What is resource allocation in project management?

Resource allocation in project management is the strategic process of distributing available resources to an engagement to ensure budgets and timelines remain on track. Resource allocation is an essential part of the wider resource management process.

In this article, we explore the important role of resource allocation in project management, its benefits, methods, and how to navigate common challenges.

Key takeaways

• Resource allocation is the strategic assignment of resources to optimize efficiency and engagement performance

• Agile resource allocation is important in project management to ensure fair workload distribution, prevent staff burnout, and improve client satisfaction. It needs to consider available time, skillsets, client budget, workforce capacity, and business goals

• The key elements of effective resource allocation include objective and priority setting, resource identification, scheduling, risk planning, budget management, and ongoing resource monitoring and optimization

• The benefits of resource allocation can include improved staff retention, increased profitability, and optimized engagement success

• Common resource allocation challenges can include poor communication, a lack of visibility, and changing project demands. Tactics like resource leveling, and real-time, firm-wide monitoring can help firms to overcome these

• Dayshape’s AI-powered resource management software can be used to automate resource allocation, enhance visibility, and support career development through skills tracking. It can also help to reduce bias and improve fairness in resource assignment

Contents

1. What is resource allocation in project management?

2. Traditional vs agile resource allocation

3. Why is resource allocation important in project management?

4. Who is responsible for resource allocation?

5. Benefits of effective resource allocation in project management

6. Common resource allocation challenges

7. How to manage resource allocation for a project

8. Resource allocation example

9. Transform your resource allocation approach with Dayshape

What is resource allocation in project management?

Resource allocation refers to the strategic distribution of available resources, such as time, budget, and workforce, to maximize efficiency and achieve business goals; it’s an essential part of the overall resource management process. Effective resource allocation ensures optimal productivity, reduces waste, and improves project outcomes. 

Resource allocation is a subprocess of resource or project management, and is primarily about matching the right people, with the right experience, qualifications, and skills with the right client and task, at the right time.

Traditional vs agile resource allocation

Agile, proactive and strategic resource allocation is the goal for today’s professional services firms. The key differences between traditional and agile resource allocation are as follows:

Why is resource allocation important in project management?

In the delivery of any project, poor allocation of resources will have a knock-on impact on overall performance. Lacking the right skills or knowledge on a project can result in the loss of efficiency, time, confidence, and motivation along the way. Effective resource allocation is not only an essential project management process, but is also a critical lever for growth and success. 

Well-thought out resource allocation should:

• Make sure work is divided evenly among all available and suitable resources to prevent staff burnout

• Empower teams by ensuring resources have the skills, knowledge, and training necessary to complete allocated work

• Optimize engagement performance by matching the right resources to the right task, at the right time

• Ensure successful, profitable client engagements

Who is responsible for resource allocation?

The person or department responsible for resource allocation in a professional services setting can vary depending on the organization. The responsibility may fall to:

• Senior management

• Project managers

• Resource managers

• Finance departments

• Department heads or team leaders

Benefits of effective resource allocation in project management

Getting it right isn’t always easy, but when done right, effective resource allocation can deliver multiple benefits, including:

1. Improve staff retention

Poor resource allocation can lead to staff burnout. A report from accountancy wellbeing charity CABA found that 74% of accountants had experienced indicators of burnout in recent months, with 63% of those surveyed saying their work environment contributed to these feelings. As a result, 45% of respondents said feelings of burnout had affected their ability to work. 

Using the right allocation process, businesses can drive better utilization, employee satisfaction, and retention simultaneously. An effective allocation system will optimize resource utilization rates without overburdening your people.

Dayshape CEO Matt Cockett explained in a piece for CEO Monthly: “Resource managers don’t just know who is working where. They understand which teams are stretched, which individuals are nearing burnout, and where capacity is being wasted. They can tell you if a growth plan is achievable with current headcount, or if your most valuable people are stuck on the wrong work.”

Efficient resource allocation methods should prevent other capable and available resources from being overlooked, ensuring tasks are assigned both fairly and strategically. What’s more, by taking into account individual preferences, interests, and career aspirations when allocating work, your firm can better support professional development and retention.

2. Increase client satisfaction

Clients will expect to see individuals with the right qualifications and experience assigned to deliver their engagements; that means those with appropriate skills, insight, and knowledge relevant to the client’s specific business and industry. This could include a combination of technical skills or sector experience, with particular ‘soft skills’ required on top. 

However, these skills do not all have to reside in one person, location or time zone. An optimal resource allocation system considers these details and identifies a team with the most suitable skills for each project stage. A resource management system that can utilize your people in the best way will benefit staff and client satisfaction alike.

3. Enhance efficiency

In the long term, an effective resource management strategy can help your firm to strike the right balance between over and under-utilization of resources. Maintaining this balance reduces the risks of overburdening your team or overspending on resources that are not required. Allocating the right resources to the right engagement at the right time boosts efficiency and cuts the risk of overruns, enhancing project timelines and quality.

4. Cost savings

Proper resource allocation prevents the overuse or underutilization of resources, reducing unnecessary expenses. The combination of greater visibility across all resources and engagement financials helps to ensure projects remain profitable and on schedule, maximizing return on investment and supporting cost efficiencies.

