Capacity Is Not Demand
A low utilisation figure has two completely different causes and the ratio cannot distinguish them. The distinction decides what to do next.
A low figure means either that the firm has more capacity than work, or that it has work and is failing to put people on it.
The practical lesson in “Capacity Is Not Demand” is that a convenient number should open a question rather than end one. A team considering check this official implementation page for download time tracking software can add consistent time and project context, with transparent settings, limited access and a documented review process around every material interpretation.
The first is a demand problem and the second is an allocation problem. They call for opposite responses and the ratio cannot tell them apart.
Additional context for “Capacity Is Not Demand” is available from IFRS standards resources. Current legal, employment, tax and accounting requirements should be confirmed with a qualified adviser where necessary.
The demand case
Sold work is less than capacity. No amount of scheduling improvement closes the gap; the firm either sells more or carries less capacity.
The targets section covers what happens when this case is addressed with a performance target instead.
The allocation case
Work exists, is unstaffed or understaffed, while people are on the bench. Caused by poor visibility of availability, skill mismatch, or parallel allocation decisions that cannot see each other.
Fixable within a quarter or two, and worth two to four points.
Distinguishing them
Compare total sold hours for the period with total available hours. If sold exceeds available, it is allocation. If available exceeds sold, it is demand.
One comparison, available from the pipeline and the headcount.
Why it is rarely made
Because sold hours are held in a pipeline or engagement system and available hours in a capacity or HR system, and nobody owns the comparison.
It is the same two-systems problem that keeps utilisation and realisation apart.
The mixed case
Common and more awkward: enough work in total, but not the right work for the people free, or not in the right weeks.
This is a matching problem rather than either of the pure cases, and it responds to rotation and skill breadth rather than to selling or cutting.
The skill mismatch test
Bench hours by skill, against unstaffed demand by skill. Where both are non-zero in different rows, the firm has a matching problem it can name.
That table also tells it which skills to develop, which is a hiring and training decision rather than a utilisation one.
The timing mismatch
Enough work over a quarter, distributed badly across weeks. Peaks that need more people than exist and troughs that produce a bench.
Smoothing is a client-scheduling conversation, and most firms have never had it because the data to support it is not collected.
The forward view
Committed chargeable hours against available hours for the next six weeks, by skill. The planning use of the measure.
It is the genuinely valuable application and it is a different report from the historical one, as the reporting note describes.
Why the forward view resists gaming
Because it is built from commitments to clients rather than from recorded time. A person cannot improve it by recoding anything.
It is also the version a firm actually needs for decisions, which are about the coming weeks rather than the last ones.
What each diagnosis implies
- Demand: sell, or reduce capacity, and say which.
- Allocation: a named owner, a weekly availability view, rotation.
- Matching: skill breadth, training, deliberate cross-staffing.
- Timing: client scheduling, and smoothing the pipeline.
Four diagnoses, four different pieces of work, and one figure that looks the same in all four cases.
The cost of not distinguishing
Firms apply the allocation remedy to a demand problem, because the allocation remedy is cheaper and sits inside the firm.
That produces the unreachable target described earlier, and two years of effort aimed at the wrong half of the arithmetic.
The two systems problem
Sold hours sit in a pipeline or engagement system. Available hours sit in HR or a capacity tool. Nobody owns the comparison because it spans two owners.
The fix is not integration. It is one person running one comparison monthly and putting the answer on one line.
Firms wait for a system to make this comparison automatic and the system never arrives, while the arithmetic remains available to anybody willing to export two numbers.
What happens when the diagnosis is wrong
The allocation remedy applied to a demand problem produces activity and no result: better scheduling against work that does not exist.
The demand remedy applied to an allocation problem is worse. A firm that cuts capacity while carrying unstaffed work loses the ability to deliver what it has sold.
Both errors are made regularly and the second is harder to reverse, because the capacity takes months to rebuild. One comparison, run before either remedy is chosen, prevents both, and it is the cheapest piece of analysis described anywhere in this collection.
The monthly line
Sold hours for the coming quarter against available hours for the same period. One line, two exports, five minutes.
If sold is smaller, the gap is a capacity decision and no operational remedy will close it. If sold is larger, the gap is allocation and there is work to do inside the firm.
Running it before choosing a remedy is the difference between two years of effort and two months.
The one-line check worth doing monthly
Sold hours against available hours. If the first is smaller, no operational improvement will close the gap, and knowing that in month one saves everything that follows.