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Author: Denise DeCarlo

My Budget is Being Cut – Oh My!

All too often our project budgets are being slashed, especially in the midst of our current economic crisis. This article will provide some insights and ideas on how to best manage this not-so-fun situation.  Here are 13 succinct steps to help you get things back in order after your cost target changes.

1)      DON’T PANIC!  If you panic; so will your team. 

2)      Understand why the project is being cut.  If it is due to overall corporate or department wide budget cuts vs. something specific to your project delivery — you will need to take a different approach to addressing the challenge.  If the budget cut is related to corporate/departmental wide changes the best approach to take is to show the value your project brings to the organization.  If the cuts are due to project delivery issues – you still need to show the value your project brings to the business – and you’ll need to demonstrate how you’re going to get the project back on track. The key here is to demonstrate to management that you have the capabilities to deliver the project successfully.

3)      Go back to the basics.  What is your project about; what value-add does it bring to the business?  Remind the senior management team (and your core team) about the great reasons this project came about.  This is a perfect time to “dust off” the original Project Charter document and any other documentation you may have that contains relevant information regarding the business justification of the project. (Do this regardless of the reason for the budget cuts.)  If you did not create a Project Charter when the project commenced, then create one now.  Look at the original Business Case which should have documented the reason the project was initiated and the value it should bring to the business.  If a business case was never created – then talk to management team members that were around when the project was kicked off so you can document this information.  By showing the business value (maybe savings to the business, cost avoidance, or revenue generation) it’s possible your project budget won’t be reduced.

4)      Find out what the business CAN afford.  Instead of randomly cutting your budget to see “what they will approve” – find out what is affordable and why.

5)      Communicate, communicate, communicate.  During times like this the rumors will be fast and furious.  Tell your stakeholders what is going on, why, and when decisions are expected. (You might even solicit their help to restore or retain some of the project budget!)  Keep things as normal as possible until the final decisions are made.

6)      Work closely with your project sponsor so they can assist you through this process. Always ensure you are aligned with one another.  Your sponsor can work with you to define the best approach to address strategic and political needs.

7)      Request a project review.  This may seem like an odd thing to do at a time like this but a project review performed by an outside consultant or an internal quality assurance person can demonstrate the things your project is doing well and may help justify some of your project scope/budget.  At the very least the project review will show weak areas that could be improved upon going forward.  If the project budget was reduced due to project delivery issues, the project review is essential.  You’ll need to get the project back on track and begin delivering quality products to demonstrate to management you can meet their expectations.

8)      Review the requirements and evaluate if you’ve done a good job prioritizing the “must do” requirements vs. “non-essential” requirements.  If a business unit has to choose between the bare minimum and what they really want – they will likely go for the bare minimum so they have something that is better than what they have today.  If requirements have not been prioritized you need to do this now.  At the very least prioritize requirements based on:

    1. Mandates for government/regulatory reasons
    2. Essential business operations
    3. Improved business operations for more than “x” number of personnel
    4. Provides value to a limited group (for example 10 or less) of personnel

9)      Address the budget challenge by:

  1. Knowing the new budget target
  2. Working closely with a variety of key stakeholders to ensure the information you have is accurate
  3. Keeping all requirements (if possible) that have direct impact and support the overall purpose of the project
  4. Finding ways to streamline project processes to produce deliverables more efficiently.  Work with the project team to best understand what is working well (ie: things not to change) and identify opportunities for improvements
  5. Removing lower priority requirements and record business impacts by not implementing these requirements.  Include money spent to-date (if any) to demonstrate sunk costs
  6. Hiring less expensive resources (if the risk remains manageable)
  7. Removing medium priority requirements that are expensive to implement

10)  Present the revised scope/budget to the senior management team along with new and revised issues and risks due to the proposed changes.

11)  As quickly as possible, communicate decisions made to your core team and explain the direct impact to their day-to-day activities. 

12)  Swiftly change the project documentation based on newly approved scope  – the sooner you do this, the better.

13)  Be glad you still have a project to manage and deliver it to the best of your capabilities (with a smile on your face!)

Having your budget cut is never fun — however – you can make the best of a not-so-good situation.  Rally the team together and remind everyone of the value the project brings to the business based on the revised scope.  Don’t dwell on the past and move forward by delivering the best product you can, given the resources allocated to your project.

Don’t forget to leave comments below.

Denise DeCarlo is a Founder and Principal of MINDAVATION, a company providing project management training, consulting, keynotes & coaching services throughout North America, Australia, the Middle East and Europe.