Resource Forecasting in Professional Services: Challenges & Benefits

Let’s take a look at an example to better understand the power of an accurate resource forecast. Let’s say you have five full-time data analysts on staff today, but there are projects coming down the pipeline that are likely to start three months from now that would require eight full-time data analysts to complete. In order to successfully deliver these projects on-time, it’s critical to recognize this gap with ample time to hire, contract, or cross-train resources. The only way to recognize this need before it’s too late is with an accurate resource forecast. 

A proper resource forecast equips an organization with an accurate picture of the future, enabling decision-makers to make better, more proactive choices based on the insight gleaned from the data. When done right, a forecast allows teams to take actions that drive profits, utilization improvements, scalability, customer satisfaction, and ultimately success. By accurately predicting the resource requirements for upcoming work, organizations can make forward-looking, data-driven decisions regarding budgeting, hiring, staffing, procurement, and scheduling, ensuring that the necessary resources are available when needed, minimizing delays, cost overruns, and other potential issues. 

By performing resource forecasting, organizations can proactively plan, mitigate risks, optimize resource allocation, and ultimately improve project performance and success rates. An accurate resource forecast reveals the resources that are being either under or over-utilized and any potential opportunities to more strategically assign resources to drive profits. Businesses should always strive to have a professional services workforce that is precisely calibrated for the work that will need to be done — with too few resources, people will be overextended and burn out, but with too many, talent will sit in the bench incurring costs. Depending on the forecasting horizon decision-makers are looking at, different tactics can be employed to turn insights gleaned from forecast data into actions that ensure there is work for every resource, and a resource for every piece of work. Check out this guide to improving utilization rates to learn about some techniques you can use to ensure optimal resource utilization for work that is 30, 60, or 90 days away. 

Forecasting enables effective resource management, cost control, and timely delivery of projects or objectives. In professional services, profitability, client satisfaction, scalability, and ultimately success heavily depend on an organization’s ability to consistently deliver high-quality projects on-time, on-budget, and within scope. Delivering exceptional projects within these guidelines grows increasingly difficult without an accurate or comprehensive resource forecast. 

An accurate resource forecast is calculated using multiple data points that, in many businesses, will need to be aggregated from a variety of sources of truth. Proper forecasting can only be done if a business has accurate, accessible, up-to-date, and comprehensive data from every stage in the customer journey — pre- and post-sale. This is why resource forecasting poses a challenge for many organizations: it requires accumulating data from multiple teams, from sales to delivery.

Oftentimes, teams have limited access to data that they may not be directly responsible for inputting or keeping up-to-date. For example, resource managers putting together a forecast must be able to access, calculate, and analyze sales pipeline data — which is typically owned by the sales or pre-sales teams. Having access to data on supply (available resources) and demand (potential work) across multiple teams is the first step required to produce a proper forecast, but it’s not the last. Below are just some of the data points you will need to build accurate forecasts; to learn more about evolving the way you use data to forecast resource needs, read our eBook Forecasting & Optimizing Capacity: Why the Future of Your Business Depends On It

DEMAND DATA

1. 1. Sales Opportunity Pipeline
   Knowing about potential work you are likely to sell is crucial to forecasting; pipeline data will give you insight into increases or decreases in demand for the foreseeable future. Be sure you know which roles and skills will be needed for each opportunities so capacity gaps can be seen and addressed.
2. 2. Engagement Delivery Metrics
   How well is your company communicating with potential and existing clients? These metrics will help determine changes in demand.
3. 3. Historical Data & Trends
   What past data shows the ups and downs in demand that your company has experienced? History and trends can help you predict the future.
4. 4. Delivery Backlog
   What projects have been delayed and which are about to begin? Understanding your backlog shows where resources will soon be assigned.

SUPPLY DATA

1. 1. Resource Schedules
   Having comprehensive data on your resources’ task and project commitments for the foreseeable future will help determine the amount of availability for new projects and clients. It can also help you understand where your resources will be over- or under-committed. Is there untapped capacity in your workforce? If there is, improving billable utilization by even 1% could mean a lot of money for your business. Check out our Resource Utilization and Revenue Calculator to see what improved billable utilization could mean for your business.
2. 2. Hiring Timelines
   How long will it take for your team to hire a new member? Having a timeline based on past experiences shows when your capacity for more projects will increase.
3. 3. Ramp Time
   What is the average time between hiring a resource and he or she can be fully utilized? Ramp time is critical for your strategy.
4. 4. Attrition Details
   The rate at which your team members leave the company is key to understanding capacity. Use actual attrition and forecasted attrition to know when decreases are likely to occur.

