What is Project Resource Management?

Resource management (done effectively) is the process of putting the right people, in the right place, at the right time.

Effectively managing project resources is crucial for professional services organizations and other companies that run their business by project. How well you manage and optimize resources will determine how much revenue you bring in per employee, as well as, the overall profitability of your organization.

 

What factors into effective project resource management?

There are several factors that determine how well professional services firms manage their resources:

 

Having a clear and thorough understanding of the project plan and the role it plays

In order to effectively manage resources, you must start with some of the key components of the project plan. Managing resources for a project begins with the accuracy of the estimate presented to the customer. The more you know about the project ahead, the more you can prepare. In other words, the more accurate your estimates are, the better you will be able to manage the schedule of your resources for the project ahead of time, allowing you to prepare for possible roadblocks that could derail the success of the project.

 

Budget of the project

Developing a budget is also part of estimating a project. Budgets are included in the estimate because it is understood that as the project progresses, the budget will likely change. Having a baseline budget amount allows project managers to have greater control over the resources assigned to the project. A common example illustrating the importance of the project budget is when a senior resource is assigned to a project, but the customer would rather have a junior resource (or multiple) assigned to the project because their rates are lower. In this scenario, two junior resources could potentially finish the project more quickly at a lower overall cost.

 

Timeframe for completion

The date you commit to delivering a project plays a big role as well. Some of your resources may work at a different pace than others - and some may not be available as much as you would prefer, because they are already assigned to other projects.

 

Tasks required to complete the project

Another key component involves assigning resources to specific project tasks. In order to do this effectively, you need to know a.) all of the tasks required to complete the project, b.) how long you expect each task to take to complete (task duration), c.) the priority of the tasks, d.) the dependency of tasks as they relate to each other  and e.) constraints and restrictions for tasks, such as deadlines, budgets, and the skillsets of your resources.

 

Having a clear understanding of all the above components of a project plan and estimate will give you a solid foundation that will help you in the next step of resource management, which is building a resource plan from the project plan, or resource scheduling.


Resource Scheduling/Resource Planning

Specific goals for a project may vary, but at a high level professional services firms are striving to complete their projects in the most efficient way possible, in order to maximize project profitability. This should be at the forefront of a project manager's mind as he/she is scheduling resources for a project. Now that you are aware of the project plan and the customer's requirements, you must evaluate your internal resources in order to effectively manage them.

 

Evaluating your on-going projects

Before scheduling resources to a new project, you should first evaluate projects that are currently active and on-going. How many of them are on-track or ahead of schedule? Are any of them at risk of not being completed on time, or going over budget? If you discover that some of your projects are at risk, now is the time to make the necessary adjustments to resources in order to produce the results you promised  the customer. Failing to recognize off-track projects before starting a new project will only make things more hectic down the line.

 

Understanding your people resources

When creating a resource schedule for a project you must know a resource's skillset, as well as their experience and billable rate. By developing an accurate estimate and list of tasks to complete the project, you should have a good idea of the skillsets required to complete a project. You wouldn't ask a resource to take on a task they aren't qualified to do; knowing your resource's skillsets as well as the skillsets required for the project will enable you to filter  resources to form a project team. Likewise, each resource's billable rate will factor in to the resource scheduling process because of the project budget. This ties back into accurately estimating the project - the skillsets required for the project will determine the resources needed.

 

Resource capacity and demand

You've evaluated your current projects and adjusted resources to make sure they are completed successfully, and you've determined which resources you have available to schedule based on skillsets required and budget available for the upcoming project. Now you must identify, of the remaining resources, which have availability.

 

Resource capacity and resource demand will help you efficiently manage these resources. The demand of a resource in terms of a project is the amount of time required to complete a project task. Resource capacity, on the other hand, refers to what that resource can handle as far as skillset and available time. For example, in order to complete a specific project task, it may take a resource 10 hours a week for the next 3 weeks. This is demand. However, this resource, due to being scheduled on other projects, only has 8 hours a week available. This is the resource's capacity. When evaluating resource capacity and demand, don't forget to factor in non-project-related commitments, such as vacation, holidays, training time, etc.

 

Scheduling your resources requires a complete understanding of your on-going projects and how they are performing, the skillsets and billable rates of your resources, as well as the capacity and demand of each resource. Once you are caught up on these key areas, you can put together a resource schedule and move on to the next phase: resource optimization.


Resource Optimization

While building an accurate project estimate and an effective resource schedule are two static pieces of the process, optimizing resources after a project has begun is an on-going process that requires diligent monitoring. No matter how well you estimate a project and build a resource schedule for the project, something is always going to change. If done correctly, resource optimization will allow you to adjust to these changes accordingly without risking your goal of completing the project efficiently, with maximum profitability.

 

Changes in capacity and demand

Throughout the lifecycle of a project, capacity and demand will change for resources. A resource may have more capacity part-way through a project because one of their other projects was completed. Or, new resources might become available altogether that weren't available when the project started. On the other hand, resources may be pulled away from a project and assigned to something with a higher priority - the demand is still the same, but their capacity is lower. Balancing these changes in resource availability alongside the priority of projects is what resource optimization is all about.

 

There are cases where you don't have the resources necessary to complete all of your projects on-time and on-budget, so you have to resort to other methods. Two common ways of dealing with resource constraints are resource leveling and resource smoothing.