5. Drive growth

Efficient resource allocation in project management enables businesses to scale operations effectively without resource wastage. It ensures that financial and human resources are directed towards the highest priority projects, driving growth.

Strategic resource allocation also enables organizations to adapt to changing market conditions quickly, creating resilient foundations and opportunities to size new opportunities.

Common resource allocation challenges

There are some common resource allocation challenges for professional services firms, including:

1. Poor communication

Failing to effectively communicate how resources have been allocated can lead to cross-department issues, potentially impacting project delivery. Clear, firm-wide communication is key to ensure all stakeholders are aware of the resource allocation plan, and can raise any concerns to prevent bottlenecks before the project delivery timeline begins.

2. Changing demands

Evolving demands and last-minute client requests can disrupt planned schedules, requiring an agile resource allocation solution. Dayshape’s resource allocation software centralizes your resources, providing greater visibility into alternative options at a national and global level, without disrupting existing schedules.

Enhanced visibility over available resources makes it easier to consider alternative resourcing decisions. Filters and automated alerts help resource managers identify schedule clashes, allowing them to prevent or resolve conflicts in real time.

3. Staff preferences

If team members’ preferences are not taken into account, this can impact staff morale. However, allocations based on preference or recency bias don’t necessarily support fair progression, so there’s a balance that needs to be struck.

Dayshape records individuals’ preferences for task types, engagements, or industries. Managers can then support career development and staff retention efforts by considering skills, individual preferences, and AI-powered suitability scoring when allocating work in the system. The ability to match skills and preferences to the work assigned will contribute to higher quality engagements, and provide greater visibility of skill shortages.

4. Inadequate data

Inadequate or outdated data on staff skills or qualifications can result in the improper allocation of resources, causing more issues further down the line. Dayshape provides visibility into key resource optimization metrics firm-wide via a customizable dashboard, powering better-informed, strategic decision making.

How to manage resource allocation for a project

When allocating resources to a particular project, it’s important to follow the below steps to ensure all goals and priorities have been considered.

Step 1: Establish goals

The first step in strategic resource allocation is to define the project’s goals, objectives, and scope. This will help with prioritization, ensuring that the right resources are allocated to the right tasks to achieve the intended outcomes. The risk of resources being wasted is significantly reduced as a result, supporting cost efficiencies too. Clearly setting out goals helps to keep everyone motivated and accountable to deliver the best outcome for the client.

Step 2: Identify available resources

The next step in the resource allocation process is to identify which resources are available for distribution. This may include:

• Staff

• Contractors

• Freelancers

• Specific skills, qualifications and experience

• Equipment

• Budget

Step 3: Prioritize tasks

Tasks then need to be prioritized to ensure resources are allocated in the most impactful direction first. Priorities may be determined based on strategic value or likely return on investment, depending on the project goals – refer back to these when setting out priorities. This will help to prevent resources being wasted on low-value or low-impact activities, supporting overall efficiency.

Step 4: Allocate resources

Allocating the right resource combinations for complex engagements demands thorough, up-to-date knowledge of your resources' skills, capacity, and availability. It also requires the ability to accurately predict the impact that resourcing decisions will have on engagement performance. AI-driven resource management software will assist you with this, monitoring resource allocation and enabling real-time adjustments.

Step 5: Review and adjust as needed

Once resources have been allocated, the resource allocation plan should be regularly reviewed to address any changes in project scope, timelines, or resource availability. Agile resource management software enables plans to be updated in real time, so allocations can be adjusted as needed. 

It’s also important to evaluate the performance of the plan once it’s live. Dayshape provides you with analytics and reports from a customizable dashboard, so you can review, amend, and plan for the future.

Resource allocation example

Grant Thornton UK successfully centralized its resource management with Dayshape’s AI-powered resource allocation software. The professional services firm was previously using legacy resource management software, supplemented by spreadsheets. After transitioning to Dayshape, the firm reported it was subsequently able to:

• Make objective, commercially driven resource allocation decisions

• Access real-time resourcing data, thanks to seamless integrations with HR and CRM systems, and timesheets

• Receive powerful, accurate reports, combining data from integrations

Laura Brierley, Project Implementation Director and Head of Agile Talent at Grant Thornton UK, commented: "With Dayshape's reporting, we now have accurate and complete data from all teams, which is hugely beneficial, and we can be a lot more proactive as a result.

"From a resource management maturity point of view, we'll continue to enhance and evolve how we use Dayshape to further benefit from the solution. We'll start to leverage the next level of AI scheduling, Advise, which will take time. But considering the progress already made, and Dayshape's support, we're confident that we'll get there."

Transform your resource allocation approach with Dayshape

Utilizing Dayshape’s AI-driven resource management platform helps firms allocate resources more strategically, optimizing resource allocation via AI-powered scheduling, while significantly reducing admin. 

Regardless of your firm's size, effective resource allocation hinges on identifying, matching, and utilizing your team's skills and capacity in line with client demand. The right resource allocation process will boost profitability, client satisfaction, and team morale.

Start transforming your organization’s resource allocation today. Book your Dayshape demo today, or contact us to find out more.