The project management formula paints a clear picture for success—having enough of the right ingredients ensures your work comes out as expected. When one area fails, results dip.
Capacity planning provides a way to ensure enough of these ingredients are present.
What is Capacity Planning?
Capacity planning is the process of evaluating capacity against demand. The goal of capacity planning is to outline whether existing resources meet a given set of needs. In most cases, this is also used to forecast bandwidth for taking on additional, future work.
Capacity planning can easily be considered essential to your business. For smaller teams, the focus is often on juggling team members with varied skills around different business areas. For larger businesses, cross-functional teams will likely need to be moved around to juggle multiple projects and potentially also to project or ensure bandwidth for incoming work.
Capacity Planning vs Resource Planning: What’s the Difference?
Capacity planning and resource planning are typically confused with one another, and while they both fall under the workload management umbrella, their focus is different.
Capacity planning serves as more of a forecast, measuring capacity or utilization against a given workload and other demands. This is more of a long-term approach for determining bandwidth to take on current and future work.
Resource planning focuses on allocation, explicitly assigning existing team members, budget and other resources to projects and tasks. This is a more short-term approach and, in many ways, is a process found within the overall capacity planning formula.
Capacity Planning Strategies
There are three prominent capacity planning strategies available.
Recreate this table.
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Lead capacity planning, which takes a more proactive approach, involves increasing capacity in anticipation of higher demand. This is commonly observed in rapidly expanding businesses, who might be dealing with an influx of business inquiries and expect to take on more work, or in businesses looking to match supply for an upcoming busy season, such as holidays. While the growth may look good on the outside, this approach holds a greater risk of overspending if the projected demand turns out to be less than anticipated.
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Lag strategy, on the other hand, does the opposite—capacity is adjusted to meet an established increase in demand. This approach works well when the budget is limited, as added resources are more likely to be properly utilized. Growing businesses often apply this strategy to address bottlenecks in their operations, but risk missing out on more time-sensitive opportunities.
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The match strategy takes pointers from the lead and lag strategies for a more calculated approach. This involves determining business trends and adjusting capacity accordingly. While this approach offers the best of both worlds, it also requires more investment to maintain, as more effort is needed to monitor demand in the background. For example, you might invest in more licenses for a given tool based on rising productivity metrics so more team members can adopt it.
While it can be easy to assume the match strategy is ideal, it might now always be the most efficient. A good rule of thumb between lead and lag is to consider the resource involved—the lead strategy is a good fit if you can easily repurpose a resource to meet a change in demand, such as team members with a wide variety of skills. The lag strategy makes more sense when a highly specific resource is needed, such as new equipment or a uniquely skilled member on the team.
Consider your needs thoroughly, and use that to apply the strategy that best works.
Why is Capacity Planning Important?
Capacity planning offers many advantages and helps address different challenges.
1. You avoid overwhelming your team
A business is made of many moving parts, and all of them affect your capacity. Projects constantly evolve, and employees come and go, directly affecting the amount of time and effort you can allocate to projects. Capacity planning helps keep you from overworking any one resource, whether this is a team member or hardware that keeps your business running.
2. You optimize budget allocations
In connection with #1, capacity planning tools not only minimize overwork, they also protect against underutilization. Team members benefit from an appropriate distribution of work, and you ensure that all hardware is being used as needed, eliminating idle resource allocations.
3. You enable flexibility and forward-thinking.
Effective capacity planning allows you to effectively meet current demands, and in its ideal state, gives you room to plan for future expansion. A good example of this is the common notion of aiming for up to 80-90% utilization, so your resources have wiggle room to address emergent issues. This can also be used to further long-term strategy-building.
The common theme when it comes to capacity planning is allowing for informed decision-making, allowing you to pinpoint bottlenecks and inefficiencies, which is great for keeping both your team and your customers happy.
