Resources are limited and the most expensive investment for any business. Therefore, how an organization utilizes its scarce resources directly impacts ROI. Project delivery is adversely affected unless the right resources are allocated to the right project.
A resource manager needs to consider employees’ skills, qualifications, experience, cost, availability, and specific interests before they are assigned to a project.
Allocating 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.
A 2017 PMI study states, “62% of organizations use resource management tools for resource allocation.“
This guide covers 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 in project management is the process of identifying and assigning the best available resources with the right skills to every project for a specific period. It also monitors the resource’s workload throughout the project life cycle and helps reassign them if necessary.
Efficient allocation of resources ensures that the right employees are working on the right project at the right time and costs. It helps reduce costs, improve productivity and ensure the successful completion of projects within the stipulated time and budget.
It involved balancing competing requirements and priorities and determining the best plan of action to maximize the utilization of limited resources and improve ROI and profitability.
Knowing the definition and role of resource allocation in project management, let’s understand the key factors affecting the resource allocation process.
2. Key factors affecting resource allocation in project management
Certain aspects must be considered while assigning the right resources to suitable work and tasks. These elements can vary based on the project and its specifications. Listed below are some of the critical ones:
A. Project goals and objectives
The overall project goals and objectives play a significant role in determining how resources should be allocated. Assigning the resources must be aligned with the project’s desired outcomes and strategic priorities. Determining the projects’ goals and objectives helps align the resource allocation with the project’s strategic objectives, ensuring that the most critical tasks receive adequate resources.
Furthermore, project goals and objectives enable organizations to identify the types and quantities of resources required to accomplish the tasks. In addition, managers can evaluate the specific skills, expertise, equipment, materials, and budgetary needs necessary for the project’s success. Clear goals allow project managers to estimate the resource requirements and allocate resources accordingly and accurately.
B. Changes in project scope
Another critical factor influencing resource allocation is the changes in project scope. Scope changes lead to adjustments in project tasks, activities, and deliverables. Therefore, the number of employees required to work will also vary based on the changes. Hence, resource allocation decisions should consider the specific requirements for achieving project success.
Furthermore, changes in the project scope impact the availability of resources. For instance, if the project scope expands and requires new skills and expertise, more resources must be allocated. Contrarily, if the scope is reduced, the resources assigned to various tasks may become available for reallocation to other projects. Hence, project managers must consider resource availability and adjust allocations based on the scope to maintain a balanced resource pool.
C. Project dependencies
Often, the project tasks are interdependent, and the completion of one task will lead to the start of another. Hence, managers must appropriately allocate resources based on the dependencies to tasks and their availability, ensuring on-time project completion.
Furthermore, when multiple projects or tasks have the exact requirement for a specific resource, the allocation decisions must consider the availability and capacity of that resource. Managers must ensure the particular workforce is assigned in a way that fulfills the requirements without being overloaded or causing conflicts in resource availability.
D. Task or project prioritization
Managers must assess the criticality of the tasks or deliverables. Some projects may be of higher priority and require resources on an urgent basis. In such situations, managers must allocate resources based on the project or task priorities. This ensures that limited resources are assigned to critical tasks, maximizing project success.
Prioritizing projects and tasks enables firms to effectively manage time by identifying and allocating resources to time-sensitive tasks or projects. Resources can be assigned to critical tasks with deadlines, preventing delays and ensuring timely completion.
E. Resource availability and skills
The resources availability and skill sets are essential while allocating them. Resource attributes like expertise, experience, workload capacity, etc., must be considered to ensure the right resources are assigned to the appropriate tasks. This ensures successful task completion and enhances overall project performance.
Managers must assess the availability of resources that play an essential role in resource allocation. The allocation must be adjusted if a resource is unavailable during a specific period. Resource availability impacts the scheduling and sequencing of tasks and activities.
F. Meeting the project deadlines
Organizations need to keep up with the project timelines to maintain their profitability. Efficient resource allocation is crucial to meet project milestones and ensure timely delivery. Proper resource allocation ensures that the project progresses as per the plan, minimizing the risk of schedule delays.
Project deadlines influence resource availability and allocation. Resources must be allocated to align with the project schedule, ensuring they are available when needed. Resources allocated appropriately prevent bottlenecks and workforce shortages, enabling efficient task execution and on-time project delivery.
