Resources are a significant investment for most businesses. Therefore, organizations strive to utilize them optimally for profitability and sustainability. However, managers often focus on keeping resources occupied with work and assigning tasks without considering employee skills or interests.
This improper resource planning and allocation blows up costs, delays delivery, and ultimately derails projects off their tracks.
According to PMI’s 2017 pulse survey, “43% of projects spike the budget, and 49% cannot adhere to deadlines.” The study also reveals that only 26% of organizations use resource management for successful allocation of resources.”
Resource allocation is an essential step in the resource planning process, and an efficient resource management system helps achieve the same. This article will cover the concept, challenges, importance, and successful resource allocation methods.
Before that, let’s understand the definition of resource allocation.
1. Resource allocation definition
Resource allocation, also known as resource scheduling, is the process of identifying and assigning resources for a specific period to various activities. These activities can be project or non-project work, such as BAU, admin, support, operation, etc. Efficient allocation of organizational resources ensures projects are delivered within time and budget.
Assigning 100% of their capacity ensures maximum utilization of resources.
Resources can be either fully or partially available. Therefore, resource managers must ensure the availability of allocated resources for optimal utilization.
Now let’s look at some of the challenges managers face when allocating resources to projects.
2. What are the challenges of resource allocation?
Effective resource allocation is often easier said than done. Without the right tools or techniques in place, identifying and allocating the right resource can be a daunting task. Let’s have a look at some of the resource allocation challenges:
A. Changes in project scope
Despite taking necessary control measures, the project scope can still change anytime during the project lifecycle. In addition, changes in project requirements in an agile world can lead to fluctuating resource demands. So, without an up-to-date resource schedule, frequent allocations to meet the changing needs become incredibly challenging.
B. Use of outdated legacy tools
Spreadsheets and homegrown tools are inadequate for the allocation of resources. They fail to provide real-time updates in project/resource schedules, causing discrepancies and redundancies. It can lead to double-booking chaos that dampens the project’s success.
C. Miscommunication between sales and delivery team
While focusing on achieving sales targets, sometimes the sales team doesn’t involve the delivery team before signing the deal. As a result, the delivery team ends up scrambling for resource allocations at the eleventh hour to meet the delivery deadline.
D. Lack of resources visibility within a matrix organization
Not having a centralized resource scheduling system means there is no visibility of allocations of resources across matrix boundaries. Hence, resource managers find it extremely challenging to allocate the best-suited and cost-effective workforce to the project.
E. Mismatch in the skillset between capacity and demand
The inability to forecast future pipeline project requirements prohibits identifying skill shortages in advance. This incorrect estimation of capacity vs. demand hinders the project resource allocation process.
Next, let’s learn about the benefits of effective resource allocation in project management.
3. What are the benefits of resource allocation in project management?
Resource allocation is essential in project management as it allows you to plan and prepare for project implementation or achieving goals. In addition, it helps schedule resources in advance and provides insight into the project team’s progress.
Allocation of resources is much more than just delegating assignments. It plays a vital role in project and operations management and eventually improves business performance. It also helps achieve optimum utilization and enhances ROI.
Here are some key benefits of resource allocation in project management:
i) Reduce project resource costs significantly
ii) Maximize the productivity of resources on projects
iii) Enhance employee engagement and satisfaction
iv) Facilitate client satisfaction with successful project delivery
v) Achieve the best outcome within existing resource constraints
Following this, let’s learn about the external and internal factors affecting resource allocation.
4. Factors that influence the resource allocation process
Factors influencing resource allocation are critical considerations in project management. By understanding and evaluating these factors, managers can make informed decisions to optimize resource allocation and enhance project success.
A. Resource availability
The availability of resources, including personnel, budget, equipment, and technology, directly impacts resource allocation decisions. The manager must assess the quantity and quality of available resources and allocate them effectively to ensure the successful execution of project tasks. Resource availability constraints may require prioritization or reallocation to optimize resource utilization.
B. Project requirements
The specific requirements of a project, such as scope, complexity, timeline, and quality standards, heavily influence resource allocation. Projects with tight deadlines may require a larger allocation of resources or even resource intensification (increased resources for a shorter duration) to ensure timely completion. Similarly, projects with complex technical requirements may necessitate specialized resources or additional training/upskilling.
C. Project cost considerations
Another key factor in resource allocation decisions is cost considerations. It’s essential to balance the resource cost rate with the available budget. Allocating resources within budgetary constraints ensures financial feasibility and efficient resource utilization. Cost-benefit analysis and return on investment assessments can guide resource allocation decisions by weighing the potential benefits against the associated costs.
