Resource allocation is a central 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 that for resources to be allocated in ways not consistent with priorites ndicated by approved annual objectives.
All organizations have at least four fypes 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 factores commonly prohibit effective resource allocation, including and overprotection of resources, too great an emphasis on short-run financial criteria, organizational politices, vague strategy tagets, a reluctance to take risks, and a lack of sucfficient knowledge.
Below the corporate level, there often exists an absence of systematic thinking about resources allocated and strateigies of the firm. Yaviz and Newman explain why:
“Manager 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 activites often get deferred. Today’s problems soak up available energies and resources. Scrambled accounts and budgest fail to reveal the shift in allocation away from strategic needs to currently squeaking wheels.The real value of any resource allocation process.”