G. Risk assessment
Project risk assessment can influence resource allocation decisions. By assessing risks, managers can determine each risk’s likelihood and potential impact on the project’s objectives. Allocating resources to address potential risks helps ensure project success and reduce adverse effects.
By assessing the potential risks, managers can have a backup plan for resources from the existing pool or contingency resources to address these unforeseen risks arising from unexpected events. For instance, in case of prolonged absence of a resource or unplanned attrition, a contingent workforce can be quickly replaced to ensure the projects are delivered on time.
Now that you’ve understood the factors affecting the resource allocation framework, let’s dive deep into some examples.
3. Examples of resource allocation in project management
An efficient resource allocation strategy allows the effective distribution of the available resources to several projects. However, 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 does project resource allocation under these circumstances happen? 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 resource allocation examples in a project:
- 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 do they need to work on multiple projects?
- The second example could be when a project manager tries to deliver several projects with fewer resources. Should I put some low-priority projects on hold or extend their timeline due to a resource crunch? Shall I allocate my existing resources only to high-priority projects?
- In another resource allocation example, let us assume that one has the required capacity and enough work. 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 risk allocating a resource that matches approximately 60% of the job description?
- There are many projects. But, the tasks do not require full-time involvement of the resources. In this situation, how do I ensure I do not over/under-allocate human resources?
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 examples of resource allocation problems in a dynamic business environment.
These are some of the resource allocation examples. Now, let’s learn about some of the problems of the resource allocation process.
4. What are common problems of resource allocation in project management?
Although resource managers initially conduct the allocation process, continuous change in project demands makes it daunting. Let us analyze some of the common resource allocation problems.
A. Use of legacy tools or spreadsheets
Many organizations still use homegrown half-baked solutions like spreadsheets for the project resource allocation process because it is readily available. Unfortunately, these legacy tools fail to provide accurate real-time data for resource allocation, leading to discrepancies and double bookings. In addition, spreadsheets are incredibly time-consuming, limiting, and a nightmare to maintain.
According to MarketWatch, “88% of spreadsheets have errors.”
B. Frequent changes in project scope
In an agile world, the project scope can change anytime during its lifecycle. Changes in project requirements can lead to fluctuating resource demands. So, frequent allocations to meet the dynamic demands become challenging without an updated resource schedule. The sudden closure of a large project will also increase the bench size, which can affect the bottom line.
C. Unable to predict resource availability
While allocating resources to a project, resource managers typically look at the existing workforce pool. Additionally, they need a backup contingency resource allocation plan rather than relying entirely on a specific person. For example, some team members can suddenly fall sick, or getting time out of a shared resource may be challenging because of other commitments. Since resource availability can suddenly change, it can be a roadblock in project resource allocation.
D. 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 specific resources without billing. Project managers must promptly respond to these uncertainties, e.g., dynamic resource allocation, including juggling resources within projects or reassigning them.
E. Limited resources in a multi-project environment
Some organizations run multiple projects simultaneously, 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 them. However, it also means that one of the other projects gets stalled and eventually delayed.
F. Lack of knowledge and communication
Sometimes, project managers lack business knowledge. Due to communication gaps among the team members, they cannot estimate the resource requirements on time. With the 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, whereas fewer resources can cause delivery delays.
G. Location and time zone differences
Due to globalization, many organizations have implemented an onsite/offshore/nearshore strategy to control costs. 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 for essential meetings and knowledge sharing.
Since you are clear about the various resource allocation problems, let’s see how beneficial it is in project management.
5. Importance of resource allocation in project management
The unavailability of a critical resource can cause project delays 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 benefits of resource allocation in project management.
A. Minimizes 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, 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.”
B. Maximizes profitable resource utilization
Simply allocating 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. Resource managers can take corrective measures to avoid under or overallocation of resources in advance using real-time information and forecasting methods. Mobilizing resources from non-billable work and allocating them to strategic/billable work ensures profitability.
This article helps you understand the limitations of legacy systems and how a modern resource management solution will assist your business
C. Enables finding the right resource using centralized visibility
A resource allocation system captures resource-related information in real-time and consolidates it on a centralized platform. 360-degree visibility helps allocate 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.
D. Delivers 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. In addition, if resources are allocated efficiently, it can eliminate the under or over-skilled project resources. Under-skilled resources cause project delays, whereas overqualified team members can spike project resource costs. Therefore, resource allocation is critical to project management.
