Resource Management and Capacity Planning Handbook

Book Review

The Resource Management and Capacity Planning Handbook by Jerry Manas is the authoritative source for any organization wanting to improve its resource management practices in the context of portfolio management.  The opening chapter does a great job of providing basic context of resource management and capacity planning and strongly leverages a benchmark study by Appleseed RMCP and expert practitioners in the field.

Organizations continue to struggle with the matter of resource management and “when you consider the constant change, lack of visibility into resource capacity, and no sense of which work is most important, the result is a perfect storm of resource management chaos.” In order to address this problem, Manas systematically covers key topics chapter by chapter that provide relevant help to companies seeking to improve. This book is not about mere theory, but gives literally hundreds of practical points based on corporate reality.

Chapter 2 addresses the road to maturity for improving resource management. I am a big believer in assessing organizational maturity, and Manas does a great job of acknowledging that organizations are on a road to maturity, and through the help of expert practitioners, gives examples of how organizations have matured their resource management processes.  The chapter also addresses the matter of time tracking and does an excellent job of providing a balanced view of why to do it and how to make it work.

In chapter 3, Manas presents a systems approach for diagnosing the root causes of poor resource management. He brings out a number of points that should strike a chord in any organizations. In the latter half of the chapter, he uses systems thinking to deep dive on estimating resources and tasks. The Resource Management and Capacity Planning Handbook demystifies the complexities of resource capacity and demand management and offers clear ways for maximizing your limited resources to drive business growth and sustainability.

Chapter 4 addresses the much needed topic of leadership and organizational change management. I was very pleased to see an entire chapter devoted to these two subjects, because most of the time in portfolio management literature, the emphasis is either on process or tools, with little regard for the people dimension (which is very critical). Much of the chapter is spent on the “50 ways to lead your users”, which is a systematic and structured approach to leading change in the organization.

Chapter 5 addresses key roles for making resource management and capacity planning successful. One of the key takeaways is that successful organizations very often have dedicated resources to support capacity planning exercises. He also takes time explaining the expanding role of the PMO.

Chapter 6 is an enjoyable chapter on strategic alignment and how not to manage resource capacity management like failed military leaders in the past.

Chapter 7 is a great chapter focusing on the human side of resource management. As chapter 4 addressed the people side of leadership and change management, this chapter does an equally good job of explaining why it is important for organizations to pay attention to the human side of project execution and resource productivity when trying to improve resource management.

Chapter 8 expands upon a white paper Manas wrote called “the Capacity Quadrant”. This chapter speaks more frankly about the topic of portfolio management and the need for visibility, prioritization, optimization, and integration of the portfolio. I loved his white paper on the topic and felt that this chapter could have been moved up earlier in the book to provide a clearer view of resource management and capacity planning within the context of project portfolio management.

The final chapter, chapter 9, concludes with industry specific challenges of resource management and capacity planning. This chapter turned out to be the cherry on top as it provided insight into unique challenges faced by different industries. Learning about challenges faced by other industries actually gives greater context to the capacity planning problem and puts readers on the alert for identifying and solving these problems in their own company.

My Conclusion to Resource Management and Capacity Planning

The Resource Management and Capacity Planning Handbook is a must-have book for PMO directors and senior leaders struggling with making the best use of limited resources. Jerry Manas has a great writing style that makes the book easy to read and easy to understand. He also does a fantastic job of blending theory with reality by explaining key topics and then providing numerous tips on how to be more successful with resource management.

Rating: 5 out of 5 stars

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PMI Standard for Portfolio Management Third Edition

The PMI Standard for Portfolio Management Third Edition is the first edition that is worth buying. Having read the 1st and 2nd editions and reviewed the exposure draft for the 2nd and 3rd, PMI has come a long way with the third edition. Nearly all the major components of portfolio management are referenced in this edition (gate reviews being the most significant omission). At the time of this review, I am preparing for the PfMP exam and have read over most of the 3rd edition twice and have studied several sections in detail. It is still not perfect as there are several inconsistencies and items I consider too theoretical (hence the 4 out of 5 star rating), but overall it is a worthy addition to the portfolio management library. 

