Forecasting is tricky for many professional services organizations that need to bring projects, resources, and timelines together to make accurate predictions. In this article, we’ll explore strategies for how to increase your forecast visibility with resource planning shared by Greg Hensley, Managing Consultant at the Resource Management Institute during a recent webinar.
Good Forecasting is All About Good Resource Management
Many people believe that they need to have full forecast abilities in place to properly plan their resources, but really it’s the other way around. Starting with proper resource planning sets the groundwork for accurate insights to forecast.
Good resource management is critical for firms like yours. Read our blog, Why Resource Management is Vital to Growing Your Professional Services Business to learn more.
Just-in-Time-Resourcing (JITR)
Consisting of six dynamic processes, RMI’s Just-in-Time Resourcing (JITR) philosophy is taught in its certified professional program and essentially hits on all the topics of resource management. Trusted by numerous global enterprises, JITR provides a unified taxonomy for efficient resource handling.
Let’s take a look at the graphic above breaking down JITR. At the top of the wheel is skills inventory, which is the foundation for establishing a powerful resource management strategy. You then build upon that with proper staffing processes, which in turn leads to better forecasting. Supporting that is sourcing and development — how you’re obtaining talent in your organization, whether it’s within your organization or with contractors. The last two items, technology and governance are helping enforce the rest of the wheel so you can get the most out of resource management in your organization.
Forecasting is Critical to Success
In order to plan for today, firms need to plan for the future. Below are a few reasons why forecasting is critical to the success of professional services organizations.
Labor Cost Importance
Labor is the biggest expense for service providers. Accurate forecasting helps manage costs efficiently.
Challenges in Projects
About 35% of projects face issues with cost, timing, or quality expectations. Precise forecasting is crucial to overcome these challenges and improve project success.
Effect of Resource Management
Good resource management is key to project success and customer satisfaction. Aligning workforce skills with project needs is vital for positive outcomes.
Disciplined Workforce Management
Professional services organizations must manage their most important asset – their people – with discipline. Effective forecasting is essential for optimizing workforce use and overall organizational success.
Over the past seven years, RMI has been conducting research on forecasting. Check out their interesting findings below to this survey question: Over what time horizon can your organization accurately forecast needs for resources?
As shown in the graph above, 50% of respondents can only forecast out 2 months. However, RMI’s leading practice is for companies to develop capabilities to forecast over a time horizon of 6 months or more. The two months that most firms are accurately forecasting for doesn’t give them nearly enough time to hire, onboard, or train a new team member to be fully billable. Now that we know where the real challenge lies, let’s get into how we can improve forecasting.
Where to Begin with Forecasting
All too often forecasts are generated the prior year from some financial revenue plan with guesstimated resource capacity needs. However, that’s not real forecasting. We consider forecasting as a living plan at the resource planning level that encompasses business planning, forecasting, and staffing.
Establish a Living Plan
Business Planning
Start with your revenue plan as the basis for your capacity plan. Connect it with key products or services that boost revenue and create a broad-level capacity plan (e.g., role, product, geo). This ensures a streamlined alignment between revenue goals and organizational capacity.
Actuals vs Estimates
Now it’s time to track actual usage of won projects at the role level. How are actuals versus estimates doing? It’s easy to set it and forget it but you want to be able to establish how well you’re able to forecast a role. Are you finding that a particular role on a project may vary quite heavily from what you’re forecasting? There might be more capacity for that particular role than you anticipated. Those are all adjustments that need to be made that will impact your forecast.
Staffing
Next, execute the forecasting plan by conducting tactical day-to-day assignments of resources to meet open demand needs and specific roles. This hands-on approach ensures that resources are deployed efficiently based on immediate requirements. Act promptly on actual needs by incorporating demand interlock planning (we’ll dive into that in a bit), allowing for a responsive and strategic approach to resource allocation.
Breaking Down Forecast Enablers
Now that you have a living plan, think about how you can keep it moving throughout the year and adapt to changes in the sales process and demand pipeline. Ask yourself, “how can we predict resource needs better through our forecasts?” This includes assessing the existing staff and determining if additional resources are required. Having good data is paramount, especially data that you trust and that will support the methodology that we’ve discussed. That data is rooted in supply and demand.
Characterizing the Supply
The JITR skills inventory process serves as a crucial foundation for efficient resource management. We define our resource pool by maintaining standardized and clearly defined roles. skills, and proficiencies throughout the organization. This all helps to understand availability, strengths, weaknesses, and things that need to be done from a sourcing and development perspective.
When assessing your resource pool, consider the following questions:
- Who is available in our pool?
- What skills and knowledge do they possess?
- Where are they located?
- Are they currently available for assignment?
- What are their preferences regarding tasks? (Capturing and storing this information is particularly vital to incorporate into staffing criteria, enhancing support for employee engagement.)
