Simple steps for effective capacity planning in your agency

It’s the first day of a new month. You wake up and brew coffee. At 08.01 the CFO pings you about last month's numbers. They’re lower than expected. You have a quick meeting with the team and everyone is as surprised. You try to figure out: “is this a chronic issue or just a one time slump?”

Looking at your future, the numbers show that the company will be bankrupt in 3 months. You're used to that – in reality, this is not the case, but people haven’t just updated their plans and allocations. You ignore the slump and ask everyone to “go the extra mile this month”.

Until the first day of the next month...

Everyone is in charge of capacity planning

It's possible to have both: a profitable agency business with an-up-to-date business forecast, and a process where consultants feel like they're part of growing the business.

You want to avoid poorly-timed recruitment decisions. Those hurt the utilization too much. You want to build dream teams: make sure the right people get to work on the right projects.

To do this, you need to have an up-to-date view to future opportunities: both tentative and confirmed ones. Very few agencies succeed in this. Most of us settle for an OK outcome, and learn to tolerate the uncertainty.

The problem is that to have the clarity, you need the help of each individual consultant. Only they know their situation best. You also need the project and account teams to update their plans. It's not like the COO can create it for them. However, it's the management's job to to foster the culture and structures in place to motivate consultants to join the planning efforts. After all, when confronted with extra admin work, they ask: what’s in it for me?

Consultants can update their plans for the next week, or they can update the company about a possible opportunity at a client: there are different levels to this you should enable. In agencies, everyone person from sales to consultants, should be part of the capacity planning process.

Example 1: a vacation that had a surprising business impact

Bob and his wife, Allison, decide to spend all of June in Europe with a camper van. His Summer vacation reveals in the timeline that there's an opportunity for Caroline to step in to do some of his work in May and June, get onboarded to the project, and when most of the team is away in July, Bob has nice pile of work waiting for him. The Product Owner had actually been a little bit worried if there will be a completely unproductive break. No sir!

Both Caroline and Bob make most of the Summer months and the client is pleased to know that they have the option to welcome Caroline full-time to the team in August/September if necessary.

Forward-looking scheduling and proactive account management unlocked 2+ months of new billable work. Thanks for the idea, Allison!

Example 2: a lucky discussion that determines next year's game plan

Denny is enjoying some Glühwein with the client-side project manager Mikaela and her boss Holly. The ladies discuss the big news that were shared internally: in addition to the webshop, their company is going to invest in building a cross-platform mobile application, using some of the webshop APIs. They don't exactly know how those APIs work and how much work is required from the webshop team – and what will be the new mobile team's responsibility.

Denny hears them out and asks if it would be OK for him to suggest a rough timeline for the architecture work and follow through with a little bit of concept design. After all, Denny's colleagues are incredibly talented at all of these things, and his experience in the webshop project gives him the knowledge required to explain the technical constraints.

Mikaela and Holly had not thought of this. Denny truly is the ideal primus motor here. Even if they choose to buy the mobile project from another vendor, it would be foolish to start from scratch rather than hearing Denny's and his colleagues thinking first.

Denny picks up the tab from the bar, wishes everyone a good evening, heads home and adds the roadmap items to the system so that they can discuss them tomorrow with the account team. Architecture/API design sprint asap; design phase in a month or so; implementation phase later next year. This may be huge.

Motivating consultants to plan their work

You can motivate the team to "own their work forecast" in different ways. We'll focus on three motivating factors: explaining why this is beneficial for them, rewarding them, and incentivizing them.

Rational arguments – the pep talk

Imagine the whole team sharing the same big picture: the consultant, talent acquisition, sales, leadership. Everyone can look at the data and act on it. At a glance you see how the company is doing, and you're able to find the right person to help you get unblocked with a technical issue in your client work.

Having a clear outlook helps you in many ways:

1. Talent acquisition hires the right people at the right time: less overworked and underutilised consultants
2. Salespeople and staffing are able to build dream teams: they see the availabilities, skills and feelings in the staffing tool
3. Less of a disconnect between different departments, less miscommunication, more time to focus on what matters
4. Management can make the right budgets, plans, and lead the company with more than just their gut feeling resulting in a more profitable business

All of this results into a well functioning, more profitable company where consultants can happily focus on client work.

Rewards

Get playful about this! Perhaps you run a friendly competition on who has added the most new roadmap items to account plans during the past quarter and reward them with a bottle of sparkling. Alternatively, you might just want to highlight them in a weekly meeting and make people feel good about the good work they’ve been doing. Reward people for focusing on the right things, and don't be too serious about it. Give credit where it is due.

Incentivizing

The most direct way to motivate people is with financial rewards. There are different ways to incentivize consultants to do their best – including keeping their plans up-to-date:

1. A partner structure: If a consultant has equity in the company, they’re likely interested in helping the company succeed both short- and long-term
2. Bonus model: Set up a bonus structure for all employees that’s based on the targets you set up
3. Give people a tiny slice of the new revenue that they bring in. If someone logs a new roadmap item for an existing customer, give them a share of that if eventually you’ll close the deal. Give them even a bigger share, if they help in closing the deal.

Make it easy for people to update their plans

Make it clear that it belongs to the weekly routine of a consultant to update their working situation for the next months. The tool where your consultants update their allocations should also enable some way to bring in new opportunities at existing clients. Communicate to your people that you want them to bring these ideas in, and have a monthly process in every account to curate these ideas and assign responsibilities. After all, this is a big part of their job as trusted advisors for your clients.

Resource Manager Oversees Resource Allocation

People know best how their future plans will look like, so our suggestion is to always have people update their own future plans. However, for larger companies, you might need people to make sure "planning goes as planned". Resource managers oversee the resource management process on a higher level. The responsibility for resource allocation shifts over time as companies grow, first being the job of the founders and later transitioning to multiple people being focused solely on that task.

Summary

In order for you to make better decisions about the future, you should have an up-to-date view of your project portfolio: both tentative and confirmed plans. Involving everyone in the team to the capacity planning process is a task that sounds simple but can feel daunting day in, day out. To succeed, make sure you have the right tools, culture, and incentivization practices in place. Changing the culture from top-down to bottom-up doesn't happen overnight.

Operating is quite a good tool to make this a reality, although there are other tools, too. Whether you run this with an ERP, dozens of spreadsheets, or something modern, remember to have the culture and structures in place.

In the next part of the series, we'll focus on building a budget and backtracking them so you'll have realistic targets that motivate your people.