Capacity Planning Glossary
Employee Capacity
The amount of work available to be taken on by a firm in a given period of time.
Capacity Planning Strategies
How a company goes about planning for capacity changes within a given period of time.
Lagging Strategy
Increasing employee capacity when the organization is running at full capacity and there is more work immediately available.
Matching Strategy
Increasing employee capacity in small increments, following market demand increases.
Leading Strategy
Increasing employee capacity in large amounts preemptively when expecting market demand to increase.
Employee Utilization
Calculated as a percentage of hours billed over hours worked. Often determines how profitable an employee is being. A higher utilization percentage is usually better.
Staffing
Stocking a business with employees. Staffing is done in accordance with how much demand there is in a company’s industry. If there is more business to be taken on than a company is capable of handling, then the company is understaffed.
Workforce Management
Maintaining a staff that is the right size and serves the correct purpose for the company. This includes hiring the right people for the role they are supposed to be in and making sure that there is enough demand for employees to be worth hiring. It also includes keeping workers happy and well-compensated with pay and benefits so that they are effective workers.
Budgeting
Planning out the financial plan and restrictions for an incoming time period. Although it is usually done yearly, some businesses may choose to plan quarterly or monthly, depending on the industry. When planning out a budget, all costs need to be taken into account, including labor, material, and potential delays and issues. Budgeting and forecasting go hand in hand.
Forecasting
Projecting revenue and profit, both in the short and long term. Short term is often done when determining budget, as the amount of projected revenue can determine how much labor and material costs can be spent on a given project. Long term is done when looking at strategic company goals and how they can be hit over a period of a few years. Forecasting and budgeting go hand in hand.
Staffing Model
A plan for hiring for a business in an effective manner. Creating a model requires looking at the company’s strategic business plan and deciding what roles are needed to move in that direction. Identify needs and holes in the business according to this plan and hire accordingly. Following a model should yield a staff that makes sense for the business.
Profitability
Revenue - Cost = Profit
The ability that a business has to earn
profit. A business with high profitability will most likely be profitable.
A business with low profitability will most likely be less profitable or
not at all.
Billability
In the state of being billable. This is important to any business that bills for time. The higher billability an employee is, the more billable hours they will work. This will raise their utilization rate and make the company more profitable.
Total Compensation
All compensation that is paid directly to an employee. This includes salary or hourly wage along with bonuses, overtime, and any other incentives paid to an employee. Any insurance, benefits, travel expenses, stipends, or payment of any kind is also factored into total compensation. This represents the full cost of an employee to a business.
Revenue Capacity
Available hours times billing rate. This represents how much available revenue there is to claim for a business. All of the unused revenue capacity is lost money to a company.