Resource allocation in organizations: an optimality result

This paper studies the problem of constrained resource allocation across multiple tasks, stages or divisions in an organization. The allocations suggested by balancing marginal resource productivity, and by balancing processing speed (or eliminating bottlemecks), are compared to the optimal organizational allocation. It is shown, under fairly general assumptions, that the former two approaches never result in an allocation that is optimal, and that the only exception to this result is when the different stages are identical. The implications and sample applications of the problem formulation and result are discussed.