January 5, 2023
General
13 minutes
Shannon Toe

A Crash Course Guide to Resource Allocation

How you allocate your resources determines how profitable and successful your project-based business will be. Ace your resource allocation with our crash course.

Resource management is one of the most challenging parts of project management. According to Wellingtone’s 2021 State of Project Management report, it is the third biggest challenge faced by project management professionals today. But it delivers high value to organizations that get it right. 

Resource allocation is a key element of resource management. It’s the process of allocating resources efficiently to achieve the highest return on your investment.

It isn’t just about the direct comparison of cost to return though. It’s also about delivering great work, delighting clients, and keeping your team happy and productive - and how that contributes to revenue and growth too.

In this guide, we’ll explain exactly what resource allocation entails and share best practices so you can improve your resource planning, resource allocation, and management.

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What is resource allocation in project management?

By definition, Resource allocation is a critical project management process that identifies and allocates resources to various activities across your project(s) to achieve your project goals in the most efficient way possible. 

Whilst resources can refer to people, equipment, or materials, in professional services businesses it typically refers to HUMAN resources - the talented team of knowledge workers that deliver innovation and success for your clients. 

How well you use your human resources can mean the difference between delivering a profitable project that hits every deadline and satisfies the customer - or a late-running, loss-making project that dents your reputation with the client. So it’s super important to get right.

Who’s responsible for resource allocation?

Resource planning and allocation can be the responsibility of several different roles within a business. 

Typically, resource allocation and management fall under the remit of project managers. They’ll allocate resources as part of the project planning stage, and may need to reallocate them as the project progresses and parameters change.

However, some companies may employ a resource manager. A resource manager is someone who is responsible for planning and allocating resources across multiple projects.

They might work at department or even organization level, perhaps as part of a central Project Management Office. In this structure, the resource manager will work with each project manager on their resource allocation strategy. 

Why is a resource allocation strategy important?

Having access to the right people at the right time and with the right skill set is critical for project success. This means the resource allocation process is a key lever for business success too. Here's why.

1. It optimizes your project outcomes

A successful resource allocation process ensures the best people are allocated to each project - based on their skills, experience, availability, and cost to the project. This means each project is staffed for success - with the people and skills it needs - within the given schedule and budget. 

2. It prevents project bottlenecks

Resource allocation involves looking ahead at resource availability, which helps you spot and mitigate any resource risks that could pose a risk to delivery before they become a problem. For example, potential resource conflicts or gaps in availability. It also helps you manage stakeholder expectations around timeframe, budget, and deliverables.

3. It improves profitability

Resource allocation keeps one eye on project delivery and another on profitability. It ensures you’re not overspending on more senior staff or skills than the project demands. This protects individual projects’ profit margins, which ladders up to overall business profitability and revenue realization. 

4. It protects staff

Effective resource allocation practices protect your people from overutilization - and the reduced productivity and mental acuity known to result from being overworked. Allocation decisions include an assessment of capacity for work, allowing for an equitable and even distribution of workload among your resource pool. This leads to happier staff, better outputs, and higher staff retention. 

Resource allocation problems

A systematic resource allocation process considers a range of different factors - including availability, skills, and cost - to determine the best person for any project at any given time.

In doing so, it supports positive project outcomes, resource ROI, and even staff retention.

There are lots of financial risks associated with poor resource allocation, especially if you’re making resourcing decisions based on a single factor.

Here are three resource allocation examples that show how one-dimensional decisions impact on budget, schedule, and deliverables.

Assigning on availability alone

If you’re assigning resources based purely on their availability, you could be seriously overspending - for example, assigning a senior developer to a project where a junior developer would suffice, simply because your senior developer happens to be free.

This overservices the project - potentially delivering more than is needed - and will burn through your project budget unnecessarily. It also risks your senior staff member feeling bored and understimulated by the work assigned to them, making them a flight risk.

Assigning on skills alone

If you’re assigning resources just based on their skills, you could be delaying projects.

Obviously your resources need to be able to do the job. But if you rely on a single person with a particular skill set - and multiple projects are competing for the same resources - you might have to wait weeks for them to become available.

That could be a risk to your project milestones and client satisfaction. Looking for a resource that has suitable skills AND availability keeps your project on schedule.

Assigning on cost alone

If you’re assigning resources based only on cost, this could be a false economy. Say you assign a junior designer because they have capacity and cost a little less.

If they don’t have the right skills for the project they could - through no fault of their own - end up taking longer and costing more than if you’d just waited a week for someone more senior.

Not only could they delay the project, they also may struggle to deliver to the standard required, posing a risk both to the project and their job satisfaction.  

What are the challenges of resource allocation?

resource allocation

On Wellingtone’s ‘process value vs difficulty matrix’, resource management is rated as a high difficultly process, but one that delivers high value to the organization. This means that - whilst it isn’t easy to master - businesses that do it well will reap the rewards.

Allocating resources in the literal sense is relatively straightforward — it’s other factors such as balancing resource availability with an ever-changing project landscape that makes this process challenging. 

On top of that, you likely won’t be dealing with just one project, but multiple projects, so there will be competing demands on your project resources. 