At its core, resource forecasting is all about using the data available today to form educated predictions for the future state of the business. It’s rare to find an organization that’s confident about forecasting that hasn’t put significant effort into streamlining the process or optimizing the data that the forecasts are built upon. Even the most mature or high-performing businesses can agree that resource forecasting comes with myriad challenges. 

According to 383 professional services decision-makers who responded to a study conducted by Forrester Consulting and commissioned by Kantata and Salesforce, the top challenge professional services organizations face is an inability to predict resource needs in advance — 59% of businesses say this is very challenging. 56% of organizations say they lack data or insights needed to engage in robust forecasting. And 51% of organizations find it very challenging to conduct resource planning and project team collaboration across the entire services workforce — both internal and external — in their current tech stack. Forecasting is tough for nearly all services businesses, and it’s rooted in the fact that a forecast is only as good as the data that fuels it. It requires combining large volumes of resourcing data — such as skills, availability, or resource cost — with data that often exists in siloes owned by other teams, like sales pipeline data. For all that data to be actionable, it needs to be easy to find and it needs to be accurate. These are both challenges for many businesses.

Accessing Data 

Calculating the forecast with data inputs from multiple teams often requires manual and time-consuming work to merge and translate information that may be housed in different tools or formats. In practice, this tends to look like hours, days, or even weeks each month spent combing through multiple spreadsheets to actually get the information into a format that can then be used in calculations. Further compounding the issue, teams rarely follow the same best practices for data input and upkeep, which leads the person responsible for the forecast to ask numerous questions about data accuracy and completeness. If they fail to consult with the team responsible for the information, they are likely to make assumptions that — if incorrect — will result in an inaccurate, unreliable, or misleading forecast. 

Trusting Data

Even when data surrounding the forecast is kept up-to-date and accurate, it will still be impossible to know with 100% certainty whether certain things in the forecast will actually happen — deals that seemed sure to close will be lost or delayed. Forecasting is the act of trying to predict the future after all. Not all predictions come true. But businesses can not wait until forecasts become true to act on them. A business that always makes decisions about hiring, contracting, cross-training, or staffing after new business is won will be a reactive business with major resourcing gaps that delay projects and frustrate clients.

This is the other primary area where businesses struggle with resource forecasting: decision-makers can see data indicating there may be skill gaps or capacity issues on the horizon, but they don’t trust the data enough to act. Part of the art of forecasting is building risk into projections so teams can interpret what is most likely to happen. Will all ten deals with a 60% probability to close in four months actually close in four months? Almost certainly not. But there should be a decision-making framework in place, informed by historic performance against forecasts, that helps teams understand that the business is confident that at least six of those deals will close, and that decisions should be made accordingly so the organization is ready to take on all six projects. A business that is great at forecasting will not always have a forecast that is 100% accurate to what will happen; instead, it will perform consistently enough against forecasts that people can anticipate demand with confidence and make decisions accordingly.   

According to findings from the Resource Management Institute (RMI), resource forecasting is the #1 inhibitor to conducting effective resource management/workforce management operations that professional services organizations face. Recognizing the importance of getting the resource forecast right to overall professional services success, RMI published a first-of-its-kind Forecasting survey report, focusing entirely on the challenges faced by services businesses trying to forecast resources effectively. This report serves as a benchmark for other organizations that are looking for ways to improve their own forecasting processes. 

In the key takeaways from their survey, RMI surmises that “the data tells us we collectively have a long way to go to getting better at forecasting. The largest forecasting deficiencies identified from this survey have dimensions spanning both process and automation tool support.” 

Many services organizations are still living in the past, with 71% of respondents relying on spreadsheets to put together forecasts, and 50% saying they aren’t able to forecast resource needs accurately beyond the next two months — not enough time to fill emerging gaps through hiring, onboarding, or cross-training resources. Only 31% of businesses reported that they were able to forecast resource needs based on requirements for certain skills.

These results highlight the insufficient processes many organizations currently have in place to enable them to look ahead to the future — challenges which will become especially restrictive as the reality of delivering services today becomes increasingly complex. Often, companies are tied down by operational silos and the failure to collaborate effectively across teams or sources of truth. Only 35% of organizations surveyed indicated that their businesses had formalized “organizational interlock” processes to ensure the integrity of their forecasting inputs, revealing a major opportunity for process improvement. 