Chapters 1-2 do a great job of giving an overview of portfolio management with the roles and responsibilities needed to make it work. Chapter 3 also does a pretty good job of creating a structure around which to organize the remaining chapters by setting each of the five knowledge areas (Portfolio Strategic Management, Portfolio Governance Management, Portfolio Performance Management, Portfolio Communication Management, and Portfolio Risk Management) in a table with the three process groups (Defining, Aligning, and Authorizing/Controlling). Chapters 4-5 in my opinion are the weakest parts in the book. There are some great additions such as the portfolio strategic plan and the portfolio roadmap, but some of the strategic processes seem out of order (e.g. prioritizing projects before they have been evaluated by a governance board) or are omitted (e.g. gate reviews). In addition, the Portfolio Charter deliverable is just too theoretical for most organizations to adopt. Chapter 6 does a good job of addressing resource capacity management and benefits realization (two big omissions in previous editions). I found chapter 7 to be very useful related to portfolio communication and I got fresh insight on portfolio risk management from chapter 8.

In short, the PMI Standard for Portfolio Management Third Edition is worth buying and offers great information for portfolio management practitioners.

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Portfolio Planning vs Strategic Planning

Too often, the modus operandi for many organizations is to receive requests and filter them through a stage-gate process in order to evaluate the merit of the request and select the right projects. If the project is selected, a project team is assembled and the project planning begins. There is nothing wrong with this process, in fact, it is an important component of portfolio management.  The shortcoming relates to the lack of strategic planning and portfolio planning.

Strategic planning occurs once a strategic direction has been established within the organization. It is beyond the scope of this post to discuss how strategy is developed. Rather, our focus is on executing the strategy. The primary assumption is that strategies have been developed. From here, the senior leaders should be able to outline the major items they believe are necessary to accomplish or fulfill the strategy. These major items help define what the company intends to do on a larger scale (“the big whats”).  Going one step further, the senior leaders may have an idea of when these major items need to be initiated. With this information, a strategic roadmap can be built to lay out when major components of the strategies should be executed. This strategic roadmap is a critical component of strategic planning.  At this point, we are looking at strategic components from a 50,000 foot view. Few details may exist for each major component listed. If more information can be provided, all the better. The critical point is that the senior leaders outline some of the major items needed for the completion of the strategy.

Before the traditional portfolio management practitioners raise their arms in protest, I would point out that all of these projects will be reviewed like any other project and need to be prioritized. The creation of a strategic roadmap does not violate key PPM principles. Rather, the strategic roadmap aids the portfolio planning process by acknowledging major efforts that need to be undertaken. Without this view, it is all too easy for decision makers to approve projects (perhaps the right projects) at the wrong time. The creation of a strategic roadmap is a proactive step of leadership to better manage the portfolio. It is far easier to anticipate resource shortages when you can see all of the major efforts on the horizon. It is also easier to acknowledge the need for strong prioritization when key strategic projects compete for resources with smaller projects. The strategic roadmap is a key deliverable of the strategic planning process and is a major input for good portfolio planning.

Portfolio planning at a more tactical level helps senior leadership know when projects will get worked. Portfolio planning improves overall portfolio success by taking into account the limited resources (financial and human) and comparing this against known project dependencies in order to properly sequence projects. Strategic planning is proactive work that outlines the major components needed to accomplish strategic goals. Strategic planning will not account for the numerous small projects that get requested throughout the year (that’s the role of the portfolio management process).   Portfolio planning utilizes select information from all project requests (large and small) to sequence the projects (based on dependencies, resource constraints, and priorities) in a way that creates an ideal portfolio at a given point in time.

Portfolio Planning3

The chart above highlights three parallel steps of the planning process: strategic planning, portfolio planning, and project planning. Strategic planning often covers a 1-3 year planning horizon (or longer) and is generally longer than portfolio planning and project planning (except for large and/or complex projects).

