Resource Allocation: How To Plan Effectively For The Short and Long Term

Posted by Deltek on October 31, 2019

Resource Allocation

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What Is Resource Allocation?

Resource allocation is the process of carefully and methodically planning and distributing your firm’s most important resource – your human capital – across multiple projects, with a view to deploying talent and teams according to their expertise and experience; delivering outcomes that go above and beyond your client’s expectations; and even reducing stress all within the established budgetary parameters. Achieving these goals will help your firm attain a steady and profitable revenue stream.

It sounds simple, but it can be a complicated process to juggle, with shifting demands and time-frames, delays beyond your firm’s control, personal emergencies, competing tasks and all sorts of other contingencies getting in the way of good planning.

Get it right, though, and you can make accurate and timely decisions about the types of opportunities to pursue – and how to manage your workforce in future – with confidence and ease.


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Why Is Resource Allocation In Project Management Important?

Resource allocation is most successful when observations taken from past data are used to predict future resourcing needs. In this way, strategic capacity planning enables a firm to maximise its productivity, and to deploy its available resources to meet current obligations and plan for future opportunities.

Observing historic and current project trends provides a strong foundation to plan the best way to distribute teams and finances across future projects. Like construction itself, once the foundation has been laid, a project’s vision can be realised through carefully planning, recognising opportunity, and effectively managing project resources.


"Observing historic and current project trends provides a strong foundation to plan the best way to distribute teams and finances across future projects."


What Is The Best Way To Approach Resource Allocation?

Resource management can be a difficult discipline to implement. It is important that everyone within the firm contributes to making the required updates to resource allocation systems, so that the data is accurate and trustworthy. 

And there must be clear processes in place that everyone can easily follow, so that they do not resort to localised information storage.

When it’s done well, resource planning and proper allocation makes it easy to identify problems before they arise, pinpointing for example that team capacity is on the cusp of being over-stretched, or identifying potential gaps between skill-sets and necessary tasks. 

Sometimes, problems can arise when people assigned to a particular team or project are out of their depth. For example, you wouldn’t put a schoolteacher into an operating theatre to perform major surgery; just as you wouldn’t assign an architect to operate tools on a construction site. 

Rather, it pays to empower your teams by establishing project team structures that position project managers to oversee resource planning, thereby freeing up architects, engineers, contractors and consultants to oversee, manage and deliver upon their own areas of expertise. 

In addition, careful resource allocation helps to ensure that all of the necessary tasks and roles within a project are occupied by the best-suited person.

What Is Resource Allocation

Who Makes Up The Resource Allocation Team?

As the name suggests Project Managers oversee projects from inception to completion, taking charge of planning, scheduling and updating across a project’s life cycle. Project Managers identify who is needed to staff a team, and then plan how the project will be carried out, using the skill-sets at their disposal.

Perhaps one of the most crucial roles in resource allocation is that of Resource Manager (or Line Manager). They understand the ins and outs of all the people they manage and can allocate resources to maximise your firm’s productivity. 

These two positions need to work together in a co-ordinated way. Usually, the Resource Manager helps to source the best team member for each required role, although they might liaise with the Project Manager to outsource some tasks to contractors if required. 

And the Project Manager needs to regularly update resource planning systems and prospects and opportunities, so the Resource Manager can seek out the right people for upcoming projects and tasks.

Sitting above these two roles, the Top Line Manager makes big-picture decisions about current and future teams, tasks and availabilities. By analysing revenue and staffing forecasts, Top Line Managers plan for future work and make management decisions involving labour force and cash flow.

Meanwhile, employees are the cogs in the machine; without them, the tasks required to bring projects to life would go unrealised. 

For some firms, and on particular projects, it may be prudent to bring in contractors for short periods – particularly if a team lacks a specific skill or capacity, or is overstretched working across several projects. 

Of course, it’s important to note that the use of contractors can become costly if the right controls and definitions are not put in place at the outset. Ideally, contractors are best deployed for short and pre-determined periods, to minimise the chance of their associated costs outweighing any benefits.


"Contractors are best deployed for short and pre-determined periods, to minimise the chance of their associated costs outweighing any benefits."


What Are Best Practice Resource Management Strategies?

Once you have established your ideal project team structures by deploying the roles outlined above, it’s time to implement capacity planning strategies. 

On projects where unexpected setbacks – such as supplier delays, or poor weather – can throw a spanner in the works, we recommend weekly planning processes. That way the Project Manager can easily devise an alternative plan – or better still have several alternatives ready in case of predictable setbacks – to avoid the prospect of labour sitting idle, wasting precious time. 

