However, despite following the best resource management practices, organizations often face challenges in cracking the ideal resource retention strategy.

Employee expectations go beyond a mere paycheck today. They prefer a rewarding work environment that will provide them with opportunities to grow and excel in their career.

The onus is on decision-makers facilitating an employee-centric culture while considering the firm’s long-term objectives.

This article takes you through some tips you can leverage when formulating a meaningful employee retention strategy and nurturing a positive work environment. But first, let’s understand the term employee turnover.

What is employee turnover?

Employee turnover refers to the rate at which employees leave an organization and are replaced by new hires. It is a measure of the number or percentage of employees who exit a company within a given period, usually on an annual basis. A high turnover rate can indicate issues within the company, like dissatisfaction or poor management practices, while a low turnover rate can suggest a balanced and content workforce.

Turnover can be voluntary and involuntary. Voluntary turnover is when the worker chooses to leave the company due to better job opportunities, burnout, disengagement, workplace conflicts, etc. Involuntary turnover is when the organization decides to terminate the employee due to performance issues, behavioral issues, etc.

Staff turnover can be expensive for companies. Hence, calculating turnover allows organizations to understand the financial impact of losing and replacing employees. In addition, it can help firms find gaps and opportunities for improvement, leading to better company productivity and growth.

How to calculate turnover rates?

Turn around rate can be calculated monthly, quarterly or yearly. To calculate the staff turnover rate, divide the total number of employees leaving the company during the specified period by the average number of employees that work within the selected time. Multiply that number by 100.

For instance, the total number of employees working in an organization is 150 and 25 employees quit the firm in a month. The turnover rate will be approximately 16.7 per cent.

The equation is:

Total number of employees leaving the firm/Total number of employees working in the firm *100

That is 25/150*100 = 16.7%.

Knowing what employee turnover is and how to calculate it, let’s understand the factors leading to a turnover.

What are the main causes of employee turnover?

High turnover rates can be an unfavorable condition for organizations. High employee turnover can be attributed to various reasons:

Lack of purpose

LinkedIn says companies with a purposeful mission see 49% lower attrition.

Employees are motivated to work in companies that have purposeful missions. Organizations with a strong culture and clear goals and objectives can retain employees better. The inspiring company culture encourages employees to perform better and make their experience at work more purposeful.

Absence of career growth and development

When employees do not see a future in their organization, there are chances of high turnover rates. Without clear pathways for development, employees may seek opportunities elsewhere. Workers may leave the organization when they do not offer skill-based training, coaching, mentoring, career development programs, or leadership development programs.

Poor management and leadership

“Employees don’t leave the organization; they leave the managers.” This saying holds in companies where unsupportive managers can contribute to employee turnover. Incompetent managers can significantly cause employee stress that can adversely affect their performance. Negative relationships with a supervisor are common reasons workers seek new employment.

Work-life imbalance

According to Flexjobs, 82 per cent of respondents say they would be more loyal to their employers if they had flexible work options.

Employees who persistently experience high-stress levels, long working hours, or an imbalance between work and personal life are likely to leave. Improper work-life balance can cause burnout and job dissatisfaction and impact overall well-being.

Excessive workload and employee burnout

When employees are overburdened with work, it leads to burnout which is one of the main reasons to quit the organization. At times, increased workloads are not entirely avoidable. For instance, employees might need to put in more work hours during peak seasons or in larger projects with strict deadlines. However, this may lead to dissatisfaction, stress and burnout.

Misalignment in organizational culture and values

If employees feel that their values or beliefs do not align with the company’s culture, they may choose to leave. A toxic or unsupportive work environment, lack of inclusion and diversity, or a mismatch between an employee’s and company’s values can all contribute to turnover.

Lack of proper recognition

Employees who feel their contributions are unrecognized or appreciated may become disengaged and seek opportunities elsewhere. A lack of reward and recognition programs or a failure to provide timely feedback can contribute to employee dissatisfaction.

Poor compensation

When employees are dissatisfied with their salaries or hikes, it may result in high attrition. Employees often consider compensation a significant factor in their decision to stay or leave a company. Employees who believe they are not adequately compensated for their skills, responsibilities, or market value may seek opportunities elsewhere that offer better pay and benefits.

These are some of the major factors that contribute to high employee turnover. Let’s dive deep to understand the consequences of high employee turnover.

What is the impact of high employee turnover rate?

High employee turnover lowers the overall efficiency and profitability of the organization. Here are some expected consequences associated with high turnover rates:

Increases overall costs

Employees resigning costs a considerable amount to the company. The cost involved in training, educating and providing specific licenses requires money. Moreover, frequently replacing departing employees can be costly as companies must invest in advertising job openings, conducting interviews, and onboarding new hires. Training costs are also significant, as new employees need time and resources to speed up their learning process. High turnover rates can lead to a continuous cycle of recruitment and training, straining the company’s resources.

Decreases workplace morale

Labour turnover may negatively impact employee morale. This can arise when employees are overburdened with work due to a lack of a trained workforce causing stress and disengagement. Additionally, new hires may experience low morale as they struggle to learn their duties and responsibilities. Constantly having such an environment will make it difficult for organizations to retain good-quality employees.

Lowers employee productivity

When employees leave the organization, existing workers experience a loss of productivity as they spend time training new hires to get attuned to the new work. Lower productivity and sub-par work quality will affect the business’s day-to-day operations. High turnover rates can lower overall output and negatively affect the company’s performance.

Loss of institutional knowledge

Experienced employees who quit the organization take their knowledge, skills, and experience with them. This loss of institutional knowledge can harm the organization, especially if they hold critical or specialized roles. New employees may take time to gain the same level of expertise, impacting decision-making, problem-solving, and overall organizational effectiveness.

Disruption in team dynamics

Companies with high turnover rates can disrupt team dynamics and working relationships. Cohesion within teams may be affected as members constantly adjust to new colleagues. Continual turnover can lead to decreased morale, increased stress, and a lack of stability, negatively impacting teamwork and collaboration.

Impedes company reputation

High-turnover rates can damage a company’s reputation, both internally and externally. Employees may perceive a high turnover rate as a sign of instability, poor management, or an undesirable work environment. Externally, potential candidates may restrain from applying to the company due to its reputation. This will ultimately impact the organization’s brand.

Hence, it is imperative to proactively address the challenges organizations face due to high turnover rates. Now, let’s investigate the importance of reducing employee turnover.

Why must organizations reduce employee turnover rates?

Employees are critical to the success of an organization. Hence, companies must ensure that their employees are cared for to reduce staff turnover. Improving employee retention can help organizations save on recruitment, onboarding, training, and lost productivity costs. Retaining talented employees and minimizing the need for frequent replacements can lead to cost savings and improved financial performance.

Furthermore, when employees stay longer, organizations can retain this knowledge, ensuring continuity, smoother operations, and improved decision-making. In addition, when workers are with the company longer, they become more familiar with their roles, processes, and organizational culture. This helps them work more efficiently, improving their performance and productivity.

Moreover, companies with low turnover rates can nurture a more positive work environment, boost employee morale, and increase engagement. Engaged employees are more likely to be motivated, productive, and committed to the company’s success. By reducing turnover, organizations can increase their chances of retaining key talent. Additionally, organizations valuing and retaining their employees tend to have a stronger employer brand.

Lastly, reducing employee turnover is essential for organizations to create a positive work environment, retain top talent, improve financial performance, and achieve long-term success.

These are some potential benefits companies can derive by reducing turnover rates. Let’s know some of the best practices to lower employee turnover.

12 effective strategies to reduce employee turnover

To retain top talent, businesses must take appropriate measures to reduce staff turnover. Organizations must implement specific methods to improve employee retention besides providing career growth opportunities, work-life balance, compensation benefits, and more.

Listed below are a few strategies:

Hire the right resources

Hiring a resource should never be a spur-of-the-moment decision. Rather, it requires meticulous planning and preparation to ensure the right fit is recruited. For this, managers must have complete visibility into pipeline project resource requirements. Based on that, they can conduct a capacity vs. demand gap analysis to identify existing skill gaps.

It would provide them with insights into missing skill sets required for the successful completion of current and pipeline projects. With this foresight, managers can develop robust talent acquisition strategies to recruit the right person ahead of time. It eliminates last-minute hiring costs and maintains a high-quality resource pool to avoid future project bottlenecks.

Allocate the right resource to the right job

When resources are allocated to tasks that do not align with their skill sets or interests, it often leads to disengagement and reduced productivity. Moreover, if the resource is underqualified, they can feel overwhelmed when executing critical tasks beyond their capabilities, leading to stress and burnout. On the other hand, if over-qualified employees are deployed to low-priority tasks, they feel their potential is not being realized and become demoralized.

In either case, the chances of turnover are high. Therefore, allocating the right resources to the right job is important to ensure employee satisfaction. Managers must implement an intuitive resource scheduling tool to ensure competent resource allocation across the enterprise. It provides a unified view of the workforce’s skills and schedules, allowing managers to book suitable resources for projects. This ensures full utilization of employees’ skills, boosts productivity, and reduces churn.

Provide competitive compensation and benefits

A major contributing factor to high employee turnover is inadequate compensation and benefits. Being underpaid makes employees feel undervalued and unappreciated, increasing the likelihood of them leaving the organization for a competitor. Thus, it is imperative for businesses to offer competitive compensation packages as per market standards to retain their top talent.

In fact, according to a LinkedIn report, companies that provide good compensation and benefits witnessed a 56% lower attrition compared to those that offer poor salary packages.

Organizations must also provide additional benefits such as paid time off, commission, bonuses, health insurance, stock/equity, retirement funds, etc., to boost employee satisfaction and engagement. Ultimately, offering competency-based salaries and benefits shows that organizations care about their workforce’s well-being and contribution, which results in greater employee retention.

Optimize workforce utilization

According to a Deloitte survey, 42% of employees have left their job due to burnout”.

Sub-optimal utilization can have grave consequences on workforce productivity and engagement. Persistent overutilization can put employees under immense pressure, contributing to work-related stress and burnout. At the same time, underutilization can lead to low morale and disengagement. In both instances, workers experience job dissatisfaction, which ultimately leads to attrition.

Thus, optimizing resource utilization in real-time is critical to maintain high productivity and prevent churn. Managers can use BI dashboards to track and redistribute the workload of under/overloaded resources to minimize the risk of disengagement or burnout. Moreover, they must periodically mobilize resources from non-billable to billable or strategic tasks. This will help improve profitable utilization.

Implement diversity, equity, and inclusion (DEI) initiatives

DEI initiatives are an excellent pathway for organizations to build inclusive work environments that value employees’ contributions and provide equitable opportunities to everyone, regardless of their socio-economic backgrounds. More importantly, these initiatives help curb instances of hostility, microaggressions, and unconscious bias in the workplace.

Therefore, by implementing DEI practices, organizations can nurture a safe and equitable environment, which can reduce employee turnover and improve retention significantly. They must first analyze the internal pool and their demographics to understand where they are lacking. Next, they can create anti-harassment, family-friendly, and disability policies to accommodate their employees’ needs. Lastly, they must adapt their hiring strategies to actively recruit from underrepresented groups.

Recognize and reward employees appropriately

Employees need a boost of motivation every now and then to perform to the best of their abilities. When they feel their work is not being recognized or appreciated by their superiors, it can demoralize them and affect their productivity. Therefore, organizations must devise a framework to reward their top-performing employees and keep them motivated.

For this, they can use resource management software to track and analyze the performance of their resources. They can identify eligible candidates and incentivize them with bonuses, paid time off, thank you emails, certifications, etc. By rewarding them appropriately, organizations can retain these employees in the long run and prevent attrition.

Offer flexible work schedules

In the post-COVID-19 pandemic era, working from home has become the new normal. As WFH promotes a healthy work-life balance, it has become an essential aspect of job satisfaction. While flexi-work hours may be a luxury for specific businesses, adjusting the hours and planning response times gives employees better focus and results in higher efficiency. It also empowers them to balance their personal and professional commitments, leading to better retention.

Furthermore, when managers consider team members’ skills and interests while assigning work, it enhances employee engagement and productivity. So, managers can use the “open seat” feature of an ERM tool to publish vacant positions and encourage interested candidates to apply. When firms consider the resource’s interests, it motivates them to perform better.

Minimize bench time

Once a project is over and if resources are not scheduled for another project, they will spend bench time until they are allocated a new project. Extended bench time leads to significant issues such as lesser ROI as the resources are not generating revenue for the organization. It can lead to planned attrition, which affects a firm’s reputation, as well as unplanned attrition, when employees begin to look for other job opportunities for growth and development.

For effective bench management and to reduce unplanned attrition, managers can employ an effective resource management tool to predict resources that will end up on the bench in advance. Project vacancy reports can be used to quickly assign them to billable or strategic work before they land on the bench. If their skills are unsuitable for project vacancies, on-the-job training or reskilling can be used to make them billable. Moreover, advanced planning on pipeline projects will help you allocate them better.

Organize effective team-building activities

Facilitating strong bonds among colleagues is proven to improve the efficacy of employees and enhance employee engagement. Companies that highly emphasize employee retention must highly value interpersonal relationships. This is because coherent teams result in enhanced communication, lower stress levels, and greater output

According to Goremotely, “extremely connected teams demonstrate a 21% increase in profitability”. Moreover, employees who feel they have made meaningful friendships at the workplace are more likely to stick around.

Managers should therefore invest in team-building activities to promote a cohesive work culture. One example is the buddy system- when new employees join, they are assigned a mentor (buddy) from the same team who hand-holds in following the protocols. The Buddy system ensures the new employee is well integrated into the team and company. Other ways to empower the team include organizing monthly team lunches, weekly informal meetings, etc.

Plan tailored training & development programs

Providing training and development programs displays the commitment given by the company. A resource manager can help the resources by projecting a career path, thereby giving a purpose and setting direction. Managers can implement an Individual Development Plan or IDP to help employees reach short and long-term career goals and improve current job performance. Training facilitates self-growth and will allow the resources to contribute better. They can take up more responsibility in the team or even be eligible for higher roles.

Managers can track the project’s progress and gauge the employee’s key strengths and weaknesses based on how they perform the tasks. Based on this, they can motivate them to learn new skills and practice on the job. When the workforce feels that their goals and objectives are being taken care of, they are likely to stay with the firm for the long term.