D. Resource interdependencies
Resource allocation decisions should also consider interdependencies between different tasks, activities, and resources within a project. Some tasks may require specific resources to be completed, and changes in resource allocation for one task can have ripple effects on other tasks. Evaluating these interdependencies helps in optimizing resource allocation to maintain project flow and minimize bottlenecks.
E. Environmental factors
Environmental factors beyond the control of the organization or project team can also impact resource allocation. Market conditions, economic factors, industry trends, regulatory requirements, and competition are examples of external factors that may influence resource allocation. For instance, if there is intense competition in the market, organizations may allocate additional resources to R&D (research and development) or marketing to gain a competitive edge.
By considering these factors, project managers can make informed decisions about resource allocation, ensuring that the right resources are assigned to the right tasks at the right time.
With that in mind, we look at some of the commonly used resource allocation strategies and methods.
5. Best resource allocation techniques and strategies
There are numerous methods to allocate resources in an organization. Let’s take a tour of some of these strategies in detail:
A. Bottom-up resource allocation
Bottom-up resource allocation is a strategy that involves identifying and allocating resources based on specific tasks or activities within a project. In this approach, individual team members or departments estimate their resource needs and submit them to the project manager or decision-making authority.
The project manager then aggregates these estimates to determine the overall resource requirements for the project and starts the resource-requesting process. Bottom-up resource allocation allows for a more detailed and accurate assessment of resource needs, as it considers the specific requirements at a granular level.
B. Top-down resource allocation
Top-down resource allocation, as the name suggests, involves allocating resources from a higher-level perspective, typically driven by high-level project objectives and constraints. In this approach, the project manager or decision-making authority determines the overall resource allocation for the project and then assigns resources accordingly.
This method provides a broad overview of resource requirements but lacks the granularity of bottom-up allocation. It is often used when there are time or budget constraints and when a quick estimation of resource needs is required.
C. Critical path method (CPM)
The Critical Path Method (CPM) is a project management technique used to identify the critical activities and sequence of tasks that determine the shortest possible duration for a project. CPM involves creating a work breakdown structure (WBS) that represents all project activities and their dependencies.
By analyzing the dependencies and durations of these activities, the critical path is determined—the sequence of activities that must be completed in order to minimize the project’s overall duration. Resource allocation in CPM involves identifying critical activities and allocating resources to ensure their timely completion, thus minimizing project delays.
D. Program evaluation and review technique (PERT)
The Program Evaluation and Review Technique (PERT) is a project management technique that focuses on estimating the duration of a project by considering three time estimates for each activity: optimistic, pessimistic, and most likely. PERT calculates the expected duration by using a weighted average of these estimates.
Resource allocation in PERT involves considering the estimated durations of activities and the availability of resources to create an optimized schedule. By allocating resources efficiently, project managers can ensure that activities are completed within the estimated time frames.
E. Agile resource allocation
An agile resource allocation is a dynamic approach to resource management that is commonly used in agile project management methodologies such as Scrum or Kanban. It emphasizes flexibility and adaptability in allocating resources based on changing project scope and organizational priorities.
In an agile framework, resources are often organized into self-managing teams that collectively decide how to allocate resources to specific tasks. This approach allows for quick adjustments in resource allocation based on real-time feedback and enables teams to optimize their performance and productivity.
F. Just-in-time resource allocation
Just-in-time (JIT) resource allocation is a strategy that aims to allocate resources precisely when they are needed, thereby minimizing waste and reducing idle time. This approach aligns resource availability with the project’s immediate needs, ensuring that resources are not tied up unnecessarily.
JIT resource allocation requires careful planning and coordination to ensure that resources are readily available at the right time for the right project. It is particularly useful in projects with tight timelines or where resources are limited, as it maximizes efficiency and reduces unnecessary resource allocation.
By employing these resource allocation strategies and techniques, resource managers can effectively allocate resources, optimize utilization, and improve overall project outcomes. It is important to tailor the chosen strategies and techniques to the specific needs and characteristics of each project, considering factors such as project size, complexity, timelines, and stakeholder requirements.
Let’s dive into the steps of efficiently allocating organizational resources to various tasks and projects.
6. Steps for efficient resource allocation
Effective resource allocation is crucial for successful project management. While there are various strategies and techniques that one can follow, given below are the best ways to assign resources efficiently across the organization:
A. Identify and allocate the best-visible-best-fit resources
A resource management system consolidates resource data from various systems into a centralized platform. Complete visibility enables the effective allocation of resources to the project based on skills, qualifications, experience, availability, costs, and other selection criteria. Scheduling cost-effective global resources from low-cost locations maintains profitability without compromising quality.
