Resources — particularly those of the human variety — are a significant investment for most companies and often in short supply. The ability to assign them most effectively and appropriately to the tasks involved in project execution plays a significant role in overall business performance. Good resource allocation, as this process is called, is essential to ensuring that projects meet time, quality and cost goals and don’t impede non-project operations. In fact, matching the right resources with the right tasks can be a win-win for employers and employees alike.
However, while resource allocation sounds simple in theory, in reality it can be a complex undertaking. To do it well requires visibility into resource availability and skills, the ability to balance the needs of the business with the career goals of the resources and the facility to keep everyone busy without risking burnout.
What Is Resource Allocation?
Resource allocation is the process of allotting appropriate employees to particular tasks or projects over a given period of time. The overall aim of resource allocation is to determine how best to apply an organization’s limited resources to achieve the best return on investment. In a nutshell, it’s about matching the right people with the right skills to the right task at the right time.
Key Takeaways
- Resource allocation involves assigning the best-skilled employees to suitable projects and tasks.
- The process involves identifying the types and number of resources required to perform a scope of work and monitoring the use of those resources until the work is complete.
- An effective resource allocation process helps a business use its resources to their full potential, boosting productivity, cost-efficiency, quality and employee morale.
- Allocating resources is a difficult task that involves managing changing priorities, internal and external dependencies, resource conflicts and competing needs.
- Resource allocation software can streamline the process and optimize resource utilization.
Resource Allocation Explained
Resource allocation is the ongoing process of assigning available resources to various work tasks, whether to staff an internal project, work on a customer deliverable or handle an operational function. Allocating employees to the work they’re most suited for is the aim, but those involved in the decision must also consider the timing of the work, the availability of the resources and other relationships among tasks — aka dependencies — that will affect the order in which activities need to be done before determining who to assign where. And as projects advance or business needs change, resources may need to be reallocated.
In practice, resource allocation is a multistep process that requires understanding the scope of work, estimating the types and number of resources required to perform the work, assessing the availability and interest of the appropriate resources, allocating those resources to the task or project and monitoring the use of those resources until the work is complete. Resource allocation often requires juggling competing needs and priorities, both within the business and among its employees. Done well, resource allocation helps the business make the most of its most valuable resources — its people — neither underutilizing them nor overworking them to meet its strategic goals.
Often, project managers will perform resource allocation because they have the best understanding of a particular scope of work, budget and tasks to be completed. In larger organizations, however, a dedicated resource manager or resource management department might oversee the process.
Why Is Resource Allocation Important?
Resource allocation is a near-term plan for how to staff a project with a finite time frame, but it can have a longer-term impact on business performance. Allocating resources effectively is essential to containing costs, maximizing productivity, ensuring quality work and maintaining employee and customer satisfaction. Poor allocation of resources, on the other hand, can have a negative impact on efficiency, timelines, employee engagement and customer satisfaction, with cascading effects on revenue, profitability and growth.
Making the investment in proactive resource allocation during the planning stages sets a project or task up for success by ensuring that it is fully equipped with the necessary skills, experience and training to take on the work involved. Effective resource allocation contributes to the equitable division of work, thus preventing staff burnout and fairly distributing opportunities that promote employee development and advancement.
Benefits of Effective Resource Allocation
In the absence of any established resource allocation process or tools, project managers, resource managers, and others seeking specific skills or capabilities are left to fend for themselves. Lack of visibility, transparency and accountability can result in a host of challenges, negatively impacting efficiency, project delivery, strategic alignment and overall business success. The implementation of a robust resource allocation process (and software, discussed later) empowers a business to use its resources to their full potential and reap the following benefits.
Enhanced Efficiency
Resource allocation aligns supply and demand so that projects and tasks are neither understaffed nor overstaffed. It also means that specific skills and experiences of employees are doled out appropriately. And when projects are staffed with resources who have the time available to complete their tasks, everything runs more smoothly. A good resource allocation plan also prevents conflicting dependencies that can lead to project delays, such as reliance on a particular employee who is working on a higher priority project.
Cost Savings
Because effective resource allocation boosts efficiency, prevents delays, identifies dependencies and minimizes resource wastage, it naturally results in lower costs. Consequently, the business gets the most out of its staffing investments and project budgets, which can boost a company’s profit margins as well as its billable resource utilization.
Improved Quality
Putting together a team with a solid mix of skills, experience, training and availability naturally improves the quality of the team’s output. A good resource allocation system makes it easier to source the right skills among different people for the appropriate stage of the project.
Better Team Morale and Satisfaction
Resource allocation isn’t just about doing what’s best for the business — it’s also about doing right by employees. According to the American Psychological Association’s “2023 Work in America Survey,” 92% of workers said it is very (57%) or somewhat (35%) important to them to work for an organization that values their emotional and psychological well-being. The resource allocation process is designed to make the most of employees without overworking them, considering not only their available bandwidth but also their need for rejuvenation and time off between projects. It will also take into account individual interests, preferences and career goals and help make sure capable employees aren’t overlooked for assignments. The net result is better team morale and happier employees.
