New Year, New Challenges: Effective FTE Planning in Capacity Management
Back from the holiday hiatus, I hope you all had a delightful holiday!
Oneof the first tasks I tackle upon returning from the holidays, which coincides with the start of most companies' fiscal years, is reviewing the actual Full-Time Equivalents (FTEs) versus the budgeted FTEs. This is a critical juncture for a capacity planner, who typically encounters one of two scenarios:
Scenario 1: Actual FTEs Exceed Budgeted FTEs
In capacity planning, you have the option to either realign the actual FTEs with the budgeted ones or let the higher count of FTEs pass through the system. Reasons to avoid immediate realignment include:
- Favorable factors such as base salary, bonus, and fringe rates used in the compensation budget can balance the extra headcount cost.
- Savings in other cost centers can offset the excess FTEs, smoothing out early-year capacity constraints.
The key is to consider whether immediate correction is necessary. Reflect on your company’s main goals, favorable factors, and leadership’s view on the excess before taking action. Remember, it's the start of the year, and there are many opportunities to adjust, including modifying future hiring plans.
Scenario 2: Actual FTEs Fall Short of Budgeted FTEs
Personally, I find this position preferable, provided it doesn't create early-year capacity issues. It offers more flexibility as a capacity planner. For instance, saving on one FTE from January to August allows for significant savings, which can be reallocated later. In my company, the peak season is in September, so saving one FTE for eight months enables hiring two additional FTEs from September to December. However, this approach can lead to starting the following year with a higher headcount than budgeted, but this can be managed with other strategies.
Similar to the thought process above, the main takeaway is not to rush into realigning FTEs. Assess your organization's capacity and determine if the changes in FTEs are necessary. In the second scenario, if the reduced FTEs aren't needed immediately, you gain flexibility for busier periods.
The start of the fiscal year presents unique challenges and opportunities in capacity planning. Whether you find your actual FTEs above or below the budgeted figures, the key is to approach the situation thoughtfully and strategically. By considering your company's broader objectives and potential adjustments throughout the year, you can make informed decisions that align with both immediate needs and long-term goals.