A Complete Guide to Resource Allocation in Project Management

Last updated on January 6, 2021

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Resources are limited and also the most expensive investment for any business. Therefore, how an organization utilizes its scarce resources has a direct impact on ROI. Project delivery is adversely affected unless the right resources are allocated to the right project.

A Resource manager needs to consider employee’s skills, qualifications, experience, cost, availability, and specific interests before allocating them to the projects.

Assigning an experienced resource for a generic position can cause lower employee engagement and spike the project resource cost. On the contrary, a junior resource taking up an important role will create employee burnout and affect delivery.

The resource allocation method is an essential component of the project management process. Many successful companies have implemented a comprehensive resource allocation framework with the help of appropriate tools and techniques.

According to a 2017 PMI study, “62% of organizations use resource management tools for resource allocation.
This guide aims to cover the essential aspects and objectives of resource allocation in project management. Before delving deep, let us start with the basics, such as the definition of resource allocation.

#1. What is Resource Allocation in Project Management?

Resource allocation, also known as resource scheduling, involves identifying and assigning resources to various activities for a specific period. It also monitors the resource’s workload throughout the project life cycle and reassigns them if necessary.

Types of Resources:

On an enterprise level, resources can be human and non-human. Some examples of resources for the projects are:

Labor:

They constitute team members or employees and contingent staff with different skill sets and form the backbone of any project.

Equipment/Tools:

It includes everything from software to hardware, depending on the organization’s type.

Facilities:

It comprises the environment needed for executing a project, such as a conference room or office space.

Materials:

These are the consumables required to generate outputs. For example, office stationery, raw materials to build a house.

Budget:

Finance needed to purchase any of the above resources.

A Complete Guide to Resource Allocation in Project Management

#2. Examples of Resource Allocation in Project Management

An efficient resource allocation plan allows the effective distribution of the available resources to several projects. This activity also requires regular updates to achieve the future goal of the organization.

A project manager often needs to carry out delivery responsibilities with fewer resources. So how to do project resource allocation under these circumstances? Does one identify each resource’s primary skill set and assign them to open positions, or is there a better way?

Let’s look at some of the specific scenarios in a project:

  1. Let us take an example of resource allocation in an IT project. Architect positions are critical for delivery. They are expensive and less in numbers. They need to be involved at the beginning of the project for system design related work. In this case, can I afford to dedicate an architect to a specific project, or they need to work on multiple projects?
  2. The second example could be when a project manager tries to deliver several projects with fewer resources. Should I put some of the low-priority projects on hold or extend its timeline as there is a resource crunch? Shall I allocate my existing resources only for the high priority projects?
  3. In another resource allocation example, let us assume that one has the required capacity and enough work in hand. But there is a mismatch in the skill set among the available resources. So, how do I effectively utilize the existing resources by building secondary skills? Can I take the risk of allocating a resource that matches approximately 60% of the job description?
  4. There are many projects. But the tasks do not require full-time involvement of the resources. In this situation, how do I ensure that I do not over/under allocate a resource?

These are all pertinent questions and do not have any standard answers. The decision on resource allocation in a matrix organization depends on its current situation and immediate priorities. At times resources may need to be out rotated from a low-priority project with suitable backfill depending on business priority. These are some of the examples of resource allocation problems in a dynamic business environment.

A Complete Guide to Resource Allocation in Project Management

#3. What are common Resource Allocation Problems in Project Management?

Although resource managers initially conduct the allocation process, continuous change in project demands makes it a daunting task. Let us analyze some of the common resource allocation problems.

3.1 Use of legacy tools or spreadsheets:

Many organizations are still using homegrown half-baked solutions like spreadsheets for project resource allocation because it is readily available. These legacy tools fail to provide accurate real-time data for resource allocation, leading to discrepancies and double bookings. Spreadsheets are incredibly time-consuming, limiting, and a nightmare to maintain.

According to Marketwatch, “88% of spreadsheets have errors.

3.2 Frequent changes in project scope:

In an agile world, the project scope can change anytime during its lifecycle. Change in project requirements can lead to fluctuating resource demands. So, without an updated resource schedule, frequent allocations to meet the dynamic demands becomes challenging. Sudden closure of a large project will also increase the bench size that can affect the bottom line.

