resource allocation

What is resource allocation?

Resource allocation is the process of assigning and managing assets in a manner that supports an organization's strategic planning goals.

Resource allocation includes managing tangible assets such as hardware to make the best use of softer assets such as human capital. Resource allocation involves balancing competing needs and priorities, and determining the best course of action to maximize the use of limited resources and get the best return on investment.

In practicing resource allocation, organizations must first establish their desired goal, such as increased revenue, improved productivity or better brand recognition. They then must assess what resources will be needed to reach that goal.

While resource allocation often refers to activities related to project management, the term is also used in other contexts, including the following:

  • economics, where it is a component of public finance; and
  • computer storage, where it describes how operating systems manage data storage resources.

How to allocate resources on a project

The following five steps are important when allocating available resources as part of project management:

  1. Plan. Project managers should first map out the project. They must divide the project into separate tasks and identify what skills are needed. They also must examine any constraints, such as the deadlines and budget. Project managers should also identify potential team members based on their skills and availability. They also need to determine task dependencies that might affect completion of specific steps. Planning also requires the development of a work breakdown structure, which matches each task to start and end dates and establishes a budget.
  2. Gauge availability. Sick time, vacation time, holidays and other projects all impact a team's availability. During this stage, managers must establish lines of communication with team members so resource allocation and shifts and changes in the project or its schedule can be communicated. Open communication is critical to enable cross-collaboration among teams and optimize the use of shared resources. It also helps identify team members that have conflicting commitments or are balancing multiple projects that might slow down the project.
  3. Schedule. Managers assign tasks and develop project timelines. They use resource management tools to automate and streamline this process and improve workload management. Effectively managing workloads can prevent burnout, identify opportunities to enhance team members' skills and indicate additional staff is needed. Resource scheduling involves blocking time for priority tasks and designating the priority level of each task.
  4. Track. Once the project begins, it's important to track the performance of team members and monitor how effectively they complete tasks. Resource allocations should be adjusted to maximize efficiency and take advantage of new opportunities that arise. Business intelligence tools and project management software and tools facilitate the collection of real-time data needed to ensure the team remains on the project's schedule.
  5. Evaluate. The success of the project is evaluated based on metrics that show how well it met expectations. Data from these findings can be used to refine resource allocation strategies in new projects.
list of project management skills
These 12 project management skills are important capabilities when creating a resource allocation strategy.

Benefits of resource allocation

Effective resource allocation offers the following benefits:

  • Collaboration. Resource allocation helps facilitate communication among teams and fosters collaboration. A resource allocation strategy allows communication with stakeholders, to keep them informed about progress toward strategic goals.
  • Efficiency. Resource availability helps teams complete a project on time and use only the resources needed to achieve each goal. A solid resource allocation strategy helps project teams avoid mistakes related to conflicting dependencies.
  • Team morale. Resource allocation improves employee engagement and team member morale. Resource allocation allows a more equitable distribution of responsibilities so that no team member is overworked. This approach can improve productivity because as team members' well-being is improved, they have the bandwidth and agency to take on additional work.
  • Cost reduction. Effective resource allocation can result in significant cost savings because it increases efficiency, reduces waste and avoids costly mistakes, setbacks and delays.

Challenges of resource allocation

There also are challenges associated with the resource allocation process, including the following:

  • Resource scarcity. Sometimes there are not enough resources available to achieve the tasks laid out in the project plan. Some resources may only be partially available throughout the project. In other cases, project resources may be available at the beginning of a project but not later on as it progresses.
  • Skill shortages. If specific skills are in short supply, that can have a negative effect on the project. The additional training or hiring required can take time that may not be built into the project's schedule.
  • Resource overallocation. Too many resources can also negatively affect efficiency and productivity. If more resources are allocated to a task than needed, employees may get overwhelmed trying to make use of them all.
  • Visibility. Poor visibility into the details of how a project is progressing can result in project managers not allocating the right resources where they're needed. A lack of visibility can also negatively affect a business's ability to forecast future project requirements, leading to future misallocation of resources. The lack of a centralized resource planning tool is often the cause of poor visibility.
  • Miscommunication. Poor communication among team members or teams can cause a range of problems. For example, a common point of miscommunication is between the sales and delivery team. If the team delivering the product to the customer isn't informed of all project requirements, it may not be able to ensure resources are properly allocated and the deliverables adhere to customer expectations.
  • Outdated technology. Legacy technology, such as a spreadsheet application, may not provide adequate real-time data for tracking This can lead to missed opportunities or overallocation of resources as project requirements shift.
  • Scope creep. Project scope can change at any point in the project lifecycle and lead to fluctuating resource demands. Scope creep is a change to the original goals or tasks of a project and can result in continuous changes or unsustainable growth in the project's scope. If requirements are continually added, resources may be exhausted and team members can be negatively affected.

Business intelligence is an important component of resource allocation, especially for tracking project performance. Learn about some common business intelligence challenges organizations face and how to handle them.

This was last updated in June 2022

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