When it comes to your company as a whole, you know the focus is on achieving goals, primarily growth goals. But as a business leader, your main focus must be on having the right resources to support these goals.
Discover why you should pay attention to strategic resource allocation to support your business growth and how your resource needs will evolve over the lifespan of your business.The Importance of Strategic Resource Allocation
Resource allocation is a key aspect of your business with major impact. Your business requires the right tools and resources to succeed, and your employees need the right tools and resources to effectively perform their jobs. Some benefits of effective resource allocation include:
- Improved efficiency
- Reduced time spent on projects
- Increased employee satisfaction
- Diminished workplace stress
- Achievement of goals
- Higher employee retention rates
However, properly allocating resources is often easier said than done. Every day, CEOs are faced with the same dilemma: how should resources be used within the company?
Ongoing Resource Allocation as a Best Practice
When you take the time to understand your company and its resource needs, you become well positioned to support growth. However, don’t get too comfortable. While you may have the right resources in place presently, you most likely will need to reassess them later as you move towards your goals and set ones.
A study by McKinsey found that “companies that reallocated more resources earned, on average, 30 percent higher total returns to shareholders annually.”
- Early Stage Resource Allocation. When you’re just starting out, your resources are likely more focused on proper allocation of funding, talent acquisition to fill key roles, and functions like research and development.
- Growth Stage Resource Allocation. Over time, your company will achieve its growth goals and you’ll set new ones. At this stage, your resource needs will shift to things such as additional employees, training tools, implementations of processes and procedures, and production facilities and equipment.
- End Stage Resource Allocation. Whether you’re preparing to take your company public, sell your business, or take part in a merger or acquisition, you will – once again – need to re-evaluate your resources. This time, your resource needs may include advisors to guide you through the process, or new or additional technology and tools to manage investor relations.
No matter what the stage of your business, you’re likely to be faced with requests from department leaders for new software, improved equipment or additional staff members. How do you determine where your resources (whether capital or people) should be used to maximize efficiency and maintain employee “happiness”?
Budgeting to Support Resource Allocation
While there are areas where you can make cuts and save your business money, your strategic resources should not be one of them. To put it simply, investing in the right resources is good for business. Explore the five steps you should take to align your budget and resource needs.
- Understand your cash flow.
Becoming familiar with the intricacies of your cash flow and the projection of future cash flow allows you to determine how much you actually have to allocate.
- Outline your current staff and resource needs.
When you know your current needs, you’ll be able to make educated predictions regarding future staff and resource needs.
- Assess your current budget
Identify where there is room in your budget for resource allocation. Then, prioritize where those resources will go based on your businesses priorities.
- Develop goals for company growth.
By setting goals on how you want your business to grow and what resources you’ll need to achieve them, you’ll have a clearer idea about where your resources should be allocated in the future.
- Align your budget with your goals.
To achieve your goals, your budget should support growth. Use your resources on areas that can most significantly impact growth. For example, if you want to bolster recurring revenue, allocate more resources to your sales team to hire more salespeople.
Allocating resources is a strategic exercise. While you don’t always have control over the amount of resources you have to allocate, you do have control over how to best utilize them. When you work to understand your company’s needs, you can pinpoint where your resources will have the greatest impact.
Have further questions about strategic resource allocation? Drop us a line by filling out the contact form below. G-Squared provides strategic financial, accounting and operational expertise to CEOs and entrepreneurs in Philadelphia, New York City and Washington D.C.
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