Capacity and Capability management and its trade-offs according to PMI

Summary

This episode discusses capacity and capability management, emphasizing the balance between resource availability and expertise. It outlines four key elements of capacity management: planning, demand management, optimization, and reporting. The script highlights the importance of assessing resource capabilities, aligning demand with capacity, prioritizing projects, and using analytics for decision-making. It also addresses the trade-off between capacity and capability, suggesting methods like resource leveling, capability assessments, and demand forecasting to optimize both for better organizational outcomes.

Takeaways

• 📊 Capacity management involves four key elements: capacity planning, demand management, demand optimization, and reporting & analytics.
• 📅 Capacity planning is about forecasting and assessing resource availability (staff, equipment, budget) compared to upcoming workload.
• 🔍 Demand management focuses on tracking current and upcoming projects, understanding when and what resources will be needed.
• ⚖️ Demand optimization is about prioritizing projects to match resource constraints, ensuring high-priority tasks are completed first.
• 📈 Reporting and analytics provide real-time insights into capacity and demand, helping organizations make data-driven decisions and avoid bottlenecks.
• 🛠 Capability management starts with assessing existing skills and ensuring they align with project needs, filling gaps through training or hiring.
• 🎓 Upskilling is a key method for building new capabilities, keeping employees engaged and preparing for future project demands.
• 📊 Regular portfolio reviews, supported by data and reporting, help organizations track progress in both capacity and capability management.
• ⚙️ Balancing capacity and capability is a constant trade-off, where organizations must decide between investing in skill-building or maintaining immediate capacity.
• 🔮 Demand forecasting helps organizations proactively prepare for future needs, smoothing the balance between current workload and long-term growth.

Q & A

What are the four key elements of capacity management mentioned in the script?

The four key elements of capacity management are capacity planning, demand management, demand optimization, and reporting and analytics.

How does capacity planning help organizations manage their resources?

Capacity planning helps organizations assess how much work they can handle by forecasting resource availability, including staff, equipment, and budget, and comparing it to the workload. This ensures that the right number of people with the right skills are available when needed.

What role does demand management play in capacity management?

Demand management is about understanding the demand for resources. It involves tracking current and upcoming projects and their resource requirements, ensuring that the organization doesn't overcommit and can align demand with capacity.

What is the main difference between demand management and demand optimization?

Demand management focuses on understanding what resources are needed and when, while demand optimization involves prioritizing and adjusting demand to meet it within capacity constraints, ensuring that the most important projects receive attention first.

How do reporting and analytics support capacity management?

Reporting and analytics provide real-time insights into capacity and demand, helping leadership make informed decisions about resource allocation, bottlenecks, and adjustments to plans based on data analysis.

What is the first step in capability management, according to the script?

The first step in capability management is conducting a capability assessment, where organizations evaluate their current skills and compare them to the needs of upcoming projects.

How can organizations address capability gaps once they identify them?

Organizations can address capability gaps by upskilling their existing staff through training or hiring new talent with the specific expertise needed for projects.

Why is it important to sustain existing capabilities, and how can organizations do this?

Sustaining existing capabilities is important because skills can degrade over time if not regularly used. Organizations can offer continuous learning opportunities, such as training workshops or internal mentoring, to keep their teams sharp and competitive.

What is the trade-off between capacity and capability management?

The trade-off between capacity and capability management occurs when organizations need to balance having enough resources to handle workloads (capacity) with ensuring that those resources have the right skills to perform effectively (capability). Improving capability, such as through training, often reduces capacity in the short term.

How can organizations manage the trade-off between capacity and capability when prioritizing projects?

Organizations can use prioritization methods like scoring models and strategic alignment to focus on projects that align with their current capability and delay those that require skills they don't yet have. This allows them to balance immediate demands with long-term capability building.

Outlines

00:00

🔍 Understanding Capacity Management and Its Key Elements

This paragraph introduces capacity management, focusing on four key elements: capacity planning, demand management, demand optimization, and reporting/analytics. It explains that capacity planning is about forecasting available resources like staff, equipment, and budget to handle upcoming workloads. The example of a tech company managing product launches highlights how proper capacity planning helps prevent resource shortages. Demand management then focuses on aligning resource availability with project needs, emphasizing the importance of continuous monitoring to avoid overcommitting to projects.