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Tactical or Strategic PPM

Fundamentally, portfolio management is about strategic execution and maximizing value to the organization through important project investments. Through various processes, leadership teams can determine how well their project investments align to key strategic goals. Optimization techniques can further enhance the value of the portfolio, ensuring that organizations get the biggest bang for their project buck. Nevertheless, some organizations turn to portfolio management to merely help at the tactical level—getting projects done—and are less concerned with using portfolio management for strategic execution. Organizations should be mindful of their portfolio management approach—is it strategic, tactical, or both?

Tactically, portfolio management as a discipline can help organizations execute projects through better portfolio planning which includes: short-term resource capacity management, managing dependencies, and sequencing projects.

1) Resource capacity management from a short-term tactical perspective (less than six months) enables organizations to minimize over-utilization and unnecessary multi-tasking, both of which increase the risk of failed project delivery. By protecting organizational capacity, projects are more likely to have key team members available when needed to accomplish project work. In addition, fewer projects usually means less multi-tasking which is a known killer of project success.

2) Managing dependencies at the portfolio level starts with identifying all the upstream and downstream relationships to each project in the portfolio. More dependencies means more complexity and increases the overall risk to portfolio success. This is not merely a program management function, but is part of portfolio planning because such dependencies can span across the entire portfolio. When organizations understand the dependencies between projects, the portfolio management team (PMT) can make better tactical decisions to ensure that upstream projects do not negatively impact downstream projects.

3) Project sequencing is another part of portfolio planning because it is related to managing dependencies. Some dependencies affect project schedules (finish-to-start, finish to finish, etc.) and in order for these projects to be successful, project sequencing needs to be managed. The PMT should understand these relationships in order to initiate projects at the right time otherwise projects could be launched too soon only to find out that other work needs to be completed first (resulting in delays and likely re-work).

Although project portfolio management (PPM) has been traditionally performed to support strategic execution, some organizations may use a sub-set of the portfolio processes and adopt a more tactical approach to portfolio management. While this may seem less than ideal to seasoned portfolio management practitioners, it still yields benefits for existing projects and programs, and can ensure greater success than if no portfolio processes were utilized.

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What Are We Optimizing? Part 1

Portfolio optimization entails all the steps necessary to construct an optimal portfolio given current limitations and constraints. These steps occur repeatedly in the portfolio management lifecycle and work in tandem with Stage-Gate processes for selecting the right projects. The purpose of optimization is to maximize the portfolio value under certain constraints. Understanding and managing these constraints is critical for making portfolio optimization a useful component of the portfolio management process.

We can optimize a portfolio in multiple ways:
1) Cost-value optimization (aka ‘efficient frontier analysis’)
2) Resource optimization (aka ‘capacity management’)
3) Schedule optimization (project sequencing)
4) Work type optimization (portfolio balancing)

The question then is, when we are optimizing the portfolio, what is it that we are optimizing? Many portfolio management computing systems promote efficient frontier analysis which commonly focuses on cost-value optimization. However, as useful as this is, it does not often take into account resource optimization, schedule optimization, or even work-type optimization.  It is possible for portfolio systems to include some of these constraints, but most are not advertised in that way.

Furthermore, it is fundamental to understand the limitations and constraints on the portfolio, for without knowing the constraints it is not possible to optimize the portfolio and maximize organizational value.  The constraint for cost-value optimization is the available budget. This helps us determine an optimal budget based on limited financial resources. The constraint for resource optimization is human resource availability. This can be measured in a number of ways and will be discussed in another post. Optimizing against critical resource availability is recommended. Schedule optimization is focused on project timing and dependencies. Work type optimization is focused on categorical designations (i.e. portfolio balancing—how much do we want to invest in key areas).

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The Goal of Resource Capacity Management

Resource capacity planning is a hot topic in portfolio management discussions because it is one of the key steps for optimizing the portfolio, but it is also one of the most difficult processes to perform. For most organizations that operate in a multi-project environment, project demand far outweighs resource supply. Overloading the project pipeline puts added strain to organizational resources and reduces the likelihood of portfolio success. In organizations where human resources are over-utilized, excess overtime and recovery exercises can become common because project teams do not have enough time to complete all work on time. This can lead to delayed projects, and in the long-run, burns people out and lowers morale. Having under-utilized human resources can also be a problem, but not quite as serious as over-utilized resources.