Characterizing the Demand
RMI likes to break down demand into four different levels, as shown below.
Baseline the Demand: Learn How Demand Comes to You
Understand where demand comes from, whether new renewals, run rates, or elsewhere. Identify sources from both delivery and sales organizations, aiming to cover all bases. Standardize this demand, turning it into probabilities for better planning. Create a consistent format for collecting and organizing demand. Keep tabs on progress, especially when someone is working at a 70% level, ensuring meaningful results. Determine the effort levels needed for different roles. Depending on the service delivery and offers, some details may be known, while others might need extraction from statements of work. Ultimately, the goal is to confirm that when a product or service is sold, there’s clarity on roles, durations, and other key aspects for future planning.
Normalize the Demand: Make it Easy for Everyone to Understand
Now you need to normalize the demand, creating a common format that everyone can understand. This format should enable everyone to easily interpret and assess whether there’s a surplus or deficit when aligning demand with supply. In prioritizing the organization’s objectives, the key is to introduce a standardized resource request format. This format not only caters to specific needs but also formalizes the required information, facilitating efficient planning and decisive action.
Manage the Demand: Getting Fresh Data
Moving forward, the next step is actively managing the demand by keeping things in rhythm and incorporating new data. The ultimate aim is to use the gathered information and demand data to share resources and skills effectively. If there’s a need elsewhere in the organization that your team can fulfill, it shouldn’t be limited to just one team but should be available to the broader delivery and resource pool.
So who does what? For professional services organizations, it’s essential to go beyond creating a sales pipeline report. The key is to have a member of the delivery team break down these sales opportunities into detailed project plans, specifying tasks, start and end dates, and time allocations. Additionally, the delivery team takes on the responsibility of managing ongoing dates in the backlog. Concurrently, the resource management team diligently monitors roll-off dates from ongoing projects and considers planned new hires to assess future resource capacity. This proactive approach ensures preparedness for upcoming demands, guaranteeing that the necessary resources are available when needed.
Analyze the Demand
To analyze the demand effectively, it’s crucial to generate analytics that provide insights into various aspects such as roles and dates. By diving into these analytics, organizations can gain a comprehensive understanding of the specific requirements for roles at different times. This information enables informed decision-making, allowing for strategic planning, and allocation of resources based on the identified patterns and trends. Analyzing demand in terms of roles and dates ensures a targeted approach to resource management and facilitates proactive adjustments to meet evolving needs within the organization.
Aligning Supply and Demand to Forecast Resource Needs: The Interlock Function
The interlock function ensures everyone is on the same page regarding factors influencing demand. This involves analyzing the timing and status of upcoming opportunities, necessary resources, ongoing work schedules, future resource availability, and hiring plans. Simultaneously, the overarching process works to facilitate agreement among stakeholders in both supply and demand, covering all demand drivers and considering the overlap, or “interlock,” between the two. This encompasses the timing and status of opportunities, timeframes, and resource requirements for backlog, future roll-offs, hiring plans, and future capacity. The primary goal is to align supply with demand, identifying any gaps in quantity or skills.
The interlock function is all about letting the data talk. Once you have compiled the data, ask yourself the following questions:
- Does the data look correct?
- What is the data saying?
- What are the implications?
- What are the actions and decisions to be made?
Once you have those answered, dig deeper by asking the following questions:
- What are the trends relative to demand indicating?
- What are the key things that are driving demand? What if they happen or if they don’t happen?
- Where are our needs more prevalent (e.g.: certain roles or skills, focused on a particular product or service, etc.)?
- Do we have enough resources to cover our forecasted demand? Are they the right resources? What do we need to do on the supply side to address any mismatches (e.g.: recruit, train, partner, etc.)
Why Resource Planning is So Important to Forecasting
Below are five benefits of resource planning, all directly affecting an organization’s forecasting capabilities.
1. Improved Project Performance
Efficient resource planning enhances overall project performance by ensuring projects are completed on time, within budget, and with high-quality outcomes.
2. Improved Utilization
Resource planning enables organizations to optimize the use of their workforce, ensuring that skills and capacities are utilized effectively across projects and tasks.
3. Better Customer Satisfaction
Effective resource planning contributes to better customer satisfaction by ensuring timely project delivery, meeting expectations, and delivering high-quality results.
4. Reduced Attrition and Better Employee Engagement
Thoughtful resource planning can contribute to reduced attrition rates as employees are appropriately assigned and engaged in tasks that align with their skills and interests, fostering a positive work environment.
5. Reduced Management Time Involved in Staffing Issues
Resource planning streamlines the staffing process, reducing the time and effort spent by management on addressing staffing challenges. This allows leadership to focus on strategic initiatives and overall organizational success.