05:00

📊 Demand Management and Resource Optimization in Action

This section dives deeper into demand management, explaining how it tracks current and future project requirements to allocate resources efficiently. It uses the example of a healthcare organization to illustrate how poor demand management can overwhelm IT teams, leading to project delays. Demand optimization is introduced as a means of prioritizing projects, ensuring that critical tasks are addressed within existing capacity constraints. For instance, a retail company might prioritize an e-commerce platform over logistics improvements if it aligns better with short-term strategic goals.

10:03

🧩 Importance of Reporting and Analytics in Capacity Management

This paragraph emphasizes the role of reporting and analytics in providing leadership with real-time insights into resource utilization and workload distribution. By reviewing data, organizations can avoid overworking key staff and better distribute tasks. The example of a construction company using analytics to prevent manager burnout illustrates the benefits of regular data analysis. PMI recommends using historical data to refine future capacity planning, learning from past mistakes such as resource underestimation or project misalignment.

15:04

📚 Capability Management: Assessing and Building Skills

This section shifts focus to capability management, which involves assessing the current skills within a team and addressing gaps. It provides an example of a construction company shifting to green building practices, highlighting the need to train or hire specialists to meet new project demands. The text stresses the importance of both upskilling existing staff and hiring externally to address gaps. The long-term success of projects is tied to the ability to align skills with strategic needs.

20:07

🚀 Sustaining Capabilities and Continuous Learning

In this paragraph, the focus is on maintaining existing skills while building new ones. Continuous learning is critical to keeping teams competitive and adapting to industry changes. PMI recommends regular training and knowledge-sharing opportunities to prevent skill deterioration. The example of a tech company hosting coding challenges to keep engineers sharp underscores the need for sustaining expertise while simultaneously developing new capabilities.

📈 Reporting and Analytics in Capability Management

This paragraph explains how organizations should use data to track the effectiveness of their capability-building efforts. By monitoring metrics like training completion rates and project success after skill development, companies can ensure that their investments are paying off. The example of a retail company training staff on new e-commerce software highlights how tracking KPIs such as error reduction and efficiency gains can validate the success of training initiatives.

🔄 The Balancing Act: Capacity vs. Capability

This section explores the trade-off between capacity and capability management, explaining how organizations must balance having enough resources to handle workloads while also ensuring they have the right expertise. The text illustrates how focusing solely on capacity (i.e., having enough people) without addressing capability (i.e., the right skills) can lead to inefficiencies. The example of a software company needing specialized skills for a new project demonstrates how capability gaps can hinder progress, even when enough resources are available.

⚖️ Optimizing Capacity and Capability: A Strategic Approach

This paragraph elaborates on how organizations can manage the trade-off between capacity and capability by conducting capability assessments and using prioritization methods. The text explains that resource leveling spreads the workload but doesn't address skill gaps, which can lead to inefficiencies. PMI suggests prioritizing projects based on available skills, with the example of a financial services firm addressing a cybersecurity gap through hiring or training, even if it temporarily reduces capacity.

🔍 Project Prioritization and Trade-offs in Portfolio Management

This section discusses the complexity of balancing both capacity and capability issues in project prioritization. PMI recommends methods such as scoring models to ensure that organizations focus on projects that align with current skills, delaying those that require new expertise. The example of a manufacturing company prioritizing operational efficiency over AI projects emphasizes how this strategic approach can optimize both capacity and capability in the long term.

📅 Demand Forecasting: Managing the Capacity-Capability Trade-off

The final paragraph addresses the importance of demand forecasting in managing capacity and capability. By anticipating future project needs and required skills, organizations can start building capability ahead of time to avoid last-minute trade-offs. The example of a healthcare organization deciding between outsourcing technical work or training internal staff shows the strategic decision-making process involved in balancing short-term capacity with long-term capability goals.