Identify key performers

Every business needs a set of worker bees who are diligent in their work. Employees are expected to show up promptly on time, get the job done, and keep the flow of work going. To effectively grow the company, one needs to nurture and reward the top performers for keeping up the employee morale of those who put a little extra into their work.

Employees who go beyond their job description and exhibit leadership deserve a pat on the back.

These key performers can be considered for senior or strategic roles. It will help them move upward and diversify their work portfolio, improving their job satisfaction and engagement. Furthermore, it will help the organizations to establish a robust talent pipeline that is immune to disruptions caused by unplanned attrition or dynamic market changes.

Develop a comprehensive performance appraisal framework

A comprehensive performance appraisal framework is necessary because it allows managers to share constructive feedback with employees. It gives them an opportunity to acknowledge employees’ strengths and also address the areas of improvement. When resources know their leaders are promoting individual development, it will boost their motivation levels and eventually increase retention.

While giving feedback is necessary to help the workforce grow, it is also important to take feedback from them. Employee feedback through surveys and one-on-one sessions is instrumental in sharing their experience and expectations and makes them feel valued. If something is not aligning with their goals, you can work on it as a manager and provide them with more opportunities. Expressing gratitude should also be a part of feedback sessions to acknowledge their work and efforts.

Key takeaways

The workforce is the success driver for any organization. In the long haul, companies need profitability & success to thrive and stay relevant in an ever-evolving market. With an evolved employee-centric culture, employers must ensure that they provide an optimistic work environment to retain their top talent.

The strategies mentioned above, coupled with a modern resource management tool, can sort your resource-related worries and help you retain valued talent within the firm.

The Glossary

The SAVIOM Solution

SAVIOM is the market leader in offering the most powerful and configurable solutions for managing enterprise resources efficiently and effectively. Having more than 20 years of experience, this Australian-based MNC has a global presence in over 50 countries. It is also popular with more than 100 customers and helping them to achieve their business goals. SAVIOM also has products for project portfolio management, professional service automation, and workforce planning software which can be easily customized as per business requirements.

However, businesses implemented a traditional hierarchical structure to solve modern-day complexities such as globalization, skills shortage, cost crunch, etc. This conventional approach didn’t prove beneficial as it was siloed and led to cost escalations, lowered efficiency, and so on.

This is why organizations evolved and adopted a matrixed structure that allowed interdepartmental collaboration and fostered a shared services model, thereby reducing unnecessary hiring costs, improving project delivery, etc.

Since it promotes sharing resources across matrix boundaries, this structure stands out for its adaptability and flexibility.

This blog explains the thought process behind the matrix structure, its importance, and the skills requirements of this new business model.

But first, let’s define matrix management.

What is matrix management?

Matrix management is an organizational strategy to implement a matrix structure wherein employees have multiple reporting lines. In other words, they report to more than one manager, unlike traditional hierarchical structures.

While employees report to the project manager for their functional responsibilities, they report to the department manager or line manager for their day-to-day operations, leave approvals, and performance appraisal. It is an ideal strategy for any company that works on multiple projects with similar or overlapping skill requirements.

Types of matrix management

A matrix organization structure enhances flexibility and collaboration across various departments and projects within firms. There are different types of matrix structures based on the degree of authority and influence between the functional/line and the project managers.

Let’s understand them in detail.

Weak matrix

A weak matrix structure is similar to the traditional hierarchical work environment, wherein the line manager has the highest level of authority, and the project manager has limited control. The line managers oversee the entire project and make most decisions regarding the budget, resources, task delegation, etc. Conversely, the project manager assumes a restricted role, that of a coordinator or expeditor.

Balanced matrix

The balanced matrix strikes a middle ground between weak and strong matrix structures. In this arrangement, both the line and project managers share authority and power relatively equally. They collaborate to make decisions regarding resources, project goals, and team members, balancing the project’s needs with the organization’s functional objectives.

Strong matrix

In a strong matrix, the project manager has higher authority and control over the resources compared to the line/functional manager. In addition to that, they have significant decision-making power and control over resource allocation, task distribution, etc. Further, they function as the primary supervisor for employees, while the line managers take on a more secondary role.

Now that we know the definition of matrix management and its types, the following section explains the working of matrix organizations.

How does a matrix organization work?

A matrix organization structure supports a shared-services model where resources can be deployed across various projects based on the skill set, irrespective of the department or team they belong to.

For instance, a graphic designer belonging to a design department is permitted to take up a role within another department running a web development project. In this case, the designer resource will be allocated to this project and reported to the concerned project manager.

It helps break down silos and foster cross-functional collaboration. Additionally, the shared resource pool reduces the costs of hiring new candidates with similar skills and optimizes overall resource utilization.

A prime matrix organization structure example is PHILIPS, a renowned Dutch electrical giant that is one of the forerunners in implementing matrix organizational structure after World War II. Their structure was based on geographical area and worldwide product divisions. This means an employee will report to their regional manager (specific to their location) and the product divisional head (the product portfolio they are a part of). However, it has evolved over time to overcome the limitations.

Even though the functioning sounds fairly straightforward, the operational complexity increases when multiple projects simultaneously demand the same competencies. Hence, the matrix organization structure requires specific roles and responsibilities to simplify this. Moreover, it’s important to understand the key aspects of matrix organizational structure to implement it successfully. Let’s take a look.

What differentiates matrix management from traditional hierarchies?

Matrix organizations differ significantly from traditional hierarchical structures in several vital aspects. While traditional hierarchical structures have a clear chain of command and vertical reporting relationships, matrix structures introduce a more flexible and cross-functional approach to organizational management.

Reporting structure

In a typical matrix reporting structure, employees have multiple reporting lines. They report to a functional manager, who oversees their areas of expertise and career development, and a project or team manager, responsible for executing specific projects. This reporting structure allows for a greater level of collaboration, coordination, and integration across organizational boundaries.

Collaboration approach

Matrix organization structure emphasizes cross-functional collaboration. Employees from different functional areas are brought together to work on projects, initiatives, or teams. This enables the sharing of diverse knowledge, skills, and perspectives, fostering innovation and problem-solving. Traditional hierarchies, on the other hand, tend to be more siloed, with limited interaction and collaboration between functional departments.

Flexibility

Matrix organizations are known for greater flexibility due to their shared services model. It enables them to quickly assemble cross-functional teams based on project needs and adjust resource allocation accordingly. This flexibility allows for a more agile response to changing market conditions, customer demands, and project requirements. Traditional hierarchies, by contrast, often have rigid structures that can hinder quick adaptation and responsiveness.

Decision-making process

In a matrix environment, decision-making is often shared among team members and managers. The collaborative nature of the matrix organization structure encourages input and perspectives from various stakeholders. Therefore, the decision-making authority is decentralized, empowering employees to contribute to the process. On the other hand, traditional hierarchies tend to have a more top-down decision-making approach, with decisions flowing from higher-level managers down to lower-level resources.

Project-based focus

Matrix management revolves around a project-based focus. Projects serve as the primary organizing principle, with teams formed to address specific goals and objectives. Employees bring their functional expertise to contribute to project success, allowing for a multi-disciplinary approach. In contrast, traditional hierarchies are typically organized based on functional departments, where employees focus primarily on their functional responsibilities rather than project-specific goals.

Skill development

Within a matrix environment, team members participate in diverse tasks across projects, increasing the opportunity for cross-functional collaboration and acquiring a broader skill set. Moreover, working alongside colleagues from various backgrounds promotes the exchange of knowledge, expertise, perspectives, etc., enhancing their versatility and adaptability, thus preparing the workforce for the future. On the contrary, traditional hierarchies follow a specialized approach to skill development where employees hone their skills within a specific area, with limited exposure to tasks beyond their defined roles.

Accountability and responsibility

Matrix management emphasizes shared accountability and responsibility. In a matrix structure, individuals often report to both a functional manager and a project manager, resulting in a dual reporting relationship. This shared responsibility encourages collaboration and ensures that employees are accountable to both their functional area and the project they’re working on. In contrast, traditional hierarchies typically involve a more straightforward reporting structure where employees report primarily to one manager.

Adaptability to Change

Matrix organization structures tend to be more adaptable to change compared to traditional hierarchies. The teams can be assembled and disassembled quickly to respond to changing project needs or market demands. This flexibility allows for a more dynamic response to changes in the business environment. Conversely, traditional hierarchies, with their more rigid structures, might struggle to adapt swiftly to changes due to their fixed departmental setups and reporting lines.

By understanding matrix structure, organizations can tap into their workforce’s collective knowledge and skills to address complex challenges effectively. Moving forward, let’s discuss the various roles and responsibilities within a matrix environment.

Roles and responsibilities within a matrix management structure

Although there are several roles involved in a matrix management structure, here are the most prominent ones.

Matrix employees and matrix teams

Individual contributors working in a matrix-based organization are called matrix employees. A group of matrix employees is known as a matrix team. As mentioned, matrix employees and their skill sets are leveraged by different departments to execute various projects. Therefore, they must report to their functional manager and the respective line managers. It is also expected that they upgrade their skills from time to time and remain relevant to their current role so that they can easily get deployed in different projects.

Functional managers

In a formal matrix organization structure, functional managers (another term used for project managers) are responsible for a particular function or project. During the project’s life cycle, they will require different types of resources to complete their delivery responsibilities. Accordingly, they reach out to the respective resource managers to onboard or release practitioners from time to time. Once resources are allocated to a functional unit, it is the responsibility of the functional manager to oversee their day-to-day activities. The resources have a dotted reporting line to the functional manager while deployed in that project.

Line managers

Every resource has a hardline reporting to a line manager or departmental manager within the matrix organization. These managers are responsible for carrying out activities such as performance appraisals, making salary corrections, building training and development plans, etc. However, they are not responsible for the daily activities of their direct reports (DRs) but take performance feedback from the concerned functional managers to make critical decisions. They are also referred to as people managers, and the reporting line between a manager and a DR does not change that frequently. An employee within a matrix organization can also play the dual role of functional manager and line manager.

Since the functioning and basics of matrix management are clear, let’s understand its benefits.

Importance of matrix management

Matrix management helps organizations thrive in the current dynamic and agile workplace. It also allows them to leverage the existing workforce potential to the maximum.

Let’s understand its benefits in detail.

Facilitates effective utilization of resources

Since matrix management supports a shared services model, it allows employees to utilize their skills on diverse projects simultaneously and unleash their true potential. Let’s take an example for a better understanding. A highly skilled and expensive resource is working on Project A but is also required to work on Project C.

In this scenario, the same resource can be utilized for both projects based on their timeline and availability, maximizing their profitable utilization while reducing resourcing costs. Furthermore, if resources are under-utilized, resource managers can provide them with suitable work by allocating them to different projects (interdepartmentally). These practices ensure uniform workload distribution and effective utilization of the talent pool.

Enables multi-skill building at the workplace

When resources are multi-skilled, one can deploy them to various tasks with varying skill demands. Certain vacancies in a project can require one person to have different skills. That’s why matrix managers encourage multi-skill building opportunities and make them a part of their individual development plan (IDP).

For instance, let’s say that a graphic designer’s primary skill is Adobe Photoshop, and CorelDraw is a secondary skill. A pipeline project requires two designers equipped with CorelDraw skills. However, only one resource is available to take up the job. In this case, the resource manager can coordinate with the line manager to initiate a suitable training program and hone that designer’s CorelDraw skills. While it helps the resource manager mitigate skill gaps and fulfill project demands, it enables employees to diversify their portfolios.

Helps leverage cost-effective resources

As resources are expensive investments, creating the most appropriate team allows the matrix organization to prevent project budget overruns and ensures profitability.

A matrix organizational structure enables resource managers to go beyond regional boundaries and leverage cost-effective resources.

If a resource is beyond their span of control, they can coordinate with other resource managers and department heads to procure the best-fit resource at a much lesser cost. For instance, let’s assume a project is based in the US, where the resource cost is higher. A matrix structure here enables the resource manager to look for similarly skilled resources from a low-cost country and control project costs without compromising quality.

Enhances innovation and autonomy

A matrix organization fosters inter-departmental collaboration between resources from different functions and locations. These form functional and culturally diverse teams. So, when subject matter experts of different domains work together, they bring their unique ideas, insights, and opinions to the table. It also empowers them to think out-of-the-box and boost innovation.

Further, matrix management goes beyond one level of authority and encourages the division of labor. So, when the project manager entrusts the specialized resources with their responsibilities, it fosters a sense of accountability. It also provides them with more space to be creative and innovative. All this cumulatively contributes to enhanced autonomy.

Promotes knowledge sharing across various functions

After understanding the functioning of matrix management, it is evident that it garners an open work environment. In other words, when interdepartmental resources coordinate to work on a project, it opens doors for knowledge-sharing.

For instance, let’s say your team is working on a website development project. It consists of web developers, graphic designers, content writers, etc. Since the website has a design component, the graphic designer can share the latest technology trends and insights with the web developer. The seamless collaboration will help them maintain a competitive edge and ensure that the project delivered is at par with quality standards.

Increases employee engagement and satisfaction

McKinsey’s survey reveals matrix US employees are more engaged at work than their non-matrixed counterparts.

Undoubtedly, when resources get opportunities to work on multi-disciplinary projects and diversify their skill sets, it increases employee engagement and satisfaction levels. Additionally, the sense of autonomy motivates them to go beyond their responsibilities and contribute to the company’s growth.

Moreover, when employees feel that their opinions and insights are heard and valued, it propels them to excel in their performance. Furthermore, fostering an open work environment through a matrix structure facilitates easy collaboration. It enables employees to share knowledge or ideas freely, learn from each other, and grow together, enhancing their engagement and satisfaction further.

Fosters higher flexibility and adaptability

As the matrix structure provides the liberty of sharing resources between different departments, it promotes flexibility in the organization. Further, when matrixed resources work on various projects from different functions, they get an opportunity to thrive in a dynamic environment.

This extensive ability to work as per different processes and standards and team dynamics across an organization helps resources become more adaptable. Honing their adaptability skills also helps them become more agile and resilient to handle adverse situations such as market volatilities, changing market demands, etc.

Encourages conflict resolution through collaboration

By fostering an environment that values diverse perspectives and supports open communication, a matrix organization encourages conflict resolution. In this structure, individuals from different departments or teams collaborate on projects, bringing together varied expertise and viewpoints. When conflicts arise, the diverse backgrounds and skill sets create an opportunity for constructive dialogue and problem-solving.

