Guidelines for Allocating Scarce Resources

Scarce resources are a fact of business life. In the wake of devastating budget cuts, furloughs, and/or layoffs, however, “normal” levels of scarcity have been exacerbated. The question for many organizations has become, “How do we move forward from here most effectively?”

When asked to help clients answer that question, I recommend that they begin by identifying some crucial information that will guide their subsequent actions and decisions.

1. Clearly define the organization’s primary mission.

Given current circumstances, the existing mission may have to change. For example, during times of greater resource availability, some organizations expanded or stretched their initial mission by offering products or services that are “nice to have,” or they increased the level of service offered from basic to premium. Now is the time to evaluate the organization’s primary mission, articulating specifically what it is and what level of service will be provided, for at least the short-term.

2. Identify the functions that are critical to the organization’s ability to achieve its mission.

Critical functions are those without which the organization would be unable to achieve its mission, or those whose loss would quickly and substantially impede a major work flow. Here’s a question that helps separate functions that are critical from those that are non-critical: “Will the organization be able to achieve its primary mission if this function is not staffed?”

Note: a function that may be critical to one organization may be merely important to another – i.e., it adds value but doesn’t prevent achievement of the mission. For example, customer service might be a critical function for an airline that promises passengers an “exceptional travel experience,” but it probably is not a critical function for an airline that promises to get passengers from point A to point B safely and at low cost.

3. Identify the skills that are critical to the successful functioning of the organization.

Critical skills are rare, unique, or in short supply; they have no acceptable substitutes in the short-run; and they are necessary for the achievement of the organization’s mission. Unlike critical functions, critical skills are dynamic, varying with environmental factors such as labor market conditions and changes in technology.

Often skills become critical due to temporary imbalances between supply and demand in the labor market. However, once those forces are back in balance, the skills no longer are critical – even when the functions they support remain critical. For example, in the 1990s, many technology-related skills were in short supply, so people with those skills were able to command large salaries. However, as others began acquiring the necessary training and expertise, the skills lost their “critical” status. As a result, salaries for these jobs no longer carried a premium.

4. Direct available resources toward staffing the critical functions and obtaining the critical skills.

Leaders must focus relentlessly on the organization’s mission, and the functions and skills necessary to achieve it, if the organization is to survive in the short-term and thrive in the long-term. This requires making tough decisions, saying “no” to people, and using the mission as the ultimate criterion – i.e., evaluating the extent to which each program, decision, function, job, policy, and system supports the primary mission. Only those that contribute directly to the mission should be retained or added.

To illustrate the above concepts a little more clearly, let’s consider a fire department whose mission is to save lives and preserve property. Most people would agree that critical functions are putting out fires and providing emergency medical care to accident victims. However, other critical functions include communication, vehicle maintenance, and payroll. Here’s why: without learning of the incidents and dispatching the appropriate people and equipment, without vehicles that operate safely when needed, and without paying those who provide the services, the fire department could not achieve its primary mission. Non-critical functions for the department may include getting cats out of trees and transporting people to hospitals who are not seriously ill and/or can use alternative means of getting there.

Some skills are critical for the fire department by virtue of the fact that specialized knowledge or expertise is necessary (e.g., dealing with hazardous materials, providing appropriate medical care). Other skills are critical because they are not readily available in the relevant labor market in the short-run (e.g., maintaining mission-critical computer systems, repairing vehicles).

Resources will remain uncommonly scarce in the near-term. What steps are you taking to ensure you allocate them in ways that allow your organization to achieve its mission?

© 2010 Pat Lynch. All rights reserved.