A Study on Resource Allocation- Sm

A STUDY ON RESOURCE ALLOCATION

INTRODUCTION:

Resource allocation is a central management activity that allows for strategy

execution. A resource allocation is plan for using available resources, especially

human resources in the near term, to achieve goals for the future. It is the process

of allocating resources among the various projects or business units.

Resource allocation is the assignment of available resources to various uses. In the

context of an entire economy, resources can be allocated by various means, such as

markets or central planning. In project management, resource allocation

or resource management is the scheduling of activities and the resources required

by those activities while taking into consideration both the resource availability

and the project time.

Resource allocation is a major management activity that allows for strategy

execution. Organization do not use strategic management approach for decision

making, resource allocation is often based on political or personal factors. Strategic

management enables resources to be allocated according to priorities established

by annual objectives. Nothing could be more detrimental to strategic management

and to organizational success than for resources to be allocated in ways not

consistent with priorities indicated by approved annual objectives.

All organization has at least four types of resources that can be used to achieve

desired objectives:

Financial resources

Physical resources

Human resources &

Technological Resources

Allocating resources to particular divisions and departments does not mean that

strategies will be successfully implemented. A number of factors commonly

prohibit effective resource allocation, including an over protection of resources, too

great an emphasis on short run financial criteria, organizational politics, vague

strategy targets, a reluctance to take risks, and a lack of sufficient knowledge.

The real value of any resource allocation program lies in the resulting

accomplishment of an organizations objectives. Effective resources allocation does

not guarantee successful strategy implementation because programs, personnel,

controls, and commitment must breathe life in to resources provided. Strategic

management itself sometimes referred to as a “resource allocation process”.

DEIFNITION OF RESOURCE ALLOCATION:

Resource allocation is a process and strategy involving a company deciding where

scarce resources should be used in the production of goods or services. A resource

can be considered any factor of production, which is something used to produce

goods or services. Resources include such things as labour, real estate, machinery,

tools and equipment, technology, and natural resources, as well as financial

resources, such as money.

METHODS OF RESOURCE ALLOCATION:

In an economist's world, resources are optimally allocated when they are

used to produce goods and services that match consumers' needs and wants

at the lowest possible cost of production.

Efficiency of production means fewer resources are expended in producing

goods and services, which allows resources to be used for other economic

activities, such as further production, savings, and investment.

This basically boils down to creating what customers want as cheaply and

efficiently as possible.

A list of eight different price mechanisms critical to an understanding of

politico-economic and socio-economic allocation. Although it is difficult to

give a clear characterization of the importance of different methods of

distribution in a modern society, the following approaches are considered to

be the major means of allocation of resources:

(1) The economic market with a price system;

(2) Voting procedures;

(3) Bidding;

(4) Bargaining;

(5) Allocation by higher authority, fiat, or dictatorship;

(6) Allocation by force, fraud, and deceit;

(7) Allocation by custom, including gifts and inheritance; and

(8) Allocation by chance.

Though simple, the list suggests different approaches used in many

politico-economic systems, including less-developed countries and societies

without democratic institutions.

RESOURCE ALLOCATION PROCESS & STRATEGIES:

STRATEGIC PLANNING:

Resource allocation begins at strategic planning when a company

formulates its vision and goals for the future. The vision and strategic goals are

accomplished through achievement of objectives. For example, a consumer

electronics company's goal may be to become the market leader in computer

tablets. An objective towards this goal is the design and promotion of an

innovative tablet.

BUDGETING:

Once you have set your objective, you will need to allocate sufficient

resources to accomplish it. In practical terms, this is often a matter of project

budgeting. In our example, the company will allocate money for market research to

determine unmet consumer needs and wants for a computer tablet, money for

product design and development, funds for production, and money for promotional

activities, such as advertising. Each department may take its budgeted funds and

allocate those resources for more specific purposes, such as hiring employees,

commissioning marketing studies, and buying raw materials and components.

LOGISTICAL MANAGEMENT:

Resources have to be moved to where they need to be in order to

accomplish the company's objectives that will bring it closer to its strategic goal.

Logistics is the process by which a company manages the flow of resources

coming into the company, flowing inside the company, and flowing out of the

company.

MONITORING AND EVALUATION:

Monitoring evaluation ensures that resources are allocated in cost

effective and efficient manner. This can be accomplished through careful logistical

management and proper accounting & auditing.

