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Steven Male

Resource Optimization Explained for Beginners

What is resource optimization in project management? What are top resource optimization techniques? Read on in our complete guide.

Resource optimization is the process of allocating and managing resources in the most efficient way possible. It matters because resources are expensive, and often in short supply. Using them in a way that maximizes their value to your business is key to running a sustainable business.

In this article you’ll discover vital resource optimization techniques, the pros and cons of resource optimization, and best practices to make it work in your business.

But before we get started, a note on the word ‘resources’. In many organizations - including IT companies and digital agencies - resources can be both human (employees) and electronic (software, computers). In this article, we'll focus on human resource optimization.

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Resource optimization: a definition

Resource optimization is the strategic management and deployment of resources in a business. Resources are limited and resource optimization is about getting the most out of them, so you maximize your return on investment. 

Resource optimization involves identifying, prioritizing, and utilizing resources in the most efficient and effective manner possible. The aim is to meet project requirements and quality standards, while minimizing waste, redundancies, and costs.

Ultimately, the purpose of resource optimization is to maximize organizational capacity, productivity, efficiency, and competitiveness.

What is resource optimization in project management?

To optimize something is to make good use of each and every part. As humans, we strive to make full use of everything. We also are constantly inventing and finding new ways of tackling a problem without compromising quality while still saving time.

Resource optimization in project management is simply using available resources such as machinery, finances, or human efficiency to accomplish the organization's goals. This should be within a specific time frame and budget.

So, how do resource optimization and project management tie together?

To maintain the workload and regulate project tasks, resource optimization aligns projects and completion dates with the available resources. This practice therefore helps organizations stick within their project budgets by ensuring that additional resources are not needed to push projects over the line.

In resource management, decision makers use resource optimization techniques such as:

  • Resource leveling
  • Resource smoothing
  • Reverse resource allocation

We’ll discuss those in more detail below.

What does resource optimization look like in practice? 

Thanks to data visualization in Runn, we can show you EXACTLY what resource optimization looks like in practice. 

In the image below, you’ll see a before and after example. 

On the left is a project team WITHOUT resource optimization. You can see there are lots of different colors. The mid-blue represents people who are optimally booked. This is ideal. But there are also pale blue and green people who have capacity to take on more work.

And the red lines? They represent people who are over-booked: they have too much work allocated to them, and not enough time to do it in.

On the right is a project team WITH resource optimization. You can see everyone is mid-blue. This means they’re all optimally booked. Any excess work that was causing stress and overtime has been reallocated to people with capacity. As a result, everyone is earning their keep while maintaining a balanced workload distribution in the team.

Top resource optimization techniques

Now that we've seen why resource optimization is important - and what it looks like in practice - the next question is how to do it. Here are the top resource optimization techniques IT companies and digital agencies should be using:

Resource Leveling

As a project manager, at times, you realize that projects may not go as planned due to resource shortages. In these instances, you have to find ways to adapt to the situation at hand to ensure project deliverables are not affected.

Resource leveling is a technique where the start and finish dates are adjusted so that a project can be finished using the resources required. This technique helps resource managers get the right balance between the demand for a particular resource and the available supply, and reduces employee burnout.

The resource leveling technique helps project managers allocate tasks to the right resources - usually qualified employees who know the task at hand.

Advantages of resource leveling:

  • Its ability to minimize deficits
  • Efficient use of resources
  • Prevents over-allocation
  • Ensures successful delivery of quality outputs

Disadvantages of resource leveling:

  • Can cause delays in other projects
  • Budget over-runs
  • May demand extra resources

Resource smoothing

Project managers use the resource smoothing technique when time constraints take center stage. Resource smoothing, or time-constrained scheduling, ensures that the requirements stay within budget to prevent the project from exceeding the sources allocated for the project.

Project managers have to assess the resources' workload to see how they can ensure project outputs are delivered on time.

Advantages of resource smoothing:

  • Successful and on-time project delivery
  • It is an efficient and cost-effective way to use resources

Disadvantages of resource smoothing:

  • Project managers will have to delay some work to give the particular project first priority
  • To prevent delays, the schedule usually has little flexibility

Reverse resource allocation

The reverse resource allocation method can be used with the two techniques above, but involves approaching it from a different direction. This technique will work in a reverse way such that you start with the last task, or most critical task and work your schedule backward.

