Tom Kendrick on Dealing with Budget Cuts

The following is a guest post by Tom Kendrick, author of the upcoming 101 Project Management Problems and How to Solve Them.

How does a project manager effectively deal with mid-project budget cuts?

Even if you begin your project with adequate funding, over time severe new budget constraints may develop. For any particular project, only some combinations of scope, time, and cost are actually feasible so if resources drop, your project could fail unless you successfully negotiate adjustments to compensate for a smaller budget and staff.

Start this process by verifying your current overall constraints with your sponsor and key stakeholders. Plan to frequently ask “Why?” and persistently probe to uncover the basis for all assumptions and restrictions. In your discussions with your sponsor, determine which of time, scope, or cost is most important. Don’t accept “all three” as an answer. Verify relative priority by devising scenario-based questions. For example, ask “Would it be better on this project to be a week late or to accept a minor scope reduction?” Keep digging until you know which constraints are truly essential and which are most negotiable.

Explore plan changes consistent with a smaller budget that best preserve what’s most important about your project. Work to adjust your project to meet the highest priorities among scope, time, and cost—consider rearranging dependencies, shortening durations though staffing changes, or other shifts. Create several plan variations, and work to come as close as possible to meeting your key project objectives. Plan for negotiations with your sponsor by preparing summaries of realistic alternative projects.

Meet with your sponsor to discuss resetting your project baseline. Begin with what you believe is your best option, even if falls significantly short the current project goals. Use data to show that your proposal is consistent with past similar projects and is based on solid, thorough analysis. If your best option differs appreciably from current constraints, also present your additional plan-based project alternatives.

Explore the value of your project, and contrast your minimum resource requirements with the anticipated benefits. Also inquire into your project’s overall priority, especially if it appears inconsistent with proposed funding. Keep your discussions focused on your project’s plan-based needs and its expected results (and away from arbitrarily determined cost constraints).

If you encounter resistance, discuss the consequences of proceeding with unrealistic funding. No one wins when a project has an impossible goal. You lose because your project fails. Your team loses because they will have had an unsuccessful, depressing experience. Your sponsor and management do no better—they initiated the project, and presumably need what it will produce. If it fails, they lose too.

Principled negotiation is based on facts and data, which are the project manager’s only real leverage in project negotiations. Your sponsor has more organizational clout and influence than you do, but keep in mind that you are the world’s leading authority on your project. When negotiating adjustments to unrealistic constraints, use what you know. By using solid evidence of what is and isn’t possible, you should be able to engage your sponsors and stakeholders in collaborative problem-solving instead of posturing.

Discuss your alternate project plans, and work together to agree on a viable project. Endeavor to establish a new baseline for your project where the overall constraints are consistent with credible plans.

Tom Kendrick is an internal project management consultant for Visa Inc., and a former project management executive for Hewlett-Packard. He is the author of Identifying and Managing Project Risk, Results Without Authority, and The Project Management Tool Kit.

Join us tomorrow for a guest post on Escalation by Lia Tjahjana, Paul Dwyer, PMP, and Mohsin Habib, Ph. D., the authors of The Program Management Office Advantage.

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