3.3 Unable to predict resource availability:

While allocating resources to a project, resource managers typically look at the existing resource pool. Additionally, they need to have a backup contingency resource allocation plan rather than entirely relying on a specific person. Some team members can suddenly fall sick, or it may be difficult to get time out of a shared resource because of other commitments. Since resource availability can suddenly change, it can be a roadblock in project resource allocation.


The Comprehensive Guide to Resource Capacity Planning

3.4 Project uncertainties causing delays:

Even after meticulously ticking all the checkboxes such as project scope and constraints, uncertainties can crop up anytime during the project lifecycle. There could be a delay in the project start date, and you may need to block certain resources without billing. Project managers must promptly respond to these project uncertainties, e.g., dynamic resource allocation, including juggling resources within projects or reassigning them.

3.5 Limited resources in a multi-project environment:

Some organizations run multiple projects simultaneously, which means sharing limited resources to complete the delivery. Negotiating with other project managers over the same resources could lead to a change in project priorities for one of the projects. It also means that one of the other projects gets stalled and eventually delayed.

3.6 Lack of knowledge and communication:

Sometimes, project managers lack business knowledge. Due to communication gaps with the team members, they cannot estimate the resource requirements on time. With an incorrect resource demand, the project lands up with either an excess or shortfall of resources. It gets noticed during the execution, and the project can get adversely impacted. Excess resources will blow up the project cost, where fewer resources can cause delivery delays.

3.7 Location and time zone differences:

Due to globalization, many organizations have implemented an onsite/offshore/nearshore strategy to control cost. Resources are allocated in different geographies covering different time zones for the same project. As a result, there is a lack of coordination between the key members, which can cause project delays. Limited overlapping business hours between the two countries can only provide a small window to hold important meetings and knowledge sharing.

A Complete Guide to Resource Allocation in Project Management

#4. Importance of Resource Allocation in Project Management

Unavailability of a critical resource can cause project delay and adversely affect overall task dependencies.

According to PMI, “50% of projects fail to deliver on time out of which 23% cite poor resource allocation as the primary cause”.

A systematic resource allocation process ensures that resources are available when required. Let’s look at some of the benefits of resource allocation in project management.

4.1 Minimize project resource cost significantly:

Resource allocation tool helps you to identify and allocate the best-fit resource instead of first-visible resources. It enables you to deploy cost-effective global resources across matrix boundaries, thereby reducing project resource costs significantly. Resource allocation in project management maintains profitability by uniformly distributing resources across all projects instead of assigning them to a high priority one.

Deloitte Global Cost Survey reveals, “Cost reduction scores over other business initiatives.

4.2 Maximize profitable resource utilization:

Simply assigning all your resources to projects does not ensure profitability. They could be working on non-billable or mundane operational tasks. Businesses must ensure optimum resource utilization, and resource allocation helps achieve that and more. Using real-time information and forecasting methods, resource managers can take corrective measures to avoid under or overallocation in advance. Mobilizing resources from non-billable work and allocating them to strategic/billable work ensures profitability.

A Complete Guide to Resource Allocation in Project Management

4.3 Find the right resource using centralized visibility:

A resource allocation tool captures resource-related information in real-time and consolidates them on a centralized platform. 360-degree visibility helps assign resources to projects based on qualifications, skills, experience, availability, costs, and other selection criteria. Centralized visibility and real-time updates avoid data redundancy and discrepancies that could lead to double booking chaos. It is one of the significant benefits of resource allocation.

4.4 Deliver projects on time and within budget:

Delivering projects on time and within budget ensures project success, increases client satisfaction, and maintains your organization’s reputation. Resource allocation in project management ensures that under or over skilled resources are not assigned to projects. Underskilled resources cause project delays, whereas overqualified team members can spike project resource costs. Therefore, resource allocation is critical to project management.

4.5 Diversify employee skill sets for increased billability:

Encouraging employees to possess multiple skills enhances their billability. Allocating resources on different projects allow them to build secondary skills in addition to sharpening their primary skills. Focused training programs and on the job experience further helps them to improve their capabilities. Secondary skills come in handy to make them billable if they are not deployable using primary skills.