This technique works when the project has a fixed deadline, or there are critical tasks that must occur on set dates. For example, if you have a project that needs an expert for one task on the critical path, you will assign tasks such that the company expert can work on that particular day on the set project.

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Metrics for measuring resource optimization

You’ll often hear us say that you can’t manage what you don’t measure. That’s why it’s essential you identify metrics and KPIs to assess the success of your resource optimization efforts. 

By tracking key metrics related to resource utilization, efficiency, and effectiveness, you can drive continuous improvement in your quest for optimal resource allocation. 

And that means continuous improvement in relation to efficiency, cost savings, and reducing waste too. Here are some key resource optimization metrics you can track.  

Resource utilization rate

Resource utilization rate measures the percentage of available resources that are actively utilized in project activities over a specific period. A high resource utilization rate indicates efficient use of resources, while a low rate may signal underutilization or overallocation. 

This one’s really important, so check out our COO Nicole Tiefensee’s Guide to Resource Utilization for Service Businesses.

Resource allocation efficiency

This metric compares planned resource allocations to actual allocations. It helps identify discrepancies between planned and actual resource usage. For example, if a project was forecast to need 150 hours of a particular resource but ended up using more or less. It also looks at accuracy – whether the right resources were assigned. 

Resource cost variance

Similar to the metric above, this compares the budgeted cost of resources to the actual cost incurred during project execution. Positive variances indicate that resources were utilized more cost-effectively than planned, while negative variances suggest overspending or inefficient resource usage. 

Resource turnover rate

This refers to how frequently resources are allocated to different projects or tasks. It’s a tricky one to interpret. A high turnover rate may indicate high allocation efficiency. But it could indicate that resources are being reallocated without completing their tasks - perhaps because there is a delay to the project. 

This churn can indicate allocation issues. Meanwhile, a low turnover rate may suggest underutilization or resource hoarding, where a team holds onto a resource even if they don’t have an immediate need for it.

The benefits of resource optimization for service businesses

Resource optimization has several important benefits for businesses – from increasing productivity and reducing idle time, to lowering costs and unlocking growth. Here’s our five favorites…

1. Lower costs

Resource optimization is an important process for IT businesses and digital agencies. It can save you a lot of money by letting you cut costs on underutilized manpower, hardware, software licenses, and whatever other resources you’re optimizing.

Resource optimization tools help clients keep their costs and capabilities in balance over time. This allows them to be proactive and avoid sudden increases or decreases in spending.

2. Make cost-effective decisions

Resource optimization can help IT firms make cost-effective decisions about new projects and challenges that come up over time. If a project presents itself that requires more resources than expected, either revenue or skills, using resource optimization techniques may help you free up the resources you need to complete the project - or it may even show that the project is not feasible.

3. Unlock growth and opportunity

Resource optimization can lead to scaling and business expansion. As an IT firm or digital agency, you want to be able to handle anything your clients throw at you. A firm that specializes in only one thing has difficulty maintaining its client base when a new type of project comes along. A firm with the ability to do everything will have more opportunities for growth in the long run and will be able to attract more clients.

4. Increase transparency

According to the Project Management Institute (PMI), there has to be transparency and trust for efficient timely project deliverables. Transparency with employees will prevent mistrust, project failure, confusion, and misunderstandings.

Transparency across multiple projects will make it easy for other managers to know what is happening in the company at any given time.

5. Improve employee efficiency

Resource optimization improves employee efficiency and morale as well. It allows workers to work on what they are good at and eliminate tasks they are not good at. Firms that do not optimize resources have employees working outside their skill sets, which can lead to mistakes and less professional work being done overall.

By optimizing your resources, you allow your firm to offer multiple services and spend less time training employees on new services and more time working on actual projects. This saves money that could otherwise be spent on retraining employees or hiring new employees altogether.

Learn more: From Transactional to Strategic Resource Management - What's the Difference

What are the challenges of resource optimization?

Now you know the benefits of resource optimization, you might ask ‘If it’s so beneficial, why isn’t everyone doing it?’ Well, there are challenges associated with it too. 

