How To Fix Resource Shortages And Still Maintain Profitability?

Resources are an integral part of projects, the shortage of which causes a delay in timelines and budget overruns. PwC Project Management insights show that 30% of project failure attributes to the lack of resources. In a dynamic business environment, organizations are often facing skill shortages to fulfill various resource demands. 

In a bid to stay afloat in this competition, companies often engage in unplanned hiring activities. The implication is the loss of productivity suffered during the lead time and onboarding process and before the employee is assigned to billable or strategic work. Besides, the costs per hire are substantially high, which adversely impacts the bottom line. 

So, the most pressing challenge for any business is overcoming resource shortages without affecting profitability and sustainability. Resource management solutions can help enterprises mitigate resource shortages without compromising on quality.

1) 360-degree visibility for competent resource allocation: 

Enterprise-wide visibility is essential for effective resource scheduling and planning. Resource management solutions capture all resource-related information from various systems and centralize on a single platform. This comprehensive information is available in real-time, so any changes made on bookings or resources are visible across the enterprise. This 360-degree visibility helps in fixing resource shortages via various channels in advance. 

Resource management solutions help identify resources that are about to get rolled off before the new project starts. It has two advantages; mitigate resource shortages and avoid bench time. Visibility across matrix boundaries helps identify cost-effective global resources when there is a lack of local resources having a particular skill set. Resource management solutions Advance search filters help overcome resource crunch and maintain profitability by allowing best-visible-best-fit resource allocations. 

2) Plan resource fulfillment activities using effective resource capacity planning:

Resource capacity planning, an integral function within resource management solutions, can help in planning outsourcing, hiring and other related activities ahead of time. It analyses the gap between project resource demands against their capacity to help formulate a plan for bridging that gap. This plan includes appropriate resourcing treatments like training, hiring permanent employees, or creating an on-demand contingent workforce. 

Training and reskilling measures are applicable when resource excess matches the minimum skill requirement for a specific task. However, when there is a shortage of resources, decisions to hire resources can be made. If the project is of a shorter duration, contractual workers can be a lucrative option.

Hire permanent employees if the project duration is longer, and the likelihood of future skill set requirement is high. Capacity planning helps foresee skill shortages to avoid last-minute hiring activities.

3) Leverage the skillsets of benched resources for existing activities: 

One of the channels to overcome resource shortage while maintaining profitability is the bench. As these resources are not engaged in any billable or strategic work, businesses strive to minimize bench strength to maintain profitability. Project Vacancy and People on the Bench report within resource management solutions identify project vacancies and foresees resources on the bench. Based on their skill sets and other selection criteria, allocating billable or strategic work to benched resources can overcome resource crunch and significantly improve profitability. 

Besides, organizations often let go of benched employees only to rehire workers with the same skill set, often at a higher price. Capacity planning helps overcome resource shortages and future proof your workforce against market volatility. It forecasts the excess or shortfall of resources to take remedial actions beforehand. These include training, bringing forward project timelines, hiring, or selling excess capacity. It not only helps overcome resource shortages but also minimizes hiring/firing costs and maintains profitability. 

4) Using global and local resources reduce cost without compromising quality:

Globalization has enabled businesses to expand their operations and set up offices in multiple locations. It has also provided access to global resources from low-cost locations. Resource management solutions can help identify resources based on their location and skill set. Global resources from low-cost countries minimize costs without affecting productivity. Let us understand it better with the help of an example.

Suppose, an ABC project requires a particular skillset to execute a task. Two resources fit the requirement- resource X from a high-cost location and resource Y from a low-cost location. In this case, resource Y is more profitable as it is cost-effective yet maintains quality. Implementing a multi-location policy helps leverage global workers across matrix boundaries. It is particularly useful when there is a shortage of local employees having similar skill sets. 

5) Implement out-rotation and backfill strategy for niche skills: 

Often, a project demands a niche skill to complete a task. As the demand for these resources is high, they are rarely on the bench waiting for task allocation. Since these skills are not readily available, resource managers can use the out-rotation and backfilling technique. 

Using resource advanced filters on the resource management solution, resource managers can locate the resource with niche skills and the project he/she is assigned to. In case the project is going on for some time, this resource can leave the ongoing project and take up the new project. This technique is called out-rotation.

Now, the vacancy of the niche skill cannot be left open as the project will suffer. So, another resource matching the minimum qualification criteria fills the vacancy as a backfill. Out-rotation and backfill techniques ensure that both current and new projects requiring niche skills do not face skill shortages. 

6) Out-of-the-box thinking to fix resource shortages: 

Most organizations think innovatively on overcoming resource crunch while maintaining profitability. Resource management solutions can help achieve that and more. Some of these out of the box ideas to overcome resource shortage includes:

1) Evaluate the profitability of each project and prioritize the most profitable ones.

2) In some organizations, especially IT, resources are encouraged to have at least two primary skill sets. It makes them viable for utilization on more than one initiative. 

3) If there is a resource crunch, focus primarily on billable work. Non-billable projects can be either paused or their deadlines extended.

4) Evaluate partnership options for resource sharing in similar organizations. Also, consider an alliance with companies having a substantial resource base from low-cost locations. 

5) Implement resource leveling when the availability of resources is essential. Resource smoothing can be applied when the timeline takes precedence. The right mix of both techniques ensures a cost-effective and efficient use of resources.

The takeaway: 

Resource shortages are unavoidable but seeking the right channels can overcome this challenge in the most profitable way. Resource management solutions fulfill all project resource demands via various mediums. Effective scheduling and capacity planning can fix resource scarcity without affecting a business's profitability. 

Author Bio:

Mahendra Gupta is PMP certified and an expert authority in the smart workforce planning and resource management domain. He is the subject matter expert in resource management and workforce planning at Saviom Software. His experience has enabled multinational businesses around the globe to diversify their project portfolio. Follow his work here.