Further, collaboration between departments necessitates frequent interactions, cultivating a sense of shared ownership over project outcomes. This also builds trust and transparency, enabling the matrix team to address conflicts constructively. Ultimately, this contributes to a positive organizational culture that values teamwork and cooperation.

The following section throws light on the essential skills that every functional and line manager should possess to ensure effective matrix management.

Skills required to become a good matrix leader

A project or line manager steers the team to success. Hence, they must equip soft skills to ensure the team’s seamless functioning within a matrix structure.

This section enlists the most prominent ones:

Conflict resolution

When employees from different departments work together on a project, they bring multiple opinions to the table, often leading to conflicts and discrepancies. Therefore, every manager must master practical conflict resolution skills to settle these disagreements and maintain team synergy.

Collaboration and communication

In a matrix team structure, a project or functional manager is supposed to convey the roles and responsibilities to every team member and maintain transparency. Therefore, they need to have excellent communication skills. Furthermore, a matrix structure demands a seamless exchange of knowledge, necessary files, etc., between departments, making collaboration an incumbent skill set for managers.

Refined analytical skills

In a matrix organization, a project manager and a resource manager can face multiple issues that can affect a project. Some of them are uneven workload distribution, disengagement, lowered productivity, billable losses, schedule/budget overruns, etc. In order to course correct, managers should refine their analytical skills to make informed decisions, create a best-fit project and resource plan, and combat such challenges.

Influential power

Good influential power is essential to bring everyone on the same page, look at the big picture, and motivate them to work towards the shared common goal.

An efficient manager must lead by example and exhibit strong ethics to encourage others to follow suit.

Problem-solving approach

A problem-solving mindset is crucial to staying on top of issues and resolving them faster and more efficiently. Therefore, a positive mindset combined with a problem-solving approach is essential for every functional and line manager.

Therefore, the aforementioned matrix leadership skills are essential for managers to excel in a matrix system and facilitate business efficiency.

Best practices for successful implementation of matrix management

Implementing a matrix organizational structure requires careful planning and execution. To ensure success, firms should follow the best practices enlisted below:

Emphasize leadership commitment to transition

Leadership support and commitment play a vital role in the successful implementation of matrix management. Executives and top-level management must actively promote its adoption to ensure a smooth transition and minimize employee resistance.

They should provide clear direction, convey the strategic rationale behind the change, and actively participate in the matrix structure themselves. That’s because leadership support sets the tone for the entire organization and helps create a culture that embraces the principles of matrix management.

Structure and clearly define roles and responsibilities

Defining and structuring roles and responsibilities is essential in matrix management to avoid confusion and internal conflicts. It includes outlining the balance between functional roles and project-based responsibilities. Moreover, with better clarity of reporting lines and the nuances of each role, resources can have a greater understanding of the work scope and contribute more towards organizational goals.

Therefore, by clearly defining roles and responsibilities, matrix organizations can ensure that employees understand their accountabilities, reduce potential role conflicts, and foster better productivity within the matrix structure.

Establish SMART objectives & goals

Setting SMART (Specific (S), Measurable (M), Achievable (A), Relevant (R), and Time-bound (T)) objectives and goals in matrix management is vital for aligning diverse teams and ensuring clarity in tasks. Each objective and goal must be clearly defined, measurable, and achievable within a specific timeframe. This enables team members to understand their roles and contributions to the overall project/organizational goals, irrespective of their functional area.

It also promotes focus and direction, allowing individuals to track progress and make necessary adjustments to meet those goals. Further, this practice enhances accountability and motivates teams to work collaboratively towards common targets. By breaking down larger objectives into smaller, manageable tasks, matrix teams gain a sense of accomplishment as they achieve milestones. This method enhances productivity, fostering a culture of achievement and improvement within the matrix organizational structure.

Develop effective communication strategies

Establishing effective communication strategies ensures that critical information flows freely across matrix boundaries. Therefore, matrix managers can leverage synchronous and asynchronous modalities to foster cross-functional team collaboration. Moreover, they can set guidelines for each communication channel to reduce unnecessary meetings or miscommunication.

Open lines of communication between matrix teams and managers help align team efforts with overall organizational goals. It also helps resolve conflicts and maintain a shared understanding of priorities. Therefore, clear communication channels promote better coordination within the matrix organization structure.

Offer comprehensive training to employees

To ensure a smooth transition to matrix management, organizations should provide comprehensive training to help employees and facilitate retraining/upskilling and multi-skill building. Such training programs equip resources with multiple competencies, allowing them to expand their organizational roles and responsibilities.

Effective training modules improve employees’ work efficiency, productivity, and overall performance. Moreover, it allows matrix companies to achieve more with fewer resources. Therefore, by investing in employee development, organizations can build an agile workforce that adapts easily to changing market conditions.

Implement ongoing evaluation mechanisms

An ongoing evaluation mechanism can be key to the long-term success of matrix management. It helps firms regularly assess the effectiveness of the matrix structure and make necessary adjustments wherever needed. This can involve soliciting feedback from employees, measuring key performance indicators, and conducting regular reviews.

Moreover, evaluating the impact of the matrix structure allows organizations to address any issues that arise, refine processes, and ensure that the structure aligns with organizational goals. Continuous improvement efforts enable organizations to optimize the benefits of matrix management and enhance overall performance.

Foster a culture of collaboration & teamwork

To create a successful matrix organizational structure, it is pivotal for firms to promote a culture of collaboration and teamwork. It involves creating an environment where diverse teams feel empowered to share ideas, communicate openly, and work collectively toward project goals. For this, they can provide tools that facilitate seamless communication, helping team members from different departments stay connected.

Further, firms can establish various team-building initiatives to strengthen relationships between the matrix team members, fostering a positive work environment. Moreover, a culture of collaboration encourages mutual respect and trust among team members.

Empower employees with necessary authority & autonomy

In a matrix organization structure, granting employees authority and autonomy empowers them to take charge of their roles and responsibilities. It enhances individual accountability and ownership, enabling employees to showcase their skills and creativity, leading to a more engaged and motivated workforce.

Further, when individuals feel trusted, it elevates their morale, leading to an increased commitment to achieving organizational goals. Moreover, it reduces the need for micro-management, allowing managers sufficient time to focus on strategic activities and contribute effectively to the firm’s success.

By adhering to these practices, organizations can navigate the challenges of matrix management and create a highly efficient work environment. Next, let’s understand how resource management software can help a matrix organization.

How can resource management software foster effective matrix management?

A comprehensive resource management software can help matrix organization function smoothly. It can help them overcome the complexities and challenges of such a structure.

Here’s how:

• Enterprise-wide visibility– The tool provides 360-degree visibility, enabling matrix managers to identify and allocate competent resources to multiple projects across organizational boundaries.
• Advanced filters- The advanced filters and skill matrix allow managers to oversee and manage a geographically dispersed workforce. It will enable them to sort and identify cost-effective global resources based on skills, competencies, and other parameters.
• Competency matrix- The competency matrix allows managers to identify suitable candidates for training/upskilling, IDP, and succession planning.
• Automated resource requisition workflow- The tool has an automated resource requisition system that can minimize power conflicts between different matrix managers. Additionally, it helps maintain an audit trail that keeps all the stakeholders in the loop, thereby promoting transparency.
• Real-time BI reports- Reports, such as capacity vs. demand, forecast vs. actuals, project vacancy, and color-coded heatmaps, come in handy when monitoring various resource KPIs such as resource utilization, availability, etc.
• Collaboration tool- The software has an in-built collaboration module that allows resources and managers to communicate and share project updates.
• What-if analysis- What-if analysis functionality enables managers to prioritize profitable assignments in a multi-project environment. Thus, it helps prevent internal conflicts and power struggles.

In summary, these features and functionalities can assist matrix organizations to effectively manage resources across multiple projects, departments, and business functions.

Conclusion

The rise of globalization and ever-increasing resource and budget crunches have made it imperative for companies to go beyond their conventional management strategies and switch to a matrix structure.

Given the increasing complexities, matrix management is the future of the global business era and undoubtedly the key to sustainability and profitability. The benefits listed above will convince you to redefine your organizational structure into a matrix environment.

So, are you ready to adopt the matrix management strategy?

The glossary

The SAVIOM solution

SAVIOM is the market leader in helping multinational clients manage their resources efficiently and effectively. With over 20 years of experience, this Australian-based MNC has a global presence across 50 countries and has helped 100+ clients with their Workforce Planning Software. Saviom also provides tools for Enterprise Project Resource Management, Project Portfolio Management, and Professional Service Automation. Boost your remote team collaboration with Saviom.

The entire process of matching the right skill set to the right job, ensuring optimal utilization of the workforce, and minimizing hiring/firing cycles constitutes capacity management.

This article entails what is capacity management, its significance, and the best practices to help you join the ranks of a well-managed business.

Let’s begin with capacity management definition.

What is resource capacity management?

Capacity management is a strategy that accounts for the resource capacity to meet the project demands. It optimises the existing capacity before adding or hiring new resources.

Moreover, it enables firms to make real-time data-driven decisions to bridge the capacity vs. demand gaps in advance. In addition, it also helps improve profitability by forecasting the billable utilization levels and optimally leveraging the existing resources.

Efficient resource capacity management helps you address the following questions:

• Are there sufficient resources to work on current and pipeline projects?
• Are there enough projects to deploy the available resources?
• Is there centralized visibility into the current resource capacity and demand?
• Is there an adequate budget to complete projects?

If these are your company’s challenges, then capacity management is essential to combat them.

Now that we know the definition of capacity management, let’s understand the benefits of capacity management in detail.

Why is resource capacity management important?

Capacity management is a critical function for businesses of all sizes and industries. One of the primary benefits of capacity management is ensuring that an organization has adequate resources to meet current and pipeline project demand.

By proactively forecasting resource requirements, managers can bridge capacity gaps with suitable corrective measures. This enables organizations to prepare for demand volatility with more precision. Moreover, effective capacity management prevents last-minute firefighting and minimizes wastage due to a large bench. As a result, it contributes to enhanced profitability.

Resource capacity management also involves forecasting resource utilization. It provides an opportunity to maximize the billable utilization of resources and generate better revenue. More importantly, it enables organizations to futureproof the workforce by helping them to upgrade their skill sets and stay abreast of evolving technological and market trends.

Therefore, capacity management strategies help firms operate efficiently, meet project requirements, and remain competitive in the marketplace.

Next, let’s learn about various metrics of capacity management.

What are the key metrics of capacity management?

The following metrics are an integral part of intelligent capacity management. They enable resource managers to take resource treatment measures well in advance.

Capacity vs. demand

Capacity vs. demand is a critical metric that tells you about the shortage or excess of resources. Resource managers can bridge the gap proactively and ensure that neither the excess capacity is wasted, nor the project has vacancies.

Resource utilization

Resource utilization is a way to measure how effectively the resources are utilized against their available capacity. It helps you ensure uniform utilization of the workforce and keeps over or underutilization of resources in check.

Forecast vs. actual time

The forecast vs. actual time lets you compare the booked hours against the actual time spent on specific project activities. It will help you protect your project costs and safeguard you from billing loss.

People on the bench

Effective bench management is the cornerstone of a capacity planning strategy. Forecasting people on the bench is, therefore, a crucial aspect of allocating projects and tasks to the workforce in advance.

Project vacancy

Project vacancy is an important metric that allows mobilizing your resources from non-billable or BAU tasks to billable projects. It also gives you enough lead time to retrain resources or hire new recruits.

Now that the basics of capacity management is clear let us understand the difference between reactive and proactive capacity management.

Reactive vs. proactive capacity management: What is the difference?

Reactive and proactive capacity management are two essential methods organizations use to manage resource capacity.

Reactive capacity management

Reactive capacity management is a responsive approach where the resource adjustments or allocations are made only after the capacity-related issues have occurred. This process involves strategies like reactive hiring, firefighting of resources, etc., to combat resource shortages, unplanned attrition, etc. Though this approach addresses immediate issues, it results in higher costs, service disruptions, customer dissatisfaction, etc.

Example of reactive capacity management

In an ongoing IT project, the client suddenly asks for additional features that require specialized skills. Managers may allocate work to the existing resources without analyzing their capacity to meet the immediate requirements. This will lead to overutilization, causing stress and burnout, resulting in project delays and client dissatisfaction.

Proactive capacity management

Proactive capacity management is a planned method to meet the anticipated resourcing challenges. It is a long-term process that involves resource forecasting and monitoring to ensure that suitable resources are available and utilized appropriately to meet the pipeline project requirements. Additionally, it offers benefits like cost savings, optimal resource utilization, enhanced service quality, etc. Moreover, it allows organizations to align resources with business objectives more effectively.

Example of proactive capacity management

Reiterating the above IT project example, in proactive planning, managers foresee the requirements that may arise in the project and ensure they have sufficient capacity to meet the demand. Proper visibility into the resources will enable managers to deploy resources to the project based on their capacity and availability. This ensures the project is completed on time and within the budget.

Knowing the differences between reactive and proactive capacity management, let’s understand the key strategies for capacity management.

Strategies for effective capacity management

Following some effective capacity management strategies will enable organizations to align their resource requirements with the changing project demand. Listed below are a few:

Lag strategy

The lag strategy is a reactive approach where the resource capacity adjustments are made after the changes in the demand have occurred. This method enables organizations to plan their capacity to meet the current demand rather than future resource requirements.

The lag strategy helps firms optimally utilize their resources and lower the resourcing costs as they do not have to hire an additional workforce until needed. Contrarily, this method may not respond quickly to sudden changes in demand, causing project delays and client dissatisfaction.

Lead strategy

The lead strategy involves increasing or decreasing the capacity by anticipating changes in future resource requirements. Contrary to lag strategy, this method allows organizations to make adjustments in the capacity before the fluctuations in demand occur.

This strategy ensures that a company is well-prepared to meet the demand changes without any delays. On the downside, with this method, organizations have excess capacity ahead of time, which will escalate the costs and the risk of increased idle time, causing billing losses.

Match strategy

Match strategy falls between lag and lead strategies and adjusts the capacity to meet the fluctuations in demand as closely as possible. With this strategy, organizations can effectively predict the demand and ensure the resources are optimally utilized in proportion to the demand.

Additionally, this strategy aims at lowering resource idle time while maintaining the capacity to meet the demand changes. Though this strategy may seem ideal for organizations, it may require a high level of coordination to match capacity precisely with fluctuating demand and significant investment in advanced tools and technologies.