What Successful Resource Planning Looks Like
Your organization is running a successful resource planning process when your service delivery function can consistently and predictably get the right person in the right place at the right time to:
- Support project excellence: on-time, on-budget, good quality
- Achieve target utilization
- Produce satisfied customers
- Improve employee engagement
3 Leading Resource Management Practices to Get on the Right Track with Forecasting
1. Implement a documented RM process with supporting training.
Ensure that the training program is accessible and comprehensive, empowering employees with the knowledge and skills needed to effectively navigate and contribute to the resource management process. This will promote consistency and adherence to established procedures across the organization.
2. A properly designed skills database and process will include defining skills by role, implementing regular updates by employees, and conducting proper validation of employee data by management or SMEs.
To enhance the effectiveness of this process, organizations can also use helpful software and reminders to encourage regular and accurate updates from employees, ensuring that the skills database remains current and reliable for resource allocation decisions.
3. Leading delivery organizations have a robust capability for capacity planning/forecasting to meet the dynamic needs of the business.
In addition to forecasting, organizations should regularly review and adjust their capacity planning methodologies, incorporating feedback from ongoing projects and market trends. This iterative approach ensures that the capacity planning process remains agile and responsive to changing business demands, contributing to sustained organizational success.
Bringing These Practices Together for Effective Results
How to Gain Insight into How Your Demand Pipeline Affects Resource Availability
Understanding the connection between your demand pipeline and available resources is vital for resource management. Start by identifying opportunities for resource planning and break them down by role. This detailed breakdown provides insights into the skills and capacities needed for the evolving demand. Use good forecasting discipline to characterize your demand. This disciplined approach creates a solid foundation, ensuring resource planning aligns well with the organization’s changing needs.
How to Effectively Characterize all Supply Probability and Normalize the Assignment Roles
Effectively understanding supply probability requires using detailed supply data to establish a common language for discussing both supply and demand. Combining this data provides a complete view, helping define strategic actions to meet changing demand. Analyzing timing through the overlap of supply and demand data reveals insights into periods of high demand that may exceed current supply capabilities. This enables strategic resource management and ensures readiness for varying demands.
How to Gauge Your Progress Against Benchmarks From Peers
To measure progress and stay ahead in resource management, tap into valuable resources such as RMI research and benchmarks from industry peers. Active participation in webinars and events not only offers networking opportunities but also serves as a knowledge-sharing platform, allowing you to learn from the experiences and insights of other resource management professionals. This collaborative approach fosters continuous improvement and keeps you informed about the latest industry best practices.
How Resource Management Software Helps You Improve Visibility for Forecasting
Resource management software is crucial for solving problems caused by scattered data in professional services organizations. It helps bring everything together, making it easier to see and plan for the future. When data is all over the place, it can lead to mistakes and affect projects, profits, employee satisfaction, and decision-making. Resource management software improves how we track projects, making them more successful and profitable, while keeping everyone on the team happy and confident in their decisions.
Here’s how resource management software effectively tackles these issues to improve forecasting:
Boosting Profitability Through Accurate Resource Allocation
Resource management software resolves the issue of inconsistent views on resource allocation for past projects. By providing a unified and consistent perspective on resource utilization, it enables organizations to accurately price future projects. This enhancement in pricing accuracy prevents budget overruns and surprise client invoices, directly impacting profitability.
Minimizing Schedule Conflicts for On-Time Project Delivery
Unforeseen schedule conflicts often arise due to disparities in resource allocation. Resource management software addresses this challenge by providing real-time visibility into resource availability and workload. By preventing schedule conflicts, the software contributes to on-time project delivery, positively impacting client satisfaction, potential renewal business, and overall profitability.
Enhancing Projections and Planning
Blind spots in projections and planning are mitigated with resource management software. By detecting schedule conflicts and planning errors during forecast meetings, the software enables proactive adjustments. This eliminates the need for last-minute “fire drills” during project delivery, fostering a more controlled and efficient project management environment.
Connecting Utilization to Profitability
Resource management software bridges the gap between resource utilization and financial tracking. By integrating these critical aspects, organizations gain insights into how resource allocations directly impact profitability forecasts. This connectivity provides a holistic view of the financial health of projects, facilitating better decision-making and resource optimization.
Eliminating Data Fragmentation
Data fragmentation often leads to mistakes, affecting various aspects of project management. Resource management software acts as a centralized hub, bringing together diverse tools and spreadsheets into a unified platform. Consolidating information on resource workloads and actual hours booked, eliminates conflicting data sources, ensuring accuracy in project tracking.
Learn how you can improve your organization’s forecasting visibility with the power of resource management software. Schedule a demo here.
About RMI
The Resource Management Institute (RMI) is dedicated to the advancement of resource and workforce management thought leadership, best practices, and standards.