Many of the challenges associated with forecasting stem from poor data quality and data integration. As mentioned previously, a forecast is only as accurate and insightful as the information fed into it. 

The process of building an accurate resource forecast for a project typically involves the following nine steps:

1. 1. Define the Project Scope
   Clearly define the objectives, deliverables, and timeline of the project. Understandthe project requirements and identify the key factors that will impact the resource needs. Use project templates when available and look to similar projects done in the past to ensure the scope is achievable. If projects are unrealistically scoped, it’s increasingly difficult to not only forecast but to make informed decisions using the data.
2. 2. Identify Resource Categories
   Determine the types of resources that will be required for the project. This may include human resources (skilled labor, project managers, consultants), finances, materials, equipment, technology, or any other relevant resources that will need to be utilized before a project is considered complete and delivered.
3. 3. Estimate Resource Requirements
   Estimate the quantity and quality of resources needed to remain profitable, hit business goals, reach KPIs, and deliver on promises to clients. Consider factors such as required skills, experience, complexity, industry standards, historical data, and expert judgment. Break down the project into tasks and estimate the resource needs for each.
4. 4. Determine Resource Availability
   Assess the availability of resources within your organization. Identify any existing resources that can be utilized for the project and evaluate their capacity and capability. This includes resources in the pipeline or those that are expected to roll off of projects before the next is kicked off. Consider internal resources, such as in-house teams or equipment, as well as external resources that may need to be procured.
5. 5. Consider Resource Constraints
   Identify any constraints or limitations that may affect resource availability or allocation. This could include budgetary restrictions, resource availability at specific times, resource availability by geography, legal or regulatory requirements, or any other factors that may impact resource acquisition or utilization. When assessing constraints, ensure all holidays, PTO, and time off requests are up-to-date and accessible in the system to avoid unnecessary surprises.
6. 6. Forecast Resource Demand
   Use the estimated resource requirements and project timeline to forecast the demand for resources over the course of the project. Consider factors such as task dependencies, project phases, seasonal variations, or any other factors that may influence resource needs. Look at what other projects are going to be kicked off or any project scopes that have changed that may delay when a certain resource can finish up one project and move to the next. What was originally planned for some projects may not be the reality once underway, so having accurate updates on any shifting timelines or changes in availability is critical for an accurate view of incoming demand and available supply.
7. 7. Allocate Resources
   Don’t wait for contracts to be signed to earmark the ideal resources — if you trust your resource forecast, allocate the optimal resource team early. Once you have determined the resource demand for a project and are confident when that demand will be needed, allocate the estimated resources to different tasks, work packages, or project phases. Consider dependencies, priorities, and any constraints identified earlier. Ensure that the allocation aligns with the project timeline and objectives. This is also referred to as soft-booking resources and is a strategic way to get ahead of resource planning before a project contract is signed or kicked-off. Soft-booking resources and allocating across projects ahead of time allows an organization to proactively plan instead of react when changes occur. Having an idea of what resources will be put where, and then adjusting as necessary reduces the chances of project delays or over/under utilizing certain resources. Managing resources reactively often reduces margins, customer satisfaction, and overall project quality.
8. 8. Monitor and Adjust
   Resource forecasting doesn’t end when projects kick-off — projects can often stretch across weeks or months, and as they deviate from plan and resource availability changes, new resource requirements may emerge. Once a project is kicked-off and resources have begun the work on delivery, keep an eye on progress or any red flags that may be coming to light. Continuously monitor the actual resource usage throughout the project. Compare it with the forecasted estimates and make adjustments as necessary. Address any deviations, changes in project scope, or resource availability issues promptly. Change is the one constant in professional services, so being agile and ready to respond to any shifting expectations, demands, or new challenges is critical to perform better than the competition and retain clients.
9. 9. Refine and Improve
   The most impactful resource forecast is one that is reflected on. Even if a forecast turns out to be different than what was actually executed, there are learnings to take into consideration for the next estimation. Getting it wrong isn’t always a bad thing as long as it’s clear where the deviation is and why it may have differed from actuals. Recognizing patterns is key — if a business is consistently getting the forecast wrong there may be other factors at play that are worth spending time looking into. Often, if the forecast fails to reflect reality, the data feeding the analysis probably needs to be refined. Learn from the resource forecasting process and refine your approach for future projects. Evaluate the accuracy of your forecasts and identify areas for improvement. Update your resource forecasting methods based on feedback and lessons learned.

