Do You Really Need That Bus?

By Steve Murphy
Senior Consultant

Most rational people would not buy a 40-passenger bus as the primary mode of transportation for a family of four. Most would buy a vehicle with a capacity that more closely matches their average daily transportation needs; in this case, four people. The bus might be nice to have for a school field trip or birthday party, but it wouldn’t make sense to purchase and maintain such a large vehicle for day-to-day use. However, many organizations do not apply this simple logic to their staffing decisions.

One of the most difficult parts of a manager’s job is balancing resources against the volume of work that needs to be completed. A proper ratio of resources to work volume allows management to maintain an acceptable level of performance without developing backlogs or increasing costs by paying for resources that are not required. Knowing the right level of, and verifying the need for, resources are primary functions of management.

However, it is not uncommon to find organizations that have no objective staffing methodology—instead, hiring decisions are driven by seasonal spikes, backlog levels, approved and budgeted positions, or emotional pleas. This often leads to overstaffing (buying the bus) and lowering de facto performance expectations during non-peak periods due to excess capacity.

What’s missing here is an objective analysis of actual need. Denying a valid request for help may cause customer service problems, backlogs, low morale, and overtime expenses. Hiring employees who are not needed will increase expenses and reduce productivity because there will not be enough work to keep everyone busy.

A capacity management methodology will reduce the uncertainty. Adding a capacity model to the traditional staffing model helps provide both the requestor and the decision maker with the data necessary to make enlightened decisions. It is a continuous process that identifies the optimal staffing level and supports proactive resource utilization in order to meet customers’ needs and expectations.

The staffing model forms the foundation of the process. A staffing model is a tool that combines the effect of volumes, processing times, resource availability, and allowances to create a graphic illustration of an operation and identifies the optimal staffing level. Therefore, a staffing model looks at an operation and determines how many resources are needed based on average volumes.

A capacity model uses many of the same inputs, but it allows managers to take a more granular, forward-focused look at the operation. This allows the leadership to change the equation from how many resources are needed to how much work the resources on hand can complete. With this data, managers can create relevant inventory and production plans that are resource-driven, not volume-driven.

For me, this is the essential benefit of capacity management. When faced with volume spikes and backlogs, the tendency is to focus on the inventory. That typically leads to morale-killing statements such as, “We had a bad day,” “Inventory went up 2%,” and “You guys need to work harder.”