Increased Flexibility and Agility
A robust resource allocation system gives an organization greater flexibility when it needs to reallocate resources to address shifting conditions, such as changes in project scope or unexpected resource constraints, before they become problematic. In addition, when companies invest in sound processes and technology for allocating their resources, they have greater visibility into their employees’ skills and availability so they can move people around as needed to meet shifting needs. Resource allocation can also foster stronger collaboration and communication as situations change, minimizing misunderstandings that can result in project risks.
Risk Mitigation
As noted above, a well-designed resource allocation system helps to proactively mitigate risks by providing tools and insights that help project managers optimize resources, anticipate challenges and respond efficiently to changes throughout a project’s life cycle. But resource allocation can prevent or manage a host of other risks, too. For example, the effective allocation of resources based on project requirements reduces the risk of delays or bottlenecks. By aligning resources with budgets, resource allocation decreases the risk of financial overruns. Robust resource allocation processes involve ongoing monitoring, reporting and benchmarking of progress, empowering project managers to identify any issues for timely interventions and corrective actions before they escalate.
Optimized Resource Utilization
A resource management system provides a comprehensive view of all available resources to help managers identify underused or overused resources and make informed decisions about how best to allocate them. Resource allocation software can take this a step further, analyzing historical data and project requirements to accurately calculate or forecast resource needs. Some resource allocation tools offer real-time monitoring, so project managers can identify underused resources or bottlenecks and make adjustments, as well as scenario-analysis capabilities to test different resource allocation strategies and maximize utilization. At the project level, resource allocation can help balance workloads, redistributing tasks or adjusting resource allocations to ensure a fair distribution of work among team members to improve productivity, prevent burnout and provide new learning opportunities.
Enhanced Customer Satisfaction
Resource allocation can have a significant impact on customer satisfaction, either directly, when used to allocate resources to customer-facing projects, or indirectly, if internal project inefficiency has knock-on effects on pricing or responsiveness to customer needs, for example. When a company is able to manage and allocate resources, it can improve the overall quality and timely delivery of products or services, increase agility and responsiveness to customer needs or issues and foster more customer-centric decision-making.
Resource Allocation Challenges
The upside of proactive and thoughtful resource allocation is clear. But the actual performance of resource allocation itself can be difficult to measure because it involves so many moving parts. Challenges will vary based on project complexity, team size, organizational structure and the kind of work involved. However, some common situations can make effective resource allocation particularly tricky.
Changing Priorities
One of the biggest problems anyone charged with allocating resources must confront is the dynamic nature of projects in motion. Business priorities, market conditions and project requirements will evolve, and resource allocation plans often have to be reassessed to align with changing circumstances. Having a flexible and responsive resource allocation approach, and the right tools, helps the business adapt to shifting priorities and still maintain project or task momentum.
Resource Conflicts and Multitasking
Resource conflicts occur when more than one project or task requires the time and skills of the same resources at the same time. It’s possible that not enough resources will be available to meet certain milestones in the project plan: Some critical resources may have limited availability during the project’s time frame, while others may be free only at the beginning or end of the project. This is particularly tough when it comes to high-demand skills in short supply. A business may opt to have certain employees participate in multiple work streams simultaneously, but there is always the risk that multitasking can result in reduced efficiency, increased errors or project delays. Prioritizing tasks and balancing workloads to avoid resource overallocation is essential but not easy.
Complex Coordination
Managing resources, each with their own specific attributes and spread across teams, departments and geographical locations, is a complex undertaking, particularly in large or decentralized companies. Thus, attempting to allocate resources using legacy technology, like spreadsheets, becomes an exercise in frustration. The lack of real-time data on resource availability can result in missed allocation opportunities, overallocation of resources and other issues when a project needs to be changed. Implementing resource allocation software allows for more seamless coordination and communication, ensuring that everyone is on the same page regarding not only available resources throughout the company but also project timelines, priorities and critical dependencies.
External Dependencies
Not all of the challenges related to resource allocation come from inside the organization. Most projects also have external dependencies, such as third-party vendors, strategic partners or regulatory approvals, that can impact project timelines and, thus, the availability and allocation of internal resources. Companies must take a proactive approach to anticipating and planning for these external issues, with contingency plans in place to minimize disruption and keep the project on track. For example, a company can identify back-up vendors for critical resources to ensure that a project keeps to its timeline.
How to Allocate Resources for a Project
Resource allocation works best when a company takes a systematic approach toward verifying that resources are being used optimally. While different organizations may have their own particular resource allocation process, there are some common steps involved in allocating resources.