Now that the essential strategies for effective capacity management are understood, let’s learn about some of the best practices organizations can follow for capacity management.

What are the best practices for efficient capacity management?

Listed below are the best practices organizations can follow while capacity management.

Use a centralized platform to track competency across the matrix organization

It’s imperative for resource managers to stay up-to-date with the workforce’s competencies in a matrix organization. It helps them allocate the right resource with the right skills, experience, qualifications, and expertise to the project tasks. However, with many businesses still relying on basic, outdated tools like spreadsheets for a crucial task like this, it becomes challenging. A centralized platform is critical to accomplish this task.

Enterprise-wide visibility helps you identify required skill sets and book specific resources based on their availability.

This approach of using a centralized platform helps you plan new strategic projects that require niche skills. Since there is a significant lead time to acquire these resources from external channels, one can look for these skills internally. Once identified, out rotating the concerned resource and backfilling with a less qualified resource maintain the success of both projects.

Manage pipeline projects effectively

Efficient resource capacity management implies reduced hiring/firing cycles and intelligent fulfillment of short-term/long-term future demands. Resource managers should stay forewarned of future potential projects and subsequent resource demands. It will help you balance your resource pool with the right skills for the fulfillment of any open position.

In case there is a gap in skill set within your existing resource pool, you can proactively apply resourcing treatments. Some of these techniques are retraining or upskilling the existing employees or hiring a permanent or contingent resource. These practices enable you to stay ahead of the curve and eliminate future project bottlenecks.

Forecast your future capacity to maximize billable utilization

Utilizing your existing capacity to their maximum potential is at the crux of efficient and intelligent capacity planning strategy.

Having said that, only scheduling and allocating resources to any tasks does not complete the job. Resource managers need to ensure that maximum resources are booked for billable projects.

Centralized visibility in a robust capacity management tool enables managers to mobilize resources from non-billable to billable and strategic projects. Moreover, foresight into resources’ utilization will help managers take a proactive approach to increase billability instead of a reactive one.

Implement a workflow for resource requisition and allocation

Resource requisition and resource allocation are two of the most crucial steps of resource capacity management. However, if this is carried out via email or phone calls, it can lead to chaos. This is because the process will require a trail of emails to concerned department heads, team managers, and so on to pull out the resource. By the time you get the right resource, the project might have already started leading to billing loss.

Thus, a well-crafted workflow is vital to get the resource on time and keep it documented and auditable. It will also keep everyone in the loop. The stakeholders will stay informed about their resources along with their allocations, avoiding any unnecessary discrepancies.

Increase profitability by reducing bench time with effective capacity management strategies

An exceeding number of benched resources is a nightmare for resource managers. For one, it’s incurring unnecessary overheads to the firm, and for two, it’s hampering the productivity of the resources. Forecasting bench time is, therefore, the right measure to take corrective measures ahead of the curve. A robust capacity management software provides intuitive people on the bench and vacancy-related details.

Leveraging real-time data, resource managers can proactively fill the vacancies with resources likely to end up on the bench. Resource managers can forecast excess or shortfalls and take remedial actions beforehand. They can get foresight into the capacity vs. demand gap to take the right resourcing measures.

Plan for different scenarios using what-if analysis

In a multi-project environment, balancing the resource capacity against the demand becomes challenging. Therefore, organizations can implement simulation and modelling techniques to simplify capacity planning. In this method, managers can create and compare scenarios to analyze different ways of scheduling or allocating resources across multiple projects.

This what-if analysis also helps compare the effect of changes in resource allocations on essential metrics, like cost, utilization, availability, etc. It, thus, enables organizations to arrive at the best possible plan and implement it in the actual schedule to align their planning with long-term objectives and maximize profitability. This way, firms can overcome resource constraints and ensure the workforce is available to meet the critical project demand.

The takeaway

Resource capacity management is the hallmark of organizational success and business sustainability. The above-mentioned best practices, combined with the right capacity management tools, will help minimize project risks and bottlenecks while ensuring optimal workforce utilization. In summary, by implementing effective capacity management strategies, businesses can achieve long-term success and growth.

The SAVIOM Solution

SAVIOM is the market leader in providing an Enterprise Resource Capacity Planning solution. With over 20 years of experience as a market leader, Saviom is actively used by many highly esteemed global companies. Some of the components of the tool include enterprise resource management, professional service automation, and workforce planning software.

Cross-departmental collaboration is undoubtedly an integral part of a thriving work culture today. In fact, according to goremotely, approximately 75% of employees regard collaboration and teamwork as essential parts of the workplace.

However, team members overlook the importance of communicating critical information amid the pressure of meeting deadlines. Moreover, some departments treat it as a race and compete to reach the finish line.

Competition instead of cross-team collaboration can adversely impact the project’s course.

This article shows you the importance of collaboration and cross-team collaboration best practices.

Let us first define the term interdepartmental collaboration

What is cross-departmental collaboration?

Cross-departmental collaboration, also known as interdepartmental collaboration, is the process of individuals or teams from different departments or areas within an organization working together to achieve a common goal. It involves sharing knowledge, resources, and expertise between various departments to improve overall organizational performance and achieve better outcomes.

What is an example of cross-departmental team collaboration?

An example of cross-functional team collaboration could be a project on new product launch. This project would require input and collaboration from various teams across the organization, including product design, engineering, marketing, sales, and customer service.

The design team would create the physical product and the engineering department would ensure that it’s technically feasible to manufacture and release the product on time. In addition, the marketing team would create campaigns to promote the product and gain more customers. Finally, the sales department would develop pricing strategies and identify target markets, and customer service would ensure that customers have a positive experience after purchase.

Throughout the project, members of each team would work together, sharing information and expertise to ensure that the product is launched successfully. This cross-functional collaboration helps to ensure that the project goals are met, and that the final product meets the needs of both the business and its customers.

Now, let’s understand the key elements of a collaborative team.

Key Elements of Collaborative Team

Collaborative teams are essential in many work environments and can greatly contribute to the success of projects and achieving organizational goals. Here are key elements of collaborative teams:

Autonomy

Autonomy refers to the ability of team members to make decisions and take actions independently, within the scope of their responsibilities. This means trusting team members to work on their tasks without constant micromanagement. It allows individuals to showcase their expertise and take ownership of their work, which can lead to increased motivation and better results.

Cooperation

Cooperation is the foundation of collaborative teams. It involves team members working together towards a common goal. This means sharing information, resources, and ideas, and being willing to help one another. Effective cooperation can lead to a synergy where the collective output is greater than the sum of individual contributions.

Mutual Trust & Respect

Trust and respect are crucial for a collaborative team to function effectively. Team members need to trust that their colleagues will deliver on their commitments and respect each other’s opinions and contributions. This will help create a positive work environment, reduce conflicts, and foster better collaboration.

Accountability

Accountability ensures that team members are responsible for their actions, commitments, and outcomes. When team members are held accountable for their work, it promotes a sense of ownership and ensures that tasks are completed on time and to the required quality standards.

Communication

Effective communication is the glue that holds a collaborative team together. It involves both verbal and non-verbal interactions, as well as active listening. Clear and open communication will ensures that team members are on the same page, understand each other’s needs and concerns, and can coordinate their efforts effectively.

Now, that we know the key elements, lets read why collaborating with cross-functional teams is essential!

Why is cross-departmental collaboration important?

Cross-departmental collaboration, which involves teams or individuals from different departments or areas of an organization working together, is important for several reasons:

Enhances employee performance and productivity

Collaboration across departments can lead to increased knowledge sharing and skill development among employees. When individuals from different areas collaborate, they often learn from each other, gaining insights and expertise that can improve their performance. This exchange of knowledge can also lead to increased efficiency and productivity in completing tasks and projects.

Improves the decision-making process

Collaborating across departments brings different perspectives to the table. This diversity of viewpoints can lead to more well-rounded and informed decision-making. Teams that draw on insights from multiple areas of the organization are better equipped to identify potential risks and opportunities and make strategic decisions that align with the overall goals of the company.

Facilitates effective conflict resolution

Conflicts and disagreements can arise in any organization, but cross-departmental collaboration can provide a platform for resolving them more effectively. When individuals from different departments work together, they are often exposed to different working styles and priorities. This exposure can help team members develop conflict resolution skills and find mutually beneficial solutions.

Boosts creativity and innovation

Innovation often thrives at the intersection of different disciplines and perspectives. When employees from various departments collaborate, they bring diverse ideas, experiences, and approaches to problem-solving. This diversity of thought can spark creativity and lead to innovative solutions and new product/service offerings.

Promotes trust and transparency

Cross-departmental collaboration fosters a culture of trust and transparency within an organization. When employees from different areas work together, they gain a better understanding of each other’s roles and responsibilities, which can reduce misunderstandings and foster trust. Additionally, sharing information and insights across departments can lead to a more open and transparent organizational culture.

Knowing the significance of cross-functional team collaboration, let’s investigate some challenges hindering effective collaboration.

Common challenges that hinder cross-departmental collaboration

Successful collaboration in the workplace positively influences the company, business, or project. But there are specific roadblocks that make it difficult for effective collaboration. Listed below are a few:

Improper communication

When organizations cannot foster open communication in the workplace, it poses a challenge for teams collaboration, and they are less likely to be involved in activities. Additionally, this will lead to the failure of the project.

Lack of vision

When firms do not have clear goals, teams work without a purpose, which will not add value and reduces their productivity, efficiency, and motivation. Moreover, a lack of vision makes it difficult for managers or leaders to delegate work effectively to employees.

Difficulty in Building trust

Trust, an essential aspect of collaboration, cannot be developed without adequate collaboration between team members. Trust can be built only when organizations promote a conducive work environment for their employees.

Inadequate Support of Leaders

Leadership plays a pivotal role in promoting and sustaining cross-departmental collaboration. When leaders fail to prioritize or actively support collaborative initiatives, teams may lack the necessary guidance, resources, or motivation to work together effectively.

Conflicting Goals and priorities

Departments often have their own goals and priorities, which may not always align with the goals of other departments or the organization as a whole. When there is a lack of alignment, it can lead to competition for resources and a reluctance to cooperate.

Lack of proper Feedback and appreciation

Organizations that do not encourage their employees with regular feedback and appreciation will see a dip in productivity and performance. In addition, when employees’ efforts and contributions are not recognized, it may lead to demotivation and cause disengagement in work.

Technological deficiency

The rise in work-from-home and remote teams has increased the need to adopt advanced technologies. To promote effective communication and collaboration between the remote units, firms must provide proper tools and technologies to ensure that all the team members are on the same page.

Owing to the challenges mentioned above, managers should strive to improve and maintain cross-departmental collaboration in the workplace. Here are some strategies to promote team collaboration:

11 strategies to improve collaboration between departments

To successfully run a business, firms must ensure effective collaboration between teams and departments. But this involves various things like developing a shared vision, mutual respect, a thorough understanding of each member’s roles and responsibilities, etc. Here are some best practices to improve your team’s collaboration.

Provide executive support

Employees look up to their higher-ups in the organization to lead by example. When the firm’s top executives invest time and effort in building social relationships, it becomes the DNA of the company culture. Therefore, it is essential for executives to demonstrate collaborative and interactive behavior to ensure it is followed throughout the firm.

Foster and model collaborative culture

Not just the executives but also project managers play an essential role in setting a tone for successful collaboration. Resources will follow if project managers initiate meetings with their counterparts to comprehend their progress and challenges. It will foster a sense of collective responsibility amongst everyone and build trust.

Managers can develop their signature practices to keep inter-departmental cooperation interesting. For example, you can organize a joint discussion at a regular cafe or manage a sports match on weekends or more. Initiating and leading by example will help managers embed a sense of community amongst their workforce and facilitate effective collaboration.

Define communication methods and channels

Encouraging effective communication between departments is only half the battle won. The real task is standardizing communication procedures and helping everyone know when and how to communicate. Before the project’s onset, managers must define the communication channels and processes to be followed.

This includes,

• Specifying when to use the synchronous or asynchronous mode of communication.
• Communication etiquette is to be followed by the resources when engaging in cross-functional communication.
• Team collaboration tools or apps to be equipped to allow the smooth exchange of information.
• Concerned authority to be addressed and contacted in case of any pressing matter or escalation.

Convey the ultimate goal and vision with transparency

One of the most critical responsibilities of a decision-maker is to convey the firm’s goals and objectives with the utmost transparency. If you expect your cross-functional team to work cohesively, you must periodically educate them about the goals and vision. When your workforce is aware of how their work adds value, they are more likely to take the initiative. This will gradually increase communication, improve collaboration between departments and maintain the flow of data.

Share and exchange feedback

There is always room for improvement whether you are an executive or working at a junior level. To help your employees improve, project managers can connect with different department heads to hold project closure meetings. These meetings will help everyone share and exchange feedback. Decision-makers will know from employees if the process needs to be improved, and employees will know the areas they need to work on.

This feedback exchange meeting will encourage cross-functional team collaboration and give everyone a fair chance to grow professionally.

Train the staff for the right skillset

You may encounter a situation where you have already established communicative company culture, but some team members still lack those habits that can help them merge. Managers can initiate training programs to fill these skill gaps and make a notable difference in team performance.

A classic example of the firm that initiated such programs is Pricewaterhouse Coopers. Their training modules include teamwork, Emotional Intelligence, and networking. They also train employees to communicate the firm’s strategy and build healthy partnerships.

Including such modules in your training program and honing your workforce’s soft skills will improve collaboration at work and give an added advantage.

Gain an enterprise-wide visibility

Effective inter-departmental coordination can only happen when everyone in the team is on the same page, or it may lead to unnecessary conflicts. To do so, managers can deploy a resource management tool to provide them with a bird’s eye view of the resources and projects.

With this, managers can assign good work to the right person and collaborate better. Moreover, resources will know the project’s progress and can work more efficiently.

Understand the interdependencies

Taking the previous example of website designing, it’s clear that every task, from website content to design, is interdependent. Employees must make an effort to understand these interdependencies. It will facilitate better cross-team collaboration.

For instance, if you are working on the content, you can collaborate better with the design team when you know how your work will affect theirs.

Initiate joint projects between departments

The next step after understanding the interdependencies is to take up more projects that involve cross-functional coordination. More so, when resources collaborate with other departments, it will help them communicate better. They can then readily solve complex issues together.