4.6 Solve resource constraints with smart allocation techniques:

In a multi-project environment, intelligent allocation of resources involves generating more ROI using the existing pool. What-if analysis allows you to build different scenarios and simulate each of them using the resource constraints. After comparing and analyzing each scenario, resource managers can help arrive at the best possible outcome. It can then be applied to the project schedule.

4.7 Improve employee engagement and productivity:

One of the resource allocation approaches involves assigning resources to project tasks based on their skills and interest. Providing an environment for self-development, skill-building, and staying abreast with current technology-trends, motivate them. By giving them the right opportunities, resource managers can effectively manage the bench and improve overall billability. The employees also feel more responsible and take ownership of their job, which increases engagement and productivity.

A Complete Guide to Resource Allocation in Project Management

#5. What are the Steps of Resource Allocation in Project Management?

Resources can be either fully or partially available. Resource managers need to consider this while making allocation decisions that ensure optimum utilization.
So, how do you allocate resources in a complex project environment? In this section, we describe the essential steps of resource allocation in project management.

5.1 Create a project plan using an appropriate tool

It is necessary to divide each project into several tasks and create their dependencies. This process is known as work break down structure (WBS), and it is the minimum requirement to create a project plan. Two tasks can be executed either sequentially or in parallel based on their relationship.
The critical path within a project plan determines the minimum time required to complete the project. This information can be used within a project management tool to provide a Gantt-chart view. Resource allocation is an integral component of this process because resources are assigned to each task for its completion.

A Complete Guide to Resource Allocation in Project Management

5.2 Identify resource requirements for project tasks

Once the project is successfully divided into tasks, the resources can be assigned as appropriate. The task may require both human and non-human resources, depending on the nature of the work. For human resources, it is necessary to identify the skills and competencies. For a non-human resource such as machinery, determine the equipment specifications before assigning to a task.

PwC Project Management Insights states, “30% of project failure results from lack of resources.

5.3 Find available resources with matching skill set

Using resource allocation software, one can easily identify the availability of a resource within the pool for matching skills. It is also possible to search for equipment with matching specifications that can be used for a specific duration. The tool provides a mechanism to update each resource’s skills and competencies in real-time with proper verification.

5.4 Bridge the demand-capacity gap using multiple channels

If a human resource with the matching requirements does not exist, one can hire or use contingency resources. Similarly, if the said equipment is not available, it can be taken on lease or procured depending on the resourcing strategy. All relevant costs need to be factored into project financials. Once the resources are selected for a specific project, the resource allocation process begins.

A Complete Guide to Resource Allocation in Project Management

5.5 Allocate resources as per demand

Once the resources are identified and established, they are assigned to specific tasks. Sometimes the resources may not be available when they are needed to perform the task. If you opt for a new hire for a specific task, the person may decide not to join at the last moment.
It may be necessary to have a backup plan for this resource. For critical positions, the person could be asked to join a little early so that he/she is available when work starts.

5.6 Re-allocate resources between projects if required

Re-allocation of resources is necessary during the project life cycle for various reasons. A resource may have performance issues which may need replacement. A resource with a niche skill may be required in another high priority project.
So, one needs to out rotate the person with a suitable backfill so that the current project does not suffer. Some of the positions can fall vacant due to attrition and needs replacing. The project manager also can rotate resources within the same project with different roles.

5.7 Track and monitor resource usage

It is necessary to track the performance of each resource to implement an effective resource allocation process. In an ideal situation, the resource must not be over/under-allocated or over/underutilized.

However, it is very difficult to ensure this for every resource when you have a large pool to manage. The experience of the project manager and some amount of subjectivity plays a big role in deciding this. The dashboards and reports from resource allocation software can help in decision making.

A Complete Guide to Resource Allocation in Project Management

#6. How to Solve Runtime Resource Allocation Challenges?

Most of the resource allocation related activities take place during the initiation phase of a project. The projects can be short-term or long-term, and resource demand can vary. The project may require additional resources, or some of the existing resources may need to be rolled off. But what happens if the initial resource allocation goes wrong as you have onboarded incompatible resources in a hurry?

