Resource Forecasting in Project Management: In-Depth Guide

Ever find yourself scrambling for resources at the last minute? Stressful, isn’t it? Resource forecasting can change that. 

By predicting your future needs, you can have the right resources ready when you need them—no more frantic searches or stressful shortages. Just imagine for a second the peace that comes with knowing your projects are prepped for success with zero guesswork and maximum efficiency.

Resource forecasting isn’t just about planning, though (if only it were that simple). Instead, we suggest you view it as your company’s strategic advantage in driving growth and success.

Ready to see it in action for your business? Let’s explore how resource forecasting can make a difference.

What is resource forecasting?

Resource forecasting is a method project managers use to accurately estimate future resource requirements by analyzing trends, historical data, and current resource capacity.

Different types of resources should be considered in a resource forecast, including:

• Human (employees, freelancers, any other relevant third parties like subject-matter experts)
• Financial
• Equipment (computers, software, hardware, tools)
• Materials (stationary, printing supplies)

While it is important to understand all aspects of this kind of project management tool, to keep things focused (and somewhat succinct), we’ll only focus on human resource forecasting.

Resource forecasting example

Hard to imagine what this looks like in practice? Here’s a real-life scenario to provide some context:

A marketing agency is taking on a series of major campaigns for a large client over the next year. These campaigns will require a team of marketers, content creators, strategists, graphic designers, social media managers, and data analysts.

The agency uses historical data from similar past projects for similar clients to identify resource needs, such as content creator involvement, graphic designer requirements, and social media needs.

Once the scope and timelines of the upcoming campaigns are established, the project manager can estimate the number of employees and work hours needed for each stage.

The agency assesses its current resource availability and looks for potential gaps. For example, in the later stages of campaigns, an agency often needs help with graphic design. But what if its lead designer takes a vacation when the campaign is at peak graphic-design need?

Using forecasting tools, the agency can create a resource forecast to predict the human resource needs of the upcoming project, considering factors like vacations and sick days, overtime, and the overall productivity rate.

Based on the resource forecast, the agency creates a plan to address staff shortages. It may hire a new full-time designer and engage a long-term freelance designer to fill the gaps when needed.

What are the benefits of resource forecasting?

Efficient, accurate resource forecasting is important to modern businesses as it helps them meet deadlines, use resources well, stay within budget, and mitigate risks. If you need more reason to invest in resource forecasting, though, let’s take a look at the benefits in detail.👇

Prevent budget overruns

Resource forecasting provides data on the number of employees and work hours needed on a project. This helps ensure projects stay within budget constraints by preventing over- or under-allocation of resources.

Meet project deadlines

Identifying potential resource bottlenecks in advance. This allows managers to adjust the project schedule proactively and ensure prompt completion.

Optimize resource utilization

An accurate resource forecast helps project managers anticipate resource demand and balance their team’s workloads, maximizing efficiency and team productivity and reducing the chance of burnout.

Mitigate risks

Forecasting helps anticipate resource shortages and scheduling conflicts so project managers can factor them into their capacity planning, minimizing disruptions and improving risk management.

Improve decision-making

Resource forecasting provides highly valuable information and data about project needs. This enables managers to make informed decisions throughout the project.

What are the challenges of resource forecasting?

Resource forecasting is an important strategic process but, like many things in project and time management, comes with many challenges.

Namely, we find that there are three common challenges businesses face when trying to implement the tactic. While seemingly small, it’s important to get these aspects right for resource forecasting to be effective.

Lack of a formalized forecasting process

Without a formal forecasting process, resource forecasting is difficult from the start and may result in unnecessary or duplicate work. 

This is often due to prioritizing short-term results and having data spread across various departments. When companies primarily focus on quick wins and immediate goals, they don’t see the need for long-term forecasting or a formal process considering growth, market trends, and disruptions.

Furthermore, when data isn’t centralized, the process is further complicated. The big-picture view of resource needs becomes fragmented when each department has its metrics, data sets, and gathering processes.

Lacking a standardized, official process means businesses often battle to accurately predict future resource needs as different parties use different methods, leading to inefficiencies, confusion, and over- or underestimations. 

As a result, teams and even whole departments suffer shortages or excess resources that aren’t used optimally. 

Lack of visibility into future needs

Forecasting must be conducted well in advance for it to work properly. Advanced planning gives companies time to gather data, analyze and spot trends, and look for potential problems. 

However, if companies lack visibility into future needs because of a lack of data or transparency in upcoming projects, they can’t accurately forecast more than a few months ahead.

If forecasting is left until the last minute, there isn’t enough time to gather and thoroughly possess the data. This results in rushed predictions that are, more often than not, very inaccurate.

Most companies don’t use dedicated resource management tools

Resource management tools are invaluable in project management and resource forecasting. If companies rely on spreadsheets instead of purpose-built tools, they hinder their ability to forecast accurately.

What are the resource forecasting techniques in project management?

With so many different methods for forecasting staffing needs, it’s important to choose one that works best for you and your organization. Here are some of the top forecasting techniques in detail to help you narrow down your options.

Delphi technique

The Delphi technique involves selecting a group of subject-matter experts (SMEs) and giving them several questions. After each round, they are given a summary that allows the experts to adjust their answers based on the overall group response.

This method combines expert analysis with crowd wisdom to establish a group decision through an iterative process.

