Resource Allocation

IDI provides resource allocation and portfolio analysis services and products for our clients.  The objective is allocation of limited resources among a portfolio of programs or investments to achieve the best overall value. 

Resource allocation in organizations involves deciding how much of limited resources to devote to each program or business area in order to get the most “bang for the buck” out of a any total budget.  Resources may be allocated both for non-recurring expenses such as capital investments in infrastructure and for recurring expenses such as operations and maintenance.  Resources may be expressed in terms of dollars, manpower or other categories.  The benefits that come from spending resources may include financial returns on investment or non-monetary benefits.  Non-monetary benefits, such as improved customer satisfaction, are structured and assessed using multiple objective decision analysis (MODA) techniques. 

IDI's approach is to work collaboratively with organizational sponsors to select tactics that are consistent with organizational values and parameters.  For example, the process might involve working with a relatively few senior managers for a few hours, or it might involve the participation of multiple managers and functional experts in the organization, ultimately convened in a structured meeting to discuss and formally evaluate the relative advantages of alternative funding schemes.  IDI can coach clients in preparing programs and budgets.  We also offer workshops that help clients develop internal expertise, training clients how to execute resource allocation independently.  

Resource allocation methodology follows either a marginal benefit-cost ratio approach or an optimization approach.  Marginal benefit-cost ratios are simply an ordered list of the incremental benefits divided by the incremental costs of each spending option.  Only one constraint is allowed at a time.  IDI uses the EQUITY software package from Catalyze, Ltd., to perform resource allocation with marginal benefit-cost ratios. 

Optimization techniques allow use of multiple constraints on resources, such as budget limitations on multiple budget years, or different sources of funds that are not fungible.  An integer optimization routine then produces an optimal spending solution for any given set of constraints.  IDI uses the LDW Portfolio software package from Logical Decisions to perform resource allocation with optimization.