The primary goal of portfolio management is to maximize the value an organization can deliver through its projects based on limited resources. The goal then of resource capacity management is to protect capacity in order to optimize the portfolio. In other words, the portfolio steering team needs to be very careful about approving projects that overload the system as this can very quickly increase the risk of not meeting portfolio commitments. Approving the highest value projects without overloading the system is a key success factor for portfolio management. The fundamental point is to make sure the organization is executing the most important work within the limitations of its current resource capacity. Therefore, capacity management therefore helps answer two fundamental questions:

  1. When do we have capacity to commit to additional work? (Portfolio oriented for portfolio optimization)
  2. Are resources available to complete our committed work? (Project oriented for project execution)

The first question is portfolio oriented because it is looking into the future to understand when new project work can be accepted into the portfolio. This step is critical because it directly affects project execution. Managing resource capacity at the portfolio level helps control work in progress (WIP). Controlling WIP directly benefits project execution because it limits the amount of bad multi-tasking. When resources are significantly over-committed, some activities do not receive adequate attention, thus raising the risk of schedule slides. Therefore, the first step in capacity management is to control the WIP by only approving projects when resources are available or when lower priority work is put on hold in order to free up additional resources for higher priority work. Understanding the organizational resource capacity helps draw a boundary (a constraint) around the amount of project work that can be reasonably accomplished by the organization. Without any boundaries, management may unknowingly authorize more project work and overload the system.

The second question is focused on short-term resource availability and is project execution oriented because the project manager needs to understand if resources are available to accomplish near-term work. If WIP is controlled, then fewer resources should be over-allocated, thus promoting more successful project completions.

Capacity Management Example

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Good Organizational Infrastructure Manages the Chaos

At a recent project/portfolio management event, there was a comment made about project managers managing ‘within the chaos’. This got me thinking about how portfolio management fits in with the chaos. Another distinction between project and portfolio management began to emerge; Project managers manage within the chaos, but good portfolio management helps manage the chaos. Let me explain.

Project managers are often given a task to make things happen and use as many project management tools as needed to execute a project. Project managers usually do not own their resources and have no direct influence over the types of projects being conducted, the project governance process, or the project priorities for the organization. Therefore, Project Managers need to learn how to best manage their projects in the midst of an ever-changing work environment (a.k.a. chaos).

Portfolio Management as a discipline can be used to help minimize the chaos within the organization. If leadership is proactive in developing good governance processes, then the organizational infrastructure will be established to accommodate the number and complexity of projects within the organization (I will touch on the need for good organizational infrastructure next month at Project World). Good project selection will help identify good projects as well as to balance the high-risk and low-risk projects being conducted at any one time. This is a big point to help manage the chaos. Too many risky projects translates into a lot of variability for project managers; and when Murphy strikes, it can have a huge negative ripple effect across the portfolio of projects.

Good prioritization will also identify the most important projects and help communicate to resources managers how to allocate their resources. Furthermore, solid resource capacity management will make a world of difference for project execution. Imagine having the right resources at the right time! Portfolio management will reduce organizational chaos to make project execution more successful when solid organizational infrastructure is put in place.

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Current Challenges with Capacity Management

Good capacity management leads to better project execution, thus bringing greater benefits to the company. However, there are several challenges associated with resource capacity management, two of which are discussed briefly below.

The first challenge is to understand what level of granularity the organization needs to be successful (i.e. at an organizational level, at a skill code level, or even at the individual by-name level). Data granularity comes with a price. Counting the number of resources in an organization is relatively easy, but provides minimal benefit. Identifying specific skills/roles and tracking this requires more effort. Allocating individuals to project phases requires even more time and energy but enables good organizational capacity management.

The next challenge is keeping the data current which requires project management discipline. Depending on the level of detail, a certain degree of project management expertise (maturity) is required to collect that data. This is where there is significant overlap between project management and portfolio management. In order to have good resource data, the project manager needs to have a reasonable project plan in order to understand the resource requirements. The aggregate of all of that information certainly feeds the portfolio management system, but the data is largely driven by the project plans.

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