1. Understand Project Scope and Objectives
The first step of project management is to define the scope of the project; this becomes the starting place for resource allocation. The project scope should include a statement of work that lays out necessary tasks, budget, timelines, milestones and key deliverables.
With this information in hand, a project manager will be able to break down tasks and deliverables to the degree necessary to determine the resources required and how to assign them. At this stage, they can also flag dependencies that might affect milestones or timelines and that should be factored into resource allocation.
2. Identify and Estimate Required Resources
Once the project scope and objectives are clear, it’s time for the project manager to match those project tasks and outcomes to the resources needed to deliver them. This step involves determining the types of skills and expertise and number of resources required for various phases of the project, as well as whether they’re in-house or need to be outsourced. It also requires making sure that the required resources will fit within the project budget.
A project manager allocating resources for an enterprise resource planning (ERP) implementation, for example, may need business analysts, ERP specialists, a database administrator, IT infrastructure experts, training or change management specialists, a QA/testing team, subject matter experts from business functions that will use the software and consultants or implementation partners.
3. Assess Resource Availability
Having determined the types and quantities of resources required, the project manager can turn their attention to the availability and bandwidth of needed resources. Few employees work on just one project at a time, or perhaps they’re already in full-time roles. But that’s not the only consideration. Remember, we’re talking about humans, not machines. Potential sick days, vacation time, holidays and other responsibilities will factor into resource availability, so assignments should be made acknowledging those contingencies.
4. Create a Resource Allocation Plan
Armed with a better idea of available resources, the project manager can specify how people will be allocated throughout the project life cycle. At a high level, this involves matching skills and expertise with the requirements of each task or project deliverable.
This is where the resource allocation rubber hits the roads, and it can get pretty bumpy. There is a variety of well-established project-management approaches, on top of which a business can build a resource allocation plan. One of the most common is the critical path method (CPM), which outlines the sequence of most critical tasks that need to be completed for project execution. Using CPM, a project or resource manager can build a resource allocation plan that aligns with that project path. This approach may not allow for multitasking, however, so may not always be the ideal choice.
Another option for project management is the program evaluation and review technique, or PERT, which provides three duration estimates for every activity or phase of a project (optimistic, pessimistic and most likely), then uses a weighted average to estimate the duration of each one. With these estimated durations and insights regarding the availability of resources during those time periods, the project manager can then build a viable resource allocation plan and schedule.
5. Assign Resources
The project manager is now ready to assign tasks and associated timelines to specific resources. This step focuses on the more granular work of matching skills and expertise to certain deliverables, blocking time for tasks and designating the priority levels for each one. At this stage, it’s essential to revisit the availability of each resource and review workload distribution to prevent overloading certain employees and underusing others. Project management software with resource allocation functionality can streamline and automate these resource assignments and workload management activities.
6. Communicate the Plan
Once a resource allocation plan and associated assignments are determined, the plan needs to be communicated to all relevant stakeholders, including project managers, team members and any business leaders or managers with a vested interest in the project. Making sure that everyone is aware of the overall plan and their individual roles and responsibilities is crucial to setting expectations, fostering collaboration and promoting transparency around resource management throughout the project life cycle. Keeping everyone in the loop about progress and potential changes also staves off unwelcome surprises that could jeopardize support for the project.
7. Monitor and Adjust
The resource allocation process isn’t over once the project begins. Continually monitoring resource utilization throughout the project life cycle enables project managers to proactively address issues and respond to evolving conditions or changes in priorities. Tracking the performance of team members and the completion of tasks is also crucial in order to shift resource allocations, as necessary, to improve efficiency. Keeping an eye on resource capacity is key, as well. If some team members have become overloaded, they may need some relief. Others may leave the company or have to take time off to care for a family member. Having a backup resource allocation plan with pre-identified resources ready to step in can prove invaluable. In some cases, a project manager may have to adjust project timelines to deal with capacity restraints. Project management software with resource allocation tools that handle tracking and reporting makes it easier to monitor how a project is progressing in relation to its resources.
8. Document and Review
Finally, it’s important for a project manager to document the resource allocation plan and its outcomes. The resulting insight is extremely valuable and can help the business evaluate the effectiveness of the resource allocation process, once all is said and done, to identify lessons learned and areas for improvement. Developing metrics for project and resource allocation success that can be tracked and reported on once the project is complete, such as scheduled versus actual utilization and planned time versus used time, makes it easier to continue to evaluate and improve the allocation of resources.
How Software Can Optimize Resource Allocation
Allocating resources well requires wrangling a ton of information on employee skills and interests, availability, project timelines, tasks, budgets and more. When this information is dispersed throughout siloed systems or managers have to manually track, allocate and report on resource utilization, the process can quickly become unruly and lead to suboptimal use of resources.
