Is it possible to talk about project management without talking about risk? Modern businesses and professionals understand that when it comes to managing projects and staying ahead of the competition, it’s necessary to manage a myriad of resource-related risks. These include lack of key skill set, talent shortage, lowered productivity, and more.
As per the Gartner risk management summit- One of the major resource risks is the increasing skills gap in the organization as 80% of organizations face a hard time finding and hiring skilled professionals.
While certain traditional risk management techniques may have served the industry in the past, however, these strategies typically fail to evaluate and prioritize risks. In addition, it becomes more challenging when managers need to handle these resource risks simultaneously for several projects.
One effective and reliable way to control these resource-related risks is by adopting comprehensive resource management software. It facilitates managers with data-driven insights to forecast risks and monitor them in real-time to stay ahead of the curve.
To begin with, let’s first understand the various resource-related risks and how resource management solutions will help mitigate them efficiently.
1. What are resource-related risks?
Resource-related risks are the set of unexpected events that have a negative effect on projects and businesses if they occur. For example, prolonged absenteeism of a resource can hamper the project timeline and contribute significantly to project delays.
According to PMI, Resource risks represent less than one-third of the records in the PERIL database, but their impact is significantly higher.
Some of the resource-related risks include:
A. Lack of critical resources
In a dynamic project environment, the lack of visibility and absence of a resource forecasting system leads to inappropriate resource planning, resulting in skill shortages. Sometimes a project requires niche skills with a minimum experience level to complete a specific task. These positions are difficult to fill and need significant lead time for hiring from the market. Last-minute firefighting for resources, leading to wrongful hiring, can significantly compromise the project quality.
B. Employee burnout
Employee burnout is considered a broader organizational challenge. Many managers continue to over-allocate resources without having complete visibility of their existing bookings and availability. As a result, resources experience stress at work and eventually burnout. Furthermore, the absence of proper tools can cause double bookings that add to resource overloading, and severely affect employee morale leading to decreased employee engagement and satisfaction.
C. Escalated project cost
While there can be many reasons that blow up your project cost and cause budget overruns, acquiring high-cost resources is one of the reasons. Sometimes, your project may experience sudden changes in the scope, and then you may be required to add more resources that were initially not factored in. In addition, assigning over-skilled resources and constant hiring/firing cycles will also add to the overheads and adversely affect project profitability.
D. Lowered productivity
Scheduling the resources against the employee interests and skills, setting unrealistic expectations, improper allocation, underutilization all result in decreased productivity. This will reflect in the project’s performance, causing project delay. It will adversely affect the project’s quality and lower down employee morale and productivity.
E. Outsourcing risk
Outsourcing results in more than a quarter of resource risks. The search for the right resources for a project contributes to project delay. Another risk, particularly with offshore contractors, is replacing staff with new resources at the eleventh hour. It results in additional training, knowledge transfer, and relationship building, which affect the project’s timeline and cost.
F. Increase in bench size
When the major activities or tasks of the execution phase are completed, non-critical resources are frequently rolled off. This sudden ramp down of resources leads to an increase in bench size. Other reasons include last-minute project cancellations or a project being struck due to budgetary constraints. If this happens, the firm risks losing its talent and financials significantly.
G. Absence of succession planning
When someone in a leadership position or key resources leaves the company, there is a noticeable gap to fill. The absence of succession planning can widen the demand gap, and the unavailability of a critical resource can even halt the project. It will create a volatile work environment leaving other employees demotivated to do their jobs. It also results in increased workload, jeopardizing the quality of deliverables.
As per Gartner, it is critical to have a quality bench of leaders and a solid succession management process.
These are some of the common resource- risks in project management. Let’s know the significance of risk management that drives projects to success
2. Importance of mitigating resource-related risks in project management
As projects rely on various types of resources like human, financial, physical to achieve their objectives and goals, it is critical for the organizations to manage the resource risks effectively. Failing to do so will jeopardize project timelines, budgets, and overall outcomes. Efficiently managing the resources enables managers to prevent overallocation and underutilization which results in increased productivity and reduces cost overruns.
