Is Your Strategic Portfolio Getting the Attention it Needs?
Could Your Project Consolidation Come Back to Bite You?
For some it will save millions, but for others it will cost millions. It is one of the biggest trends currently – the consolidation of projects and initiatives. As a leader, the level of sophistication you apply to the task will make all the difference.
Looking for Savings?
Within many organizations the number of projects had been growing unchecked. New projects were popping up like mushrooms. Meanwhile, few projects seem to come to an end. The result was a proliferation of projects competing for scarce resources.
For a business unit to have 50 or more ‘live’ projects is not unusual. If the average budget was $1.5 million that would represent a total investment of $75 million. For large organizations the number of projects and initiatives could be many times that. Meanwhile, projects often account for between 20 and 50% of the organization’s executive workload – the volume of emails, meetings, paperwork and so on.
Common sense says that not all projects can or should get the go ahead and certainly not at the same time. However, resourcing decisions around projects often defy practical logic. However, the new economic reality, means the boom years for projects are now at an end. Resource constraints and budget cuts are the new norm. Project proliferation has given way to project consolidation.
Ready for the Great Consolidation?
We are calling it ‘The Great Consolidation’, it is like ‘the Great Resignation’ except it is organizations disengaging from projects, rather than people disengaging from organizations.
We use the term ‘great’ because of, not just the amount of money involved, but the scale of the implications for strategy and success. Also, because it represents a major shift in the traditional approach to projects and initiatives.
Budget cuts are happening right across the board. Securing resources for any project new or old has suddenly got a lot more difficult. In some organizations there is, in effect, a project freeze. With calls for greater focus and disciplined prioritization, as many as 1 in 15 projects could face the axe.
Let’s explore the great consolidation on 3 levels:
4 Consolidation Principles
The 4 principles are in effect the principles that should guide consolidation. They are as follows:
As these principles suggest the approach goes beyond simple cost-cutting. It is more sophisticated and more strategic:
2 Places to Consolidate
In reality, leaders may care little about the majority of projects. They can only be expected to really care about those projects, programs and initiatives that are clearly linked to success. That is, those projects and initiatives that are directly linked to the performance of the business, the success of the strategy and the realization of the vision. It is this subset of important projects and initiatives is worthy of the title ‘strategic portfolio‘.
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).
2 Ways to Consolidate
In the rush to consolidate, some organizations will save millions, others may lose millions. A key factor is the sophistication of their approach.
There are two ways to consolidate:
- Surgical Precision – Strategic, thoughtful, careful, rigorous, and exact.
- A ‘Hatchet-job’ – Lack of precision, impulsive, imprecise, reactive and short term.
In the good times organizations struggled to make effective decisions about which projects get resources and which ones don’t. Now those decisions are more important than ever.
Those who get it right – applying surgical precision – can save millions. For those who get it wrong – making it ‘a hatchet job’ – could lose millions.
How you approach the consolidation of your strategic portfolio could be one of the consequential decisions you make this year.
Will You Apply Surgical Precision?
Some organizations will save millions in the consolidation of projects and initiatives. They will:
- Deliver major savings and efficiencies by means of careful surgical cuts to their portfolios.
- Focus and align people, projects and resources with business needs and priorities. This disciplined prioritization will address strategic choices and make the necessary trade-offs.
- Double down on their strategy by bringing a new intensity to those critical projects and initiatives most closely linked to business performance and success.
To consolidate, organizations must get good at something they have struggled with for years—managing the strategic portfolio. That includes prioritizing, timing and sequencing projects and, where necessary, scrapping projects too.
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. Besides, project portfolios need to be pruned regularly to adapt to changing business needs and priorities.
Will it be a ‘Hatchet-Job’?
Others will waste many millions in a crude ‘project cull’ driven by short term financial expediency but with little thinking of strategy or long-term value creation. By randomly yielding the knife they could set back progress towards their strategic goals by 3, 5 or more years. Moreover, they could take the crisis of dis-engagement (quiet quitting and so on) to a whole new level.
There are many parallels between the Great Resignation or Great Disengagement and the Great Consolidation. That is because the projects that people are working on are a key factor in their level of engagement. The decisions made around projects will have a major impact on levels of commitment and engagement.
The ‘Elon Musk’ way of realizing savings and efficiencies, involves swinging the knife wildly and cutting in all directions1. Although the savings may be swift, they risk being overshadowed by unintended consequences, collateral damage and hidden longer term costs.
How Will You Consolidate?
Bottom line – the way you consolidate – how cuts and changes are made matters. Leaders need to adopt the right process to achieve the right result. That result is not just measured in terms of short-term financial performance but also longer term organization health and success.
This is not a time for impulsive or rash decisions. It is a time for calm heads and clear thinking. Moreover, it is in the words of one of our coaching colleagues ‘not the time to act like a tyrant’.
Effective communication and engagement is important, if the long term health of the organization is not to suffer. ‘Simply tossing people and projects on to the scrap heap, with little more than an email or a memo is not sufficient’.
Consolidation is a moment of truth in terms of how the organization treats its people – everybody is watching – those who are going and those who are staying will remember how the organization’s leaders conduct themselves at this time.
For many, the pious words spoken by leaders, such as ‘people are our greatest asset’ and ‘we are one big family’, will be shown to be empty and meaningless.
Consolidating your portfolio presents but opportunities and challenges. How you approach it could be the most consequential decision you make this year.
- This is inspired by the media reports of Elon Musk’s approach to cuts and consolidation at Twitter in October 2022 [↩]