RESOURCE ALLOCATION PATTERN:

Resource Management is a very important part of Real-time and Embedded

software design. This article discusses commonly used Resource Allocation

Patterns. The discussion is divided into two parts:

I. Resource Allocation Algorithms

II. Distributed Resource Allocation

I. RESOURCE ALLOCATION ALGORITHMS:

This section covers some of the resource allocation algorithms that are

commonly encountered in Real time systems. These algorithms are:

a. Hottest First

b. Coldest First

c. Load Balancing

d. Future Resource Booking

a. HOTTEST FIRST:

In hottest first resource allocation, the resource last released is allocated on next

resource request. To implement this last in first out, LIFO type of allocation,

the list of free resources is maintained as a stack. An allocation request is

serviced by popping a free resource from the stack. When a resource is freed, it

is pushed on the free resource list.

The disadvantage of this scheme is that there will be uneven utilization of

resources. The resources at the top of the stack will be used all the time. If the

resource allocation leads to wear and tear, the frequently allocated resources

will experience a lot of wear and tear. This scheme would be primarily used in

scenarios where allocating a resource involves considerable setup before use.

With this technique, under light load only a few resources would be getting

used, so other resources would be powered down or operated in low power

mode.

b. COLDEST FIRST:

In coldest first resource allocation, the resource not allocated for maximum

time is allocated first. To implement this first in first out, FIFO type of

allocation, the resource allocating entity keeps the free resources in a queue. A

resource allocation request is serviced by removing a resource from the head of

the queue. A freed resource is returned to the free list by adding it to the tail of

the queue.

The main advantage of this scheme is that there is even utilization of resources.

Also, freed resource does not get reused for quite a while, so inconsistencies in

resource management can be easily resolved via audits.

c. LOAD BALANCING:

In situations involving multiple resource groups, load balancing is used. A

resource group is controlled by a local resource controller. In this technique, the

resource allocator first determines the lightly loaded resource group. Then, the

resource controller of the lightly loaded resource group performs the actual

resource allocation. The main objective of resource allocations is to distribute

the load evenly amongst resource controllers.

d. FUTURE RESOURCE BOOKING:

Each resource allocation is for a specified time. The resource allocation is only

valid till the specified time is reached. When the specified time is reached, the

resource is considered to be free. Thus the resource does not need to be freed

explicitly.

This technique is used in scenarios where a particular resource needs to be

allocated for short duration to multiple entities in the future. When an allocation

request is received, the booking status of the resource is searched to find the

earliest time in future when the resource request can be serviced. Resource

booking tables are updated with the start and end time of each resource

allocation.

II. DISTRIBUTED RESOURCE ALLOCATION:

Most Real time systems are distributed across multiple processors. Different

techniques are used to manage resource allocation in such distributed systems.

Some of these techniques are discussed below. They are:

i. Centralized Resource Allocation

ii. Hierarchical Resource Allocation

iii. Bi-Directional Resource Allocation

iv. Random Access

i. CENTRALIZED RESOURCE ALLOCATION:

In this technique, a centralized allocator keeps track of all the available

resources. All entities send messages requesting resources and the allocator

respond with the allocated resources. The main advantage of this scheme is

simplicity. However, the disadvantage is that as the system size increases, the

centralized allocator gets heavily loaded and becomes a bottleneck.

ii. HIERARCHICAL RESOURCE ALLOCATION:

In this technique, the resource allocation is done in multiple steps. First, the

centralized allocator takes the high level resource allocation decision.  Then, it

passes on the allocation request to the secondary allocator which takes the

detailed resource allocation decision.

The advantage of this scheme is that the centralized allocator is not burdened

with the detailed resource allocation decisions. This technique could be

implemented in multiple levels of hierarchical resource allocations.

iii. BI- DIRECTIONAL RESOURCE ALLOCATION:

This scheme allows two independent allocators to allocate the same set of

resources. It is used in situations like bi-directional trunk groups. The switch at

each end of the trunk group allocates the trunks from one specific end. This

logic avoids both ends allocating the same resource under light and medium

load. However, under heavy load, there is a possibility of both ends allocating

the same resource. This situation is resolved by a fixed arbitration algorithm

leading to one of the switches withdrawing its claim on the resource.

iv. RANDOM ACCESS:

Whenever a resource needs to be shared between multiple entities which cannot

synchronize to each other and they do not have access to a centralized allocator,

designers have to resort to random access to the resource. Here all the entities

needing the resource just assume that they have the resource and use it. If two

or more entities use the resource at the same time, none of them gets service

and all the entities retry again after a random back off timer.

