Euphemisms such as ‘consolidation’, ‘adjustments’ and ‘prioritization’ are now in everyday use. Some more plain speaking leaders are talking of ‘cuts’. However, this is not a time for rash decision-making.
Here is a guide to help you ensure that the project and program decisions you make won’t come back to haunt you.
Some CEOs are talking about ‘blood on the streets’ (Alphabet/Google). Others are using more euphemistic language such as:
Whether you are consolidating, adjusting, prioritizing, or simply cost-cutting take care. Any brash decisions you make at this time could come back to haunt you. So, slow down and make the right decisions.
Here are some of the ways your hasty cost-cutting decisions could come back to haunt you:
The above are not excuses to avoid making a decision. Decisions need to be made regarding the consolidation and optimization of the strategy portfolio. This is an essential element of managing the portfolio, but it is especially important at a time when business needs are changing and resources are more scarce than ever.
The list of factors listed above serves to emphasize the importance of those decisions and how they should be made with care and forethought.
If any of the factors are in evidence then slow down and revisit not just the decisions being made, but the objectives of those decisions and the process by which they are being made (steps, information, people involved, etc.)
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Given the amount of money tied up in projects & initiatives it is a natural place to look for efficiencies and savings. Those who look there won’t be disappointed. But care is required at making savings that won’t come back to bit you.
Cost-cutting, if done poorly, can actually hinder, rather than boost performance. Short-term financial expediency can have longer term costs. Examples include:
The process cannot just be about cost-cutting, but performance, strategy and success too. Disciplined prioritization is important to ensure a new intensity around those projects and initiatives that are critical to success.
Cuts are made without sufficient thought or planning resulting in collateral damage & unintended consequences. Rather than surgical precision the process is a ‘hatchet job’.
Organizations or individuals don’t make their best decisions when under pressure. They can develop tunnel vision that skews perceptions of risk and results in a paralyzing threat rigidity.
Many decisions are being made regarding the portfolio without sufficient information or visibility. That includes knowledge of the number of initiatives and projects, the proportion that are succeeding vs struggling and the level of investment including manpower.
Moreover, there is often a lack of clarity or alignment on the business fundamentals of key projects and initiatives (e.g. business need and business impact).
Not all projects are equal – some projects and initiatives matter more than others. Some are ‘strategic’ – they are directly linked to success – that is to the performance of the business, the success of the strategy or the realization of the vision. This subset of important projects and initiatives is worthy of the title ‘strategic portfolio’ and needs to be managed differently to the broader mass of projects.
In cutting or consolidating projects it is important to separate the strategic portfolio, from the greater mass of projects and initiatives. Deep cuts to strategic projects and initiatives could actually damage performance.
A simple rule of thumb is – you consolidate the strategic portfolio, but you cut the rest of the project portfolio.
The strategic portfolio must be seen in the context of the wider project portfolio. That is because every project and initiative draws on organizational resources. A proliferation of projects means that resources are often spread like peanut butter across a long list of projects and initiatives. As a result, those initiatives that are strategic often find themselves competing for time, attention and, of course, resources.
Taking a ‘big picture’ – portfolio view – is necessary in order to leverage synergies, learning & savings across projects. For example addressing overlaps between projects or the opportunity to share resources could go along way to meeting any savings that are required. Similarly, stand-alone or isolated project resourcing decisions, made without considering the overall portfolio, could have implications for other inter-related or interdependent projects.
Making cuts across the board is the easiest thing to do, but this fails to reflect key business needs and priorities. The most important projects and initiatives may be starved of resources, due to a failure to prioritize or to make difficult decisions (e.g. scrap some projects).
To consolidate, organizations must get good at something they have struggled with for years – that is prioritizing or even scrapping projects. But will ‘scarcity breed clarity’ 1 and result in a discplined prioritization2?
Because resources are allocated based on a rigid annual budgeting cycle and a multi-year strategy, it can be difficult to ensure resources are aligned with changing business needs and priorities when they change.
Align people, projects and resources around key priorities is essential to effective consolidation. So you could say that making cuts to projects it is an Issue of alignment first and savings second.
Remember you cannot cut your way to greatness. If you must cut, then do so in a way that enables you to focus with a new intensity on those areas that can build momentum and accelerate results.
A real danger is key projects / priorities being stalled by indecision or a lack of resources. Look for ways to intensify your project and to become more hardcore in terms of key priorities / sources of value.
Sets back the strategic vision by 3, 5 or 7 years as longer term strategic investments are but on ice.
You cannot just press pause on a project and expect to continue where you left off after 6, 12 or 18 months have passed. The people will be lost, the ideas will be lost, the momentum will be lost. In many ways it could mean going right back to the start.
The rise of bureaucratic procedures & controls. Speed, agility & innovation is squashed by committees & paperwork.
When the going gets tough, there is a tendency to tighten control. So, at a time when the organization needs to be more nimble in adapting and responding to change, it becomes more bureaucratic, rigid and slow. This result is a rise in bureaucracy, with more paperwork, reporting, approvals and so on. Those who are closest to the work are stripped of autonomy and must go before a committee before they can act. Meanwhile, more nimble competitors steal the day, capitalizing on the opportunities as well as the threats.
Times of uncertainty and volatility bring opportunities as well as challenges. It is essential that the organization can realign a strategic portfolio to capitalize on opportunities. This is at the core of being agile and to preventing a gap between strategy and execution.
There is growing concern about engagement levels, with much talk about ‘quite quitting‘ and ‘performance paranoia‘.
Cuts & how they are made could result in further disengagement. Projects can be left in ‘limbo’ for long periods of time, with people left worrying about the likelihood of cuts and the risks to their jobs. Understandably, rising uncertainty and anxiety can dampen motivation and hamper efficiency. It is at times like this that leaders have an opportunity to shine – to quell anxiety and to keep people focused on their role and purpose.
The process of cost-cutting can also damage organizational health and culture – factors that could account for more than 50% of longer term business performance and success3
Leaders want their people to be passionate about their projects and initiatives – but what happens to all that passion when a project comes under the knife? People had to fight to get their project off the ground, are they expected to simply lie down when the project’s future is in doubt? Just how long will it take for them to get passionate about the next project or role they are given?
The process of consolidation and cost-cutting can generate a lot of noise & interference. It can distract the organization from doing what needs to be done.
‘Performance is potential minus interference’ according to Timothy Gallwey4. A key role of the leader is to keep people focused and on-purpose in spite of uncertainty. They must demonstrate confidence and clarity.
A key risk is that the process gets driven by politics & territorial in-fighting, rather than business needs & priorities.
We say ‘protect the people not the project or inititive’. Leaders who park or suggest the parking of a failed or struggling project should be celebrated for putting the interests of the business ahead of their own political agenda.
Traditional approaches to resource allocation are a key part of the problem. It is essential to add alignment to the allocation of resources – to adopt a more dynamic approach to resource allocation – otherwise we are likely to find ourselves right back in the same situation again.
It is essential to pull the learning from projects. Indeed, failed or struggling projects may be the greatest teachers. However, when project budgets evaporate the motivation for learning tends to evaporate too. The challenge for organizations is to learn from projects so that the same lessons don’t need to be learned again and again.