Categories: Capacity and Demand
There are two aspects to capacity management—its relationship to stability and uncertainty, and the measurement of its variables.
Managing capacity involves:
- monitoring the supply of, and demand on, adaptation capacity, and, when necessary,
- making adjustments in order to operate in “The Zone” (a space for pursuing as much change as possible while minimizing the negative effects of future shock).
As I stated in the first post of this series, future shock occurs when the demands of change exceed a person’s or group’s capacity to properly deal with its implications. (This is reflected in their inability to maintain productivity, quality, and safety standards). At first glance, you might assume that future shock is something to avoid at all cost. However, that’s not what I’ve seen from leaders who consistently achieve their change objectives. In fact, some of the most predominant lenses and patterns associated with success are the ones that help keep an organization on the cusp between order and chaos.
Although this juncture between predictability and pandemonium is clearly a risky place to attempt critical transitions, it’s also where we find maximum flexibility. I labeled this point, where order and chaos most closely resemble one another, as The Zone. This is where people and organizations have both the greatest likelihood of becoming overwhelmed with instability, and the greatest possibility of adapting to uncertainty. The purpose of capacity management is to monitor the balance between too much and too little change and operate an organization at the boundary point between the two.
Measuring Demand and Capacity
Strategic assets are vital to an enterprise’s future, highly sought after, protected once secured, and not easily replaced. The ability of people to operate under turbulent conditions without becoming overly dysfunctional (i.e., unable to maintain productivity, quality, and safety standards) unquestionably creates a competitive advantage. As such, it should be treated as a strategic asset. To do this, capacity must be explicitly managed. However, it is impossible to manage a process unless it is measurable. Therefore, what follows are the key aspects of measuring change-related demand and capacity.
The demands a change imposes (the amount of energy it will consume) are determined by many factors, but they can be grouped into five categories:
- Timing: Is the change coming at people quickly? Is there time pressure to effect the change? Was the initiative a surprise, leaving little time to plan?
- Scale: Are a significant number of people affected by the change? Does it require shifts beyond the primary location where it is being implemented? Does the initiative have a major impact on the business performance?
- Resources: How many people are needed to execute this change? Does the funding represent a sizeable investment? Will new or upgraded technology be required?
- Complexity: Does the initiative require balancing multiple variables at the same time? Is it dependent on others’ initiatives falling into place? Is it difficult to explain? Does it involve challenging activities with which people have had little or no prior experience?
- Culture: Does the initiative require significant shifts in established routines or how people generally operate on a daily basis? Does it require any fundamental changes in how people think about their work, their customers, or their roles?
For each of the first four factors, we can assign a rating that indicates a high, medium, or low energy drain during implementation. Those ratings can then be added together to determine their cumulative impact. The fifth factor (culture), however, has a different relationship to the others and is actually a multiplier of the first four. This is because a change in set patterns of behaviors and mindsets drains more energy during implementation than any of the other variables. Even more important, when energy is spent dealing with cultural change, it causes each of the other factors to be more taxing than would otherwise be the case. Therefore, when calculating how much demand is currently impacting or will impact people who are trying to accommodate a major change endeavor, culture should be viewed as having a multiplying, not an additive, affect.
Therefore, the formula used to determine the load carried by people trying to accommodate change looks like this:
CHANGE DEMAND = (Timing + Scale + Resources + Complexity) x Culture
Calculating demand is fairly straightforward compared to measuring capacity. Rather than taking a head-on, linear approach, capacity has to be measured indirectly because the metric being sought is the “remaining” energy available for addressing change—how much is left after other changes have taken their toll.
To measure available capacity, focus on five factors:
- Performance: Are productivity and effectiveness levels dropping? Is preventable overtime increasing? Is less being done (or costing more or taking more time)?
- Quality: Are quality-related concerns increasing? Is more time being spent on fixing mistakes? Are customers complaining about service?
- Safety: Are incidences of physical injuries increasing? Do people report feeling more at risk of danger?
- People: Are the people in the organization, and their relationships with each other, healthy (effective, honest, supportive, etc.)? Are there accelerated absences or stress-related symptoms? Are there signs of communication or decision-making problems?
- Progress: Are projects behind schedule? Running over budget? Consuming more resources (or returning worse results) than planned?
The five factors combine to determine the load carried by people trying to accommodate change. Calculating demand and available capacity are key steps toward understanding and managing capacity.
Next: Putting it all together—The Mechanics of Capacity Management