Purpose – Resource allocation is challenged by dynamic environments where changes are frequent. The purpose of this paper is to identify resource allocation challenges and practices in service units that perform both project and non-project activities in dynamic environments. Its goal is to show that top-down mechanisms of project resource allocation need to be replaced by or supplemented with mechanisms that are more flexible. Design/methodology/approach – A qualitative comparative case study was conducted in two service units of two project-based firms. The main source of data consisted of semi-structured interviews with 17 service managers and staff members. Findings – This study shows that resource allocation is not necessarily a top-down process at all, and the practices are context-dependent. Two more flexible approaches are revealed – hybrid resource allocation and bottom-up resource allocation – as examples of managing resource allocation in service units that engage in projects under uncertain conditions. The results of the analysis highlight prioritisation and adapting to change and delay as the main issues that managers face in allocating resources to different types of projects and service activities in dynamic environments. Research limitations/implications – The two target companies chosen for the qualitative research design limit the analysis to project-based firms in a business-to-business context. Further, the viewpoint of the service unit is central to the study. Studying project resource allocation in different organisational contexts and uncovering the perspectives of product development and delivery units would offer promising directions for future research. Practical implications – The study reveals that in dynamic project settings such as service organisations, top-down mechanisms of resource allocation need to be accompanied by other, more flexible approaches to ensure the sufficient resourcing of projects and related services in dynamic environments. Companies need to establish practices for resource allocation changes that are caused by re-prioritising tasks and accommodating changes and delays in their project and service activities. Originality/value – Compared to a top-down perspective taken in previous research, the study proposes a more flexible approach for resource allocation in constantly changing environments with different project and service activities. Previous studies have focussed on resource competition between projects, placing project managers in the central role for resource allocation. By contrast, this study discusses hybrid and bottom-up resource allocation, both of which involve broader personnel engagement in resource allocation tasks, drawing on the experience of all employees.

Introduction

The increased use of projects in various industries has resulted in changes to organisational structures and a move from functional line organisations to more flexible project-based forms of organisation. Human resource allocation becomes critical for project-based firms when the same resources can be assigned to several overlapping projects as well as non-project activities. Resource allocation is more challenging for organisations that face rapid changes in their environment, activities and priorities. In an uncertain organisational context, using the same resource pool to carry out projects and non-project activities poses difficulties for resource allocation. Such challenges are not yet sufficiently understood, and their solutions have not been sufficiently explored. This study investigates how human resources can be allocated to projects and other services under dynamic conditions. This study responds to the need for understanding the situated practice of resource allocation and the related contextual and contingency variables in project-based firms (Söderlund, 2004). Previous project management studies building on the contingency theory have included some aspects of the project and organisational context in their analysis, such as different types of complexity (Baccarini, 1996), technology (Shenhar, 2001), project autonomy (Martinsuo and Lehtonen, 2009) and management control (Canonico and Söderlund, 2010). The majority of such research has investigated construction and product development projects, and the focus has been on selected processes in project management: contracting, decision making, knowledge generation/integration/exchange, project (management) evaluation, projects as business processes, relationship management and risk management (Hanisch and Wald, 2012). Different resource allocation approaches in different organisational settings have not received significant attention in project contingency research. Previous studies of resource allocation processes within project-based firms and the challenges they face have focussed mostly on the prioritisation of projects and assigning resources to multiple projects. These studies generally employ a top-down perspective regarding resource allocation and consider managers to be the responsible actors assigning tasks to staff (Hendriks et al., 1999; Abrantes and Figueiredo, 2015; Ballesteros-Pérez et al., 2012; e Silva and Costa, 2013). Earlier studies have primarily examined resource allocation in multi-project environments within organisations, such as research and development units, rather than units that face external customers directly, such as service units. Like internal units, these customer-facing units deal with internal uncertainties due to the cross-functional involvement of personnel in projects. However, they also face additional uncertainties stemming from customers and the broader market environment.