Keywords

💡Capacity Management

Capacity management involves overseeing the available resources in an organization to ensure they can handle the current and future workload. In the video, it's about balancing resources like staff, equipment, and budget to meet project demands, illustrated through examples like a restaurant ensuring enough chefs are available for reservations.

💡Capacity Planning

Capacity planning refers to forecasting the resources needed to meet future work demands. The video compares this process to a restaurant assessing if they have enough staff and ingredients for reservations. For organizations, it involves predicting the workload and adjusting resources, such as hiring staff or adjusting timelines to avoid bottlenecks.

💡Demand Management

Demand management is about understanding the upcoming demand for resources and ensuring the organization has enough capacity to meet those needs. The video uses a healthcare system rollout as an example, showing how tracking IT specialist needs helps prevent overloading teams and ensures smoother execution of projects.

💡Demand Optimization

Demand optimization focuses on prioritizing projects to align them with available capacity. It helps ensure the most critical initiatives receive the necessary resources. For instance, the video describes a retail company prioritizing its e-commerce platform project over logistics because it would bring more immediate revenue, illustrating how resources are optimized.

💡Reporting and Analytics

Reporting and analytics provide real-time insights into capacity and demand, allowing for better decision-making. In the video, it's highlighted how organizations can use data on resource utilization and project performance to adjust plans and reassign tasks, preventing issues like overworked teams and delays.

💡Capability Management

Capability management involves assessing and building the skills needed to meet an organization's strategic goals. The video discusses this in the context of regularly reviewing team skills to ensure they align with project needs, such as a construction company assessing their ability to adopt sustainable building practices.

💡Upskilling

Upskilling refers to training current employees to develop new skills that meet the evolving needs of the organization. The video highlights this in the example of a construction company training their staff in green building technologies, ensuring that capability gaps are filled and employees remain engaged and motivated.

💡Resource Leveling

Resource leveling is a project management technique used to spread the workload evenly across available resources to avoid burnout. The video mentions this as a way to balance workload distribution but cautions that focusing solely on capacity can lead to productivity issues if skills or expertise are lacking.

💡Capability Assessment

Capability assessment is the process of evaluating the current skills of a team to identify gaps that need to be addressed. The video uses the example of a healthcare company assessing whether their IT staff have the necessary skills to implement a new system, emphasizing the importance of aligning skills with project needs.

💡Project Prioritization

Project prioritization involves ranking projects based on strategic importance and resource availability. The video discusses how organizations might prioritize projects that align with current capabilities and delay others that require skills the team doesn’t yet possess, such as a manufacturing company focusing on operational efficiency over AI integration.

Highlights

Capacity management involves balancing workload and resources.

Capacity planning is about forecasting resource availability against upcoming workload.

Demand management tracks current and upcoming projects' resource requirements.

Demand optimization prioritizes projects to meet capacity constraints.

Reporting and analytics provide insights into resource utilization and project performance.

Capacity planning ensures the right number of skilled people are available for projects.

Healthcare organizations can use demand management to avoid overwhelming IT teams.

Demand optimization helps prioritize projects based on strategic goals.

Reporting and analytics help identify potential bottlenecks and adjust plans accordingly.

Capability management starts with assessing existing skills against project needs.

Building new capabilities may involve upskilling or hiring new talent.

Sustaining existing capabilities is crucial to maintaining competitiveness.

Capability management is about having the right skills to deliver strategic goals.

Balancing capacity and capability involves a constant tradeoff between quantity and quality.

Resource leveling can help spread workload evenly but must consider skill sets.

Investing in capability may temporarily reduce capacity.

PMI suggests using prioritization methods to decide which projects to focus on.

Demand forecasting can help prepare teams in advance for upcoming project needs.

The tradeoff between capacity and capability management requires strategic decision-making.

