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Libby Marks

Understanding the True Costs of Poor Resource Management in Business

Flatlining financials? Delivery delays? Forecasting fails? Your business might be counting the cost of poor resource management. But you can fix it.

We’re about to let you in on some resource management earned secrets that will save your business time, money, and risk. 

For once, we’re not talking about the benefits of resource planning here. We’re looking at the flipside – the cost of poor resource management to your business – financially, operationally, and reputationally. 

But don’t worry. It’s not all doom and gloom. For everywhere you’re hemorrhaging cash, talent, or time, we’ve got the perfect way to staunch the flow. Let’s go!

The flat line – financial penalties and falling profits 📉

In resource-heavy organizations, people are your biggest investment. But they’re also your biggest opportunity to drive profit. Resource management is about doing that in the most efficient way, so you maximize the ROI of your people. Do it well and you’re on the path to healthy profits. But do it badly and your budget will bleed out. 

Underutilization erodes profit margins

The Resource Management Institute calculates that a 1-point increase in resource utilization could bring in over $1.2m in additional revenue (in a 300-person business with an average $200-an-hour bill rate). 

If your business is experiencing low or inconsistent utilization rates due to poor resource management, that’s how much it could cost you. Even small dips in utilization can cause significant revenue loss over time.

The fix

  • Monitor utilization for fluctuations and room for improvement. 
  • Target 85% utilization rate to allow for maximum productivity without burnout.
  • Balance workload between staff to ensure no-one is over- or under-utilized.

Misaligned resources impact profits

Profit profitability relies on accurately aligning people to projects – the classic golden triangle of ‘right people, right projects, right time’. Accuracy is essential to maximizing the ROI of a project

If you assign people at the wrong time, for example, they could be twiddling their thumbs waiting, doing non-billable work, and eating into your profit margins. Or if you assign the wrong person to a task – say a senior designer when a junior would do – that also eats into your budget. Meanwhile, assigning unqualified resources can cause delays and quality issues. 

The fix

  • Ensure exact resource needs are understood before staffing your projects.
  • Create a Resource Breakdown Structure to capture needs in a standardized way.
  • Consult experts and historical project data to accurately determine the skills and time required.

The wrong resources increase costs 

Another financial risk is when you don’t have the resource insights to make cost-effective staffing decisions. This undermines project cost control and sends budgets spiraling. 

Resource management data tells you which skills are most in demand, identifies skills gaps, and lets you fill those gaps most cost-effectively. Like upskilling existing staff rather than hiring skills externally. Or recruiting new team members in good time rather than reactively appointing expensive short-term contractors. 

Sadly, poor resource management means you don’t have this information available to you for this type of strategic workforce planning, leading to over-reliance on overly expensive resources.  

The fix

  • Use skills gap analysis and utilization data to identify talent shortages.
  • Implement cost-effective methods to develop and upskill employees in-house.
  • Ensure resource managers and HR communicate for timely recruitment processes.

The revolving door – high staff turnover and human costs 😣

When we use the word ‘resources’, it’s important to remember we’re talking about human beings. Your people aren’t cogs in a machine – they have hopes and dreams, they get bored and frustrated – and this can impact your business. 

Effective resource management is truly people-centric – ensuring talents are nurtured, ambitions are realized, and staff stick around. But get it wrong and you’ll be hampered by the high costs of unplanned turnover and other workforce disruption.

Disengaged employees vote with their feet  

Without strong resource management practices, your people can experience: excessive and imbalanced workloads; frustrating project allocations that don’t use or develop their talents; and career stagnation. 

Unsurprisingly, this can lead to burnout, boredom, and low morale. In turn, this reduces employee engagement and productivity, and increases staff turnover (as well as the related cost and disruption to your business).  

The fix

  • Look at utilization data to create fair and balanced workloads that maintain morale.
  • Use a skills inventory to align people with projects they’ll want to work on.
  • Create personal development plans to help your employees and organization grow together.

Poor capacity planning incurs costly layoffs

Another cost and disruption associated with poor resource management is the revolving door of hiring and firing employees as demand fluctuates. This is an expensive mistake when resource management is an alternative to costly layoffs – showing you where and how to reallocate people during quieter times.

The fix

  • Use forecasting to anticipate demands and proactively adjust staffing levels.
  • Reassign underutilized staff to other projects instead of laying them off.
  • Implement cross-training programs to make the workforce more flexible.

The egg on your face – reputational damage and revenue loss 🍳

Your reputation precedes you – building trust, opening the doors to opportunity, and ensuring a steady flow of both clients and job candidates. Whether it’s from frustrated clients or disgruntled ex-employees, a poor reputation can quickly create business risk. It’s just another reason businesses are prioritizing better resource management

Unhappy clients damage your reputation

If your business gets known for poor project outcomes, late delivery, or running over budget, potential clients will steer clear – choosing your competitors instead. This means you’ll need to cut costs to attract work, and no business wins in a race to the bottom of clients’ budgets. 

Resource management helps you deliver quality, meet deadlines, and control costs – earning you a reputation as a dependable, high-value partner. This leads to positive word-of-mouth to attract new clients through referrals, as well as repeat custom from existing clients. 

The fix

  • Improve resource allocation accuracy to deliver more projects on time and budget.
  • Use your skills inventory to match appropriately qualified people to project tasks.
  • Use project prioritization techniques to ensure VIP projects get MVP resources. 

Employer brand impacts talent options

Reputation doesn’t just matter to clients – it matters to potential hires too. If your business is known for overworking employees, chaotic projects, and zero career growth, no one will want to work for you – especially not the top talent you want to attract. This leaves your talent pipeline depleted, with fewer candidates, and higher costs. 

Effective resource management fosters healthy teams, supports professional development, and keeps workloads balanced – making you an employer of choice for bright new hires. This makes recruitment easier, cheaper, and reduces time-to-fill vacancies too. 

The fix

  • Make people your North Star and create more human-friendly practices.
  • Prioritize activities that boost engagement and retention, like career development.
  • Implement a talent pipeline strategy to make recruitment easier. 

The marathon that's lost – losing ground to competitors 🏃‍♀️

Without strong resource management, you can become an ‘also-ran’ in the race to success. When your organization is in constant crisis mode – or making decisions in the dark – it can quickly lose ground to competitors. But resource management best practices help you stay ahead. 

Reactivity loses the race 

Resource management is all about proactivity – planning and controlling what you can, so you’re better prepared to deal with what you can’t. Without it, your business can get trapped in a cycle of reactivity – your constant firefighting leaves you no time to plan. 

And while you’re dousing the flames of another avoidable issue, your competitors are stealing ahead with their more strategic approach – making space for upskilling, scenario planning, and process improvements.

The fix

  • Make proactive resource management your goal. 
  • Explore opportunities to introduce resource management best practices into your allocations.
  • Learn how resource management software can equip you for better decision-making.

Forecasting fails limit growth

Until Amazon starts selling crystal balls, the best way to forecast future demand is by using centralized resource management insights. 

Forecasting lets you plan ahead, allocate resources strategically, and seize new opportunities with confidence – knowing you have the capacity and capabilities to deliver. Without it, you can’t prepare for future demand. Have you got enough staff? Will you be able to onboard that project? Who knows? 

This lack of foresight can mean many things: staff are overstretched or under-used, projects flounder, and you turn down clients because you don’t know you have spare capacity. If only you’d seen it coming… 

The fix

Learn more with Runn

Learn more with our library of resource management resources, perfect for beginners and experts alike. 

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