Resource Allocation in Project Management

Introduction

In project management exists a tight connection between results and resources optimization. An inadequate planning of resource allocation might lead to a non-manageable or non-reasonable budget formulation.

Each organization must wisely allocate resources to avoid delays, rework, nonconformity and to ensure a overall company efficiency in the long run. All companies face the same dilemma at one point, how best allocate resources. Allocating resources to wrong ideas or projects that eventually fail will lead to wastage. On the other hand, not allocating resources in the right ones can lead to even greater opportunity costs. Under and over allocation are the main problems that arise in a non-planned resource allocation scenario.

Is critical to have a planned approach in RA to manage a project portfolio effectively. Being able to allocate the correct resources, in terms of skills and quantity, to the right ideas, projects and products should be the final goal of each project manager.

In this article will be introduced different techniques and approaches to optimize resource allocation. A explanation will be provided to guide PM's on how to best allocate resources.

Resource Allocation

The process of assigning and managing assets in order to support an organization's strategic goals is called resource allocation. In project Management, is the scheduling of activities and resources required by those activities taking into consideration both the project time and the resource availability. It involves balancing competing commitments and priorities in order to determine the most effective course of action to best utilize a limited pool of resources and maximize the return on investment.

Resource Allocation Process & Strategies

Resource allocation begins with strategic planning. A company should formulates and agree on its vision and goals, and proceed in accomplishing them through setting objectives and working towards their achievement. Once a strategy is drawn it will be necessary to allocate sufficient resources to accomplish it. Project budgeting comes into play at this stage, each department will use an agreed budgeted fund to allocate resource for specific purposes, such as buying raw materials, hiring employees, etc. Resource will have to be moved where they are needed the most, that is why resource allocation is at the core of each projects and why without a proper allocation projects are destined to fail. In the next paragraph it will be explained the different resources a project manager have to keep in consideration while starting up allocations.

Core Resources

• Land: Natural resource required in production process, land, mineral, forest, oil and water resources.

• Labour: The aggregate of humans physical and mental effort used to generate goods and services. It is a primary factor in production. The labor force is determined by the adult population of a nation.

• Capital:Wealth in the form of money or assets, sign of the financial strength of an individual, organization, or nation, and assumed to be available for development or investment.

Allocation Decisions

The basic allocation decisions begin with the choice of what is going to fund the project, it is important to avoid allocating resource merely in terms of meeting milestones, but also in terms of timing and utilization of scarce resources. The challenge

Resource Allocation Problem

• Time Limited: Projects must be finished on an agreed time, using as few resources as possible.

• Resources Limited: Projects must be execute by not exceeding specific level of resource usage or general resource constraints.

• Resource Over-allocation: Assign more tasks than what resources can handle within the standard workweek time frame. A company with multiple projects and a limited pool of resources often risk to encounter this issue, this can lead to overtime and overspending on financial resources.

Resource Allocation Techniques

“The schedule produced for a project assumes that enough manpower and equipment is available to get the activities done as scheduled. This is not always the case, and in a large or complex project, it might not be obvious that a deficiency exists.”

“Resources required by activities are unlimited, while some resources are highly limited in practice. In most real construction projects, scheduling without considering resource limitations may result in a non-credible schedule, since the start-ability of activities is affected by resource availability.”

There are different solutions and techniques to tackle the problem of resource allocation, identify the right one for a specific business is crucial to ensure the effectiveness of the procedure.

Resource Leveling

The aim of leveling resources is to minimize the variations in resource loading by "Shifting tasks within their slack allowances".

The technique is applied to resolve conflicts and to create a smoother distribution of resources, determine the correct resource requirements to ensure availability at any given time and to schedule the activities in order to secure the smoothest achievable transition across usage levels.

In resource leveling resources should be assigned to those activities with:

• Minimum slack
• Shortest duration
• Earlier start
• Most amount of successor tasks
• Highest resources requirement

Steps

Figure 1 - Activity Network Diagram - Construction Building Example

• 1- Create a project activity network diagram.

It is the sequence of project activities that shows the sequential relationships between them with arrows and nodes. This tool is widely used in project management and is required to identify a project’s critical path (used to determine the expected completion time of the project). The nodes represent the nine activities required to build a construction, the arrows that connect the different nodes show the process flow. [Figure 1] It is possible to identify different type of activities, A,B,C run in series, i.e. is not possible to proceed with the activity B if A is not completed. D,E,F run in parallel, they must all be completed before G or H can be executed. A network diagram is also essential in identify the critical path, the path which has the longest completion time.

• 2- Create a table showing resource requirements, duration and available slack for each activity.