And with several projects running at the same time and people jumping from one of them to the other, resource allocation takes on new shades of complexity. Here are some of the top challenges in resource allocation - and how to overcome them.

No central resource pool

The first step to effective resource management is for project managers to know exactly what resources are available to them.

This means visibility into who resources are, what skills they have, what their level is, how much they cost, and whether they’re available. Many businesses don’t have this information readily available. 

For example, your project manager might be waiting on a mid-weight software engineer becoming available from your UK operations, not knowing there are two with capacity for the work in your US team.

Creating a centralized resource pool will allow all project managers in your organization to see exactly who’s available - without team, departmental, or geographic silos getting in the way of effective resource allocation.

resource allocation in Runn
Runn offers better resource visibility across projects and makes resource allocation easier.

Project changes and dependencies

The next challenge - arguably the biggest - is the dynamic nature of project-based businesses. Even with the best-laid plans, projects can turn on a dime. Staff sickness could mean missing a milestone. A client could change the project scope. 

Where you previously had the right people in the right place at the right time - now your schedule and project resources are out of sync. 

Plus, it’s rarely the case that your project team members are only working on YOUR projects at any one time. A survey of 500 managers from global companies found that 81% of the workforce is working on multiple projects at the same.

This creates project dependencies and complexity - X needs to happen before Y and Z can. And if X gets delayed, so do Y and Z.

So when something slips in your project schedule - and that in-demand resource you managed to secure next week is now needed in two weeks' time instead - they may no longer be available. Argh!

This means the resource allocation process isn’t a one-and-done exercise. It needs monitoring and managing throughout the project lifecycle. To prevent that from becoming a massive time-sink - or worse, failing to respond to changing project parameters - you need dynamic tools that can help you. 

Time-consuming tools 

When you have a small team of ten to twelve staff, say, you can just about manage it without any formal tools or systems for allocating resources. But as you grow, so does the risk posed by ad hoc resource allocations. 

Trying to manage resources using something like a spreadsheet or Trello board just isn’t sustainable or scalable.

Firstly, it takes time to manually manipulate and interpret the information available to you. And secondly, in a dynamic project environment, the information is out-of-date almost as soon as you click the ‘close’ button. Read on why resource planning in Excel is not scalable.

To manage and allocate resources efficiently and effectively, you ideally need a resource management tool. This can automate availability and capacity calculations based on real-time data. So seeing which team members are free is an at-a-glance task, instead of an afternoon of analysis.

Without a resource allocation plan - or good resource management software - it’s challenging to maintain visibility over constant changes in workload and resource availability.

Fortunately, there are tools that can help - and the time and money they save will more than offset their monthly cost.

Step-by-step guide to an effective resource allocation process with Runn

Below, we'll walk you through some best practices for resource allocation in project management. We'll use Runn to provide examples of how appropriate project and resource management software can help.

Stage 1: Lay the foundations

Before you get started with allocating resources to particular projects, you need to put the foundations in place - from using the right tool to centralizing your resource data. Here are the essential steps you need to take to improve your resource management.

1. Use the right tools

Doing resource allocation and planning your capacity without the right software is going to be tedious, time-consuming, and probably not that effective.

There's only so much one project manager can do when trying to generate real-time data for resource allocation - it's hard to collect, interpret and act on in a timely way. 

So your first step to improving resource allocation in project management is choosing an appropriate project management tool - one that calculates all the numbers in real-time. so you can make quick and confident resourcing decisions.

You would think that in this day and age people automate everything that can be automated, but Wellingtone found that only 23% of organizations use a PPM or a resource management software solution.

No wonder why poor resource allocation is so common — there are still too many resource-related decisions being made based on gut feeling alone. That’s not the way to do it! 

2. Create a central resource pool

To allocate the right resources to the right tasks at the right time, you need to know which resources are available.

Runn’s People Planner model provides a centralized place to view and assess the suitability of every resource in your organization. You can find people by role, skill, team, tag, and more.

From here you can easily spot who’s got the skills and capacity you need for your project. Without this information in a central place, your project managers are allocating resources in the dark.

3. Establish capacity and availability

Before your project managers can begin allocating resources, you need to establish how much time you have available to allocate in the first place.

  • Do some of your people work part-time?
  • Do some of your people only work on certain days of the week?
  • Is there a public holiday coming up?

Capacity refers to the amount of time someone can work. This comes from the number of hours per week or day they would usually work. Resource availability refers to the amount of time a person can work minus time off, sick leave, time allocated on other projects, and other tasks. 

Once these other factors have been accounted for, a person’s availability may be a lot less than what you initially expected!

Runn’s  People Planner shows you everyone’s workload, holidays, time off, and availability - so you can factor availability into your resource allocation and create balanced workloads and realistic project schedules. Our capacity charts can help you see the big picture and filter out the capacity of the roles important for you.

capacity report example

‍4. Improve visibility into the project pipeline

To improve resource allocation, it’s important to know what work is currently underway and what work is coming up as you may have people working on multiple projects at a time.

Our Project Planner displays all your projects scheduled in the selected timeframe and will show you what’s currently on.

