Long-term resource planning is essential for a company’s growth. But what if you get it wrong?
Of course, mistakes happen — and we’re here to help you correct them. Here are 5 common mistakes in long-term resource planning you might be making.
1. Treating Long-Term Planning Just Like Short-Term Planning
Most companies start with short-term planning — or, specifically, planning for a few days or weeks in advance. This type of planning focuses on tasks and small objectives that take a few hours to complete. In long-term planning, such an approach is unacceptable!
What should long-term resource planning focus on?
Long-term planning should not focus on unnecessary details. Instead, it should give the managers and executives a general idea of what their company’s work will look like in the weeks or months to come. It also shouldn’t focus on individual tasks. Instead, it should include information on:
- People’s allocations, availability, and risk of being benched.
- Costs of work on existing and planned projects, as well as the revenue generated by the work.
- Current and future utilization of resources — or lack thereof, in the form of an employee bench.
- Other key performance indicators, such as project profitability and overhead percentage.
- Gaps in the sales pipeline and any forecasted changes in income in the future.
To recap: long-term planning should focus on getting a bigger picture of all the operations, not the tasks that contribute to particular projects on a smaller scale.
2. Planning for a Very Specific Period
Imagine a professional services company that always prepares its resource management plan for the upcoming month. While that may sound good at first, this company will inevitably struggle with:
- Repetitive allocation: For example, specialists who are assigned to a project for a few months.
- Unknown risks in the future: Do we have enough projects for all our employees? What happens when our projects end?
- A growing employee bench: Caused by a lack of information on specialists who are about to become idle.
- Lack of flexibility: In the current professional services market, projects come and go. Make sure you leave room for such changes.
What is the alternative to planning work every once in a while?
Instead, long-term planning should take place whenever it is possible to plan work to some degree of certainty — and this also applies to draft allocations and tentative projects. By doing so, executives can:
- Provide all the other managers with up-to-date information on people’s availability.
- See the availability of people they would like to include in new projects and react to their absences.
- Test out different scenarios for projects and allocations and choose the best ones for their business.
- Alter the sales pipeline based on the changes in utilization forecasts.
- See opportunities and risks for planned and prospective projects.
3. Demand Planning Based on Roles Only
Long-term planning is not only about time but also about the money that time generates. It’s an ingredient of the most important expense in the professional services industry: the wages that make up the majority of the spending in the project budget.
What if the wages are much greater than expected? That usually happens when a company plans a project using average wages for required positions
Example of Why You Should Plan People Instead Of Roles
For example, if a project requires 3 specialists working 160 hours each, and an average wage for this type of specialist is $30 per hour, the COO expects to spend the following on the operation :
3 x 160 x 30 = $14,400
Therefore, he decided to sell the service for $25,000, with a 42% profit margin.
However, if only more expensive specialists are available, the COO might be left with a much smaller profit margin than expected. For example, if the costs of the available employees will be, on average, $45 per hour, the wages alone will cost:
3 x 160 x 45 = $21,600
and they will consume the majority of profits, bringing the profit margin down to less than 14%.
However, this situation could easily be avoided — if you assign individual specialists with specified known wages to the project, the problem will be nonexistent. Planning based on average data or assumptions is not an option.
Do I need to calculate these values every time?
Fortunately, you don’t have to use Excel spreadsheets to calculate all these values. Some advanced resource management software, such as BigTime, can immediately offer you the information in the specialist’s profile.
4. Planning Before Hiring the Right People
Long-term planning based on wishful thinking is one of many problems managers can face. In some cases, they make an even greater error by assigning projects to people who have not yet joined the company — and they may put the whole project at risk by doing so.
So, how can you solve that problem? There is just one thing you can do to avoid that situation: only allocate people who you are sure will be available when the project starts.
5. Inability to Assign a Desired Person to a Project
Imagine you’re planning a new project, and you already have a perfect candidate for a senior specialist who would play a key role in the operation. You enthusiastically assign them to their new responsibilities… just to find out that they are already very busy.
Unfortunately, these schedule conflicts are bound to happen unless you know the exact capacity management of your employees.