In order to allocate resources optimally and identify project resource gap it is important to have create a complete overview of each activities' requirements. This will help in identify the difference between available and required resources. This stage is crucial as different approaches can be taken, e.g. adding more resources, prolong the schedule, hire more labor force.

Figure 2 - Gantt Chart Example

• 3-Develop a resource loading table or Gantt chart .

"Is a instrument that addresses the determination of realistic due dates and other important milestones for new customer orders, as well as the resource capacity levels that are a result of the actual set of orders in the system"

Gantt chart, as can be seen in Figure 2, is a project planning tool used in project management, it is used to show the timing of tasks necessary to fulfill project's requirements. Each line represent a different task and they are represented on a time-phased scheme, the expected time is represented by a horizontal bar where the left end represent the expected beginning of the task and the right end the expected completion date. As in the network diagram tasks may run in sequence, in parallel or overlapping.

Prioritize Projects

Organizations often struggle to balance a growing list of incoming projects while the need for core services continues. Prioritizing projects avoid pressure on individuals or teams in presence of over-allocation or task conflict. It is essential to decide how to prioritize projects and separate high priority projects from lower ones. A prioritization matrix can overcome such problems.

Prioritization Matrix

"A prioritization matrix, as can be seen in Figure 3, is a simple tool that provides a way to sort a diverse set of items into an order of importance."

A Prioritization matrix bring different benefits:

• Quantifies decisions with numeric rankings.
• Facilitates agreement on priorities.
• Provides a quick and reliable to evaluate options.
• Help in the prioritization of complex issues.

Steps

Figure 3 - Prioritization Matrix Steps

Figure 4 - Prioritization Matrix Steps

Figure 5 - Prioritization Matrix Steps

Figure 6 - Prioritization Matrix Steps

Figure 7 - Prioritization Matrix Steps

Figure 8 - Prioritization Matrix Steps

• 1- Agree on the objective to be reached and identify the key project stakeholders

It is necessary to ensure that the whole team, working on the matrix, is fully aligned on the ultimate goal to achieve

• 2- Identify which projects should be evaluated for prioritization.

The expertise and the knowledge of the involved participants are required to outline which projects should be compared on the prioritization matrix. The Project must be listed as can be seen in Figure 4.

• 3- Identify the criteria required to meet the goal (Figure 5)

Create a list containing all the characteristics needed to achieve the prefixed objective. Through brainstorming and discussion the team should align on these criteria. Few examples:

-Ease of implementation, Customer satisfaction, Improves Company image, Use of Technology, Improves Company Profitability, May be completed within timing goals, Investment Cost

• 4- Compare criteria importance by allocating a value to each criterion on a agreed scale. (Figure 6)

Judge the importance of each criteria comparing it with the other. These number will results at some extent arbitrary. However, by keeping them constant and applying them in a prioritization matrix it will be possible to reach an accurate standard.

• 5- Compare each project's impact on each criterion by rating them with the an agreed scale. (Figure 7)

• 6- Compare the projects against the weighted criteria (FIgure 8)

Once the importance of each criterion and project is stated is possible to evaluate how they meet each other. By multiplying each project rating with each criterion rating it is possible to retrieve the score for each project for each criterion.

• 7- Compare the final result

Once all the scores are added up for each project is possible to outline which ones should be prioritize. In the given example it is possible to see how the most important project will be Project 2, with a score of 69 and the least important Project 4 with a score of 17.

Linking Tasks

Linking similar task to different projects. If a resource have been allocated to a task which is similar across different projects it is possible to link these task. In this way a resource that appears to be over-allocated with tasks, can actually work at the same time with activities that shares common similarities.

Leaving Breathing Room

Anticipate challenges is important when allocating resources, project managers should carefully thinking ahead in order to foresee obstacles and constraints. It is then vital to leave breathing room between tasks to avoid unexpected expenses. When facing strict deadlines, it is necessary to focus energy on time management and in creating a clear timetable to achieve goals. However, in order not to under-allocate resources, which could lead to a budget loss, a balance between breathing room and a quick approach to task must be achieved.

Conclusions

The process or resource allocation can be described as the company activity of placing in the best possible way its scarce resources. The strategy is to bring to customers, goods and services, whose fully satisfy the expressed request, by matching matching their preferences utilizing the lowest possible production cost. Resource allocation is an ongoing process through all the project span, it must be kept monitored to ensure efficient use of resource and identify all problems.

Annotated Bibliography

• Schwalbe, Kathy (2007). Information Technology Project Management 5th Edition.
• The Associated General Contractors of America(AGC) (1976). The Use of CPM In Construction.