Look out for tentative projects. If they get confirmed, that's more projects you’ll need to balance your resource allocations among.

The People Planner and Capacity Charts are quick ways to see where you may be going beyond capacity.

Stage 2: Plan your project and allocate resources

Once you have set up your tools to show you other projects in your pipeline - and how many people and hours you have available - your project managers are in a better position to allocate these resources intelligently to specific projects. Here’s how…

1. Understand project scope and delivery constraints

Establish the requirements and deliverables of your project and identify any delivery constraints, such as:

  • Scope
  • Deadlines
  • Dependencies

At this stage, it is crucial to effectively communicate with all the stakeholders involved so you align expectations from the project and can be realistic about what is achievable and what isn't.

Stephan Zoder from Forbes says that poor communication is still the primary contributor to project failure. To avoid this, talk to everyone standing above and below you to find out whether their understanding of the initiative aligns.

2. Identify roles and skills for your project

Start identifying the roles, skills, and seniority level you will need for your project. 

As a project manager, you might not always know who will be appropriate for the job. When planning project resources, it is a good idea to consult the respective team leads, solution architects, and resource managers.

They know their team members and their team's workload well and will have an idea of who on their team would be a good fit or where you may be lacking in skills necessary for project delivery.

If you have a project budget, you can use the project budget in Runn to organize the roles you will have involved in the project and estimate how much of the budget will be allocated to each role.

3. Map out your high-level project timeline

Next, build out a high-level project plan. Work with your team to break down the scope into tasks and activities and estimate how much time you think you will need to deliver the scope of work.

The number of hours or days your team will need to complete each task in a work breakdown structure will feed into your resource plan and project schedule, so this is an important step.

From here, identify the overarching project phases and critical milestones, and deliverable deadlines. You can visually draw these up in the project planner. Once you have lined these all up, you’ll be able to see a timeline with start and end dates for the project.

4. Be aware of utilization rates

It’s always important to remember that human resources are HUMANS first, RESOURCES second. That means they need to take breaks, chat with another team member, or even take a walk for a bit of rest during the day.

Plus they need to answer emails, attend meetings, and undertake training. (According to McKinsey, people spend 28% of their workday checking and answering emails).

For your business, this is important but non-billable time. You should assume that your team members will have 80% of their time available for work, and within that time, 80% will be available for billable, project work.

If you book them more than this, you’re setting your project up for failure, as there will inevitably be slippages and delays.

With Runn, you can easily view the percentage of a person's time that has been assigned, and how much of it is billable or non-billable in a daily, weekly, or monthly view. Use this team utilization information to keep a manageable, balanced workload across your colleagues. 

employee utilization report

5. Allocate resources to the project

Add the available resources you want to assign to the project, ensuring that they have the capacity to can take on new work. Don’t forget to

  • To take any time off or public holidays into consideration
  • Make sure the people you’re allocating to the project have the appropriate skill sets and level of experience
  • Check no one is overbooked, will have scheduling conflicts, or has holiday coming up

If you spot a potential scheduling conflict or overbookings, resolve it by reallocating work to a different resource or shifting the schedule if there’s no one else available. 

Runn allows you to add people to a project by role and skill, as well as alerts you of overbookings and time off in real time so you can adjust things on the fly.

What if you find you don’t have the right resources at the right time?

If you don’t have anyone on your project team with the right skill set, you might need to hire a contractor to help you deliver the work. Use placeholders to represent them in Runn. Or you could use a resource leveling technique to resolve your scheduling conflict.

Stage 3: Monitoring and managing resources

Even best-laid plans can get derailed. Scope creep. Inaccurate estimates. You need to keep an eye on progress, budget, schedule, and resourcing once your project is underway - and make adjustments if needed. 

Monitoring your resource plans against project reality lets you identify how your team is tracking against the original plan - and identify any resource or scheduling risks early before they become issues. 

Frequently checking important resourcing metrics like team member utilization and capacity will inform your decision-making and avoid over-allocation and team burnout.

Data from Runn’s built-in timesheets helps with making comparisons of plans versus reality, and with forecasting your resourcing and financial health for the remainder of the project.

Runn’s variance report shows the variance between your actual and planned resource allocations.

To stay on track and mitigate any risks, you might have to:

  • Swap out a resource
  • Allocate more resources
  • Adjust your project timeline
  • Negotiate project deliverables

Final thoughts

Using your resources effectively means higher ROI from your staff costs, better project outcomes, and higher profitability. As you can see, it starts long before your project does, and needs monitoring and managing as your projects progress. 

This requires real-time data and organization-wide visibility into your project pipeline and resource availability. Runn project management software provides exactly this, so that you can allocate resources with clarity and confidence, and react dynamically to changing circumstances.  

  • Centralized resource pool for confident resource planning
  • Access to information on skills, level, cost, capacity, and availability
  • Drag-and-drop resources into your project plan
  • Monitor project progress and adjust resources easily

Reclaim control of your resource allocation. Try Runn for free for the next fortnight - no credit card, no charge, no catches.

Start your 14-day free trial today.

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