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Will Consolidation Save or Cost You Millions?

For some it will save millions, but for others, it will cost millions.  One of the biggest trends currently is 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 has been growing unchecked. New projects were popping up like mushrooms. Meanwhile, a few projects have come to an end. The result was a proliferation of projects competing for scarce resources. 

A business unit with 50 or more ‘live’ projects is not unusual. Suppose the average budget was $1.5 million, representing 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 leader workload – the volume of emails, meetings, paperwork, etc.

Common sense says that not all projects can or should get the go ahead, and indeed not simultaneously. However, resourcing decisions around projects often defy practical logic. However, the new economic reality means the project boom years are ending. Resource constraints and budget cuts are the new norms, and 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 the amount of money involved and the scale of the implications for strategy and success. It also represents a significant shift in the traditional approach to projects and initiatives.

Budget cuts are happening across the board, and securing resources for any new or old project has become more complex. 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 significant consolidation on three levels:

4 Consolidation Principles

The four 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 most projects and can only be expected to care about those projects, programs and initiatives linked to success. Those projects and initiatives are directly related to the business's performance, the strategy's success and the vision's realization. This subset of essential tasks and initiatives is worthy of the strategic portfolio ‘title.

Separating the strategic portfolio from the greater mass of projects and initiatives is essential in cutting or consolidating projects. Deep cuts to strategic projects and initiatives could damage performance. A simple rule of thumb is – you reduce the strategic portfolio, but you cut the rest (of the project portfolio).

2 Ways to Consolidate

In a 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:

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 needed help to decide effectively which projects get resources and which don't. Now those decisions are more critical than ever.

Those who get it right – applying surgical precision – can save millions. Those who get it wrong – making it ‘a hatchet job' – could lose millions.

How you approach consolidating 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 significant savings and efficiencies through 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 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 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 disengagement (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 people are working on are a vital factor in their level of engagement. The decisions made around projects will significantly impact levels of commitment and engagement.

The ‘Elon Musk's 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 – how you consolidate – how cuts and changes are made matters. Leaders need to adopt the right process to achieve the right result, and 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 are essential to maintain the organization's long-term health. ‘Simply tossing people and projects onto the scrap heap, with little more than an email or a memo, is insufficient'.

Consolidation is a moment of truth regarding 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 your most consequential decision this year.

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