Implement rewards and recognition program

Resources help you meet the project deadlines with all your might and capabilities. It is needless to say that their work and effort deserve acknowledgment. Project managers and executives can integrate rewards and recognition programs into their workplace policies to acknowledge hard work. This step will encourage effective team collaboration with the higher-ups and colleagues.

Organize team-building activities

All work, no play is a recipe for low productivity and disengagement. If your team is only communicating formally during meetings or project discussions, then the human element is missing from the equation. To get this right, department managers can collaborate and cooperate in organizing various team-building activities. This exercise is beneficial to understand everyone’s strengths and weaknesses and act accordingly. It is always healthy to have some fun at the workplace along with work.

You can use these ways to improve interdepartmental collaboration at your firm.

Conclusion

The late American business magnate Steve Jobs once said, ‘One person never does great things in business.’ This adage holds in every sense. One cannot accomplish projects and reach milestones without the help of others.

Cross-functional collaboration is, therefore, a key to a business’s success.

The above tips will help you improve and maintain effective collaboration between departments. In addition, it will help you enhance your profitability and add glory to employees’ productivity and engagement.

What ways do you follow to foster collaboration at your company?

Glossary

The SAVIOM Solution

SAVIOM is undoubtedly the market leader in offering the most powerful and configurable Enterprise Resource Management Solution. Having more than 20 years of experience, this Australian-based MNC has a global presence in over 50 countries. It is also popular with more than 100 customers and helps them to achieve their business goals. SAVIOM also has products for project portfolio management, professional service automation, and workforce planning software which can be easily customized per business requirements.

However, this cannot be done when your firm does not have a standardized procedure to track and measure these parameters.

Moreover, the absence of a unified measure can lead to inaccuracies in project planning, causing billing loss in the future. It’s high time to put an end to these inadequacies and give your resource management process an edge.

This is where the Full-time Equivalent or F.T.E model comes into picture. It expresses the total workload of an employee in a standardized manner, regardless of whether they work full-time, part-time, or on a temporary basis.

This blog entails an in-depth description of two different measures- FTE (Full-time equivalent) and Hours, that benefit specific industries and give you precise, valuable insights into their KPIs.

Let’s begin with understanding all about the full-time equivalent,

What is FTE or full-time equivalent?

FTE, or full-time equivalent, is a unit of time defined to measure the workload, availability, or capacity of an employee. In other words, it is the hours worked by a single employee on a full-time basis.

It is a standardized measure to calculate project hours and staff count. In a nutshell, it is a comprehensive measure of the upcoming projects and tasks and the total number of people you plan on scheduling for these tasks. It also eliminates the ambiguity revolving around FTE vs. headcount.

Now that you are clear about the FTE meaning, let’s understand its benefits in detail:

Now that you are clear about the FTE definition let’s understand its benefits in detail:

What are the benefits of FTE?

Some FTE benefits are listed below:

• Improves project management

The FTE model provides a standardized approach for calculating the demand for future projects and the number of hours required to accomplish tasks. For example, if your project needs 400 work hours, you can equate it to 9.41 FTE (400/42.5 hours) for five days. Accordingly, you can hire nine full-time and one part-time worker to fulfill the project demand. Hence, it enhances the project management process and ensures successful delivery.

• Provides accurate understanding of workforce composition

Unlike headcount, FTE takes into account both full-time and part-time workers within the organization. This comprehensive view allows businesses to make informed decisions regarding when to hire part-time or full-time employees. By hiring the right professional, organizations can control project resource costs and ensure smooth organizational workflow.

• Evaluates role-based capacity

FTE tracking allows you to aggregate the capacity of role-based employees. For example, if there are 20 content writers with a capacity of 0.7 FTE each, their aggregate will come up to 14.0 FTE. You can use the sum for accurate role-based resource management and task allocations.

• Ensures uniform workload distribution among employees

Using the FTE model, managers can ensure that tasks are distributed evenly among the team members. For example, in the marketing department, the FTE of 3 employees are 1.0 FTE, 0.5 FTE, and 0.75 FTE. By allocating tasks based on FTE, managers can ensure that each employee’s workload is proportional to their capacity, and no one is overloaded or underworked.

Now that the benefits are understood let’s move to the next part to understand which industries benefit the most from the FTE model.

When should you use FTE?

If you are planning a large-scale project that will continue for months and require extensive hourly calculations, FTE tracking can work wonders for you. You no longer have to calculate the work hours and headcount separately.

The full-time equivalent is ideal for Engineering and Construction projects. They have projects that last for months, and they end up hiring contractors on a large scale. However, with ‘guesstimation,’ they either equip excess capacity or find contracts expiring mid-projects.

So, when implementing this unified measure, you must draw up a clear project plan in advance and allocate resources accordingly.

FTE vs. Headcount

Nowadays, companies are leaning towards the FTE model as opposed to the headcount for many reasons. Firstly, headcount does not consider the number of part-timers in a firm. This can lead to over-hiring of employees. For two, it focuses on the overall organizational strategy and filling roles in general but does not drill down to closing the specific skill gaps.

How to calculate FTE?

As discussed earlier, FTE provides a standardized measure of employee work hours, allowing businesses to understand and optimize their staffing levels. Let’s now delve into the step-by-step process of calculating FTE.

Establish the standard working hours of the employees

Prior to calculating FTE, organizations must establish the standard weekly working hours expected from full-time employees while excluding any unpaid hours or time off.

For example, if an organization follows a 42.5-hour work week (equivalent to 1 FTE), this signifies that employees are scheduled to work 8.5 hours a day for five days every week.

Calculate the total hours worked by employees

To accurately calculate FTE, it is imperative to consider both full-time and part-time employees. Full-time employees’ total hours worked per week match the standard working hours (e.g., 42.5 hours). For part-time employees, their hours worked per week should be calculated proportionally.

For instance, if you have three full-time employees and two part-time employees who work three days a week, the total hours worked by all employees would be:

Full-time employees: 3 x 42.5 = 120 hours

Part-time employees: 2 x (3 days x 8.5 hours/day) = 51 hours

Total weekly hours for all employees: 127.5 + 51 = 178.5 hours

Divide the total work hours by the standard working hours

Now, one must divide the total hours worked by all employees in a week (i.e., 178.5 hours) by the standard working hours per week (42.5 hours for 1 FTE). This calculation provides the full-time equivalent (FTE) for your entire organization.

As stated in the example in the prior section, the total hours worked by all employees is 178.5. Divide this by the standard 42.5-hour workweek:

178.5/42.5 hours = 4.20

So, within your organization of 5 employees, you have 4.20 FTE.

Round the number to the nearest hundredth

Depending on the calculation, you may obtain a decimal value. To simplify and manage the number, round it to the nearest hundredth.

In our example, as the FTE is 4.20, it means the organization has the equivalent of 4.20 full-time employees working on the projects.

Now, let’s understand how to calculate FTE for various types of employees in detail.

How to calculate FTE for various types of employees?

Calculating FTE isn’t a one-size-fits-all process, as different types of employee categories, such as full-time, part-time, contingent workers, etc., require unique approaches. Let’s delve into the intricacies of their FTE calculations.

FTE for part-time employees

To calculate FTE for part-time employees, follow these steps:

Determine the standard number of hours that constitute a full-time workweek in your organization; in this case, it happens to be 42.5 hours.

For each part-time employee, divide their weekly hours worked by the standard full-time workweek hours as shown below:

Part-time employee 1: 25 hours per week

Part-time employee 2: 20 hours per week

Part-time employee 3: 15 hours per week

The sum total of the hours worked by all three part-time employees in a week = 60 hours

Now, to find the total FTE of the part-time employees, one must divide the total part-time hours, i.e., 60, by the standard full-time hours, that is 42.5

Part-time FTE = 60 hours / 42.5 hours = 1.41 FTE

If we round it off to a hundredth, the total FTE would be 1.41 of all part-time employees.

FTE for full-time employees

Now, let us calculate the total FTE for full-time. Generally, the FTE for full-time employees is equivalent to 1. However, if the FTE is greater than one among full-time employees, it likely means that the organization is paying overtime. And if their FTE is less than 1, the firm is paying for additional costs they may not need with better resource planning.

To lay it out in plain terms, let’s take five full-time employees working 42.5 hours per week.

Total hours worked by five full-time employees is five employees x 42.5 hours/ week = 212.5

Then, divide the total number of hours by the standard full-time hours, i.e., 212.5 / 42.5 = 5 FTE

Thus, the total FTE would be 5.0 for your full-time employees.

FTE for contingent workers

Determining FTE for contingent workers, such as temporary or seasonal employees, involves assessing their working hours in relation to the standard full-time hours.

To determine the FTE for each contingent worker, divide their weekly hours worked by the standard full-time workweek hours. Next, sum the FTE values for all contingent workers to calculate the total FTE for this category.

For example, if a contingent worker works 30 hours a week and your standard full-time schedule is 42.5 hours:

Contingent FTE = 30 hours / 42.5 hours = 0.705 FTE = 0.71 FTE

By following these steps, organizations can accurately calculate FTE for various employee types, aiding in resource planning, budgeting, and compliance reporting.

Now let’s understand how to calculate work hours.

What are the work hours?

Work hours are a fundamental aspect of employment, and they play a vital role in the structure and management of modern workplaces. They do not necessarily require a strict definition, as they can vary based on industry, job type, and even individual preferences.

However, standard working hours for a full-time employee typically fall within the range of 37.5 hours (7.5 hours * 5 days) to 42.5 hours (8.5 hours * 5 days) per week, spread over five or six working days.

Now let’s explore the benefits,

What are the benefits of using hours?

• Facilitates accurate billing

Meticulous tracking of work hours offers visibility into billable and non-billable hours, enabling organizations to generate precise client invoices. This detailed breakdown of time spent on tasks not only accelerates billing processes but also enhances transparency and accountability. Ultimately, accurate billing contributes to improved client satisfaction and better business outcomes.

• Helps calculate project budgets

By analyzing clocked hours from previous similar projects, businesses can derive data-driven insights to formulate budgets accurately. This proactive approach to budgeting helps in accurate resource allocation, cost estimation, and overall financial planning for upcoming projects. Thus, it ensures successful project execution within budgetary constraints.

• Maintains the project’s health

When resources meticulously log the precise number of hours they dedicate to a project or task, organizations can compare the initial booked hours with the actual time invested. This practice empowers firms to identify discrepancies early on and take corrective measures swiftly. By doing so, they can ensure optimal resource utilization, mitigate potential overruns, and improve the project’s health.

How to calculate work hours?

To calculate the hours worked by an employee, you need to know when they started and stopped working. Once you have this information, you can subtract the start time from the end time to get the total time worked.

For example, if an employee started work at 9:00 AM and stopped working at 5:00 PM, they worked for 8 hours.

However, you also need to consider any breaks that the employee took during their workday. For instance, if the employee took a 30-minute break for lunch, you would subtract that time from the total time worked. In this case, the employee would have worked for 7.5 hours (8 hours – 30 minutes).

If you have the start and end times for each day of the week, you will repeat this process for each day and add up the total hours worked for the week.

When should you use hours?

If you are an accounting and consulting firm and cater to short-term, time-specific, billable projects, clocking hours is the ideal choice to calculate the time spent by your consultants. Hours keep your bills precise without letting any worked hours go to waste.

Based on the hourly charge-out rates of employees, you can go for cost-effective global resources and increase your profit margins. Besides this, clocking hours are suitable for evaluating the performances of one-time activities.

For instance, if a consultant is required to provide advisory services to a client, they can log the hours spent on it. This takes care of the bill and lets you gauge the efficiency of each consultant. Thus, when planning short-term projects, you should rely on an hour-based resource management model.

What are the downsides of calculating hours?

Unlike Full-Time Equivalents (FTE), clocking hours is not a comprehensive practice that can take care of both duration and number of resources. Hours can also be inflexible when project requirements change, and they introduce uncertainty into timelines making them inconvenient for long-term project planning. Moreover, this method may prioritize quantity over quality and add administrative overhead.

Now, let’s look into critical pointers to help you decide which measurement type aligns best with your company’s needs.

FTE vs. Work Hours: which should you choose?

When choosing between Full-Time Equivalent (FTE) and Hours as measurement approaches for workforce capacity, several factors come into play. Understanding these factors is crucial to making the right choice.

Here’s a closer look at things to consider before choosing a specific measurement for your company:

Nature of the organization

The nature of the organization, including its industry, work patterns, and demand fluctuations, plays a significant role in the decision between using Full-Time Equivalent (FTE) or hours as a measurement approach for workforce capacity. For instance, industries such as healthcare or customer support that require continuous operations and coverage may find FTE more suitable. On the other hand, project-based industries like construction or consulting, where workloads fluctuate and short-term resource allocation is crucial, may prefer tracking hours.

Project-based organizations operate in a way wherein teams work on multiple client projects simultaneously. In such a scenario, tracking hours would be advantageous as they allow the company to allocate resources based on the specific needs of each project. They can monitor individual team members’ hours worked and project progress and track billable hours accurately. By tracking hours, the organization can flexibly adjust the workforce capacity to meet project deadlines and allocate resources efficiently.

Business goals and objectives

The goals and objectives of the organization heavily influence the choice between FTE and hours. Different goals require different considerations in terms of resource planning and allocation. For example, if cost control is a priority, FTE may be preferred as they provide a standardized measure of capacity. On the other hand, if the primary goal is to maximize productivity, tracking hours can offer more granularity and insights into individual and team performance.

To illustrate, consider an accounting firm operating in a highly competitive market. Their primary objective is to deliver exceptional client service and meet financial reporting and tax filing deadlines. In this case, tracking hours help the firm create accurate client invoices. Moreover, it can provide valuable insights into workforce capacity and resource allocation, enabling the organization to optimize client engagements and ensure the timely completion of deliverables.

Workforce characteristics

The characteristics of the workforce, such as work intensity, productivity levels, and variations in job roles, are important considerations when choosing between FTE and hours as a measurement approach. In addition, workforce composition and the nature of tasks performed can influence the accuracy and suitability of each method.

For instance, in a manufacturing company, employees might have variations in work intensity and productivity levels due to the complexity of tasks or experience levels. Tracking hours in this scenario can provide insights into individual productivity and help identify areas for improvement or training needs. In addition, by analyzing hour-based data, the organization can locate high-performing individuals or teams and those who may require additional support or development opportunities.