 

Resource leveling

Resource leveling involves identifying the demand for an over-allocated resource, and making sure the supply (capacity) meets the demand. To increase supply of a resource, you either need to have another resource with equal skillset available to assign to the project (you probably wouldn’t be doing resource leveling if this were the case) or you need to increase the amount of available hours the resource has by ‘leveling’ the hours spent on different projects.

 

For example, a resource schedule may be built out for Project A over a 10-week period, but due to the project tasks and skillsets required, Pam (high-demand resource) would be required to work 60 hours some weeks, while only working 30 in others.

This isn’t practical, as Pam cannot work more than 40 hours in a week. Resource leveling in this case would involve adjusting the project date of delivery from 10 weeks to 12 weeks, which would increase Pam’s resource capacity to match the demand while staying under that 40-hours-a-week limit.

 

It is common for resource leveling to indirectly affect the completion date of a project in scenarios like the one above, because in most cases resource leveling is only used when a project is at risk due to task dependencies (i.e. a certain task must be completed before the next one is started and you can't just skip it and come back to it later). This is one of the main differences between resource leveling and resource smoothing.

 

Resource smoothing

While Pam is allowed to work up to 40 hours a week per her organizational policies, they would prefer she only be allocated for 38 hours a week for the sake of flexibility. Resource smoothing involves adjusting the resource schedule for different project tasks and assignments while still working within the predefined resource constraints (38 hours) when slack is available.

 

Resource smoothing is applied after resource leveling, and does not have an affect on the project completion date. The purpose of resource smoothing is to take advantage of slack in the resource's schedule in order to work within the desired allocation for that resource by moving around project tasks that don't have dependencies.

 

Resource optimization - balancing the future

There are plenty of resource optimization techniques that will help you drive up project profitability today, but maybe the most important optimization technique has to do with finding a balance between maximum project profitability and maximum investment into growing your resources. While increasing profitability for each project is an immediate goal, you have to set yourself up for future success.

 

Why is it important to balance a resource's billable time with learning and educational time?

  • Your people resources need time to learn new technologies and hone already established skills, both of which will result in more flexibility for project managers in the bigger picture.
  • Educational time not only sets your professional services team up for future success, but it also allows the resource to feel valuable because they recognize that you are investing in them.

Educational time doesn't have to mean classroom training either - any time you can expose junior resources to low-risk, yet new assignments on a project, is an opportunity for you to invest in the future while still maintaining utilization and realization rates.


Qualifying your efforts - measuring resource utilization and realization

If resource management involves putting the right people, in the right place, at the right time, how do you measure the effectiveness and sustainability of your efforts?

 

Utilization and realization are two common metrics used by project-focused organizations to determine how well resources are being managed, scheduled and optimized.

 

A resource's utilization rate is a metric, expressed as a percentage, that shows the amount of time a resource spent working compared to the amount of time they could be working. The realization rate of a resource shows the amount of billable time worked compared to the total amount of hours.

 

Calculating resource utilization

The first step in calculating utilization and realization is establishing a baseline number for the total hours a resource has available to work. The most common number used in professional services firms is 2080 hours in a year (40 hours a week x 52 weeks in a year = 2080 hours). That being said, every organization is different. Some companies factor in their company holidays and/or vacation time, and start with a baseline of 2000. The baseline number itself isn't as important as just being consistent - once you decide on a baseline number for total hours, it is important to use that same baseline when calculating realization and utilization for all employees in order to get the most accurate measurements.

 

After establishing a baseline, you can begin to calculate utilization for a resource. The goal is ultimately to have 100% resource utilization. Julie a full-time employee, was available to work 2080 hours last year, in total she ended up working 2080 hours. Julie was 100% utilized.

Utilization rate = Hours Worked / Hours Available to Work

 

Calculating Resource Realization

Calculating resource realization requires you to know how many of a resource's hours were billable, and how many of those hours were actually billed to a client. The total billable hours will be the new baseline; you can divide the hours billed for a resource by the baseline to determine realization rate. Continuing on the example above, Julie worked 2080 hours but only 1456 of them were billable. Of those 1456 billable hours, 1224 hours were billed to customers and resulted in revenue. Julie was 84% realized (1224 billed hours / 1456 total billable hours).

 

Realization rate = Billed Hours (hours billed to the customer) / Total Billable Hours

 

Measuring utilization and realization rates is critical for professional services organizations because it:

  • shows you how well your resources are being managed, at a glance
  • gives you a key performance indicator (KPI) that allows you to compare your organization to industry benchmarks
  • provides insight into overall project profitability, and shows where you have gaps that need filled.

 

How does software allow you to better manage your project resources?

Professional services organizations that excel at resource management have some very important things in common.  First off, they have strong leadership at all levels of the organization,  focused on transparency, innovation, a culture of continuous growth and accountability.  But leadership is only a part of the equation. Organizations that excel at resource management, and project management in general, understand the need for information. Being a top performer requires visibility and visibility requires data.  In other words, Key Performance Indicators (KPI’s), such as utilization and realization rates, as well as, project-specific metrics.

 

Beyond Software is a powerful professional services automation (PSA) suite that helps project-focused organizations connect their project and financial data to increase visibility into projects, create accountability, and improve cash flow through more efficient resource management. Beyond Software offers a complete suite of modules, including Financial Management, Project Accounting, Project Billing, Project Resource Management, Time and Expense Tracking and Business Intelligence Reports, Consoles and Dashboards

 

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