Capacity Planning Best Practices
The Capacity Planning Process. Reference image. Show these as steps, and select appropriate imagery:
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Identify resources and scope
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Estimate demand & calculate capacity
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Measure & address the capacity gap
Beyond learning the concept and importance of capacity planning, it’s important to know how to best use it to your advantage. Below, we’ve outlined best practices for effective capacity planning management.
1. Identify your resources and scope
Capacity planning begins with one question: What are you working with? This can be broken down further into the following guide questions:
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What tasks need to be accomplished?
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How many/which team members are available to work on this?
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When does the project need to be completed/how much time is available for this project?
Once you have this information, it’s time to compile—one of the most common formats for this is to outline them in a spreadsheet. It’s important to get as much detail as possible in this stage to get a more precise plan.
2. Determine capacity and demand
It’s recommended to sit down with your team, specifically those identified in Step #1, so you can discuss the tasks at hand. From here, you will want to estimate the amount of effort required for each task. Common units of measurement used include hours or effort points.
For your team members, compute how much time they have available for the project. Take into account existing workload, and subtract this from their overall availability—include time attending regular meetings or responding to emails, as they can often be overlooked in this equation. This is especially important for team members who juggle multiple roles or projects, who are at greater risk of being overloaded when new work arrives.
3. Evaluate & align capacity against demand
You can now project whether your existing resources meet the anticipated demand. Your key takeaways would be:
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Whether your total capacity meets total demand, can you allocate enough resources to accomplish all the work in the given time?
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Resource utilization rate - Is work evenly distributed across the team, or are there disparities in responsibilities?
Optimize resources accordingly—if your current capacity can’t meet demand, you might increase team size, negotiate for more time, or adjust existing workload to free up certain team members for the work at hand. Alternatively, if you find that your capacity exceeds the demand, this tells you that you have room to work on other priorities, such as taking on new projects or augmenting other ongoing initiatives.
Other Best Practices to Consider
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Aim for cross-functionality. Highly-skilled, well-rounded team members are a great resource to have on your team, as they give you more flexibility in project capacity planning.
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Use your data! Past projects provide plenty of useful insight into future capacity planning, especially when working on projects that are relatively similar in nature or scope. This gives you an opportunity to identify existing bottlenecks and potential changes that could affect your capacity. A data-driven approach is also great for negotiating for additional resources, as stakeholders will have more confidence in investing in decisions backed by evidence.
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Build a culture of openness within your team. Estimations are volatile by nature, and this is worse when your team has a faulty perception of its capacity. You will need to have difficult conversations to ensure that you arrive at a realistic estimate of the work and its availability, especially with limited resources. Capacity planning then helps create a cycle where workloads are reasonable and utilization trends are positive. This helps with morale and reinforces the impact of proper capacity management across the board.
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Invest in capacity planning tools. Capacity planning deals with many moving parts, and it can get tedious to perform effectively at scale. Strong capacity planning solutions remove much of the busywork around capacity planning, providing you with real-time projections as you move resources around. This allows you to focus on the actual planning instead of struggling with building tools from scratch.
Capacity Planning Template
To help you get familiar with capacity planning, we built a simple template that lets you practice the most fundamental steps in the process—the template is designed around managing individual team members’ capacity to accomplish a list of assigned tasks.
To make your own copy, open the template, then click on File > Make a copy.
Instructions are included in the Instruction tab of the template, and notes are also attached to a number of cells in the template to guide you while inputting data.
Optimize Your Capacity with Workamajig
Capacity planning serves as a guide for when you need to adjust important parameters in your project, such as your team composition or your project timeline. By measuring how your current resources stack up against demand, you create a healthy working environment for your team and ideally create sufficient room for long-term growth.
With Workamajig, the premier project management software, you have an all-in-one solution for creating your project timeline and seamlessly transitioning into task and resource management. Scope projects and manage capacity with ease, then use built-in collaboration and reporting tools to ensure that your team stays on top of the work, completing tasks and addressing roadblocks along the way.
Originally published May 5, 2025.