Pros	Cons
• Insight from experts • Anonymous participation reduces bias • The iterative process achieves a thoroughly deliberated and considered forecast	• Time-consuming • Resource intensive • Can lead to pressure to conform to the consensus as it emerges, neglecting other valuable insight

Nominal technique

The nominal technique requires individuals to interact minimally before coming together. They are presented with a problem (in this case, the upcoming project) and asked to submit their ideas anonymously. The answers are collated, and then the group analyzes the suggestions and decides on the best action.

Pros	Cons
• Equal participation among group members • Structured, focused format • Fast results	• Can be challenging logistically • Limited time can be restrictive, forcing rushed decisions • Can be influenced by group dynamics • Some participants might not want to contribute unconventional ideas due to face-to-face setting

Brainstorming

Brainstorming is a collaborative technique that involves noting ideas contributed “in the moment” by a group. It often requires a moderator to make notes of the suggestions.

The success of this approach hinges on the members listening to each other and feeling free to express their thoughts and ideas.

Pros	Cons
• Team collaboration • Flexible, informal, and creative • Minimal prep work required • Easy to implement	• No structure • Can encourage groupthink • Quieter team members may not express their ideas • Can quickly go awry with lots of impractical or irrelevant suggestions

Trend analysis

Trend analysis involves studying historical data from past projects to establish resource requirement patterns. The patterns are then applied to future projects to predict their needs.

Pros	Cons
• Data-driven • Accurate • Finds long-term trends and shifts that help project planning	• Requires historical data, which isn’t always available • Past trends can be unreliable in fast-changing industries • Doesn’t factor disruptive changes

Time series

The time series method also focuses on historical data analysis but applies statistical methods like moving averages and exponential smoothing to predict future needs. For example, it can forecast future project resource requirements by assessing seasonal variations.

Pros	Cons
• Data-drivenIdentifies underlying patterns and cyclical trends • Objective and uses quantitative data	• Highly complex • Requires a huge amount of high-quality historical data • Relies on past data trends continuing

Ratio analysis

Ratio analysis determines resource requirements by evaluating key human resources metrics and calculating ratios like turnover rate. It gives insight into workforce performance and efficiency by comparing ratios against industry benchmarks or themselves over time.

Pros	Cons
• Simplifies complicated data • Quick to implement • It is easy to communicate results to stakeholders	• Lacks nuance • Limited scope • Accuracy depends on the data

Scatter plot

The scatter plot technique visually represents the relationship between two variables and shows correlations, such as how the number of deliverables affects project profitability. 

It’s mostly helpful in indentifying trends, patterns, and outlying data but is limited to two variables at a time and lacks detailed statistical analysis.

Pros	Cons
• Clear visual representation of the relationship between the variablesIdentifies patterns and correlations • Can help with data exploration	• Potential for data overlap and misinterpretation • Correlation doesn’t necessarily mean causation • Lacks detail • Limited to two variables, so scope and complexity are hindered

What is the step-by-step process involved in resource forecasting?

Want to implement some of these techniques? We’ve created this handy step-by-step guide to help you understand the resource forecasting process and stay on track.

1. Define upcoming project needs

First, it’s important to ensure you understand the upcoming project’s scope, objectives, deliverables, and timeline. Identify the tasks that must be completed for the project to succeed and assess the activities required for each task using the work breakdown structure.

2. Assess resource needs

Next, you must establish the number of people needed for the different project phases and the required skill sets and experience levels. Create an estimate of the workload for each phase and the number of hours each team member is required to work.

Using project management and time tracking software to assess past project data can help generate an accurate estimate.

Toggl Plan’s Project Timeline feature lets you view past projects and see how long different tasks took, so you can use this information to inform your decision-making.

You can then use it for the upcoming project to begin resource allocation.

3. Analyze current resource capacity

Now that you know how many resources and work hours you will need for the project, you must determine whether you have enough available capacity. Assess your current team’s availability, skills, and utilization (the Team View in the Toggl Plan is helpful here) and look for gaps.

You can use parametric estimating here to estimate accurately the amount of resource capacity you’ll need. If you have a time tracking tool like Toggl Track, you can analyze historical work hours data from the Project Dashboard to refine time estimates.

4. Develop the resource forecast

For this step, you must choose a forecasting technique from those mentioned earlier and create a detailed forecast of resource needs by month or project phase.

Estimate the number of new hires or contractors needed to fill gaps and account for risks affecting resource availability or capacity, such as employee turnover or unexpectedly difficult tasks.

Use your time tracking tool to monitor the time spent on tasks and adjust the upcoming project’s schedule if needed.

5. Continuously monitor and update

Once the project begins, ensure you monitor actual resource use compared to the forecast and refine the forecast based on performance data and any changes in requirements.

Here, Toggl Track’s Projects dashboard lets users compare estimated vs. actual time spent on tasks. This information is crucial for tracking project progress and highlighting improvement areas in future forecasts.

What factors can influence resource forecasting in a project?

Resource forecasting is impacted and changed by various project factors, including:

• Market conditions
• Hiring methods
• Technological changes and advances
• Changing client requirements
• Team member requirements
• Complexity of project 

Of course, many other factors can influence a resource forecast, but it is beyond the scope of this article to mention all of them. 

Back to you

Effective resource forecasting is a vital tool in project management. It helps businesses mitigate risks, stay within budget, and avoid delays and bottlenecks, ultimately contributing to successful, on-time project delivery. 

However, it often goes wrong when companies don’t use the right techniques or tools.

Using time tracking data from tools like Toggl Track can significantly improve the accuracy of your resource forecasts. Sign up for Toggl Track for free today and start improving your resource forecasting.