Resource forecasting accurately can result in many benefits, including but not limited to: 

1. 1. Proactive Resource Allocation
   Organizations can allocate the right resources to the right tasks or projects in a proactive, rather than reactive, manner. This ensures that resources are utilized optimally, reducing bench time and improving productivity, client satisfaction, and delivery success.
2. 2. Improved Utilization
   At its core, resource forecasting is just a way for businesses to visualize resourcing data and recognize (and act upon) missed opportunities. A proper resource forecast reveals which resources are being over- or under-utilized and gives managers the option to adjust their plans accordingly. Use our interactive Resource Utilization and Revenue calculator tool to see how improving billable utilization through more accurate forecasts would impact the profitability of your business.
3. 3. Improved Budget Estimation
   Resource forecasting allows organizations to plan and allocate budgets effectively. It helps in preventing cost overruns and ensures that sufficient funds are allocated for the required resources.
4. 4. More Timely Delivery
   Understanding the resource requirements for a project in advance allows organizations to allocate resources proactively, preventing many of the common causes of delayed project kickoffs like double bookings or conflicts. Forecasting properly minimizes the chance of delays caused by resource shortages or bottlenecks.
5. 5. Effective Risk Management
   Resource forecasting helps in identifying potential risks associated with resource availability. By analyzing the resource demand and supply, organizations can anticipate and mitigate risks related to resource shortages, skill gaps, or dependency on external suppliers. It allows for proactive measures to be taken to address these risks and ensure smooth project execution.
6. 6. Forward-Looking Resource Planning
   Hiring and onboarding resources takes time. Businesses need to engage in long-term resource planning to hire or cross-train ahead of emerging demand. By understanding the resource demands and having an accurate vision of the future, organizations can make proactive decisions regarding hiring, training, or investing in additional resources before it’s too late.
7. 7. Informed Decision-Making
   Resource forecasting provides valuable insights for decision-making at various levels within an organization. It helps stakeholders and project managers make informed decisions regarding resource allocation, procurement, outsourcing, or resourcing strategies. It ensures that decisions are based on accurate data and realistic expectations.

Resource forecasting is a complex process that requires inputs from numerous teams, datasources, and workflows to execute effectively. It can not be done manually in spreadsheets at scale. Leveraging technology to improve data quality, accessibility, and accuracy is no longer a way to get ahead of the competition — it’s required. As professional services businesses continue to evolve in response to growing client demands, the changing dynamics of the modern workforce, and shifts in the global economy, it’s more critical than ever to invest in the right technology to streamline the resource forecasting process. 

Research shows that the unique requirements of professional services organizations are best served by vertical SaaS solutions that are purpose-built to address those industry-specific needs. Where generic, horizontal solutions like point resource management and project management solutions fail to account for the nuanced client, workforce, and revenue dimensions of professional services, vertically oriented professional service clouds are specifically designed to give professional services decision-makers the clarity, control, and confidence they need to overcome their top challenges – namely, the inability to predict project resource needs in advance, which 59% of professional services organizations find very challenging. 

For an example of how the right software tools can transform professional services operations and enable more accurate resource forecasting, check out this success story from Logicalis. Prior to adopting a purpose-built tool, Logicalis was managing resources in spreadsheets — their legacy PSA couldn’t keep up with their resourcing needs. Resource forecasting ws so onerous that it often didn’t get done, leaving decision-makers to act without the context of data. According to Resourcing Director Mike Downes, “It would have taken me a month to do my demand forecast, so we just didn’t do it, it was based on gut feel.” Logicalis was ready for a solution that would increase the teams’ confidence in resourcing data — so that every resource decision being made is informed, strategic and data-driven.

Since adopting the Kantata Professional Services Cloud^TM, Logicalis has cut the time it takes to build their resource forecast from multiple days to a few hours. “We now have a complete and accurate view of all engagements happening over the next six months,” says Downes. “That means instead of relying on a combination of gut feel and spreadsheets, I can confidently put together the best teams for each engagement and press the button on the recruitment process much sooner.”

If your business is struggling to accurately estimate future resource needs, or if you’re still stuck in spreadsheets trying to translate and combine data to get a realistic picture of the work your business will undertake in the weeks and months to come, consider looking into a professional services cloud solution with purpose-built resource forecasting capabilities. Remember that resource forecasting is an iterative process, and it requires ongoing monitoring and adjustment. Regularly revisit and update your forecasts as the project progresses and new information becomes available.