Organizational structure

The organization’s structure, whether centralized or decentralized, can impact the choice between FTE and hours. Centralized organizations that make decisions at the organizational level find FTE more suitable for consistent workforce planning. Meanwhile, decentralized organizations that give autonomy to individual departments may prefer hour-based measurements to allow for department-specific flexibility.

For example, consider a multinational organization with various departments operating in different regions. Each department has unique workforce requirements and autonomy in decision-making. In such a decentralized structure, tracking hours would provide the departments with the flexibility to manage their workforce independently based on their specific needs and demands. This decentralized approach ensures that each department can optimize resource allocation based on their requirements while adhering to overall organizational objectives.

Legal and regulatory considerations

Legal and regulatory requirements can influence the choice between FTE and hours. For example, certain jurisdictions or industries have specific rules regarding employee classification, benefits eligibility, and compliance regulations that may impact the measurement approach used for workforce capacity.

For example, in some countries, labor laws define full-time and part-time employee classifications based on the number of hours worked. In this case, FTEs may be necessary to ensure compliance with legal requirements and determine eligibility for benefits. By using FTE, the organization can accurately determine the status of employees and ensure adherence to labor regulations.

Considering these factors collectively and understanding their influence on the choice between FTE and hours can help organizations make decisions that align with their unique needs.

Conclusion

Full-time equivalent and hours-based resource models cater to different industries and projects. This blog has covered the usage and benefits of both models to help you make the right decision for your firm. FTE takes care of long-term projects, while the hours are perfect for short-term tasks.

The success of accurate project planning and forecasting lies in making the right choice of metric as much as it is driven by the process followed.

Which sophisticated metrics are you selecting for your firm?

Glossary

SAVIOM Solution

SAVIOM has over 20 years of experience helping multinational clients manage their resources efficiently and effectively. This Australian-based MNC has a global presence across 50 countries and has helped 100+ clients meet their specific business goals. Saviom also provides tools for project portfolio management, professional service automation, and workforce planning software. So, SAVIOM can help your business establish an efficient system geared toward your specific business challenges.

Is it possible to achieve this year-on-year?

A successful workforce planning process that enables HR departments to strategize for their future capabilities can make this achievable.

The workforce is undoubtedly the most important tangible asset for every organization. Despite its importance, it is often not carefully planned, measured, or optimized. Many organizations do not have visibility of their current or future workforce requirements.

There is also a lack of a consistent process by which they conduct workforce planning. As a result, it hurts both the top and the bottom lines of their business. It has consistently topped the wish list of HR executives within any organization. But it has always remained a challenging area when it comes to execution.

Strategic or Operational; Long-term business strategy or Short-term goals: Where do I need to pay maximum attention? These questions often baffle C-level executives.

This article describes the characteristics and different workforce planning processes and how successful organizations have adopted this practice.

But first, let’s start with workforce planning definition.

What is workforce planning?

Workforce planning is the process of planning and ensuring that the right number of human resources are available for the right role at the right location at the right cost with the right competencies.

In other words, it is a process of matching the workforce’s capacity and capability to meet its demands, now and in the future. By forecasting future work demand, organizations can identify the gap against the capacity so that the necessary resourcing steps can be taken to bridge the gap.

Types of workforce planning

There are primarily two types of workforce planning: strategic and operational. Let us go over some of the workforce planning definitions.

A strategic workforce plan is developed to help the organization achieve its long-term vision. Strategic workforce planning is created by designing a process that proactively anticipates future human resource requirements. It will ensure that the organization has a highly skilled workforce needed to meet its business goals. It assists in the following:

• Support the organization’s strategic plan
• Address external workforce factors that affect the entire business
• Maintain organizational capacity
• Mitigate risk exposure

On the contrary, operational workforce planning helps in deciding what needs to be done to achieve the business’s immediate priorities. It aims to create a focused, realistic plan to deliver unit-level business objectives. It helps to run the day-to-day activities in the company as efficiently as possible. At this level, it also complements an organization’s strategic plan for the long-term future.

Operational workforce planning focuses on immediate resource requirements for the activities within a six to twelve months horizon. If the organization plans for its workforce beyond three years, it comes under strategic workforce planning.

Anything in between can be described as tactical workforce planning, which has not received much attention in the industry.

What is the importance of workforce planning?

Organizations spend a significant amount of time and money to define their vision and future roadmap. Consulting companies have developed frameworks and have built various offerings around this subject. In this case, one can visualize the new business model and what resources will be needed in the future.

If goals and strategies are our vision of an ideal future, shouldn’t we focus our attention on achieving our long-term goals? Are short-term goals as important as long-term vision?

Extensive research has indicated that short-term goals are just as important as long-term ones. Without the former, there is a higher chance of failure in meeting the ultimate objective. Many HR organizations and consulting companies primarily focus on strategic workforce planning and suggest a blueprint around that. At the same time, they must not overlook the organization’s immediate requirements, which can be the need of the hour.

If there is a challenge in addressing short-term business requirements, it will derail its long-term strategy. Effective resource capacity planning addresses the short-term and medium-term requirements of workforce planning. It is the process of forecasting the gap between capacity and demand.

What is workforce optimization?

Workforce optimization is an ongoing process of matching workforce supply with the changing workforce demand to increase billable utilization. It requires centralizing information from various systems for decision-making. It uses all aspects of the complete workforce management life cycle and provides valuable insights into the workforce’s performance based on customer experience.

It implies asking your employees to “work smart and not work hard.”

It is a business strategy that balances customer satisfaction, service levels, resource allocation, operational costs, and other key performance metrics for a business to get the best performance out of the employees.

A workforce planning example

Let us take a hypothetical situation in an organization where:

• Three different projects are running with different start and end dates.
• For two projects, the end date cannot be extended. However, the third project has some flexibility with its timeline.
• There are three different categories of resources based on their skill set.
• Some of the selected resources can play the role of a project manager along with their primary skill.
• We have ten workers in each category, and all are deployed in projects with a certain amount of resource loading.
• Many resources are partially available and have some spare capacity.

At this stage, the firm gets a new order for which there is additional work of ten resources in each category for six months duration (Billable work for thirty FTE for six months period). The work requires two project managers on a full-time basis for the duration of the project. However, the remaining activities can be carried out on an hourly basis.

Without a proper workforce planning process, the firm may decide to hire thirty new personnel to deliver this project. As a result, the firm will have excess capacity at the end of the project.

Is it a cost-effective solution?

According to Paycor, “Labor Costs contribute to 70% of total business investment, including wages, benefits, payroll, and related taxes.”

• A systematic planning framework will raise the following questions for the decision-maker:
• What happens at the end of six months? Is there visibility of more projects or any other strategic work? If not, the company has to let go of thirty newly hired employees. How will it impact the brand image of the company?
• Is it possible to hire so many new employees within such a short notice period? Will you be forced to compromise on quality that can impact the delivery?
• How does the organization maximize its profit from this new initiative?
• Are we fully utilizing the capacity of the existing workforce with this quick decision? If not, can we adjust the current workforce’s allocation and get maximum utilization out of them?

After applying capacity planning principles, the organization will decide to:

• Free up two project managers from the existing pool of resources after reallocating their work to other project managers having excess capacity.
• Extend the timeline of the project, which has flexibility.
• Find the Total available capacity within each skill category.
• Calculate the gap between demand and available hours.
• Arrive at the workforce requirement in each category based on this gap.
• The project is for a short duration, and there is no information on future projects; use a contingent workforce instead of hiring new resources for delivery.

The above example highlights the importance of operational workforce planning. This immediate business requirement cannot be ignored at the cost of its long-term human resource strategy.

Operational workforce planning (benefits & best practices)

Operational workforce planning enables an organization to achieve short-term objectives. Keeping track of day-to-day operations, assigning people to prepare for immediate operational or resource needs, and addressing ad-hoc changes come under its umbrella.

What are operational workforce planning benefits?

A workforce planning model delivers both tangible and intangible benefits. Some benefits, such as cost reduction, can be immediately realized. Other benefits, such as employee satisfaction, have long-term implications. In this section, we discuss some of its benefits.

Reduce project resourcing cost significantly

With operational workforce planning, an organization can significantly reduce resource-related costs within a project. It can be achieved by deploying the right resource (no under/over skilled) to the project, leveraging global resources from a low-cost location, avoiding over/under allocation of resources, etc.

Improve billable and strategic utilization of the workforce

The process forecasts different types of utilization of resources. It identifies resources spending time in administrative or low-priority work and mobilizes them to more productive work.

Create visibility of resource competency

The workforce planner provides visibility of people’s information across the matrix organization and controls the rights to modify them. The system can achieve a 360-degree view of all types of work demands.

Deploy competent resources to the appropriate opportunity

The process ensures that you do not deploy a senior resource for a junior position, which will be a waste of his skillset. At the same time, if an inexperienced resource is given the task of an important role, there will be delivery challenges.

Forecast skill shortage proactively and apply necessary measures

Resource planning solutions can identify skill shortages ahead of time and take corrective action. It retrains and upskills bench resources ahead of time to make them billable, use a contingent workforce for short-term assignments, etc.

Ensure that excess capacity is not wasted with early forecasting

The system can identify excess capacity ahead of time for necessary corrective action. It brings forward project timelines to absorb additional resources, restart initiatives that were shelved earlier, etc.

Align sales and delivery by managing pipeline opportunities

It enables the sales team to estimate and forecast demand for various resources based on the sales pipeline opportunities. The delivery team ensures that the right resources are available at the right time to finish the project as they are given sufficient lead time.

What are operational workforce planning best practices?

Operational workforce planning has been critical for all projects to reduce resourcing costs. It allows businesses to reorganize and become responsive to the changing market conditions quickly. It goes beyond the basics of measuring the demand against capacity. Some of the best practices include:

Minimize project resource cost with a combination of local and global resources

Multinational companies have made global resources from low-cost countries accessible. It has created new opportunities for organizations to control costs and increase their profitability without compromising delivery qualities.

In a survey conducted by HR.com, “60% of businesses unanimously agreed that they saw cost-saving benefits within twelve months of using a workforce management solution.”

Forecast resource capacity vs. demand in advance

The workforce planning software allows businesses to forecast capacity vs. demand by role, department, team, location, skills, etc. It also allows people with different roles to view their specific information at the right time, which helps in decision-making.
Track Competency Matrix Across the Enterprise

It is critical to track and keep up-to-date information about the competency of the workforce. It allows the right resource with skill, experience, qualifications, individual preferences, etc., to be allocated to the proper work. It will enable resource managers to identify the right resource for a new opportunity.

Manage pipeline projects effectively

Once a prospect reaches a certain probability of closure, capacity planning activities can be initiated for the pipelined opportunities. It will avoid any last-minute rush and improve the hiring process as there will be sufficient lead time, and the quality of the new resources will also not be compromised.

Forecast profitable and overall resource utilization

The operational workforce planning process allows tracking and forecasting short or long-term billable, strategic, and overall utilization. It can be achieved with the help of an appropriate tool. One can take corrective actions to ensure high utilization and protect the business’s profitability.

Publish project vacancies and manage bench effectively

It effectively utilizes internal resources who have finished their previous assignment and are waiting for new work. It will provide foresight into both future resource needs and the details of the available workforce.

Streamline resource requisition and allocation process

Most of the conflict happens when different projects are eyeing a key resource for their delivery. The resource requesting and allocations are done through email or phone requests. In this scenario, a person can be double-booked if multiple clients select the same person. The project that confirms billing in the first instance is given priority to get the resource.

Strategic workforce planning (benefits & best practices)

Strategic workforce planning enables HR to plan for the capabilities they need in the future. It ensures that the company’s workforce has the right size, shape, cost, and agility for the future.

What are strategic workforce planning benefits?

Strategic planning looks into the future requirements of the workforce. The organization may want to expand or sell some of its business functions as a part of its long-term strategy. The business may re-badge human resources from another organization during M&A or transition part of its workforce to its partner if they are selling certain entities. These decisions come under long-term strategic planning. Here are some of the benefits:

Utilize the capacity of the workforce

• Avoid surplus or excess labor; If not appropriately managed, it will result in layoffs or costly hiring.
• Provide sufficient lead time for hiring so that quality is not compromised.
• Performance-based planned attrition to maintain quality; create a productive workforce.
• Use technology, such as RPA, AI, etc., to improve efficiency.
• Build a supply of contingent resources using empaneled vendors.

Minimize employee turnover and hiring Cost

• Provide a well-defined career path to the workforce.
• Encourage multi-skill building using Individual Development Programs.
• Allow movement of the workforce within departments.
• Create a retention plan for talent management.
• Use employee referral programs for hiring new talents.

According to Kornferry, “By 2030, there will be a talent deficit of roughly 85 million people, and if left unchecked, could result in $8.5 trillion unrealized annual revenue.”

Develop skills for future requirements

• Identify and align skills as per business needs.
• Hire resources as per current and future requirements.
• Promote cross-skilling and make the workforce flexible.
• Match business goals with employee development aspirations.
• Assist the employees in pursuing higher education or industry certification.

Improve overall productivity

• Right resource for the right job; no under/over skilled resource for any position
• Retaining critical employees for a more extended period promotes employee loyalty.
• Engage the workforce with job rotation and provide new opportunities
• Minimize Demand Supply Gap with effective resource capacity planning.
• Optimize billable resource utilization of each employee.

What are strategic workforce planning best practices?

Strategic workforce planning best practices align the organization’s talent strategy with the business goals and long-term objectives. Following are some of the best practices in this area:

Company-wide collaboration

Strategic workforce planning is aligned with the business strategy of an organization. Although it is an HR-driven initiative, other departments also have a significant role to play. Input from all stakeholders can be collected using a workforce planning template which will help derive specific action plans.

Use past data judiciously

Lessons learned and the use of past data can provide deep insights into a company’s business. Examining the patterns that occurred, when the business succeeded, and what your staffing levels were like at that time can give a good indication of staffing requirements. It helps to break this down into different segments (department, project, etc.) so that the overall picture becomes more evident.

Define metrics for performance measurement

The decision-making and review process becomes streamlined with cold, hard stats. An unplanned attrition rate will decide how many new hires need to be hired on a regular basis. It also needs to be planned on a staggered basis so that there is minimum impact.

Get stakeholder’s buy-in in advance

One needs to get executive buy-in for a widespread project. This initiative will impact every department within an organization. Unless the leadership team has approved certain key decisions, they will not get implemented. With management support, one can get complete visibility of the company’s new direction.