Furthermore, resource-related risks like the non-availability of critical resources or procuring key personnel will negatively impact the project timelines. Hence, managing these risks effectively will ensure that suitable resources are available for the projects and timely completion of project milestones.
Inefficient resource management can lead to budget overruns, improper allocation, or unexpected expenses. By implementing effective risk management techniques, organizations can identify cost escalators, monitor resource expenditures, and make informed decisions to control project costs.
Risk management enables managers to recognize the knowledge and skill gaps and address them through training programs, hiring efforts or by reassigning resources to ensure the project has the necessary competencies. In addition, managers can develop contingency plans to mitigate the impact of unforeseen events, ensuring project continuity and reducing the likelihood of project failure.
Lastly, by managing resource-related risks managers can establish credibility and trust among stakeholders, leading to improved satisfaction and project success.
Resource risk management is an essential component of project management. Let’s understand some of the steps to determine resource risks.
3. Steps to assess project resource risk
Resource risks can negatively impact the project’s progress and profitability. Therefore, to ensure successful project delivery, project managers must create a risk management framework to mitigate resource risk effectively.
But, where will you begin to assess your risk related to project resources? And how to draw out an intelligent contingency plan ahead of time?
Here are the necessary steps to formulate one:
A. Forecast potential resource risks
Before initiating the project, the project in charge will assess all resource-related risks. He/she will first begin by identifying the type and nature of resource requirements and then determine the factors that may simulate the risks.
B. Risk assessment
It is a systematic process to evaluate the potential impact of risks when it occurs. Most commonly, risks are categorized into low-priority and high-priority. Then it is reported in the “Risk Register.” Furthermore, the risk register allows a project manager to assign a resource responsible for resolving it.
C. Risk action plan
The risk action plans are a go-to guide in case the “unexpected” event happens. A risk mitigation plan is created to ensure that the right actions are carried out promptly. It focuses on implementing reasonable control measures to eradicate or lessen the impact of these risks if they do occur.
D. Monitor & control risks
This process involves implementing risk strategies in project management, monitoring residual risks, and reviewing the strategy at regular intervals. In addition, it evaluates the effectiveness of risk response plans and contingency plans throughout the project. Thus, it ensures that no risk is overlooked.
Knowing the steps in assessing the resource risks in projects, let’s understand some of the best methods to mitigate resource risks effectively.
4. How to mitigate resource risks in project management
According to the study by Gallup, Inappropriate risk management practices would lead to major losses in business and market value.
Therefore, not being able to mitigate them ahead of the curve can affect the project’s health. It will also negatively impact the firm’s finances and eventually cause loss of business.
Resource management helps to manage and mitigate resource risks in today’s dynamic project management scenario. It helps you form a resource plan intelligently and continuously optimize your workforce.
A. Foresee project resource demand to avoid shortage of resources
Once a pipeline opportunity reaches a predefined percentage or an approval stage, project managers estimate the resource requirements and initiate the resource requisition process. Then the resource manager assesses the resource pool across the enterprise and identifies skill shortages well in advance. They can then implement resourcing treatments to bridge the gap effectively.
Training, upskilling, out rotation/backfill strategy for niche resources are some of the measures that help bridge the skills gap and avoid shortage of resources. It also lets you avoid wasteful hiring/firing cycles to ensure projects are successfully delivered.
B. Implement resource optimization and eliminate employee burnout
Managers are responsible for generating positive employee experiences and reducing work stress for employees. With the right forecasting tools, managers can help resources to manage their workloads with ease and enhance productivity.
Resource optimization techniques help project managers to complete deliverables with minimal obstruction. They can implement resource smoothing and leveling techniques to optimize the resource schedule. These resource optimization techniques keep a tab on the resource health index. It helps to allocate work based on resource availability, ensuring that no resource is overutilized.
C. Leverage cost-effective global resources across the matrix boundaries
Proactive resource planning across matrix boundaries enables you to identify and allocate cost-effective local and global resources by skills. It helps in reducing project resource costs significantly without compromising the quality. Replacing high skilled resources with low-cost generic ones with similar skill sets helps control the budget.
Instead of the first visible first fit, managers must assign the best available best fit resources to the projects. It further contributes to cost reductions by distributing highly qualified and costly resources across all projects rather than allocating them to a single project.