E. Diversifies employee skill sets for increased billability
Encouraging employees to possess multiple skills enhances their billability. Allocating resources to different projects allows them to build secondary skills in addition to sharpening their primary skills. Focused training programs and on-the- job-experience further help them to improve their capabilities. Secondary skills are handy to make them billable if they are not deployable using primary skills.
F. Solves 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 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 allocation schedule.
G. Improves employee engagement and productivity
One of the resource allocation best practices involves assigning resources to project tasks based on their skills and interests. Providing an environment for self-development, skill-building, and staying abreast with current technology trends motivates them. Resource managers can effectively manage the bench and improve overall billability by giving them the right opportunities. The employees also feel more responsible and take ownership of their jobs, which increases engagement and productivity.
These are some of the significant benefits of resource allocation in project management. Let’s know some telltale signs that help organizations improve the resource allocation process.
6. 4 signs you need to streamline your resource allocation
Improper resource allocation will put projects at a higher risk of encountering missed deadlines, lower productivity, increased costs, etc. Below are some essential signs of poor allocation in an organization:
A. Unavailability of critical resources
Frequent unavailability of critical resources indicates poor resource allocation that can disrupt projects. It can occur due to booking many critical resources to a project, leaving the other projects with fewer niche-skilled resources. Further, critical resources are highly demanded and often moved between different projects to fulfill ad-hoc demands. Therefore, project managers may sometimes be unwilling to release them to keep them readily available for future similar work, causing a lack of critical resources in a multi-project environment. All these scenarios indicate the need to make resource allocation transparent and all-encompassing.
B. Non-uniform workload distribution
If certain resources are overwhelmed with too many projects/ tasks while others are underutilized, it implies uneven workload distribution, indicating inefficient resource allocation. When employees are booked to projects exceeding their capacity, it will cause stress and burnout. Likewise, when resources are scheduled to project/ tasks below their capacity, it will lower their morale and lead to disengagement. This uneven workload distribution will eventually lead to poor project outcomes.
C. Lowered performance and productivity
When there is a dip in the performance and productivity of employees, it is a sign of poor resource allocation in organizations. When a critical resource is deployed to low-priority or mundane tasks, they will feel undervalued and disengaged. Conversely, when an under-skilled employee is assigned to high-priority projects, it will cause stress, exhaustion, and burnout. Both situations will eventually hamper the project’s progress and the final deliverable quality.
D. Frequent project failures and client dissatisfaction
“According to Wellington report, only 34% of organizations complete projects on time and within the budget.”
Project failure is an indication of improper resource allocation. It can stem from deploying under/over-skilled employees to projects, setting unrealistic deadlines, resource under/overutilization, etc., causing budget and schedule overruns, productivity issues, and project failures. When projects fail, clients may also feel that the organization has not delivered as committed, resulting in dissatisfaction and loss of repeat business.
These are some essential signs that will help organizations improve resource allocations. To overcome these issues, let’s understand the best resource allocation methods in project management.
7. What are the resource allocation methods 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 human resources in a complex project environment? This section describes the essential resource allocation steps in project management.
A. 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 the work breakdown structure (WBS), the minimum requirement in starting a project plan. Two tasks can be executed 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 integral to this process because resources are assigned to each task for completion.
B. Identify resource requirements for project tasks
Once the project is successfully divided into tasks, the resources available can be assigned as appropriate. The task may require human and non-human resources, depending on the nature of the work. For human resources, it is necessary to identify skills and competencies. For a non-human resource such as machinery, determine the equipment specifications before allocating a task.
PwC Project Management Insights states, “30% of project failure results from lack of resources.”
C. Find available resources with matching skill set
Using resource allocation software, one can quickly identify the availability of a resource within the pool for matching skills. Searching for equipment with matching specifications can also be used for a specific duration. In addition, the allocation tool provides a mechanism to update each resource’s skills and competencies in real time with proper verification.
D. Bridge the demand-capacity gap using multiple channels
One can hire or use contingency resources if a human resource with matching requirements does not exist. Similarly, if the equipment is unavailable, it can be taken on lease or procured, depending on the resourcing strategy. All relevant costs need to be factored into project financials. The resource allocation process begins once the resources are selected for a specific project.
E. Allocate resources as per demand
Once the project resources are identified and established, they are assigned to specific tasks. Sometimes, the resources may not be available when 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 to be available when work starts.
