In an environment of retrenchment we are beginning to see much tighter controls on the approval of major spend projects.
However, stopping those waned projects which are addressing yesterday’s problems may be even more important than not starting those projects designed to address today’s. But which ones to stop and how do we ensure that they are really terminated?
The initial cutting back on projects is often more of a starvation process than a strategic decision making exercise. Resources and budgets are cut indiscriminately across the portfolio and in the scramble of re-planning projects, survival will depend upon the level of senior management commitment and political ‘clout’ applied to keep the project running.
This in itself is not a bad thing. Projects with top management support are consistently shown to perform better – however it does undermine the strategic portfolio planning principles.
ailing projects
Some kind of fast culling process is required but the principles should be more related to an identification of those ailing projects which do not meet the normal desirability and do-ability characteristics required to keep them in the ‘portfolio pack’.
Desirability and do-ability assessments are an integral part of portfolio management. While in theory the initiation and planning authorisation processes should have filtered out weak project contenders, the cut-off levels for authorisation which have been applied in the past may not be stringent enough in the new constrained environment. In any case, these factors do not remain stable over the life of the project. Projects with long execution stages may not have been reassessed (for desirability in particular) for months and in some cases years!
organisational dynamics
If you are considering stopping a project in the execution stage, a third factor must be taken into account. How ‘stoppable’ is the project? Traditionally the emphasis is on an analysis of sunk costs, and if you are lucky, an assessment of the benefit impact. But there are also organisational dynamics to consider.
Will we be successful in turning off the effort and expenditure being applied to the project? If the focus of the culling is on reduction in costs, then can CAPEX costs really be avoided? If the focus is on release of resources, then how effectively will these resources really be redeployed?
In a recent analysis of three large portfolios which had undergone a torrid cut-back exercise, we found that over 30 per cent of curtailed project activities were continuing outside the portfolio radar. All of the portfolios were misaligned against the strategically agreed balanced scorecard. One portfolio had over 80 per cent of its active projects in the ‘business-asusual’ category with just one project in the category of business development. The aftermath required the business to reassess its total strategic portfolio plans – a costly and potentially unnecessary exercise.
Project culling is a necessary and essential part of the portfolio management process. The challenge is to ensure it is systematically and strategically applied.