A Guide to Resource Allocation for Your Small Business

Resource allocation assigns resources to project tasks. Here, we discuss how to allocate resources and the factors that can make the process difficult.

Updated May 18, 2020

You probably have seen the sign: “Your dishes don’t do themselves.” Someone has to wash them — or at least put them in the dishwasher.

Every project needs people and tools — also called resources — to get from here to there. But resources are often scarce, more so if you’re working on simultaneous projects. Which is why project managers must be able to effectively assign and schedule resources to squeeze the most value out of them.

This process is called resource allocation, a core project manager responsibility.

Overview: What is resource allocation?

A resource is anything required at the task level to complete an activity and move the project forward. These can be people, funding, equipment, materials, reports, vehicles, computers, and other technology.

Resource allocation assigns or allocates resources to project tasks to meet schedule and quality requirements. If you’re managing a construction project, your project management resources list may include:

  • Workers
  • Construction equipment
  • Hand tools, power tools, and machine tools
  • Materials, such as wood, steel, brick, concrete, chemicals, etc.
  • Vehicles
  • Hardware and software
  • Safety gear
  • Design blueprints

This is a list of the most commonly used resources:

  • Labor: the people or human resources to perform a task. They should be available and possess the required skills, knowledge, and certifications to meet specifications. If the project is to bake a cake, you’ll need a baker or a group of bakers.
  • Materials and supplies: Things that go into a project. To bake a cake, materials — or ingredients — will include flour, baking soda, salt, sugar, frosting, etc. For art projects, art supplies may include paint, watercolor, canvas, drawing paper, etc.
  • Tools and equipment: The tools you will need to bake your cake, such as measuring cups, spatula, pastry brush, kitchen scissors, whisk, rolling pin, etc.

What are the challenges of resource allocation?

Resource allocation is not an “assign it and forget it” kind of process. Changes are inherent to projects, which is why you need a contingency plan as an integral part of any project plan.

For a project to progress according to plan, project managers must manage resources throughout the project’s life cycle. The failure to address project changes promptly can result in project derailment.

1. Changes in scope

As much as possible, you want the project’s scope to remain constant. But that won’t always be possible. The project management triangle — more popularly known as the triple constraint — states that the project constraints of time, scope, and resources are connected, which means any change in one will cause one of the remaining two, or both, to change.

If your project’s scope changes, because of funding or priority changes, you’ll have to make resource or time allocation adjustments. Projects going beyond the original scope happen a lot, so be ready to tap your pool of freelancers, contractors, suppliers, and vendors.

If that happens, you may have to request a project budget adjustment.

2. Changes in schedule

Project schedule changes can affect resource allocation in the following ways:

  • Expanding timelines: Project delays resulting from the client taking time to provide feedback or approval to start the next phase of the project may mean temporarily shelving the project until the client responds. In the meantime, resources may have to be assigned to other projects so they’re not sitting idle. Or with independent contractors, a work agreement may have to be put on hold until further notice.
  • Shrinking timelines: If the client accelerates the timeline, you may scramble to find resources. Remember this as you manage client expectations.

3. Changes in resource availability

Resources sometimes become unavailable when you need them most. Employees take pre-approved vacation leaves or suddenly become sick, businesses shut down because of a natural or man-made disaster, equipment or machinery failure, or supplies don’t arrive on time.

Timely and sound communication strategies can save the day here. When a team member is unavailable and their work is time-critical, speak with other team members to see if they can accommodate the extra work.

Otherwise, check your resource list for a replacement. If no one qualified is available, bring in freelancers or outside contractors. If that isn’t possible, negotiate a timeline adjustment with the client.

4. Changes in dependencies

Certain tasks can’t be started until another is completed. These are called dependencies. Pushing back predecessor tasks will likely delay the entire project, so it’s important you know the status of each task.

A project tracker can help you stay on top of things. It shows where bottlenecks are, which critical tasks are in danger of getting delayed, and which team members need a helping hand.

5. Changes in priorities

Resource-strapped organizations that work on simultaneous projects usually share resources across projects, making project prioritization critical to getting the most out of finite resources.

When priorities change, you may have to pause, or terminate, Project A to focus on Project B because it’s what makes sense for the company. That may also mean going back to the drawing board to rewrite your resource allocation plan.

How to allocate your resources for your project

When you’re ready to assign resources to your project, follow the general guidelines below:

Step 1: Break down the project into tasks

To assign resources to a project, you must know the tasks involved. For a project to be successful, resources must be assigned at the task level and each resource must be appropriate for the task.

For instance, if you’re working on a kitchen and bathroom remodeling project, a plumbing installation job will require a plumber, while to do the kitchen cabinets, you need a carpenter, and so on.

Tips for breaking your project down:

  • Understand the project’s scope: Is the project big or small? Is it short term or long term? Only when you know the breadth and depth of the project will you be able to determine the type and quantity of resources you need.
  • Use project management tools: A work breakdown structure breaks down projects into manageable tasks you can assign to individual team members.
Example of a project work breakdown structure

Your project’s work breakdown structure may look something like this. Source: TeamGantt.com

Step 2: Assign your resources

Once the project has been broken down into tasks, you’re ready to assign resources.

Tips for assigning resources:

  • Know your resources: Review your resources profiles. Do they have the skills and experience to satisfactorily complete a job? Can they handle the tools and equipment the project requires? Are they certified to do specific jobs? With outside contractors, can your budget accommodate their rates?
  • Don’t over- or under-allocate: Over-allocation means you’re assigning too much work to certain resources, leading to burnout, poor team collaboration, and unmet deadlines. Under-allocation happens when you have more resources than needed, which you pay for even when they’re sitting idle.

Step 3: Reallocate resources as needed

Resource management happens throughout the project’s life cycle. Even when a project is underway, certain situations may come up to disrupt the plan and schedule, such as:

  • Team members don’t show up for work or are late because they’re sick or have an emergency.
  • Specific equipment may be needed for other projects.
  • Raw materials arrive a day late because of inclement weather.

Tips for reallocating resources:

  • Factor surprises into your plan: The above scenarios — plus others — can cause a major scheduling or budget adjustment, so take into account the different ways your resource plan can go haywire.
  • Optimize resources through resource leveling: Resource leveling is a resource management technique in which project start and end dates are modified to balance resource demand with available supply. It’s used when resources are scarce, when they have to be shared with other project teams, or when certain resources aren’t available for a specific time frame.

Step 4: Track resource utilization

Monitor resource utilization rates. This is to make sure you’re maximizing resource usage. To measure an employee’s utilization rate:

Utilization rate = working time / total time

So if an employee works 35 hours out of 40 in a week, their utilization rate is:

Utilization rate = 35 hours / 40 hours

Utilization rate = 87.5%

The optimal rate is between 70% and 90%.

The resource utilization rate shows two things:

  • If it’s too low, the project is probably not profitable.
  • If it’s too high, team members are probably overworked.

Effectively allocate resources for project success

You may have the most reliable talent on the team, but if you lack adequate funding and the tools to do things, your project is doomed to fail, which showcases why effective resource allocation is such a vital component of the project management plan.

To keep your projects organized and every document you need in one place, from project initiation to closure, check out The Blueprint’s list of the best project management software. Options such as monday.com and Smartsheet come with resource allocation and planning templates you can use right out of the box.