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Demand and Capacity Planning Done Right

A recent study cited that more than half of U.S. employees feel overworked or overwhelmed at least some of the time and 70 percent say they often dream of having a different job. [1] The Japanese have a word for this risk and they call it muri (無理), which translates into unreasonableness, impossible; beyond one’s power; too difficult by force; perforce; forcibly; compulsorily; excessiveness; immoderation. [2] From the employee perspective, this definition is accurate.

An additional quote demonstrates that most of this stress is created by leadership:

When employees said they worked long hours due to external factors, such as employer demand, they reported more feelings of overwork, compared to those employees who said they worked long hours for personal or financial reasons.

The study goes on to cite several risks this poses to companies including, but not limited to, health risks to employees, lost productivity, safety issues, and, ultimately, impact to the bottom line. So, if overworking employees have such a negative impact on a company’s ability to survive, why is this problem so pervasive? Are leaders malicious? Do they just not care? In a few cases, yes. But let’s take a deeper look at a third more likely alternative: demand and capacity planning requires a holistic, disciplined approach that most fail to follow. Let’s take a closer look at what that approach looks like.

Understanding Demand

Start by understanding your demand. There are 4 important steps to do so. 

Step 1 – Define what jobs are done to meet your customer demand. This may seem like an obvious step, but most operations fail to account for just how many jobs their employees do.  For example, at a healthcare client, Medical Assistants perform three main jobs to support a patient visit: room prep, patient pull, and urine drug screen. However, they also perform several other jobs to support the patient visit, including, but not limited to, triaging calls, checking referrals, and checking faxes. These jobs are often taken for granted, but require capacity. A key point is to be holistic and brainstorm all the jobs that are done. 

Step 2 – Standardize how the job should be done. This is an important step in converting your demand into a unit of time. There are several key points to do this correctly. First, creating a job instruction breakdown sheet for each job will help capture the best-known way of doing the job now. This is the foundation of understanding and improving a job. A good resource on how to do this is The TWI Workbook by Graupp and Wrona. Second, time studies should be conducted on employees who can do the work to understand the standard cycle time or amount of time it should take to complete the job.

Step 3 – Understand your demand patterns per unit of time. The first key point here is to look for patterns. Even variable demand has a pattern to it. For example, Mondays and certain hours of the day may have a pattern that are distinct from the rest of the days of the week or hours of the day. This will be easier for businesses that have routine, predictable demand patterns, but can be done for those that don’t. In fact, it is more important to try and find the patterns in those that don’t. Another key point is to engage with sales and understand what forecasted demand will look like. Too often, operations are not synced with sales targets and, as result, cannot properly prepare for what’s to come.

Step 4 – Now that you have done steps 1 – 3, you have all the necessary information to convert your demand into a time unit. The key point is the multiply the standard cycle time for each job by the demand for a certain time period. For example, if you expect 20 units of demand in a day and it takes 30 minutes to complete each job, then you have 600 minutes of total demand.   

Understanding and Creating Capacity

Now that you have a firm grasp of your demand, it’s time to start understanding and creating the capacity to properly meet this demand and move towards eliminating muri. There are also 4 important steps to do so. 

Step 1 – Train and track who can perform a job per the newly defined Job Instruction Breakdown Sheet. To stay consistent with the TWI methods, Job Instruction should be deployed. This method was deployed in WWII and demonstrated a 25% reduction in training time. Today, thanks to the work of Patrick Graupp and others, companies like Lego have utilized the strength of TWI to eliminate variability and deliver products and services quicker, better, and at a lower cost. The use of a Job Instruction Training Timetable should be used to set target dates for and to train employees on various jobs.

Step 2 – Once employees are trained and you confirm they can properly do a job, you can start assigning their work hours to a particular job. A key point is to determine how many production hours each employee has to actually work. The typical response is “eight,” but too often this doesn’t account for breaks or non-production activities employees might be required to do, such as huddles or special projects. Another key point is to start assigning those employees capable of performing the least amount of jobs first, as they will have the least amount of flexibility. This is like playing a game of tetras in many ways.

Image 1 – The original Job Instruction Card

Step 3 – Understand the gap between your demand and your available capacity. Once you have exhausted and assigned all the working hours available, most likely you will come to a scary realization: you have employees who are paid to be at work without the capabilities to properly perform a job. This often puts more pressure on those who can. Do not panic. Remember, this has always been the case. The only difference is that now you have visibility into the problem and that’s always the first step required to do something about it, which brings us to the next step.

Step 4 – Deploy countermeasures. There are several strategies to use here. The first one people run to too quickly is to add headcount. However, I would encourage holding off on this strategy. The first one should be to train and create capacity using the TWI techniques highlighted above. If you hire new employees, you will still need to train them, in addition, to onboarding them, which could involve more effort than upskilling the employees you have.

The second strategy to consider is utilizing overtime. This can be costly, but when coupled with the demand and capacity plan outlined in this paper allows a minimal impact on the customer.

The last strategy to consider, and one that companies too often ignore, is trying to control your demand: both the amount, the complexity, and when it is received. Depending on your gap, sometimes slowing down and simplify what kind of business you take on will allow you to deliver better customer value until you can build up your capabilities. Also, smoothing out the demand reduces the burden on employees and should be considered.

Deploying these three strategies creates a strong foundation that allows you to work on matching your capacity to your demand, at which point, adding staff and growing make sense.


It is important to realize that there is no right answer on how long it should take to complete Steps 1 – 4. However, there is a paradox that exists for those who do it successfully: they often create capacity for employees to go through these necessary steps required to, well, create capacity. This may seem counterintuitive and those who are deterred will most certainly see their business deteriorate. If leadership doesn’t create time for employees to improve the work, then, as they say, the work isn’t going to improve itself. Some successful strategies that I have utilized include a 3-5-day improvement event fully dedicated to these steps in times of anticipated low demand or utilizing weekends to not impact production (and, yes, employees are paid for their time).  Another key point is to leverage a Sensei or one who has experience in successfully guiding clients through the above-mentioned process. If you are going to invest time in the process, you can’t afford to waste it. 

Those who do adhere to the steps in this blog will realize the greatest reward: a balanced and happy workforce that delivers value and helps create a competitive edge. They deserve it. Your clients deserve it. You deserve it.


[1] Study: U.S. Workers Burned Out, ABC News, May 16

[2] https://en.wikipedia.org/wiki/Muri_(Japanese_term)

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