management blessing. Instead, consider naming and empowering an estimation ombudsman—someone who owns the process and results for all pipeline opportunities. This can shorten the agency learning curve by providing a central repository for estimation efforts and data, leading to more accurate inputs for capacity demand.
Fallacy of Full-Service and the 80/20 Rule
“We’re an integrated, full-service, traditional digital marketing firm”. Ughh. Chasing any and every client opportunity has led too many firms to position themselves as one-stop-shops. The reality under the hood is that most only deliver a handful of services really well. Many high growth agencies understand the need to specialize in a crowded market and have taken it a step further by productizing their service offerings. Productization allows them to know exactly what they’re selling (and what they’re not), leading to much simpler Capacity Planning since each offering is defined by the skillsets and time needed to deliver it. Of course, there will always be customization needed for some clients but use of the 80/20 rule can streamline resource management – 80% productized service sales and 20% custom.
Rethink Talent Pool
Much of Capacity Planning focuses on keeping the team utilized and knowing when to hire the next resource. However, today’s “gig economy” can provide a semi-committed bench of trusted freelance talent to allow an agency to flex with spikes in demand without making long term commitments to hires. Most shops do this on an ad hoc basis but incorporating freelance as a central element of the operating model can be a competitive advantage. It also allows firms to accept opportunities on the margins of their specialization, owning the work while subcontracting it out in the hope of expanded opportunities down the line. And this same model applies to working with partner shops, an effort SoDA has helped drive for years. Be great at what you do and align with freelance and partner networks to scale for all.
In practice, Capacity Planning simply attempts to best match new revenue with resources to maximize utilization and generate profit. As agencies grow this matching can become cumbersome. Smaller firms often manage Capacity Planning via direct line of sight to each revenue opportunity and explicit knowledge of what each team member is working on, making resourcing decisions much simpler. Borrowing from this smaller firm mentality, some high growth firms are reorganizing themselves into pods of dedicated cross-functional resources with their own P&L. All pod members know what’s on their plates and in the pipeline and are held jointly accountable for hitting profitability targets like Gross Margin. The approach not only simplifies Capacity Planning, it empowers team members as owners and entrepreneurs in assessing revenue opportunities and how and when to invest in the right capacity.
About the Author: Jeff serves as Managing Director of Zemoga, where he’s responsible for strategic growth and scaling of the company. He’s been working with the Zemoga team as a consultant, business partner, and employee for almost 10 years. Jeff’s a digital agency vet - from rolling up shops under Publicis in the early aughts to working as an advisor to a host of SoDA shops. Jeff has a masters in international management from Thunderbird and loves puppies and heavy metal.