Workforce planning is a continuous process

Many organizations fail because they do the whole process once and forget about it after making initial changes. The workforce will change over time regardless of what happens. People will leave. People will retire. People will be promoted. At the same time, the business model will also change with new product lines. A workforce strategy needs to address all these parameters.

What are the steps in workforce planning?

Developing talent is a critical component of successful workforce planning. By talent, we mean the various skills and competencies of the workforce as per the business requirements. Talent acquisition ensures that you have the right number of resources for both short-term and long-term opportunities.

The following are different steps:

Forecast & take stock of workforce capacity

• Take an inventory of all the full-time, part-time, contractor, or freelance resources of your organization.
• Note those resources that will be available within 1 – 2 months after finishing their assignment.
• Include resources who will be joining or leaving during this period.
• Assign calendar (Workweek and Holiday list) to your resources if they are working from different locations and time zones.
• Track the skills and competencies of the selected resources.
• Identify the hot skills and tag them against the applicable resources.

Establish work-in-hand (demand) in short-term

• List down all the current and future projects, including internal projects.
• Include the projects which are there in the pipeline with a 75% or above probability of closure.
• Account for non-project activities like BAU, support maintenance, administrative work, training, etc.
• Categorize the projects into billable, strategic, and non-billable projects and prioritize them.

Perform workforce demand against capacity gap analysis

• Analyze resource capacity vs. demand
• Identify the gap between resource capacity and demand
• Identify skill shortages or excesses.
• Prepare a resource plan to bridge the gap.

Establish a workforce planning framework for excess/shortfall

For shortfall of resources:

• Decide on a full-time or contingent workforce based on the duration of the assignment.
• For full-time hiring, identify the locations and skillset and consider future deployability.

For excess of resources:

• Bring forward the timeline of the existing projects by deploying additional resources.
• Restart some of the projects that were shelved earlier
• Ask the sales team to look for new opportunities based on the available skillset actively.

Book the available resources for the identified projects

• Assign the right resources to the right Project.
• Apply selection criteria such as resources belonging to the same location, years of experience, cost rate, etc.
• Ensure you are not allocating over-skilled or under-skilled resources
• Allocate generic / ghost resources as placeholders on future projects.

With an understanding of how to develop an effective workforce planning strategy, let’s take a look at some of the best workforce planning practices.

Best practices for successful workforce planning

Successful workforce planning requires a deep understanding of both business goals and resourcing needs. Enlisted below are some workforce planning best practices that organizations can leverage to their advantage.

Regularly review the workforce plan

Successful workforce planning requires ongoing monitoring and adjustment to ensure its effectiveness. This involves regularly reviewing resource data, key performance indicators, and market trends to identify any shifts that may impact workforce needs.

This way, organizations can proactively address emerging challenges and optimize their talent management strategies accordingly. Regular feedback from managers, employees, and stakeholders also plays a crucial role in identifying areas for improvement and implementing necessary changes.

Leverage workforce planning software

Technology and analytics have revolutionized the field of workforce planning, providing organizations with powerful tools to gather, analyze, and interpret data for informed decision-making. By leveraging workforce management software, organizations can gain valuable insights into their current and future workforce needs.

These solutions can help identify skill gaps, assess workforce capabilities, and forecast future talent requirements more accurately. Additionally, automated systems can streamline administrative tasks, freeing up HR professionals to focus on strategic workforce planning initiatives.

Offer internal training, external courses, and mentorship programs

Training and upskilling programs are essential for ensuring that employees have the necessary skills and competencies to meet evolving job requirements. As part of workforce planning, organizations should identify skill gaps and develop targeted training programs, IDP, and succession plans to address them.

This can include internal training initiatives, external courses, mentoring programs, etc. By equipping employees with the knowledge and skills they need to succeed, organizations can enhance employee engagement, retention, and performance, while also future-proofing their workforce against emerging skill demands.

Promoting diversity and inclusion

Diversity and inclusion are critical aspects of successful workforce planning. Embracing diversity in the workforce brings together resources with different backgrounds, perspectives, and experiences, leading to greater innovation, creativity, and problem-solving.

Organizations should actively include DEI initiatives in their workforce planning strategies for sustainable growth and development. A diverse and inclusive workforce not only fosters a positive work environment but also enables organizations to effectively cater to the diverse needs of their customers and clients.

By embracing these best practices, organizations can achieve their organizational goals and position themselves for long-term success in a rapidly changing world.

How can workforce planning software help create an effective workforce plan?

The importance of workforce planning cannot be overstated. It can shape a successful future for organizations and help them maximize the potential of their human capital. Let’s take a look at how organizations can leverage robust workforce planning software to create design and implement an effective workforce plan:

• Enterprise-wide visibility- The tool offers 360-degree resource visibility into critical metrics such as demand, availability, capacity, financials, etc. This enables organizations to evaluate workforce capacity and project demand for current and future opportunities.
• Forecasting and capacity planning- The forecasting and capacity planning capabilities of the tool allow managers to identify and mitigate capacity vs. demand gaps ahead of time.
• Real-time reporting analytics- The tool’s intuitive reporting dashboards and analytics provide in-depth insights into KPIs in real-time. Reports such as forecast vs. actual, utilization heat maps, project vacancy, and people on the bench can help managers identify potential bottlenecks and plan for corrective action.
• Competency matrix- The in-built competency matrix captures and maintains the professional attributes of the workforce. It helps organizations to keep track of their resources’ capabilities.
• What-if analysis- The what-if analysis facility of the tool enables managers to simulate various scenarios and pick the most-well suited workforce plan.

Therefore, these features and modules play a key role in effective workforce management.

Conclusion

Some of the large companies are at risk of becoming too large to adapt to changes quickly. They put a lot of time and effort into defining the long-term vision and strategizing on the expansion plan in multiple geographies. As a result, many immediate priorities are overlooked, and they can end up in a sticky situation.

While long-term goals are important, short-term business objectives also need to be addressed promptly. One needs a proper workforce plan to steer the company in the right strategic direction, even if there is no large project in the pipeline in the near future. It improves the bottom line as you spend less on the workforce and generates more revenue per employee due to greater efficiency.

The Glossary

The SAVIOM Solution

SAVIOM is the market leader in providing highly configurable and robust solutions for managing and planning your workforce. With 20 years of experience, it has a presence in many countries. Many Fortune 500 companies are currently using and have benefited from this product. SAVIOM also provides tools for resource management, project portfolio management, and professional service automation. The workforce planning software can be configured for any industry, and it helps solve short-term resourcing problems.

It’s imperative for organizations to streamline critical resource-centric functions such as capacity planning, resource allocation, and utilization tracking to make every project successful. Any disruption can cause issues such as budget overruns and project delays, resulting in client dissatisfaction.

This is where the role of a resource manager becomes critical for the success of any organization. They ensure that the right resource is allocated to the right project and not overutilized.

This blog discusses the characteristics of a successful resource manager. But first, let’s start by defining:

What is a resource manager, and why are they important?

A resource manager is responsible for allocating all the resources under their span of control to various projects. These resources can be human resources, assets, equipment, facilities, etc. For a large organization, the average number of resources under a resource manager’s span of control can vary from 200 to 500.

Typically, when a project manager raises resource requests, the resource manager assesses the enterprise resource pool. They then allocate the best resource matching the demand criteria of the project.

Besides competent allocation, a resource manager also ensures improving productive utilization, bridging the skill gaps, effective bench management, etc.

Resource managers play a vital role in project success, and by extension, they contribute significantly to organizational success. They support a firm’s strategic objectives and goals by facilitating the following functions:

Resource planning and demand forecasting:

Resource managers work closely with project managers and department heads to develop resource plans and forecasts to determine project resource needs. This proactive planning ensures that the right resources are available at the right time, minimizing bottlenecks and avoiding resource shortages.

Efficient resource allocation:

Resource managers allocate resources effectively to various projects, departments, and teams. They ensure that human and non-human resources are distributed in a way that maximizes productivity and minimizes waste. This efficient allocation helps in achieving organizational goals within budgetary constraints.

Resource optimization:

Resource managers oversee, track, and optimize resource utilization. They identify under/overutilization and take corrective actions to mitigate it. By balancing workload distribution, resource managers improve profitable utilization and workforce productivity.

Conflict resolution:

Resource managers often face challenges related to resource conflicts and competing demands. They mediate disputes arising from overlapping resource requirements and negotiate compromises or alternative solutions. Their role involves prioritizing projects, resolving resource clashes, and maintaining a fair and equitable distribution of resources across the organization.

Performance monitoring:

Resource managers monitor resource performance and evaluate the effectiveness of resource allocation strategies. They analyze key resource metrics, such as resource capacity, availability, utilization, etc., to identify improvement areas and optimize strategic decision-making.

Risk management:

Effective resource management involves identifying and mitigating resource-centric risks. Therefore, resource managers proactively assess potential risks, develop contingency plans, and ensure backup resources are in place. This enables the organization to minimize disruptions and maintain operational workflow.

Cross-departmental collaboration:

Resource managers act as a bridge between different teams, departments, and stakeholders within the organization. They facilitate communication and collaboration by sharing resource-related information, coordinating resource needs, and resolving conflicts. This promotes synergy among various parties and ensures successful project delivery.

In summary, their efforts contribute to effective planning, improved performance, and the overall success of projects and initiatives.

Next, let’s learn about the consequences of not hiring a resource manager.

What can go wrong if businesses don’t invest in resource managers?

The success of every project depends on the resources that are allocated to the tasks. Resource managers are responsible for the efficient allocation of resources. Furthermore, they deploy those resources based on their capacity, skills, and experience.

Thus, if companies don’t invest in resource managers, it may result in sub-optimal resource allocation and planning. Ultimately, it will lead to project failures, hamper the company’s reputation, and result in client dissatisfaction. Moreover, resource managers ensure that resources are utilized on billable or strategic work at all times. When a resource gets rolled off from a project, the resource manager acts proactively and assigns him to suitable work before he/she hits the bench.

Lastly, resource managers forecast the future availability of resources and bridge the resource gaps in advance. They identify the shortage/excess of resources and take appropriate measures to fulfill the demand. In the absence of resource managers, businesses may face lost market opportunities and find it hard to sustain amid market volatility.

In a nutshell, the whole resource management structure will get negatively affected if businesses don’t invest in resource managers. Modern resource management software helps resource managers streamline their responsibilities and enable companies to gain a competitive edge.

Let’s learn about the key responsibilities of a resource manager within an organization.

What are resource manager’s responsibilities?

A resource manager needs to fulfill certain key responsibility areas to execute the above-mentioned activities and prove their mettle.

Here’s a rundown of the essential resource manger responsibilities.

Assigning resources to projects as per competencies and skills

Every project demands different skill requirements, and misalignment in resource competencies and demand can impact its quality or timeline. For example, assigning a critical or highly specialized resource to a routine task causes budget overrun, lower engagement, and productivity. On the contrary, allocating an under-skilled resource to skill-intensive tasks hampers the project’s progress and delays the deadlines.

Thus, the vital role of a resource manager is to diligently assess each project’s requirements, resource availability, skills, and competencies so that allocations align with the attributes of resources. It allows them to achieve competent allocation and eliminate future project bottlenecks.

Helping project managers with resource capacity planning for pipeline projects

A resource manager has to coordinate with the project manager to stay abreast of future resource requirements for pipeline projects. They first foresee the resource demand and assess the available capacity to find any existing gap between them. In case of shortage or excess of resources, they can proactively implement certain resourcing treatments.

They can analyze on-the-bench reports, implement the out-rotation and backfill strategy, or go for planned hiring to proactively fill the project vacancies. In case of excess capacity, the resource manager can request the project manager to bring forward project timelines or organize training programs for upskilling of employees. They can also collaborate with various functional managers and allocate resources to cross-disciplinary projects. In some cases, RMs can sell the excess capacity to external organizations.

Tracking resource utilization, workload, and overtime

The onus lies on resource managers to maintain the resource health index. Thus, they have to track utilization levels to ensure that every resource works on billable or strategic projects. Another job that falls under their responsibility areas is evaluating their workload and distributing it uniformly to prevent over/underutilization.

If resources are overutilized, RMs can pull in more resources to redistribute the work, make utilization levels uniform, and prevent employee burnout. For underutilized resources, finding some billable or strategic work to assign them to can help enhance productivity.

Collaborating within departments for resource requirements

Although resource management is an independent discipline, it demands coordination between resource managers and other leaders or supervisors of the organization. For instance, to understand the project demand and objectives, a resource manager has to collaborate with project managers or PMOs. Otherwise, it will become arduous for them to find the ideal fit for the job.

They also have to stay in constant touch with PMOs to understand the project’s criticality before the fulfillment of requests. Moreover, to bridge skill gaps or resource crunch, they have to coordinate with HR managers to streamline the recruitment process. They also coordinate with RM to initiate suitable upskilling programs.

Creating a learning and development roadmap for resources

“Gartner’s recent research reveals that 58% of the global workforce needs new skills to get their jobs done.”

This stat highlights the value of constant training and upskilling of resources in retaining a competitive edge and high productivity.

A resource manager, thus, has to stay updated with evolving industry trends and skill demands. It is also vital for them to take resources’ personal interests and aspirations into account.

Accordingly, they must identify skill gaps and formulate a personalized learning and development program to future-proof their workforce. This way, they avoid frequent hiring and firing, save resource costs, and boost employee engagement and productivity.

Effectively manage bench and implement corrective measures

Bench refers to employees who are not allocated to any project, which means they are non-billable but on a company’s payroll. A resource manager needs to constantly track bench size using a resource management tool to ensure it doesn’t exceed the threshold. If resource managers foresee project ramp-downs, they have to find suitable project vacancies to allocate them before they hit the bench.

Besides, they also implement appropriate resourcing treatments such as training or upskilling for the benched resources to utilize them effectively. Additionally, providing shadowing opportunities to engage freshers and assigning senior employees to strategic work or training juniors falls under the radar of resource managers’ responsibilities.

To accomplish these KRAs, resource manager needs to equip themselves with appropriate professional management skills.

Here are the most important ones.

Skills required to become a successful resource manager

Resource managers need to be equipped with essential management skills to perform their duties effectively. Let’s take a look at the basic human resource management skills necessary to be a proficient resource manager.