If you haven’t adopted a weekly planning processes yet, this best-practice example may help to streamline your resource allocation process:

1. Project Managers always update resource plans on Thursdays;
2. Line Managers and Planners review and adjust bookings for the following week on Fridays;
3. Employees execute tasks during the following week, according to the booking schedule.

In addition to these weekly tasks, monthly forecasting helps businesses maintain control of their cash flow, labour and time, thereby ensuring that resources are allocated effectively across projects. Knowing where your revenue and expenses are likely to be incurred before embarking on a project puts your firm in a good position to capitalise on new opportunities as they arise.

In addition, these streamlined processes can help to free up time and energy for business leaders to proactively seek out new opportunities. Resource management best practice suggests that making time – once a month is ideal – to meet with clients, partners and project managers will help you to plan effectively in short-term increments and secure long-term workflows.

managing project resources

How Can You Optimise Resource Planning For The Long Term?

The most straight-forward way to approach resource planning is to break down your tasks into achievable chunks, as follows:

Step 1: Plan current projects 2 to 3 months ahead
Get a complete view of tasks being performed over the next 2 to 3 months, including planning existing and any recently signed-off projects. And make sure that Project Managers are considering project plans for the next 2 to 3 months.

Step 2: Plan new opportunities 3 to 6 months ahead
Shift towards longer term planning, by deciding how to incorporate seeking and converting new opportunities into your planning schedule. This may require monthly updates for prospects and opportunities that are 3 to 6 months ahead. 

Step 3: Combine with forecast and hire on facts
Having mastered the short and long-term planning of steps 1 and 2, it's possible to implement revenue forecasting and make labour hire decisions based on known project and opportunity data.

Forecasted revenue predictions are essential if you intend to make decision-making around current projects and future opportunities both sustainable and profitable. 

Depending on the size of your firm, and the nature of your business, it may be a good idea to implement a client services team to update your forecasts on a monthly basis, thereby freeing up capacity for managers and employees to focus on projects in hand.


"Forecasted revenue predictions are essential if you intend to make decision-making around current projects and future opportunities both sustainable and profitable."


How To Measure Resource Utilisation To Achieve Optimisation

It’s not enough just to plan and schedule your current and future projects; you need to analyse your performance to ensure your outputs match your business objectives.

In resource planning, there are three main Key Performance Indicators (KPIs) that can help you monitor and improve employee performance. These are: 

  1. Actual utilisation: hours spent on billable projects, as a percentage of available hours, on a per person basis;

  2. Planned utilisation: a weekly view of future workload, expressed as hours booked or utilisation; and 

  3. The freelancer ratio: the percentage of your total salary costs that is spent on contractors.

These KPIs can be used to improve employee productivity and performance via a process of enhanced accountability. In addition, there are two important resource utilisation formulas that focus on costs and productivity. The first is 'Billable Utilisation', which measures the percentage of hours employees spend working on billable tasks while at work. And then 'Productive Utilisation', which combines both billable hours and business development tasks, as a percentage of total available hours. 

Whilst KPIs serve a purpose – such as helping to inform where the firm is optimising its resources and where it needs to improve in relation to productivity – it is important not rely solely on these metrics. If you observe room for improvement in your productivity metrics, you might ask: 

  • Are there any current business processes that could be hindering or obstructing team members from meeting their KPIs and driving business success?; and

  • Has the firm already adopted resource management best practice, or is there room for improvement in the systems and processes that support teams to do their best work?

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What Are The Prerequisites For Effective Utilisation Of Resources?

As we’ve already said, achieving best-practice resource allocation is a complex task, but through our work with project-based clients we’ve observed three main pillars that will help firms to do so successfully. These include:

  • Management decisions and support: when management spearheads an initiative to improve business processes – and does so in a supportive way –people are more likely to engage with those initiatives, which helps to achieve better productivity outcomes from existing resources;

  • Clear processes: the more succinct and easily understood the firm’s processes are, the more likely they will be adopted across the company. It’s essential that every team member plays their role, otherwise the initiative is likely to fail, so make it easy and straightforward for everyone to adopt the new measures; 

  • Balance within the reporting system: Overly detailed planning can be off-putting, and deter team members from providing regular updates to your plans. Examine how detailed your plan will be, and consider how you plan projects. Is it possible to combine rigorous and flexible reporting in the one system?

While it’s true that the revenue stream of project-based firms can fluctuate significantly over time, a firm’s ability to weather these fluctuations can be maximised by streamlining its workforce against its incoming revenue, at all times. 

Putting these strategies and processes into place will enable firms to make workforce and labour hire decisions based not on gut feeling, but on facts and insights from existing and prospective projects, and known revenue and resource data. 

Getting effective resource planning right can help to position your firm to deliver profitably on existing projects, and to secure and deliver more of the right types of projects in the future.


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