Agile angst - the dreaded annual budget bun fight

In May/June 2020 we spoke to 20 of New Zealand’s leading CDOs and CIOs. We asked them to tell us about the challenges they were facing with their digital transformation journeys. Unsurprisingly we found some common themes and we summarised them in this infographic: 5 Top Challenges for Digital Leaders.
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Each time we will look at a specific challenge in more detail. (Here’s our last post Agile Angst – overcoming agile governance woes if you want to catch up).

This week we’re looking at the second key challenge of agile project management – ​the investment planning process.

In most established companies the allocation of investment budget is a big deal. Invariably the demand for investment dollars outweighs the budget available. There are must-dos (like complying with regulation) and nice-to-haves, and many vocal and differing opinions about what the priorities should be.
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Securing a project budget can be tough at the best of times, but when it’s an agile project it’s even harder. Scope may be vague, costs unproven, benefits uncertain.

Some common issues I’ve heard from transformation leaders:

1. Our central investment planning process is asking us for detail on costs/benefits and deliverables that we don’t have;
2. Our project office wants certainty, but who knows what exactly we’ll be working on in the next six months;
3. This form filling really distracts from our agile philosophy, but what choice do I have, my team needs a budget.​  

Like it or not, for most traditional companies, the annual investment budget allocation process is a necessary step to ensure the key priorities for the business are appropriately funded and resourced. And it’s also necessary for showing prudent financial management and strategy execution to the Board.
 
And you need the budget.
 
So, you need to live with it, but maybe there’s some ideas that might make living with it a little easier.

Do you even need a project budget?

I’ve always found it really odd that companies treat digital channels as discretionary projects, but other channels like sales teams or the call centre are funded from the operating plan. In 2020 there is nothing discretionary about great digital channels and hopefully the lockdown experience for many companies has reinforced that position.

The good news is that if your company still has lots of opportunities to automate processes and migrate interactions to digital (and ideally a good track record of doing that), then there is an opportunity to avoid the annual project bun fight altogether and self-fund from the automation benefits.

​Let me explain. If you are, for example, automating a process that removes fulfilment costs then the money that was in the operating budget to pay for fulfilment costs could be reallocated to fund your project. (Often there’s a lag in realising those benefits so it may need to be a gradual reallocation over a couple of financial years).

Is your digital project really a one-off or here for a while?

If your project is here for the foreseeable future (for example an automation programme that’s going to take three years), then you need certainty of budget allocation, in order to ensure you can retain the knowledge you’re building in your team.

​The last thing you want is staff leaving at the end of this year’s project and you then rehiring the following year. In this situation base your funding request on the number of teams you will need, with the idea that budget and schedule is fixed so the only factor that can change is scope. 

Are you friends with your project office and budget allocation group?

Goes without saying that if these folks are determining whether you get the budget you need for the next year, then you need to maintain a good relationship with them. However, I’m not talking about bribing them with chocolates.

​Ideally, you’ve already ensured they are au fait with agile principles and how agile works in your company (see my last post Agile Angst - overcoming agile governance woes). 

Now take the time to understand exactly what they need from you and why they need it.

​A digital lead in a large corporate recently told me that he’d sat down and asked his project office exactly why they needed the info they asked for, and what they did with it, and while it didn’t make the need to submit a request go away, he was better able to articulate the end purpose back to his team.

​Ultimately central project offices are about risk management. They want to allocate the organisation’s scarce funds to projects with the lowest chance of failure - the yardstick of which can be exactly how much you know about your project. 

​Once you understand in detail what the PMO needs and why, you can start working together on options to reduce the risk of investing in an agile project.

• Can you complete a proof of concept or prototype to better demonstrate the value of your project and/or solve the hardest technical issues upfront to de-risk delivery?
• Can you only ask for funding for the first quarter or half, with the intention that you will be back for more money once you have proven project value and capability?
• Can you provide project data for the next 12 months but update forecasts more frequently than usual?
• Would a “certainty rating” help the PMO highlight any risk built into their forecasts? For example: Quarter 1 = 100% certain of accuracy of costs/benefits; Q2 = 90%; Q3 =75%: Q4 = 40%.
• Could you set aside a “costed risk” component of your budget that you won’t use/give back until key unknowns are clarified by the project?
• Can you invite the project office on to your steering committee so they have more direct access to how the project is tracking?

Ultimately a good project office will adapt their processes over time to better accommodate agile projects. But like anything if you approach this on a collaborative basis with an intention to try, learn and iterate, you will find the best rhythm for your organisation.

Next time we’ll focus on another common issue associated with agile project management – delivery date uncertainty.
 
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