RESOURCE ALLOCATION

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Strategic Management MGT603

Lesson 32

RESOURCE ALLOCATION

Learning objective

This chapter consists of resource allocation and how it is important for the success of the organization. It

also include the "Conflict" its types and how to reduce it.

Resource Allocation

In strategic planning, a resource-allocation decision is a plan for using available resources, especially

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

resources among the various projects or business units.

The plan has two parts: Firstly, there is the basic allocation decision and secondly there are contingency

mechanisms. The basic allocation decision is the choice of which items to fund in the plan, and what level

of funding it should receive, and which to leave unfunded: the resources are allocated to some items, not

to others.

There are two contingency mechanisms. There is a priority ranking of items excluded from the plan,

showing which items to fund if more resources should become available; and there is a priority ranking of

some items included in the plan, showing which items should be sacrificed if total funding must be

reduced.

Resource allocation is a major management activity that allows for strategy execution. In organizations that

do not use a strategic-management approach to 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 organizations have at least four types of resources that can be used to achieve desired objectives:

financial resources, physical resources, human resources, and 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 overprotection 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.

Managers normally have many more tasks than they can do. Managers must allocate time and resources

among these tasks. Pressure builds up. Expenses are too high. The CEO wants a good financial report for

the third quarter. Strategy formulation and implementation activities often get deferred. Today's problems

soak up available energies and resources. Scrambled accounts and budgets fail to reveal the shift in

allocation away from strategic needs to currently squeaking wheels.

The real value of any resource allocation program lies in the resulting accomplishment of an organization's

objectives. Effective resource allocation does not guarantee successful strategy implementation because

programs, personnel, controls, and commitment must breathe life into the resources provided. Strategic

management itself is sometimes referred to as a "resource allocation process."

Conflict

Conflict is a state of opposition, disagreement or incompatibility between two or more people or groups

of people, which is sometimes characterized by physical violence. Military conflict between states may

constitute war.

In political terms, "conflict" refers to an ongoing state of hostility between two groups of people.

Conflict as taught for graduate and professional work in conflict resolution commonly has the definition:

"when two or more parties, with perceived incompatible goals, seek to undermine each other's goal-

seeking capability".

One should not confuse the distinction between the presence and absence of conflict with the difference

between competition and co-operation. In competitive situations, the two or more parties each have

mutually inconsistent goals, so that when either party tries to reach their goal it will undermine the

attempts of the other to reach theirs. Therefore, competitive situations will by their nature cause conflict.

However, conflict can also occur in cooperative situations, in which two or more parties have consistent

goals, because the manner in which one party tries to reach their goal can still undermine the other.

Types and Modes of Conflict

A conceptual conflict can escalate into a verbal exchange and/or result in fighting.

Conflict can exist at a variety of levels of analysis:

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Strategic Management MGT603

· intrapersonal conflict (though this usually just gets delegated out to psychology)

· interpersonal conflict

· group conflict

· organizational conflict

· community conflict

· intra-state conflict (for example: civil wars, election campaigns)

· international conflict

Conflicts in these levels may appear "nested" in conflicts residing at larger levels of analysis. For example,

conflict within a work team may play out the dynamics of a broader conflict in the organization as a whole

Theorists have claimed that parties can conceptualise responses to conflict according to a two-dimensional

scheme; concern for one's own outcomes and concern for the outcomes of the other party. This scheme

leads to the following hypotheses:

· High concern for both one's own and the other party's outcomes leads to attempts to find mutually

beneficial solutions.

· High concern for one's own outcomes only leads to attempts to "win" the conflict.

· High concern for the other party's outcomes only leads to allowing the other to "win" the conflict.

· No concern for either side's outcomes leads to attempts to avoid the conflict.

In Western society, practitioners usually suggest that attempts to find mutually beneficial solutions lead to

the most satisfactory outcomes, but this may not hold true for many Asian societies.

Several theorists detect successive phases in the development of conflicts.

Often a group finds itself in conflict over facts, goals, methods or values. It is critical that it properly

identify the type of conflict it is experiencing if it hopes to manage the conflict through to resolution. For

example, a group will often treat an assumption as a fact.

The more difficult type of conflict is when values are the root cause. It is more likely that a conflict over

facts, or assumptions, will be resolved than one over values. It is extremely difficult to "prove" that a value

is "right" or "correct".

In some instances, a group will benefit from the use of a facilitator or process consultant to help identify

the specific type of conflict.

Practitioners of nonviolence have developed many practices to solve social and political conflicts without

resorting to violence or coercion.

There is no one optimal organizational design or structure for a given strategy or type of organization.

What is appropriate for one organization may not be appropriate for a similar firm, although successful

firms in a given industry do tend to organize themselves in a similar way. For example, consumer goods

companies tend to emulate the divisional structure-by-product form of organization. Small firms tend to

be functionally structured (centralized). Medium-size firms tend to be divisionally structured

(decentralized). Large firms tend to use an SBU (strategic business unit) or matrix structure. As

organizations grow, their structures generally change from simple to complex as a result of concatenation,

or the linking together of several basic strategies.

Numerous external and internal forces affect an organization; no firm could change its structure in

response to every one of these forces, because to do so would lead to chaos. However, when a firm

changes its strategy, the existing organizational structure may become ineffective. Symptoms of an

ineffective organizational structure include too many levels of management, too many meetings attended

by too many people, too much attention being directed toward solving interdepartmental conflicts, too

large a span of control, and too many unachieved objectives. Changes in structure can facilitate strategy-

implementation efforts, but changes in structure should not be expected to make a bad strategy good, to

make bad managers good, or to make bad products sell.

Structure undeniably can and does influence strategy. Strategies formulated must be workable, so if a

certain new strategy required massive structural changes it would not be an attractive choice. In this way,

structure can shape the choice of strategies. But a more important concern is determining what types of

structural changes are needed to implement new strategies and how these changes can best be

accomplished. We examine this issue by focusing on seven basic types of organizational structure:

functional, divisional by geographic area, divisional by product, divisional by customer, divisional by

process, strategic business unit (SBU), and matrix

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