Portfolio Management has many benefits one of which is reducing executives’ time wasted in budget battles
At least once a year executives go through the painful process of budget allocation and project planning. Many times an organization has clear corporate level objectives that guide the budgets and projects to be worked on over a given time horizon. However, there tends to be a weak connection between corporate strategies and the business units’ project or portfolio list, resulting in a debate among executives between dollars/projects near the cute line.
Typically for each debate there are slides and financial models developed to support each executive’s personal goals. Many hours are spent by many people to develop these required views and scenarios that may be overseen during the executive level debates.
So how can portfolio management help?
Subtle changes to the budget and project planning process can have significant impacts to productivity. The two minor steps that are missed are:
- The corporate level objectives need to be ranked so that all the executives and planners know the company vision.
- Each group building a project list needs to link each budget request to one of the corporate level objectives.
Once each group compiles their prioritized list of budget requests both above and below the cut line, better informed cross group budget discussions occur. This is critical for companies that have dependencies across groups or business units. These changes can prevent future budget challenges such as a company having an ERP project as the number one corporate objective that requires resources from multiple groups. However one of the dependent groups puts the ERP project below the line because other projects in their list are perceived as more important. Once the primary ERP group gets funding they think their project will go smoothly until they ask for support from this other group who put it below the line. Therefore the overall ERP project goes over budget and results in another round of executive budget discussions.
As we approach Q4 many companies are in the middle of this struggle and can see vast improvements in productivity as well as other top line and bottom line benefits of portfolio management. Stay tuned for more details on how portfolio management can improve company margins.