One of the methods of project resource allocation is assigning best-visible-best-fit instead of first-available-first-fit resources. Visibility also allows the uniform distribution of skilled resources across multiple projects instead of only deploying them to a high-priority project.
B. Avoid under or overallocation of resources
Uniform distribution of resources across all projects ensures that there are no over-allocated resources across the enterprise. Under allocation of resources results in productivity and revenue loss. Conversely, over-allocating resources can cause burnout, affect the quality of output, or, worst, result in unplanned attrition.
Forecasting billable /strategic utilization helps project managers to move resources periodically from non-billable to billable/strategic work. Thus, it facilitates optimum resource utilization and improves business efficiency.
C. Subscribe to an automated resource request process
While allocating resources, manually sifting through the resource pool or taking phone/email requests from individual project managers can be cumbersome. An automated resource requesting that is independent of cumbersome spreadsheets streamlines the process.
It allows project managers to specify the required skill sets, qualifications, experience, cost, and project timelines. This request directly reaches the inbox of the resource manager in charge, who starts planning for the same. As the entire process is documented and auditable, tracking allocation records eliminates any process-related confusion.
D. Empower employees to work on projects of interest
Studies have shown that when employees work on tasks of their choice, it has a positive effect on their engagement and productivity. Therefore, managers must also consider their interests instead of allocating resources only based on their skills and availability. To achieve this, resource managers can create open positions and publish the same, which becomes visible to all the relevant personnel across the enterprise.
Accordingly, interested resources can show their interest in joining the project, and the concerned resource manager can select the appropriate project team. It also saves the resource manager’s time from looking across the enterprise to find the right fit and negotiating with their line/ project managers. Therefore, this method is a win-win for both resources and the managers responsible for their allocation.
E. Diversify employee skill sets and responsibilities
Encourage employees to have at least two or more skills. To allocate resources efficiently on projects that need various skills allows them to sharpen their primary skill sets and an opportunity to build new ones. They can also be given further training on acquired skills, and on-the-job experience helps them improve their capabilities.
Sometimes, when employees get roll-off from a project, there isn’t any task to assign them based on their primary skills. Here, their secondary skill sets will come in handy, and they can be made billable by allocating them to other projects.
Sometimes, the demand for a niche skillset to start a new project may arise. As these resources are hard to find, out-rotating a niche resource from an ongoing project helps kickstart the new project. Simultaneously, another resource having minimum qualifications can backfill to continue the current project. This dynamic resource allocation ensures that none of the projects suffer.
F. What-if analysis to fulfill dynamic project demands
Juggling resources within multiple projects is common when resources are limited. However, in this ever-evolving business environment, any error from poor judgment can prove to be very costly. So it is when the simulation of business scenarios comes in handy.
Applying different sets of rules on the same resource pool and comparing situations can help visualize various impacts. For example, it can involve stalling or extending the low-priority project’s timeline and allocating its available resources to a high-priority one.
What-if analysis, a powerful feature of resource modeling and simulation, helps arrive at potential outcomes using constraint-based assessment. Like weighing the pros and cons of options in our everyday situation, this principle applies to resource planning and allocation. Once the ideal and feasible scenario is derived, implementing the same on an actual project schedule facilitates successful resource allocation.
G. Use real-time Business intelligence to monitor and improve resource allocation
Even after the resource allocation process is complete, there can be changes in the project requirement that requires immediate attention. Modern resource management solutions equipped with real-time business intelligence dashboards and reports help improve the enterprise’s health index.
Role-based customizable dashboards enable decision-makers to make informed decisions and make adjustments to resource allocations accordingly. Thus, real-time business intelligence help in tracking and controlling resource allocations ahead of time.
Proper resource planning and allocation play a crucial role in the success of any business. It ensures that organizational resources (human & non-human) are allocated appropriately to achieve the desired outcome. It also helps to identify potential resourcing risks and allows for contingency planning.
Ultimately, effective resource allocation can lead to increased productivity, better cost savings, and improved business performance. By implementing the aforementioned strategies, combined with robust resource management software, can help companies reap the numerous benefits of resource allocation.
8. The Glossary
9. The SAVIOM Solution
SAVIOM is the market leader in offering the most powerful and configurable solutions for deploying appropriate resources to suitable projects. With over 20 years of experience, this Australia-based MNC has helped more than 100 clients across over 50 countries address specific business challenges. SAVIOM also provides tools for project portfolio management, professional service automation, and workforce planning software.