Understanding Resource Management Models: A Beginner's Guide

Having a defined system in place to manage resources is crucial for not only effective management but also boosting organizational productivity and performance.

But before you can make the most of these benefits, you need to find and implement a resource management model that can best help your organization handle resources efficiently.

And this concise guide aims to help you do just that.

We’ll look at the three leading resource management models, their pros and cons, and wrap up with questions to ask yourself to identify which model suits your organization best.

Dive in: 

• What are resource management models?
• Centralized resource management
• Decentralized resource management
• Hybrid resource management
• What resource management model would work for you?

What are resource management models?

A resource management model refers to the way an organization structures, organizes, and manages its resources including human and software resources.

You need a resource model to optimally manage resources to: 

• Increase utilization rate
• Allocate resources efficiently
• Develop the skills and capabilities of your workforce

At the end of the day, an efficient resource management model — tailored to meet your business’s needs — helps you increase cost savings and unlock revenue growth as you enjoy a competitive edge.  

Since these models are aimed at effectively managing human resources, they take an employee-led approach which, in turn, increases employee retention and reduces burnout among your workforce.

Having said that, let’s look at the three broad resource management models that you can leverage:

Centralized resource management

As the name suggests, centralized resource management involves a central authority making all resource-related decisions including resource planning, allocation, and budgeting.

This central authority could be a dedicated team or department — really anyone from a Resource Management Office (RMO) in a large organization to a senior resource manager at a small business.

Keep in mind though: centralizing resources isn’t limited to funneling all resource-related authority and decision-making to one person. There is a lot of process building that has to happen to support centralization efforts.

For example, one foundational pillar of centralized resource management involves establishing robust data management practices and consolidating resource data into one platform. In turn, this serves as a:  

• Single source of truth that stakeholders can use to access data and make informed decisions
• Central management hub that offers more visibility, therefore, more opportunities to optimize resources

Further reading ➡️ Centralized Resource Management: The What, Why, & How.

High-performing organizations that understand the power of a skilled talent pool leverage centralized resource management. Their aim? To have a streamlined system in place that helps them achieve resource management maturity, guaranteeing timely project deliveries within defined budgets, and a motivated workforce that is neither overstretched or under-challenged.

Pros

A central system for managing resources improves project outcomes, resource utilization, and employee satisfaction. Here’s a full rundown of the benefits of a centralized resource model: 

• Increased visibility into resources, their availability, expertise, and performance leading to efficient allocation.

• Improved resource visibility and resource allocation also unlock better capacity planning. Businesses are in a better place to forecast needs and plan accordingly.

• Informed business decision-making off the back of the availability of in-depth resource and project data.

• Increased employee engagement as they’re optimally used (never under- or overworked) — working on meaningful work that engages them further.

• Increased project success rate, deliverables’ quality, and business growth as you boost your ability to catch bottlenecks before it’s too late.

Cons

While the perks of a centralized resource model far outweigh its downsides, this doesn’t mean it is free of any cons. In fact, the leading two shortcomings are:

• Decision-making becomes concentrated in a few hands which can give people the impression that collaboration and input is unwelcome. They may feel that resource management is something done "to" them, not "with" them.

• If one part of the center system fails, it can jeopardize the whole system — chances of the whole system suffering go up when you don’t have backup plans in place.  

Decentralized resource management‍

The exact opposite of a central model, decentralized resource management involves individual teams managing resources and making relevant decisions. 

Since teams manage their individual resources in this setting, it’s often referred to as decentralized resource management.

Thanks to this distributed responsibility, there’s a greater sense of democratic, collaborative decision making.

However, there’s no defined, streamlined system in place as all teams have their unique ways of managing resources. Naturally, this can lead to under-utilization, inadequate capacity planning, and unpredictable employee engagement levels — culminating in poor outcomes such as high turnover and frequently missed deadlines.

The benefits of this management model entirely depend on how effectively and efficiently teams manage their people. There’s typically a loose blueprint guiding decentralized resource management with teams mostly having different systems and processes in place. 

