Effective Capacity Planning is Rooted in Tools, Communication and Team Alignment
by Jenn DePauw, The1stMovement
On paper, capacity planning should be very simple, right? Multiply this, divide by that, calculate billable utilization, average bill rate, and bam... a revenue forecast to help drive your sales pipeline.
Ok, if only it really were that easy.
Balancing your sales pipeline and your capacity to produce great work is always going to be a challenge, especially when we see shifting needs within our industry. Clients want projects faster to market, which means work needs to move faster to production imminently once it is signed on the dotted line. And so, the race begins!
Most digital agencies don’t have the luxury of an on-demand team ready to dedicate 100% of their time to a project with little or no notice. The common challenges of the industry leadership are balancing profit margins with overworked employees, compromised client service due to insufficient resources, or equally challenging is reduced quality of work from the same overextended pool.
More than 100 key-stakeholders at digital agencies view “New Business Pipeline vs. Capacity” as an “important” to “very-important” KPI in managing their agencies.
The first step in managing sales vs. capacity is having the right tools and automated systems to manage your sales pipeline and resource allocation. The good news is that while these automated tools are ever evolving, and continue to deliver great value, there is no quick switch to plan your capacity. Once you have done your research—and found the tool that is right for your team—there is still going to be a level of human interaction needed to guide your capacity planning. A capable team that is able to manage the necessary data points is key.
Project Managers and Business Development team alignment is imperative in order to plan for resources. PMs typically have the clearest visibility into current capacity and assignments, but also have a view into things like team stress level and morale. Meeting the expectations for the expediency demanded by the client can often lead to higher levels of stress and lower levels of employee satisfaction – two things that often have a direct effect on efficiency and quality of work.
A common vernacular across your team will ensure that everyone is level set to the same expectations. At The1stMovement, we have a Sales Stage Definition list that defines the criteria to calculate a percent to close so when a 75% prediction is identified, it holds some weight because criteria has been set to define that percentage. This allows us to layer onto the definitions the engagement level needed for resource planning. For example, when a lead is at 25%, biz dev is in the discovery stage – finding out what is the need, how long it takes to make a decision, who the decision makers are, etc. At this point the PM can begin to provide insight and information on past/similar projects. This level of engagement increases as the lead moves through the pipeline and towards the finish line, along the way the PM and Biz Dev have a finger on the pulse of capacity.
From a project management perspective, key-stakeholders at digital agencies see “Lack of view into over-servicing clients” as the issue that has the most impact on agency profits.
Yes, over-servicing of clients has a direct impact on profitability because you are essentially giving your services away. It also has an impact on your capacity planning by slowly eating away at available resources. This allows it to creep into your culture, which ultimately can lead to lower employee satisfaction and lower productivity. Let’s face it, it’s hard to see real value in something you are giving away for free. Spend time to go over what is included in the SOW, understand the objectives and the role your team plays, and then empower your team to make decisions, or take action, when they see a project going off the rails.
Pipeline vs. Capacity comes down to good data, good communication, and realistic expectations. Sell realistic lead times whenever possible to allow time to plan resources effectively. Communicate expectations internally, when everyone understands the nuances of the project and the level of service needed it’s easier to identify areas of over-servicing. And lastly, appreciate the value that you provide to your clients. When everyone is aligned on the value of the service you are selling, managing capacity can be done much more effectively.
About the Author: Jenn DePauw is the Managing Director of The1stMovement, a digital agency with offices in Los Angeles, Denver and Hong Kong.