Resource planning

Resource forecasting in project business

Reija Stenroos
Reija Stenroos
Head of Sales and Marketing

It is hard to run a profitable project business without forecasting. Analysing the resourcing situation plays an important role, and it includes examining how many people are reserved for upcoming projects, how profitable the projects are, and whether the company has a skills deficit. By identifying potential problems, it is possible to react in good time, making it more likely for projects to succeed.

Project profitability

In many project organisations, people are the largest cost item. Therefore, it is important to ensure the right people are available at the right time in order to keep costs down. In itself, allocating human resources to projects does not lead to higher revenue. In the worst case, the people working on a project may not have the required expertise or, conversely, people may be overqualified, which can impact on the project’s cost structure.

The utilisation and billing rates are among the most important indicators of resourcing. However, it is crucial to understand what types of project work people are involved in now and in the future. Companies should try to allocate working time to projects that are either billable or most relevant to the company’s strategy. If the company notices that its personnel spend a lot of time on work that is not billable, it is appropriate to shift the focus to projects that are more relevant to the company’s business.

Regular monitoring of critical financial indicators, such as project costs, income, and profit margins, ensures that project budgets are not exceeded and makes forecasting easier. One of the essential aspects of successful project monitoring is to compare the actual working hours with the plans. If projects regularly exceed the planned number of hours, forecasting will be more difficult. Reacting to this issue can improve the project business and align future quotes more closely with the project’s cost structure. 

Addressing competency requirements

The sales pipeline should be taken into consideration during forecasting in order to ensure that future competency requirements are clear in advance. This also helps with capacity planning, making it possible to avoid last-minute recruitment and schedule overruns. The earlier the requirements are known, the better future recruitment can be planned.  

In some situations, there may be free capacity because employees’ skills do not match the company’s needs. In such cases, it is possible to respond more effectively when the resourcing information is up to date. Competencies can be developed and expanded through different forms of training. Sales can also favour project entities for which the organisation has free personnel.   

How to improve forecasting

Reliable forecasting requires accurate, up-to-date information. A versatile and effective resourcing tool provides the necessary information on matters such as how much billable work is in the sales pipeline, how many free people are available with specific competencies, and comparisons of the realised working hours in relation to planned working time. When all the information relevant to the business is consolidated, decisions can be made based on fact rather than feeling.

Forecasting the future encompasses all of the following:

  • Optimising the personnel’s use of time to maximise efficiency, leading to increased billing and, ultimately, profit.
  • Proactively adjusting to market trends and changes by training personnel and maintaining competencies. In the long run, this boosts the company’s revenues.
  • The ability to adapt flexibly to changes in demand.
  • Minimising excessive workloads and consequent exhaustion.
  • Ensuring the right people have been allocated to the right jobs and avoiding idling.
  • Providing the right information to supervisors so they can manage their teams better.
  • Reacting to changes in the utilisation and billing rates. Ensuring that projects remain on budget and making changes based on lessons learned.
  • Ensuring that projects succeed and schedules are kept. This will keep customers satisfied, which means business success and growth over the long term.
  • Monitoring how plans compare with actual working hours. 

We have created a guide about effective resourcing. If you want to know more on how to get started with effective resource management and do better forecasting, download the guide.

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