High-level domain knowledge

Though there is no fixed criterion for it, a basic level of domain knowledge is helpful. It helps a resource manager relate to the basics, technologies involved, areas of application, and more for a particular industry. A seasoned resource manager can sometimes switch to even another industry with some basic training and conceptual learning.

Having said that, in-depth knowledge of a particular industry is highly beneficial – especially for someone looking to start their career in resource management. Let’s say a software developer with over ten years of experience wants to become an IT resource manager. They will definitely get the advantage of that knowledge of the nitty-gritty of the software industry and excel at their performance.

Task prioritization and quick decision-making

A resource manager must exhibit the acumen to prioritize projects based on return on interest, value proposition, and other factors. Critical resources, if allocated to a low-priority project or a less skill-intensive project, will increase costs. Conversely, their absence in high-priority projects may lead to compromised quality and client dissatisfaction.

So, a resource manager must streamline the allocation of highly skilled or experienced resources to projects. Besides, they should be able to make prompt decisions on using suitable resourcing measures to fill significant gaps in capacity vs. demand.

Proven experience in resource planning and management

Resource managers must have a proven track record and sufficient experience in the resource management space of a specific domain. They must have in-depth knowledge of critical components like resource planning, pipeline project planning, etc.

It is also indispensable for a resource manager to be proficient in tracking resource utilization levels to identify any instances of over/underutilization and take measures and eliminate them.

Monitoring, reviewing, and controlling resource metrics, including bench aging, fill rate, project vacancies, etc., is one of the prime responsibilities of RM. Moreover, the ability to understand and handle the complexities involved in a matrix organization is equally necessary.

Quick problem-solving and negotiation skills

Key resources are often in high demand across different projects within an organization. Hence, resource managers must equip themselves with management skills such as quick problem-solving skills to resolve power conflicts between project managers. For example, let’s assume that two projects are starting simultaneously, and both project managers request the same-skilled critical resource. In this scenario, the RM will first assess the project’s priority and allocate the resource to the one that takes precedence.

Then, to fulfill the other project’s demand without creating conflict, they can negotiate with the respective project manager. They can explain how a less experienced resource with a similar skillset can do the job well. Similarly, they can equip negotiation skills in different scenarios to minimize conflicts, fulfill requests, and provide fair opportunities to less experienced resources.

Excellent communication skills with resources and stakeholders

As resource managers are responsible for fulfilling resource requests, possessing excellent communication skills is a must-have management skill for them. It helps them understand the resource requirements of a project manager and convey them to the resources better.

It is crucial for them to identify different resource-related risks like prolonged absence, unplanned attrition, skill gaps, etc. Then, they must convey these risks to stakeholders effectively and prepare a backup plan to mitigate them.

Hands-on experience with resource management tools

Managing resources effectively – especially when working in a large firm, is not possible without a resource management tool. The tool gives 360-degree visibility of resource allocation and multi-dimensional views for resource managers, project managers, etc. It also allows planning, resource forecasting, capacity planning, and scheduling.

Besides, real-time business intelligence reports and dashboards enable data-driven quick decision-making, which helps improve the resource health index. For RMs to perform at their best, it’s imperative to have hands-on experience in resource management tools.

The aforementioned management skill sets are critical attributes that every good resource manager should possess in order to perform their primary roles and responsibilities.

Now let’s take a look at the KPIs that are commonly used to measure the performance of resource managers.

How to measure the performance of a resource manager?

A resource manager’s performance depends on how efficiently they fulfill their key performance indicators (KPIs).

The following are the primary KPIs to fulfill for a project resource manager.

• Billable utilization:

Billable utilization of every resource falling under a resource manager’s span of control is one of the main KPIs. The percentage of the resources’ available capacity utilized for billable and strategic work determines their performance.

• Bench size:

Bench size keeps increasing or decreasing according to constantly changing resource demands. A good resource manager must keep the bench size within a fixed percentage of the available capacity or minimize it.

• Bench aging:

The number of days a resource is on the bench is called bench aging. Ideally, the bench aging is 0 days. However, in practical scenarios, it should not exceed 90 days. If it exceeds, it indicates an issue with the resource manager’s performance.

• Fill rate:

The fill rate is measured to determine how efficiently a resource manager can fulfill the resource demand on or before the project begins. If a resource manager assigns the resource as per the demand on or before the start date, the fill rate is considered 100%.

• Individual development program (IDP):

Every resource has their personal development goals and aspirations regarding their career. It is, therefore, vital for a resource manager to give them enough opportunities to hone soft skills and other technical skills in their respective domains. A resource manager’s performance also depends on how well they cater to everyone’s aspirations and let them advance their career.

Conclusion

As resources are the key investments of a firm, tapping into their maximum potential is highly important. That’s why resource managers are an integral part of determining project and organizational success.

The primary objective of a resource manager is to increase an enterprise’s profitability and sustainability by maximizing the workforce’s profitable utilization and future-proof it to lead the competitive world.

One can become an efficient resource manager by understanding the key responsibility areas and refining the above-discussed resource management skills.

Do you have the skills needed for human resource management? What would your approach be to becoming a good resource manager?

The Glossary

The SAVIOM Solution

SAVIOM has over 20 years of experience helping multinational clients manage their resources efficiently and effectively. With over 20 years of experience, this Australian-based MNC has a global presence across 50 countries and has helped 100+ clients meet their specific business goals. Saviom also provides tools for project portfolio management, professional service automation, and workforce planning software. So, SAVIOM can help your business to establish an efficient system geared towards your specific business challenges.

To overcome these roadblocks, a business can implement robust training scheduling software to assign the right trainer to suitable training programs. In addition, it helps optimize training programs and schedule the sessions effectively, thereby reducing resource costs and improving business efficiency.

The rapid proliferation of digital transformation across numerous industries has created a huge global demand for advanced IT skills. Unfortunately, the IT industry is continuously grappling with challenges like labor shortages, skill gaps, supply chain disruptions, cybersecurity threats, cost pressure, etc.

To overcome these bottlenecks, IT companies must possess an optimized talent pool. This is where robust workforce planning can help these firms meet the rapidly changing demands and ensure business sustainability.

Furthermore, it will enable IT firms to reduce resourcing costs, maximize workforce productivity and improve overall profitability.

This article elaborates on the significance of workforce planning in the IT industry.

But before that, let’s elucidate some critical elements affecting this sector’s workforce planning.

Factors influencing workforce planning in the IT industry

IT workforce planning involves analyzing the availability of talent, forecasting, and planning future demand for IT services, and developing strategies to attract, build and retain the necessary workforce. This ensures they have the right resources who can deliver quality services.

However, there are several factors that an IT firm must consider before designing a robust workforce plan. They are:

• Technological advancements

Due to the emergence of advanced technologies like Data Science, Cloud Computing, ML, etc., existing technologies and certain IT skills can become outdated at a faster pace. Therefore, with efficient workforce planning, IT firms can identify emerging technologies relevant to the business and implement the necessary training to improve the technical proficiency of their consultants and avoid skill obsolescence.

• Industrial trends (remote/hybrid model)

IT firms must consider current industry trends and adapt their workforce plan accordingly. For instance, in recent years, remote and hybrid work models have gained prominence amongst IT professionals. Therefore, IT firms must consider the technology infrastructure needed to support their employees. This way, companies can attract and retain top talent in a highly competitive job market.

• Long-term and short-term business goals

Workforce planning must align with the organization’s overall business strategy. Therefore, while formulating a workforce plan, IT business leaders must assess the operational and strategic goals of the organization and identify short-term and long-term resource demands. In addition, the workforce plan must be flexible enough to adapt to changing business needs while ensuring that the organization has the right talent to succeed.

• Skill levels of the existing workforce

When developing a workforce plan, IT managers must assess the current skill levels and capabilities of the existing workforce to identify any gaps or talent shortages that need to be filled. With these accurate insights into the existing workforce’s skill levels, an organization can ensure it has the right talent to achieve its business objectives.

Considering these factors, let’s see how workforce planning can be advantageous for IT organizations.

Benefits of workforce planning in IT companies

Besides addressing challenges like skill shortages, and frequent hiring/firing cycles, workforce planning provides several other potential benefits to IT organizations.

Here are a few:

Reduces resourcing costs of IT professionals significantly

“According to statistics, the median salary of an IT professional in the USA is $97,430.”

Due to fierce competition for a limited pool of skilled professionals, the IT industry is battling with high resourcing costs. A solid workforce planning process can help IT organizations evaluate labor charges and identify cost-effective global resources. Workforce planning helps determine whether skill requirements are one-time or recurring and build the right mix of contingent and permanent consultants.

In addition, it allows IT firms to maintain the right band mix of consultants for every project to control costs. For instance, the IT manager requires six support engineers to optimize the application performance in an app maintenance project. By assigning a mix of senior and junior support engineers’ firms can minimize project resourcing costs.

Helps bridge capacity vs. demand gap of IT workforce

Workforce planning helps IT managers forecast their future workforce requirements by considering the company’s growth plans, pipeline projects, and other business objectives. This way, they can identify demand vs. supply gaps and implement suitable course-corrective measures to eliminate last-minute hiring or firefighting for resources.

For instance, a pipeline software development project requires five Python developers. However, only three developers were available to work on the project. Here, managers can out-rotate 2 Python developers from projects that have reached the completion stage or initiate planned hiring. This way, they can bridge the demand gaps and prevent project delays.

Maintains workforce competency in real-time

Most IT firms capture consultants’ skills and competencies during onboarding but fail to update them regularly. However, managers need up-to-date resource information to ensure the availability of competent IT professionals for projects.

A real-time skill inventory can help IT businesses gain a holistic view of the workforce pool and their competencies.

Consequently, it helps them match consultants’ skills with the right projects. For example, a web development project requires a UI/UX designer with expertise in Figma. With the help of the competency matrix, managers can narrow the search and assign the most suitable UI/UX designer to the project, thereby ensuring successful delivery.

Control the unplanned attrition within the projects

“A survey indicated a significant increase in IT job attrition, with approximately 25.2% of employees quitting their jobs.”

Factors such as lack of career development opportunities, burnout, etc., contribute to high attrition rates in the IT industry. A robust workforce planning enables IT firms to reduce unplanned attrition in different ways. It ensures that IT resources work on multifaceted projects that align with their skill set and interests.

Furthermore, with workforce planning, managers can create effective L&D methods like formal training, mentoring, feedback, peer-to-peer coaching, etc., and aid in their professional growth and development. This will result in better job satisfaction, lower burnout/disengagement, and prevent unplanned attrition.

Manages the bench size of IT employees effectively

IT projects experience frequent ramp-up and ramp-down phases during the project lifecycle. In the absence of visibility into ramp-down activities, consultants spend extended periods on the bench, resulting in billable losses. Workforce planning enables IT managers to forward plan, and assign resources to suitable opportunities before they hit the bench.

For instance, a software development project had to roll off several software developers post the execution phase. With workforce planning, managers can anticipate which consultants will be released from the project and assign them to suitable work accordingly. In addition, they can initiate training/upskilling, provide shadowing opportunities, or sell the excess capacity and effectively manage the IT bench size.

Future-proof skills of IT personnel for emerging technologies

“According to a survey, 91% of technology managers said finding skilled IT professionals is challenging.”

IT firms must continuously upgrade the tech proficiencies of their workforce to keep up with rapidly changing technological advancements and prevent skill gaps. Here, workforce planning can help IT managers facilitate appropriate training programs that can be customized to the Individual Development Plan (IDP).

For instance, consider an IT firm with a team of developers proficient in Java and Python. While these developers can build, deploy, and manage applications, they may need to be upskilled to undertake advanced projects. Therefore, the IT firm’s managers can upskill them with in-demand skills like SQL. This will help diversify consultants’ skill sets and enable them to stay relevant in the volatile market.

Facilitate succession planning for critical resources

“While 86% of leaders believe succession planning for leadership roles is a priority, only 14% believe they do it well” – Deloitte.

Succession planning is a crucial process in the IT industry, especially for critical resources such as top-level executives, technical experts, and key personnel with specialized knowledge and experience. Workforce planning can facilitate succession planning by identifying potential successors and creating a roadmap for their development.

For instance, let’s say an IT company has a CTO who has built strong relationships with clients and possesses extensive technical knowledge and expertise but will be retiring in a few years. To fill this critical position, managers can use workforce planning to identify potential successors and create a development plan, which includes mentoring, training, and coaching to help them develop the skills and knowledge required to take on the CTO role in the future. This facilitates the seamless transfer of tacit and institutional expertise and ensures business continuation.

Having enlisted the benefits, here is how modern workforce planning can help IT firms.

How can modern workforce planning help IT firms?

Workforce planning is critical for organizations to enhance business efficiency and achieve short- and long-term goals. Implementing advanced workforce planning software helps IT firms to increase the effectiveness of the entire process further. Here’s how:

The 360-degree visibility of the tool enables managers to filter the IT professionals based on their skills, competencies, location, cost, availability, etc. For instance, if an IT project requires a Data Analyst, they can use the filters like job role, location, competency, etc., and identify resources from Mexico and India and select the best-fit employee.

In addition, forecasting capabilities help managers foresee pipeline projects and evaluate the demand. With the capacity vs. demand reports, the managers can identify the shortage/excess of resources in advance and implement resourcing measures to bridge the same.

Moreover, with a real-time competency matrix, businesses can gain up-to-date information on the consultants’ skills. It helps facilitate succession planning by identifying skilled IT personnel and preparing them for future roles.

The project vacancy and bench reports help managers identify vacant positions and fill them with suitable IT consultants. Further, the open-seat feature empowers IT employees to choose projects and tasks based on their interests, thereby enhancing productivity and engagement. Moreover, this kind of incentive will highly motivate the consultants and reduce attrition rates.

Lastly, the what-if-analysis helps IT organizations to create and compare various scenarios in a sandbox environment. Then, based on the insights, managers can formulate a suitable workforce plan. Hence, it will help future-proof the workforce.

By leveraging these capabilities, IT firms can optimize their workforce and ensure that they have the talent required to meet the demands of the industry.

Bottomline

“Acquiring the right talent is key to the growth of an organization”– Marc Bennioff, Salesforce CEO.

An efficient workforce planning process can help the IT industry make the right staffing decisions aligned with its mission, strategic vision, and budget. Therefore, leveraging a robust and advanced workforce planning tool can help IT firms overcome resourcing challenges like increasing costs, unplanned attrition, skill gaps, etc. It will also give your company a competitive edge and enables you to achieve organizational goals successfully.