Criteria that an organization can use for allocating resources to different departments:
i. The role played by the individual company departments in realizing corporate objectives, especially the long-term objectives:
Those departments whose contributions to company annual objectives/strategic objectives are immediate are likely to receive more allocation than others.
ii. Relative Economic Efficiency of the departments:
Those departments that have a higher output-input ratio are in most instances preferred centres of resource allocation. In economic terms, an efficient (or pareto efficient) allocation is one at which no re-allocation of resources could make any department better off without making some other department worse off.
iii. Departmental value-addictiveness to company’s growth and overall profitability: This implies that more profitable departments (high yielding) have more resources dedicated to them.
Since resources are finite, they must be allocated according to criteria that will maximize the impact per resources allocated.
iv. Need and Market for Departmental offering:
What is the probable versus potential market for the department’s products and/or services is the question to be answered here, e.g., there may be a huge potential market for the department’s offering, but the probability of competing successfully for a large share of external market may be minimal unless significant advertising expenditure committals are made. Clearly established need and a large probable market are preferred.
v. Internal Resource Generation Processes:
Are there departmental-specific activities capable of generating revenue for own sustenance? Departments that have own resource-generating activities may be able to sustain themselves without or with little additional resource support from the head office.
vi. Monitoring and Evaluation Systems:
Is there a comprehensive plan by a department to evaluate resource impact as well as account fully for resources allocated? An organization may be keen on those departments with clear-cut resource monitoring and activity reporting systems
vii. Marketing Plans:
Is there a plan to market the department’s products to ensure that targets are met and/or surpassed? Departments with achievable (realistic) marketing plans-higher yield chances are often preferred.
viii. Instructional and Administrative Leadership:
Is there a departmental head who can and will serve as the leader for the design and implementation of the department’s activities and programs? Is there adequate technical know-how and administrative support to ensure efficient use of resources?
ix. Departmental Track Record:
Is there a record of success in preparing and implementing departmental plans? A previous outstanding record is preferred case.