Resource Allocation Dilemma

A negotiation conflict arises between the Head of Research and Development Department (Party 1) and the Head of Production Department (Party 2) over the allocation of $2 million on important activities. Party 1 emphasizes the importance of market research in retail sector, while Party 2 argues that meeting customer demand is equally crucial and needs additional fund for enhancing production facility. A negotiator mediates the dispute, suggesting that both departments have performed well in the past and evaluating their performance to determine resource allocation. Ultimately, a decision is made to allocate 70% of the resources (1.4 million) to the Production Department and 30% (0.6 million) to Research and Development Department.

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Head of Research and Development Department (Party 1 less skilled negotiator)
Head of Production Department (Party 2 Skilled negotiator)
Me (Negotiator)
Party 1: The manager has decided to allocate $2 million on important activities. Nothing
more is much important than market research in retail sector.
Party 2: I know, it is important to get things done based on research on any subject. However,
meeting the demand of the customer is equally important as attracting and retaining the. Our
department needs additional fund for enhancing production facility.
Party 1: But it is impossible to hand over the funds to you when there are actually no use.
You all were granted funds for meeting the production level. Why didn’t you say then you
need additional funds?
Party 2: How can you say that there is actually no use? We need it for increasing production
and keeping the funds ready for the production facilities in case of increase in customers.
Party 1: I have written a formal letter to the manager and he will decide what to do and what
not to.
Party 2: I am not asking for the entire fund, at least 60% of the fund could be used by our
department. W are ready to negotiate with your team for the remaining 40%.
Party 1: We are not. We need entire fund.
Party 2: Why do you need the entire fund? Just for marketing the business. The customers are
already aware of the products and services we offer so what is the use of re-marketing them
unnecessarily.

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Party 1: Though the customers are aware of the business and the offerings of the company,
we do have introduced a new product line with different characteristics and features and this
is why the promotion of the same is crucial else, the customers would be unaware of such
new offerings and we might lose them to out competitors in the market.
Party 2: It is just a new product and unless we produce it what will be the use of your
marketing techniques. What if the customers demand the same within the same week with
thousands of unit at each region? What will we serve them?
Party 1: what do you mean by this? Marketing and promotion is a waste of time an d money?
Party 2: It cannot be denied that without research in any field, it becomes a challenging task
to identify the potentials and targets which needs to be achieved. But then again, not meeting
the entire targets based on the survey or research is a shameful act which could be more
riskier and result in ineffectiveness of the team and the organization as well.
Me: Do you both mind if I explain my view:
Party 1 and Party 2: Yes. You may proceed.
Me: Why don’t you both take equal resource and proceed with your work and leverage your
differences so as to create value. In fact, capitalizing on the differences can help you both to
negotiate with each other. You both must note that your primary interest must rest in getting
credit your ideas as well as use of the resources and also gaining stature in the organization.
You both must keep in mind that you are not working in your personal interest rather in the
best interest of the company. So please think on the perspective of the company first and then
move towards taking any decision rather than creating such a trouble.

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Party 1: Do you think it would be adequate enough to proceed with only a nominal amount of
$ 1million in research and development? We require more funds for proceeding with
marketing and promotion. Being the member of the management team, how could you do not
know the importance of marketing?
Me: Even if I am aware of the facts, couldn’t you find out any other source for promoting the
products and services? Why being rigid towards the marketing strategy when you know that
you have been provided with a limited fund?
Party 2: I am ready to negotiate with the other team for equal resource. Please ask them to
sign the agreement for such.
Me: Being stubborn for making such a decision will not help any of us. Rather, please be
assured that allocation of resources will be for the best interest of the company and will
benefit all the members of the organization. Denying to negotiate with each other will also
cause delay in other programs as well.
Party 1: Why should I be made responsible for the delay? Why he (party 2) is interfering with
the allocation process when he knows the importance of marketing but still not backing up.
Me: Ok then, I agree that both of you have not agreed for the resource allocation of equal
basis. Therefore, I need to take help from the managerial head. Resources will be allocated
depending on the performance basis of both the departments whenever resources were
allocated.
Party 1: Continue with your strategy. I know our performance and it will prove that we will
take the massive share of the resources.
Party 2: Go ahead and let me know the results when you are done.

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After an hour of meeting with manager
Me: Alright! I have taken up the evaluation report which states your progress in the past and
the potential of each team along with the results based on the overall performance of the
organization whenever resources were allocated in the past.
Party 1: I am eager to know the results. Please be quick.
Party 2: Please do not delay any further and announce the results and proceed with the
resource allocation.
Me: Yes of course! So the results are:
Research and development department has performed very well during the past 4 quarters
with immediate results on the sales and revenues of the firm and a progress of at least 20%
whenever market research and promotion of the products were done. On the other hand, the
production department has outstanding performance during past 4 quarters with quick attempt
towards meeting the demand of the customers and producing the required level of supplies as
ordered by the distributers, retailers and wholesalers.
Party 1: So, what are you up to? You have got the results and evaluated our performance.
Party 2: Please present your final verdict
Announcement of final verdict in front of the managers and head of departments
Me: All of us are aware that the two most vital departmental heads were at a conflict
regarding the allocation of the limited resources which were to be granted for the most
important project only. However, from the evaluation of their performance results I have
come across the fact that both these departments have performed beyond the benchmarks and

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improved the performance of the company. Thus, once again this creates the dilemma for me
in terms of allocation of resources to the most deserving department. However, this strategy
seemed to fail in deciding the resource allocation.
Party 1: So, what will you do now?
Party 2: will you please allocate the resources and finish the matter as soon as possible. There
is a delay in the production of a number of lots.
Me: Yes, of course. So, keeping in mind that both the activities are necessary for ensuring
sustainability of the business, production facility must not stop because it takes more time to
produce a finished product. Whereas, research will hardly take any time to be conducted on
any particular target. Moreover, research could be done in less funds and limited resources,
whereas production depends on raw materials, labour and expenses towards the same. This
not only requires time but also enormous capital as well.
Me to Party 1: Working with limited resources would not hamper the research, but the overall
production will get hampered because the process of production is long enough and time
consuming.
Party 1: Kindly note that with limited resources I can only manage online medium of
advertising and few digital hoardings can be put up. So, in case there is any impact on the
performance we are not to be blamed for.
Me: U are being assured that you will not be blamed for anything. It is our decision for
allocating the limited resources.
Party 2: what is the ratio decided for allocation?

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Me: It has been decided to allocate the resources based on the ratio of 70:30. 70% would be
allocated to the production department and the remaining to the research and development.
Party 1: Ok, then kindly proceed with resource allocation process
Party 2: I agree to the decision. Please go ahead
Me: Ok. Let us begin with the allocation process. A total of 1.4 million will be given to the
production department and rest 0.6 million to the other department.
Me: Ok. Any queries or issue with the decision?
Party 1: No more questions
Party 2: No.