Transcripts

[Music]

in this episode I will be talking

about capacity and capability management

and the trade-off we see between them in

an organization at the heart of capacity

management are four key elements

capacity planning demand management

demand optimization and Reporting and

analytics let's dive into each of these

and look at how they work together to

help organizations make better decisions

when managing their

portfolios first up is capacity planning

this is where organizations assess how

much work they can handle based on their

available resources it's essentially

about

forecasting you look at your current and

future resource

availability whether that's staff

equipment budget and compare it to the

workload that's uh that's coming down

the pipeline it's like running a

restaurant and making sure you have

enough chefs and ingredients to meet the

reservations for the night in project

management terms this means ensuring you

have the right number of people with the

right skills available when your

projects need

them take a tech company as an example

they might have several product launches

planned throughout the year and each one

requires input from their software

Engineers through capacity planning

they'll map out the expected workload

for each engineer and identify when they

might face a shortage if they find that

their resources will be stretched too

thin they can take action early either

by hiring more staff adjusting timelines

or even delaying some projects to avoid

bottlenecks now demand management comes

into play when we talk about understand

in the demand for your resources it's

not just about what resources you have

it's about knowing what's going to be

needed and when this involves keeping

track of current and upcoming projects

as well as their specific resource

requirements if you don't have a clear

view of the demand for your resources

you might find yourself constantly

reacting to shortages with teams

scrambling to cover all the work

PMI recommends that organizations focus

on aligning Demand with

capacity this requires continuous

monitoring to avoid overc committing to

projects and ensuring your portfolio

remains

sustainable let's consider a healthc

Care Organization rolling out a new

patient management system demand

management here involves tracking when

and how many it Specialists will be

needed to implement different parts of

the

system without clear demand management

they could end up with too many tasks

scheduled at the same time overwhelming

their it team and delaying the

project by understanding demand they can

stagger tasks and allocate resources

more effectively ensuring smoother

project

execution the next piece of the puzzle

is demand

optimization while demand management is

about understanding what's needed demand

optimization is about prioritizing and

adjusting that demand so you can meet it

within the constraints of Your Capacity

it's it's about making sure you're

you're you're focusing on the most

important projects first and balancing

resource use across your

portfolio sometimes this means saying no

to certain projects or delaying them in

in favor of higher priority initiatives

optimization is all about making the

best possible possible use of your

available resources for example a retail

company might have multiple initiatives

from launching a new e-commerce platform

to improving their Logistics if both

projects need the same it team demand

optimization would involve prioritizing

the project that aligns most closely

with the company's immediate strategic

goals in this case the e-commerce

platform might take precedence if it's

expected to drive more Revenue in the

short term the logistics project could

be pushed to a later date when more

capacity is available this ensures that

the most critical work gets done without

overloading the

team lastly we have reporting and

analytics which ties everything together

reporting is essential because it gives

leadership realtime insight into

capacity and demand across the portfolio

by regularly analyzing data on resource

utilization project performance and

workload distribution organizations can

make informed decisions about when to

shift resources where potential

bottlenecks might arise and how to

adjust their

plans imagine a construction company

that's juggling several projects at

once through reporting and analytics

they might discover that their best

project managers are con consistently

overworked leading to

delays by reviewing the data they can

reassign some of the less critical

projects to other managers and free up

the key personnel to focus on on high

impact

tasks without these insights the company

might just keep pushing forward unaware

that they're driving their their top

talent toward burnout PMI encourages

regular portfolio reviews supported by

these reports by analyzing historical

data organizations can learn from past

mistakes maybe they underestimated the

resources needed for a previous project

or or misjudged the demand during a busy

season with accurate reporting they can

refine their capacity planning and

demand management going forward to sum

it up capacity management is about far

more than just counting heads or or

keeping an eye on the budget it's a

continuous Balancing Act between the

work that needs to be done and the

resources available to do it through

careful capacity planning organizations

can foresee and mitigate resource

shortages demand management helps track

what's needed when while demand

optimization ensures that the right

projects get the attention they deserve

and finally reporting and analytics help

make sense of all this data ensuring

that decisions are backed by realtime

insights and long-term analysis so where

do you start with capability management

well the first step is capability

assessment this is where you take a look