It can create a major stumbling block in the delivery and must be course-corrected ASAP. We refer to this situation as a runtime resource allocation challenge. Following techniques can mitigate some of these challenges as a part of a new resource allocation strategy.

Resource Leveling

In this case, the start and finish dates of the projects are adjusted based on resource constraints. One can adjust the project timeline, but it isn’t easy to get additional resources. For example, the research projects may have this kind of flexibility. The manager needs to rework and create a revised schedule to identify the new completion date using given resources.

Resource Smoothing

There is no flexibility around the project timeline in resource smoothing, and the work must complete within a specific time. However, the project manager has the flexibility to add and remove resources during the lifecycle as required to deliver the time-bound project. Availability of resources is assumed.

Additional mentoring using SME

If the existing resources do not meet the 100% requirement, they can be given additional opportunities to learn on the job. Positions requiring multiple skills are challenging to fulfill.
A person meeting a certain percentage of the requirement can be given a chance with additional mentoring. It is provided by identified subject matter experts (SMEs) to fast-track his competencies. The SMEs could be either external persons or someone within the project.

Independent Audit

An independent audit can be carried out if there are governance issues that has resulted in an improper allocation of resources. Experienced project managers usually do this within the organization or with the help of consulting firms. The concerned person needs to engage with both the client and the internal team to bring the project back on track.

If the resource allocation strategy is flawed at the beginning of the project, it can derail the overall delivery objective. It is expensive to revisit resource allocation when the project is in execution mode. Every project manager would like to avoid such a situation. But unfortunately, this can happen due to many factors that are beyond their control.

A Complete Guide to Resource Allocation in Project Management

#7. Summary of Resource Planning and Allocation

In conclusion, we describe some of the resource allocation best practices:

Do’s

  • Know the scope of your projects before carrying out resource planning and allocation. Is it a big or small project, long or short?
  • Use proper resource planning and allocation tools to get a 360-degree view of all resources. It includes their skill, availability, booking details, etc.
  • Establish a well-documented resource requesting process
  • Get visibility of your pipeline projects in advance. Plan allocation with ghost resources that can be replaced by actual resources later.
  • Build a strategy for contingent resources and freelancers in addition to full-time resources. Establish a few vendor organizations that can provide resources quickly. They can be utilized for short-term assignments.
  • Encourage employees to acquire multiple secondary skills in addition to their primary skills. It will help to place them in a billable role.
  • Encourage project managers to accept a certain number of resources matching 60-70% actual requirements. The remaining skill can be acquired on the job.
  • Plan for runtime resource allocation for some of the high-priority projects.
  • Track your scheduling details using resource allocation reports. Plan for the resources which are getting rolled off from the project on specific dates.
  • Have an overall risk and its mitigation strategy on resource allocation for individual skill sets with particular emphasis on niche skills

Don’ts

  • Do not over or under allocate resources. Burn rates will ultimately result in unplanned attrition.
  • Balance the resource allocation activities across the organization. Do not give priority to certain projects at the cost of others.
  • Do not allocate contingency resources for long-term or strategic projects. These positions need to be filled with regular full-time employees.
  • Avoid hiring regular employees if you have short-term requirements and do not have visibility for future work. The contingent workforce can do this; otherwise, this will result in a higher bench.
  • Reduce hiring/firing cycle for the resources. It will give a bad reputation to the organization. It can be controlled using effective resource capacity planning.
  • Do not assign critical or expensive resources to the non-billable activities. This will be a waste of their skill set. Juniors resources or trainees can pick up non-billable tasks.
  • All the high performers should not be allocated to a single project. Each project needs to have a combination of some high achievers, some average, junior resources, and contingency staff. It will help to create proper band-mix and increase profitability.

#8. The Glossary:

A Comprehensive Guide to Resource Planning in Project Management

#9. The Saviom Solution:

SAVIOM is the market leader in offering the most powerful and configurable Enterprise Resource Allocation and Scheduling solution. Having more than 20 years of experience, this Australian based MNC has a global presence in over 50 countries and more than 100 customers. SAVIOM also provides smart solutions for project portfolio management, professional service automation, and workforce planning software.

Please contact us to discuss your business challenges and significantly reduce project resource costs!

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Sudeshna Negi & Punya Palit

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