D. Optimal resource allocation for enhanced productivity
Scheduling the right resource for the relevant project enables you to maximize productive utilization. Resource managers, therefore, need to create a thorough allocation strategy for resources. Before assigning resources to specific project tasks, they can consider the availability, skillset, and cost of personnel using a resource planner.
After competent resource allocation, the project manager should also keep an eye on the overall team productivity to successfully meet the project’s objective.
E. Proactive resource planning to avoid last-minute firefighting
Capacity planning facilitates managers to avoid scrambling for resources at the eleventh hour. It helps them to compare the existing capacity against the resource demand and identify shortages or excesses of resources ahead of time. It also gives enough lead time to managers to conduct planned hiring and creates the right resource mix that suits the project budget.
With the right resource plan, outsourced resources can be used productively and bring profitability to the organization. In addition, it helps to reduce untimely hiring activities, which can lead to cost escalation and compromise the quality of the resource.
F. Facilitate effective bench management and improve billability
For effective bench management, a robust resource management framework plays a critical role. It helps to manage a sudden ramp down of resources across different phases of the project. Project managers can also inform resource managers well in advance before ramp-down activities. That way, resource managers can look into project vacancy reports and plan work for resources even before they hit the bench. It will ensure continuous billability and reduce idle bench-time between projects for the majority of the resources.
With on-the-job training or shadowing opportunities, resources that meet only the minimal qualifying criterion can also be made billable using the current opportunities.
G. Form a backup strategy for succession planning
Succession planning is the future-focused practice that ensures that the sudden resignation of critical resources in key positions does not negatively affect the firm or projects. Organizations should first identify the knowledge, skills, and abilities to perform certain functions. They should then develop a replacement plan/backup plan to prepare multiple individuals to perform those functions through training/upskilling.
However, the convergence of the organization’s needs and the employees’ interests should also be taken care of while creating a backup plan.
As the steps to mitigate the resources are clear, let’s see how advanced resource management software can help reduce risks.
5. How does modern resource management software help in mitigating risks?
An enterprise-grade resource management system provides features that allow managers to effectively allocate and plan resources. The advanced capabilities of the tool enable organizations to efficiently manage their resources and minimize the risks related to the workforce.
The tool provides 360-degree visibility into the organization’s resources and their information like skills, qualifications, availability, cost, location, etc. This enables managers to allocate competent resources to suitable projects.
Moreover, it provides a competency matrix that helps firms to implement effective succession planning strategies.
Furthermore, the forecasting and capacity planning feature enables the managers to foresee pipeline project demand. The capacity vs. demand reports helps in identifying the resource excess/ shortage and take appropriate measures to bridge the gap.
Moreover, the forecast vs. actual and utilization reports helps managers implement corrective measures and eliminate under/over utilization. It also allows them to mobilize skilled resources from non-billable work to billable or high-priority projects.
In addition, real-time project vacancy and people on the bench reports enable organizations to identify and assign the resources on the bench to billable or strategic projects.
The what-if-analysis enables managers to create and compare various project scenarios and determine the best-fit resource plan. This helps managers to identify potential bottlenecks, resource shortages, or conflicts that may arise and mitigate these risks before they impact the project’s timeline, budget, or quality.
In a nutshell, this is how an ideal resource management solution can help organizations mitigate risks effectively.
Do you still use spreadsheets to document resource-related risks in projects manually? It is now evident that resource risks are inherent in projects and can continuously evolve if not mitigated well in advance. Therefore, managers can meticulously identify, analyze, and control resource risks across a project’s lifecycle using a resource management tool. It also provides early warnings to track the risks before it hinders the project progress.
What type of resource risks did you encounter recently?
7. The Glossary
8. The SAVIOM Solution
SAVIOM is the market leader in offering the most powerful and configurable solutions for managing enterprise resources efficiently and effectively. Having more than 20 years of experience, this Australian-based MNC has a global presence in over 50 countries. It is also popular with more than 100 customers and helping them to achieve their business goals. SAVIOM also has products for project portfolio management, professional service automation, and workforce planning software which can be easily customized as per business requirements.