at your existing skills and see how they

align with the needs of your

portfolio PMI suggests regularly

assessing your team skills and comparing

them to the demands of of upom of

upcoming

projects for example if you're about to

launch a new Aid driven product do you

have enough people skilled in AI

Technologies are they proficient in the

specific tools and programming languages

required without this assessment you

could end up with projects that stall

because you don't have the right

expertise a good example might be a

construction company that wants to Pivot

into Green Building practice

practices they assess their current team

and realize that while they have plenty

of experience in traditional

construction they lack the skills needed

to incorporate sustainable

Technologies by doing this capability

assessment early they can plan ahead

either by training their existing staff

or bringing in external Consultants to

fill the Gap this helps prevent delays

and ensures that the project has the

right people working on it from the

start now after assessing your current

capabilities there will often be gaps

this is where the next step comes in

building new

capabilities it's one thing to recognize

where you're lacking but the real

challenge is how to address

it PMI suggests a couple of different

methods here and in one way is through

upskilling investing in training your

existing team to build the new new

skills you

need let's say that same Construction

Company decides to upskill its its

current staff in

sustainable uh construction

practices they might send their

Architects and Engineers to courses on

Green Design energy efficient building

materials and renewable energy

systems this investment pays off because

you're not only filling capability gaps

but also helping your team grow which

keeps them engaged and

motivated another method is to hire

externally sometimes the skills Gap is

too large to be filled by upskilling

your current team in a reasonable time

frame in that case you may need to bring

in new Talent with the specific

expertise you're

missing for example a healthc care

company transitioning to a new patient

data system might find that none of

their current IT staff have experience

with the required software they could

hire a specialist or consultant to lead

the project ensuring the right skills

are on hand from day one but capability

management isn't just about filling gaps

it's also about sustaining your existing

capabilities it's easy to get caught up

in developing new skills and forget that

maintaining the skills you already have

is equally important teams can lose

proficiency over time if they aren't

continually using or refreshing their

skills PMI encourages organizations to

set up continuous learning opportunities

this could be through regular training

workshops or even internal knowledge

sharing where employees with specialized

skills Mentor others for example a tech

company that regularly uses a specific

coding language might offer refresher

courses or host coding challenges to

keep their Engineers

sharp sustaining existing capabilities

is about ensuring that your team stays

competitive and doesn't fall behind as

industry standards

evolve finally reporting and analytics

are critical to capability management

how do you know if your capability

building efforts are paying off how do

you track whether your team's skills are

improving or or if there are still gaps

that need

addressing PMI recommends organizations

use data and reporting to monitor the

effectiveness of their capability

strategies you can track metrics like

training completion rates employee

performance improvements after training

or the success rates of projects that

required new skills these insights help

you see if your capability building

Investments are actually leading to

better project

outcomes for instance let's say a retail

company implements new e-commerce

software and invests in training their

staff to use it by tracking key

performance indicators kpis like the

time it takes for employees to become

proficient the number of Errors reduced

posttraining and overall system

efficiency they can see if the training

has truly paid off off if the results

aren't as expected they might adjust

their training approach or even revisit

their hiring strategies to bring in more

qualified talent in addition regular

portfolio reviews help organizations

keep a pulse on their

capabilities these reviews give

leadership the chance to reassess

whether the skills they've built are

still aligned with their strategic goals

the market can change quickly and

sometimes the capability I ities that

were critical a year ago might no longer

be relevant by staying on top of these

reviews companies can adjust their

capability building strategies to ensure

they remain competitive and adaptable to

Industry

changes so let's pull it all

together capability management according

to PMI is about more than just having

enough people it's about having the

right people with the right skills to

deliver on your strategic

goals it starts with assessing what

skills you currently have then building

new capabilities to fill any

gaps alongside that you need to sustain

your existing capabilities to keep your

team

sharp and all of this needs to be

supported by data analytics and regular

reviews to ensure your strategy is

working and remains aligned with your

portfolio's needs now when we talk about

capacity and capability it's easy to

think of them as separate

issues capacity is about how much work

you can handle at any given time how

many resources people and hours you can

dedicate to

projects capability on the other hand is

about the quality of work do you have

the right skills and expertise to

actually deliver on those projects but

here's the catch managing both at the

same time

creates an optimization

challenge organizations often find

