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Resource Allocation by Business
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Template for: Resource Allocation by Business
The purpose of this section is to present an overview of how
the resources of the company (group) are being allocated by business.
A company should be viewed as a collection of 'N' number of businesses. The
sum of these businesses should add to the total of the corporation. If a company
has 5,000 employees and it has 5 businesses, then the sum of the employees
allocated to the five businesses should equal 5,000.
This requires that every horizontal unit allocate 100% of its staff to the
corporate businesses.
Practical notes and suggestions for resource allocation:
- If a sales force of 100 people spends 60% of the time selling for Business
'A' and 40% of the time selling for Business 'B,' then allocate 60 sales
people to Business A, and 40 sales people to Business B.
- All horizontal units must allocate all of their employees to the corporate
businesses, and not to any other horizontal unit. This is a fairly simple
process as long the manager of each horizontal unit has the list of
corporate SBUs. Without that list, the task is fruitless.
- The president and all other corporate executives, and their secretaries,
need to be allocated to the businesses as well. Every employee in the
company should be allocated to one or more corporate SBU. (An employee
can be allocated to more than one SBU. For example, 60% to business one, and
40% to business two.)
- Allocating all corporate staff to the corporate businesses does not have
to be complicated. The key is the one page list of SBUs. In some cases, it
is appropriate for the horizontal unit manager to allocate resources to the
business units. In other cases, the employees should be asked directly to
allocate their time. In still other cases, computerized tracking systems are
able to compute the proper allocations automatically. For many
employees, the allocation is obvious. For others, a quick ball-park estimate
is usually sufficient. To the surprise of many, especially in companies
with more than half of their employees working in centralized departments,
quick estimates often reveal more good data than do their 'sophisticated'
inter-departmental cost allocation systems.
- If appropriate, add a "New Venture SBU" to the list of corporate
SBUs in order to allocate resources for the activity of analyzing new
ventures and new corporate acquisitions.
Example of Resource Allocation by SBU for Communications Company XYZ
XYZ's
Strategic Business Units |
Number
of
People |
This
Year's
Expenses |
% of
Total
Expenses |
% Total Exp
--------
% Total Profit |
| Local Telephone Service |
40,000
|
$ 4 B
|
40 %
|
1.1
|
| Mobile Cellular Telecomm. |
20,000
|
$ 2 B
|
20 %
|
1.1
|
| Aircraft-Passenger Tel Ser |
10,000
|
$ 1 B
|
10 %
|
1.1
|
| Communication Switching |
10,000
|
$ 3 B
|
30 %
|
0.8
|
|
Corporate Totals:
|
80,000
|
$10 B
|
100 %
|
1.0
|
|