As companies grow and become more complex, software to help them manage their project plans, workload, budgets and resources has become increasingly important. The project management software market is predicted to grow from $5.37 billion in 2023 to $9.81 billion in 2028, according to Research & Markets. Project management software with resource allocation functionality can streamline the process from start to finish. Here are some additional considerations:
Capabilities, like the automatic identification of appropriate resources using a suitability scoring system that factors in skills, qualifications, location, availability and other important criteria, can free project managers or resource managers to focus on resource allocation strategy and problem-solving.
Scenario planning offers the ability to explore various resourcing options to see how they might impact budget or timelines.
Software with built-in intelligent capabilities can alert managers to potential issues or offer solutions to unexpected shifts in resource needs so projects can keep moving forward.
Resource allocation software can easily incorporate individual preferences and career development plans into the mix to create resource allocation plans that boost employee satisfaction and retention by matching people with projects that advance their personal goals.
Purpose-built resource allocation solutions offer real-time tracking of resource profiles and availability so everyone has access to the most accurate and up-to-date data to allocate resources.
Allocate Resources Faster and More Effectively With NetSuite
NetSuite SuiteProjects is a professional services automation solution that includes a resource management system to match the right employees to the right jobs and help increase profit margins and utilization rates. The software gives project or resource managers access to centralized, up-to-date employee profiles highlighting their skills, interests, experience, work preferences, availability and more with which to build their resource allocation plans, make resource requests and secure their bookings. Reporting tools in SuiteProjects let project leaders monitor critical metrics, such as most-worked hours, allocated hours and assigned hours, to make informed, data-driven decisions to keep projects on track and within budget and assess and balance team member workloads. Additionally, the resource forecasting capabilities in SuiteProjects provide insights into the organization’s ability to staff future projects in a way that protects profitability.
A well-designed resource allocation process, supported by purpose-built software, tames complexity and empowers a business to engage all of its resources to their full potential. By optimizing resource utilization, businesses are also better positioned to improve profit margins, retain their best people and increase customer satisfaction.
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Resource Allocation FAQs
What is an example of allocating resources?
Resource allocation is the process of assigning employees (aka resources) to projects in the most effective way, so that the right people are matched with the right work at the right time. Let’s say a business has approved the implementation of a marketing automation system. With the project scope in mind, a project or resource manager will identify key resources required, such as a marketing automation specialist, content creator, data analyst, business analyst and QA/testing team. Then they will look at the availability of these resources and create a resource allocation plan that covers the entire project life cycle. Once the project kicks off, the manager will monitor workloads and the project’s progress, reallocating staff as needed to prevent over- or underutilization and keep the work on track.
What is the main idea of resource allocation?
Resource allocation is the process of strategically selecting and assigning available resources to a business task or project in order to meet business objectives. The goal is to match the right resources to the right work at the right time, while keeping within project goals and timelines. Effective resource allocation delivers a multitude of benefits, including lower costs, increased efficiency, improved quality, better employee and team morale, greater agility, enhanced risk mitigation and increased customer satisfaction.
How do you allocate resources effectively?
Resource allocation is a multistep process. It begins with understanding the project’s scope and objectives. This is followed by determining what resources will be required to meet those objectives and complete the in-scope tasks; assessing the availability of these resources; creating a resource allocation plan that covers the project life cycle; communicating that plan to the resources involved and to other key stakeholders in the business; monitoring the performance of the resource allocation plan over time and making adjustments as necessary; and documenting and reviewing the results to inform resource allocation for future projects.
Because effective resource allocation involves managing many moving parts and balancing other, often competing, needs and interests, implementing resource allocation software is a good investment. Purpose-built tools can help project managers and resource managers streamline and automate the more tedious aspects of the process; centralize key data, like resource profiles; and optimize resource utilization in ways that would be nearly impossible to do manually.
What are 2 methods for allocating resources?
Oftentimes, businesses will build their resource allocation process on top of their preferred project management methodology. There are a number of widely adopted project management approaches, but two of the most common are the critical path method (CPM) and the program evaluation and review technique (PERT). With CPM, the business will find the most streamlined order of tasks (the “path”) that will need to be followed to achieve the project’s objectives and then assign resources to these tasks. Companies that use PERT assign three duration estimates for every project activity and then calculate a weighted average to determine the ideal duration of each. Considering the estimated duration and availability of resources, the project manager or resource can then build a resource allocation plan and schedule.
What is an example of a resource allocator?
A resource allocator is typically a project manager or dedicated resource manager who is responsible for determining and assigning employees to projects or tasks.
What is an example of resource reallocation?
Anyone who has worked on a project understands their variable nature. Scope creep, changing priorities and last-minute employee unavailability are among the many reasons why project managers may need to reallocate resources to the project at hand or another deemed more important. Flexibility is key.