themselves trying to balance having

enough resources while also having the

right expertise in place it's rarely an

either or situation it's a constant

tradeoff between quantity and

quality let's break this down imagine an

organization that has a huge project

pipeline but is stretched thin on

resources

they might have enough people in their

team so capacity isn't the issue but the

real problem is that those people might

not have the necessary skills to tackle

some of the specialized projects that

are coming down the

pipeline this creates a situation where

you're constantly trying to optimize

between getting more people on board or

focusing on upskilling the people you

already have PMI theories address this

through balancing resource capacity with

capability

enhancement take resource leveling as an

example PMI suggests that resource

leveling helps spread the workload more

evenly across your team to avoid burnout

but if you focus only on leveling the

workload just managing capacity without

addressing whether your team actually

has the right skills you run into the

problem of of people being busy but not

necessarily

productive in this case while you've

optimized for capacity you've

compromised on

capability so what's the

solution PMI recommends organizations do

capability assessments to evaluate

whether the right people with the right

skills are assigned to the right

tasks for instance in a software

development company you might have

enough Engineers to take on several new

projects but if none of them specialize

in the emerging technology you need for

a key initiative you have a capability

Gap you might choose to invest in

training those Engineers to build that

skill set but in doing so you

temporarily reduce

capacity because those individuals will

need to step away from active projects

to train this leads us to the tradeoff

when you invest in capability like

training or hiring specialized Talent

you temporarily reduce

capacity the time or resources you spend

building capability takes away from the

immediate availability to work on

projects for example a financial

services firm might realize it lacks

cyber security expertise to manage a new

Regulatory Compliance project so they

either hire outside Consultants or train

internal teams both options affect

capacity either by using resources to

hire or by pulling employees out of

current projects for

training this trade-off between

short-term capacity and long-term

capability is a constant Balancing Act

in portfolio management now this

optimization problem gets even more

complex when you add in Project

prioritization let's say your

organization has both capacity and

capability issues at the same time you

don't have enough people to cover all

your projects and you also don't have

the right skills in place for some of

the more critical

tasks how do you decide where to focus

your

efforts PMI suggests using

prioritization methods like scoring

models and strategic alignment to decide

which projects get the green light you

could prioritize projects that align

most closely with your current

capability and delay those that require

skills your team doesn't have yet for

instance a Manufacturing Company might

have a backlog of projects but after a

portfolio review they prioritize

projects focused on operational

efficiency because their current team

has the expertise for that they delay

more complex

projects requiring AI

integration until they can train staff

or hire the right Talent

so what does this look like in practice

let's say a healthc Care Organization is

balancing its digital transformation

initiatives with day-to-day operational

demands they need to implement new

electronic health record systems but

also maintain Patient Care Quality they

don't have enough it professionals to

handle both and at the same time the IT

team they do have isn't trained in the

the new system being rolled out here the

organization has to make a decision do

they Outsource the technical work and

keep their capacity up but sacrifice

internal capability building or do they

take the time to train their it team

reducing capacity in the short term but

investing in long-term

capability pmis theories on portfolio

management would recommend doing a cost

benefit analysis to assess the the

tradeoffs looking at both immediate

needs and long-term strategic goals if

the digital transformation is key to

Future growth investing in training

might be the better long-term move even

if it means slowing down in the short

term another key method PMI suggests for

managing this balance is demand

forecasting by looking at upcoming

project needs and the capability is

required you can better prepare your

teams in advance if you know that in 6

months you'll be launching a project

that requires new skills you can start

building that capability now so by the

time the project kicks off you've

already managed the Gap without

sacrificing current

capacity this proactive approach can

help reduce the pressure of the tradeoff

smoothing the process of balancing

immediate workload with long-term

growth the bottom line is the trade

trade off between capacity and

capability management isn't something

you can completely avoid it's an

inherent challenge in managing a

portfolio but the key is to recognize it

and actively manage it rather than being

reactive by using pmis methods like

resource leveling capability assessments

prioritization and demand forecasting

you can make more informed decisions

about how to balance the two sometimes

you'll need to sacrifice capacity in the

short term to build long-term

capability other times you'll have to

push forward with limited skills and

rely on external support to keep

capacity high it's all about making

those decisions

strategically so you're always aligning

your resources and skills with your

organizations's goals

[Music]