Pros

Mainly, distributed or decentralized resource management benefits you in the following ways:

• Efficient resource allocation and utilization. Self managed teams can be very successful. Team managers know their people best, and therefore they can assign them to projects that align with their professional goals and utilize them to the best of their capacity.

• Reduced single points of failure. If one team struggles with an aspect of resource planning, management, and budgeting, the rest of the business tends to stay unaffected. 

Cons

Since nothing is centralized — in other words, there’s no single source of truth — the model delivers the following downsides:

• Lack of integrated project and resource data. In turn, the organization gets little to poor insight into how resources are managed and utilized — resulting in inconsistent decision-making.

• Poor cross-team resource allocation and collaboration. High-performing organizations use resources based on their skill set, not job title or role, allowing for cross-team project coordination. A decentralized resource model doesn’t support this, preventing businesses from achieving a competitive edge.

• Lack of standardized practices or policies. Each decentralized unit has its own systems, software, and processes, which negatively impact costs and encourage the risk of duplication — even increasing project risks while reducing client/customer satisfaction due to inconsistency in performance.

Hybrid resource management model

A hybrid model takes from both centralized and decentralized resource management models where some strategic decisions are handled centrally with departments managing the day-to-day decision-making.

For instance, conflict resolution may be centrally managed, but skills audit and project allocation may be handled by individual departments.

Pros

Since a hybrid model marries both centralized and decentralized approaches to resource management, it brings together the strengths of both worlds. These strengths culminate in the following benefits:

• Flexibility in resource allocation as individuals and teams can effectively collaborate on this note. This efficiently meets the needs of both individuals and departments.

• Allows decentralized units to better meet the needs of local departments. This advantage of a hybrid approach is best for organizations with international branches, allowing them to meet local demands.

Cons

Despite it canceling out the downs of both centralized and decentralized management, the hybrid model shows these shortcomings:

• Slow implementation time as your organization works out what to control centrally and what to delegate to individual departments.

• Inconsistency and impacted decision-making as things may fall through the cracks due to the lack of clear guidelines around who is responsible for them. This also opens the room for a lack of accountability, leading to inefficient resource management.

• Risk of duplication of efforts. This risk grows if you don’t have adequate systems in place for communication and coordination between the center and department.

That said, planning and executing a hybrid resource management model takes extensive work upfront. In fact, finding the right balance between centrally managed and departmentally handled decisions can not only be challenging but also time-consuming.

Which resource management model would work for you?

The best answer for this lies within you. A few questions to ask yourself to get to this answer:

• Where is your organization at? Are you in a growing stage or are you a deeply cemented business? A small business can move fast with a decentralized approach. However, a centralized or hybrid resource management model would better suit medium to enterprise organizations

• What are the business goals and objectives? If the aim is to lead the market, achieving resource management maturity would help you get there (which means a centralized resource management model will help you the most). 

• How are you currently managing resources? What challenges are you facing in doing so? Your unique set of resource management challenges will determine which model will suit your organization the best. For example, if you’re seeing poor utilization rates across the board, you’ll want to centralize to better access data and get more visibility.

Bottom line: research extensively before you make a decision

Whatever resource management model you decide to leverage, our word of advice is to centralize resources in a single platform.

This means that whether your decisions are centrally or departmentally managed — or split between the two — all data is captured in a single resource management platform. This way, you’ll have:

• More visibility into resource availability and expertise
• Consolidated resource and project data for improved decision-making
• Easy resource allocation, budgeting, and scheduling alongside better forecasting 

With all this said, it’s essential you first spend time understanding what you need to make informed decisions. We’ll leave you with some of our most popular resource management guides to give you a helping hand!

➡️ Resource Optimization Explained for Beginners

➡️ Experts Share 11 Reasons Why Resource Management is Important

➡️ Transitioning From Spreadsheets to Runn for Resource Management (Interview)