The main disadvantage of this technique is that the random access channel

works well only when the overall contention for the random access channel is

very small. As contention increases, hardly any resource requests are serviced.

FACTORS AFECTING RESOURCE ALLOCATION:

The factors that affect resource allocation are:

i. The objectives of the organisation

ii. Preference of dominant strategists

iii. Internal politics

iv. External influences

i. OBJECTIVES OF THE ORGANISATION:

Objective setting is a complex process. There are number of objectives, some are

official (or explicit) while others are operative (or implicit). Employees of any

organisation tend to judge the importance given by strategist to tasks on the basis

of amount of resources allocated to them. If the chairperson of a company, while

resenting the annual report, makes a recording of persuasive in speaking or writing

on the virtues of human resources but the actual resource allocation does not reflect

the importance given to these resources, then the human resource development is

certainly not a priority strategic task. Operative objectives tend to affect the pattern

of resource allocation to the maximum extent.

ii. PREFERNCE OF DOMINANT STRATEGISTS:

The dominant strategists most often the chief executive officer tends to affect the

process of resource allocation. Their preferences are reflected in the way how

resources get allocated. Perceptive strategic business units, divisional, and

departmental heads know that such preferences matter and try to present their

demands in line with them or attempt creating interest in the dominant strategists

for their demands so that resources can be attracted easily.

iii. INTERNAL POLITICES:

The ownership of resources is often misconstrued as possession of power. Those

departmental units which are able to attract more resources are perceived as being

more powerful. Executives who are in a position to affect the process of resource

allocation in their favour are received to be more effective. These perceptions

make resource allocation a rational political process. Internal politics within the

organisation, therefore affects the process of resource allocation.

iv. EXTERNAL INFLUENCES:

Apart from internal politics external influences also affects resource allocation.

These influences arise due to government policy and stipulations, the demand of

external shareholders, financial institution, community, and others. For instance,

conditions imposed by legal requirements on companies may require additional

investments in labour welfare and security, pollution control and safety equipment,

or energy conservation. The shareholders may expect a higher dividend or bonus

shares and resources may have to be diverted to them. Financial institutions may

impose restrictions or require companies to invest in technology upgradation. The

discharging of social responsibilities such as contribution to community services

may require allocation of funds. Thus external influences affect the process of

resource allocation considerably.

If we look back to the factors described previously, it is easy to recognise that

in the absence of clear strategic priorities, the process of resource allocation could

be distorted to a great extent. If strategies are made explicit at different levels,

objectives are clearly laid down, and strategic priorities are defined unambiguously

then balanced of allocation of resources is more likely.

DIFFICULTIES IN RESOURCE ALLOCATION:

Peter Drucker put forward the idea that the job of an effective manager has there

components:

Analysing available opportunities to produce results and developing an

understanding of their costs

Committing resources to pursue the most promising opportunities and

When some activities lead to results and others do not, deciding which

should receive more resources and which should be abandoned altogether.

Drucker described the third component as the most painful step. In this

subsection, it deals with that painful step makes the process of resource

allocation so difficult.

The previous subsection described the factors that affect the process of

resource allocation. These factors, combined with the fact that the resource

allocation process is highly complex, create serval difficult for the

strategists. The four major difficulties are:

a. Scarcity of resources

b. Restriction on generating resources

c. Overstatement of needs and

d. Tendency to imitate competitors

a. SCARCITY OF RESOURCES:

The major difficulty arises due to scarcity of resources. Financial,

physical, and human resources are hard to find. Firms will usually face

difficulties in procuring finance. Even if finance is available, the cost of

capital is a constraint. Those firms that enjoy investor confidence and high

creditworthiness process a competitive advantage as it increases their

resource generation capability. Physical resources would consist of assets

such as land, machinery, and equipment. In developing countries like India,

many capital goods have to be imported, the government may no longer

impose many conditions but it does place a burden on the firm’s finances

and this places a restriction on firms wishing to procure physical resources.

