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Resource Allocation Techniques
Once an organization’s goals have been established, there’s a need for resources- the assets of the organization (financial, physical, human, and intangible). How can managers allocate these resources effectively and efficiently so that organizational goals are met? Although managers can choose from a number of techniques for allocating resources, we’ll briefly describe one technique here: budgeting.
Budgeting
Most of us have had some experience, as limited as it might be, with budgets. We learned at an early age that unless we allocated our “revenues” carefully, our weekly allowance was spent on “expenses” before the week was half over.
A budget is a numerical plan for allocating resources to specific activities. Managers generally prepare budgets for revenues, expenses, and large capital expenditures such as equipment. It’s not unusual, though, for budgets to be used for improving time, space, and use of material resources. These types of budgets substitute non-dollar numbers for dollar amounts. Such items as person-hours, capacity utilization, or units of production can be budgeted for daily, weekly, or monthly activities. Exhibit-1 describes the different types of budgets that managers might use.