F. Re-allocate resources between projects if required
Re-allocation of resources is necessary during the project life cycle for various reasons. For example, a resource may have performance issues that may need replacement. A resource with niche skills may be required in another high-priority project.
So, one needs to out-rotate the person with a suitable backfill so the current project does not suffer. Some of the positions can fall vacant due to attrition and need replacing. The project manager also can rotate resources within the same project with different roles.
G. 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, there must not be under/ overallocation of resources or over/underutilization of the workforce.
However, it is tough 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 play a significant role in deciding this. The dashboards and reports from resource allocation software can help in decision-making.
Now that the strategies are clear, we move on to know how to combat the runtime resource allocation challenges.
8. How to solve runtime resource allocation challenges?
Most of the allocation of resources related to activities occurs during a project’s initiation phase. The projects can be short-term or long-term, and resource demand can vary. The project may require additional resources, or some existing resources may need to be rolled out. But what happens if the initial resource allocation goes wrong as you have onboarded incompatible resources quickly?
It can create a significant stumbling block in the delivery and must be course-corrected ASAP. We refer to this situation as a runtime resource allocation challenge. Following resource optimization techniques can mitigate some of these challenges as a part of a new resource allocation strategy.
A. 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, research projects may have this kind of flexibility. The manager must rework and create a revised schedule to identify the new completion date using available resources.
B. Resource smoothing
There is no flexibility around the project timeline in resource smoothing, and the work must be completed within a specific time. However, the project manager can add and remove resources during the lifecycle as required to deliver the time-bound project. Resource availability is assumed.
C. Additional mentoring using SME
If the existing resources do not meet the 100% requirement, they can be given additional learning opportunities 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.
D. Independent audit
An independent audit can be carried out if there are governance issues that have resulted in an improper allocation of resources. Experienced project managers usually do this within the organization or with the help of consulting firms. The person concerned needs to engage with the client and the internal team to get 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. Moreover, it is expensive to revisit the allocation of resources 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 beyond their control.
These are some of the best ways to solve runtime resource allocation challenges. Let’s delve into how ideal resource management can benefit resource allocation.
9. How can resource management software help streamline resource allocation?
An enterprise-grade resource management system provides advanced features and functionalities that help organizations allocate resources and achieve sustainability and profitability effectively.
Here’s how-
The tool’s 360-degree visibility enables managers to allocate resources efficiently based on their skills, qualifications, availability, experience, etc. Additionally, it helps assign cost-effective global resources to projects to maintain the quality of deliverables and profitability.
Furthermore, forecasting and capacity planning enables managers to forecast pipeline project demand. The capacity vs. demand reports help identify shortage/ excess of resources and allow managers to take appropriate measures to bridge the gap. This will ensure a 100% fill rate for projects to happen on time.
Additionally, real-time BI reports and dashboards like utilization heatmaps and forecast vs. actual time/cost reports enable managers to prevent overallocation and underutilization, ensuring uniform workload distribution. Furthermore, managers can effectively mobilize resources from non-billable to billable or strategic work to ensure they are optimally utilized.
Moreover, the system’s open seat feature allows managers to create and publish positions across the firm. Accordingly, interested candidates can apply for the work, and managers can select the appropriate ones, saving time to identify the right resource and enable effective allocation.
Lastly, the tool’s what-if-analysis feature helps managers create various resource plans, compare their outcomes, and implement the most viable one on the actual schedule, facilitating successful allocation.
Thus, modern resource management software with advanced capabilities can help in effective resource allocation in an organization.
10. 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 existing 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. In addition, 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% of actual requirements. The remaining skills can be acquired on the job.
- Plan for runtime resource allocation for some of the high-priority projects.
- Track your resource scheduling in project management details using allocation reports. Then, plan for the resources getting rolled off from the project on specific dates.
- Have an overall risk and 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 the hiring/firing cycle for the resources. It will give a bad reputation to the organization. However, it can be controlled using effective resource capacity planning.
- Do not assign critical or expensive resources to non-billable activities. This will be a waste of their skill set. Instead, junior resources or trainees can pick up non-billable tasks.
- All the high performers should not be allocated to a single project. Each project must have a combination of high achievers, some average, junior resources, and contingency staff. It will help to create a proper band mix and increase profitability.
11. Glossary
12. 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 and has helped more than 100 customers address their business needs. 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!