Human resources are seemingly in abundance in India but the problem

arises due to non availability of skills that are specially required. Highly

specialised IT and compute professional, advertising personnel, and

telecom, power, and insurance experts are scare in India. This places severe

restrictions on firms wishing to attract and retain personnel. The availability

of scarce resources is very real problem faced in resource allocation.

b. RESTICITIONS ON GENERATING RSORCES:

Within the organisation there are several difficulties encountered in resource

allocation. The usual budgeting for existing strategic business units,

divisions, departments places restrictions on generating resources for newer

units and those with a greater potential for growth. This is often seen in the

case of bureaucracies such as government departments. Here the usual way

of resource allocation is fixed percentage of increase over the previous years

budget allocation irrespective of the needs of the departments or the projects

that they handle. The results are restriction on generating resources for

allocating to new departments and the projects that might be in greater and

more in urgent need of resources.

c. OVERSTATEMENT OF NEEDS:

Another frequent problem, especially in a bottom up approach to resource

allocation is of overstatement of the needs for resources. The budgeting and

corporate planning departments may have to face their executives who do

not get resources according to their expectation. Such negative reactions

may hamper the process of strategic planning itself. When strategic

budgeting is used for resource allocation, powerful units may be divested of

resources for reallocation to potential units. ‘Budget battle’ may ensure if

resource allocation affects vested interest.

d: TENDENCY TO IMITATE COMPETITORS:

It is interesting to observe that companies in an industry tend to intimate their

competitors in terms of resource allocation. No wonder companies are industries

are often so alike internally. There might have been strong reasons in the beginning

to do so when the competitive strategies might have been similar. But as

companies move from one strategy to the next, often the resource allocation

patterns fail to respond to the strategic changes. Different companies following

different strategies may have similar resource allocation process and identical

resource configurations. This does not really make sense and tends to hurt the

capability to develop competitive advantage especially when differentiation

strategies might be followed.

TYPES OF RESOURCE ALLOACTION:

The different types of resource allocation are:

1. ALLOCATION BY MERIT:

This can be seen as a rewards system of sorts. This view suggests that

rewards should be distributed according to productivity, effort, or

demonstrated ability.

o In the work place, this can be seen as salary increases, promotions,

and even layoffs.

o In the college environment, this can be seen as the distribution of

grades. As not everyone can receive an A for classes, the grades need

to be distributed reflecting a student’s understanding of the subject.

In aspects where a necessity is involved, such as food, shelter, and water,

this system breaks down. In impoverished countries, for example, few

would argue for denying children food because they are not as productive as

adults.

2. ALLOCATION BY SOCIAL WORTH:

Allocation by social worth tends to take a practical view toward resources,

directing them toward those who appear most likely to contribute to the

common good. This view suggests that resources should move in directions

that ultimately do the greatest good for the largest number of people.

Criteria for social worth can include age, seniority, rank, and expertise.

o In the work place, this can be seen as layoffs. Generally speaking, a

senior worker will not be fired over a new worker.

o In the college environment, this can be seen as the distribution of

money to labs. Labs for graduate students and upperclassmen tend to

be better than freshman labs.

Allocation by social worth breaks down when the criteria for worth ignores

basic human rights. For example, wealth is sometimes used to measure

social worth, especially in countries with market economies. This attitude

can cause food, energy, education, medical attention, and social influence to

"flow uphill," thereby making severe imbalances in essential resources even

worse.

3. ALLOCATION BY NEED:

Allocation by need tends to view resources in terms of basic human rights.

This view suggests that every person has the same right to some minimal

level of a given resource. Obvious examples include food, shelter, and

clothes.

o In the work place, this can be seen when a company diverts funds to a

division in that company who's equipment is outdated.

o In the college environment, this can be seen as scholarships given to

students who otherwise would not be able to attend college.

Allocation by need breaks down when this criterion is applied so strictly that

it removes the incentive to produce. It's usually true that people work

hardest when they believe they will enjoy the fruits of their labours. This is

also the same reason why socialism doesn't work.

4. ALLOCATION BY EQUAL OR RANDOM ASSIGNMENT:

Allocation by equal or random assignment takes the view that no rational,

unbiased way can be found to distribute resources. This is the default

allocation method when no other allocation method works.

o The most obvious example of this is a lottery. When there is no

obvious way to distribute resources, a simple lottery can prove to be

the "fairest" way.

Allocation by random assignment breaks down when each portion of a

resource is simply to small to do any good. For example, dividing antibiotics

into small doses during an epidemic could make each dose so small that no

one benefits.

No simple rules for allocation can guarantee fairness under all

circumstances. The ultimate decision depends heavily on exactly what needs to be

distributed and on the specific details of each situation. The Candy case study is a

perfect example of resource allocation.

ALIGNING RESOURCE ALLOCATION TO STRATEGY:

Resource allocation deals with the procurement, commitment and

distribution of resources.

A major task of top managers is resource allocation. Strategy guides

manager in making decisions about resource allocation.

It lay down clear priorities among competing plans, programmes and

projects.

In course of day - to – day, routine work, managers are distracted

enough to be diverted away from strategic tasks.