1. Resource constraints

Resources are necessarily limited. Any organization with unlimited resources is either on the fast track to bankruptcy or backed by a deep-pocketed billionaire. Organizations need to balance availability of resources with cost and ROI. That means there’s rarely enough resources available to do everything. 

2. Inherent complexity

Resource optimization involves managing a lot of moving parts – especially in a dynamic project-based environment. People, projects, allocations… Coordinating resources and optimizing their use can be complex, especially in large organizations or projects with multiple stakeholders.

3. Change and uncertainty

Project work is characterized by uncertainty. From scope creep and changes to deliverables, to market fluctuations and competitor activity. This can disrupt your best laid plans and require a rapid rethink. Maintaining optimal resourcing in a state of change and uncertainty is an ongoing challenge. 

4. Competing priorities

Even in the same organization, there can be disagreements over how to best use resources (this is where a resource deployment strategy can be helpful). Organizations often have multiple projects or goals competing for the same set of resources. Balancing these demands is difficult. 

5. Technology and tools

Technology and tools for resource optimization – such as resource management software – are highly beneficial but not always available. As a result, organizations may struggle to access the data and functionality they need to master resource optimization. 

Although these challenges are legitimate concerns, they’re not insurmountable. Discover how IT service businesses like yours overcome the challenges of resource optimization with Runn [case studies].

Resource optimization best practices

Assess your resources regularly

You can’t optimize your resources if you don’t know who you’ve got at your disposal. Conduct regular assessments of available human resources – their role, skills, capacity, etc. 

Look at their utilization rate to understand whether they’re in high demand or under-utilized. This will help you work out whether you have the right balance of resources for business success. Map this against your organizational strategy and direction of travel to help align resources with future needs.

Having a comprehensive view of where your resources stand can give you a better idea of how to handle future projects, opportunities, and challenges. It also lets you plan ahead. For example, if you're planning on taking on new staff members or hiring a contractor, then resource planning and optimization will help you find the best candidates for your needs.

Prioritize projects 

When resources are limited, it’s essential you use them wisely. There’s no point in allocating resources to a low-value project if it leaves a high-value strategic initiative understaffed and struggling. 

Prioritize projects based on strategic objectives, resource constraints, and criticality. Use techniques like project portfolio management and value stream mapping to prioritize projects. 

This ensures limited resources are allocated to the most important initiatives. 

Look beyond availability 

To truly optimize your resources, you don’t just need to allocate resources to projects. You need to allocate the RIGHT resources to projects, at the right time in the project schedule. 

When scheduling resources, consider such as skills, seniority, experience, ambitions, and development opportunities, as well as availability and workload capacity. 

Establish clear policies and processes

Resource optimization is a whole-organization process. You’ll get the best out of your resources when all resources are available to be optimized. And when everyone is following the same policies and processes. 

(Put simply, there’s no point in Team A fairly sharing resources if Team B is hoarding them. Or if a senior manager can waltz in and reallocate people to their pet projects.)

You need to establish transparent criteria for resource allocation decisions and formalize processes for resource and change requests. This ensures fair and consistent decisions that minimize conflict and maximize impact. 

Use resource optimization software 

You’ll not be surprised that a resource management software vendor is telling you to use resource management software. But Runn was designed specifically to address the challenges of resource optimization.

Tools like Runn – and Float, Saviom, and others – provide increased visibility into resource utilization and capacity. They make it easy to understand whether you’re resources are being used optimally – and what to do about it if they’re not.

Check out our pick of the 10 best resource management tools for 2024.

Optimize your resources with Runn

Gone are the days when you had to manage projects manually. Many professional services organizations use project resource planning software to give them a competitive edge.

Resource planning tools provide fast accurate insights into 

  • Resource availability and allocations
  • Whether workloads are balanced or imbalanced
  • Resourcing risk to projects and portfolios
  • Demand for specific roles and skills
  • Overabundance and underutilization
  • Capacity to take on work and deliver it well

Resource management software also lets you implement resource optimization techniques – like resource levelling – as easily as dragging and dropping tasks and resources in a project plan. Changes display straight away, so you can see if your approach works or if you need to do more.

This gives project managers and resource managers almost magic powers to create accurate, achievable resource schedules – even when managing multiple projects.

Try Runn for free for 14 days today and see how easy it can be.

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