A good strategy serves the purpose of telling the managers clearly

where their priorities lie. In the absence of guidance from the

strategy, manager can easily end up misallocating resources.

Misallocation of resources can take place in two ways.

First resources might get allocated to tasks that are really not

necessary from the strategic point of view.

Second task that are strategically important may be starved of

resources. In both these cases, resources that are often scarce get

wasted. In other words, aligning resource allocation to strategy means

‘putting your money where your mouth is’.

Another challenge before managers in resource allocation is that of

trade – offs.

Since resources are scarce and organisational tasks that demand

resources are often too many, manger end up making difficult trade

off in the process of resource allocation.

The process of trade - off requires hard to be made. For example,

there may be a situation where scarcity of resources means that

money available for investment may be limited. That limited amount

of money needs to be allocated to competing projects, each of which

demands the attention of managers. In deciding which projects to

fund and which projects to postpone or abandon, managers would

naturally need to have a clear priority.

Another example could be of scarce human resources. There may be a

high demand for well qualified, component IT professionals to put to

work on several projects. But the number of such professionals

available with the organisation may be limited. In such a situation

there should be a clear priority set so that available IT professionals

could be put to work on strategically important projects.

The basic challenge before the strategist is how to allocate scarce

resources to competitive strategic tasks that lead to the

accomplishment of organisational objectives and the realisation of

strategic intent.

It would be easier for strategists to allocate resources if the strategic

priorities are clear.

WHAT IS RESOURCE OVER - ALLOCATION?

Over-allocation of a resource is when a resource has been assigned more work than

can be completed during normal work hours. Resource allocation often leads to

overtime and overspending on financial resources.

WHY RESOURCE ALLOCATION IS IMPORTANT?

Over - allocation is most likely to occur when there are multiple projects in a

company or when software is used to allocate tasks to resources. Over - allocation

occurs is when project managers have been encouraged to meet unreasonable

expectations. Project managers then push their resource allocation beyond

obtainable limits in order to meet constrained schedules and budgets. Over -

allocation puts unreasonable pressure on resources and can be costly not only in

overtime monies but in resource burnout.

TECHNIQUES FOR AVOIDING RESOURCES OVERLOAD:

The most obvious way resource overload can be avoided is by setting up a project

schedule that is realistic. Avoid pushing employees through an unreasonable or

aggressive project schedule as a first defence. Schedule the project in a realistic

way as part of effective project plans.

Here are five other ways to avoid resource allocation overload in your projects:

1. RESOURCE LEVELING:

In this method, the project manager can either level resources by hand

(complicated, but perhaps more sound) or use a software program such

as Microsoft projects to level resources for you. This method requires the

project manager to be truly on top of his or her game, and to recognize areas for

concern before they become problematic.

2. PRIORITIZE PROJECTS:

By prioritizing projects, when a resource allocation overload is apparent or a

task conflict exists, it can be resolved without piling pressure on the

individual or team (or requiring the individual or team to put in a couple

twelve-hour days).In this way, when you find your resources have been

overloaded, decisions as to which tasks they should focus on are easier to

make.

3. LINKING TASKS:

Linking tasks is more of a logistical solution. If the resource has been

assigned to research the markets for project A and project B, these tasks

could be linked. In this manner, when it appears that a resource has been

over-allocated, really the tasks are similar enough to count for two projects.

By linking these tasks from the different projects, the problem can be

resolved.

4. LEAVING BREATHING ROOM:

 When scheduling the project, it is vital to leave breathing room between

tasks however, it is important to not under-allocate resources as this could

lead to a loss of budget monies meaning resource allocations problems will

affect your project's health. A fine balance must be achieved between

breathing room and not moving forward quickly enough.

5. AVOID THE “PUTTING OUT FIRES” APPROACH TO PROJECT

MANAGEMENT:

If your team is consistently putting out fires, it makes it difficult to focus on

the project. Moreover, by putting out fires, the team becomes knee-deep in

ash, while project tasks pile up. This is where project management

techniques such as scrum come in handy.

How you plan your resource allocation is key in keeping your project on track and

on budget with the outcomes you expect. If you have problems with resource

allocation or your teams are complaining of burnout or being overworked, consider

reviewing your resource management skills to keep your projects healthy.

CONCLUSION:

The chief executive officer has a major role to play in managing the

process of resource allocation.

Strategic management is based on a participative mode and the

communication of the strategic plan to all executives creates a congenial

environment where resource allocation decisions may be taken amicably.

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