Part 2 of 3: Adaptive and Responsive: Budget and Resource Management
Part 2 of 3: Adaptive and Responsive: Budget and Resource Management
Authored by Dipti Batta
In the first article of this series, we explored the concept of an ‘Adaptive and Responsive’ flavour to strategy formation, planning and execution. We found that a high maturity on the scale of being ‘Adaptive and Responsive’ results in maximum value delivery within agreed timelines, effort, quality and budget, all despite the challenges of unplanned changes in the delivery landscape, market conditions and customer behaviours/needs. Delving deeper into the planning aspect to support the above maturity, we shifted from an activity-based plan (based on a fixed upfront signed off scope) to a goal/outcome-oriented plan (based on a flexible view on the scope).
Consequently, to support the intended outcomes for ‘Adaptive and Responsive’ strategy formation, planning and execution, we need to review and realign the supporting resource management and budgeting approach as well – the focus of this article.
If the budget and resource management processes are not aligned, the focus on ‘being adaptive and responsive’ for other areas bears suboptimal results as it will be weighed down by traditional approaches.
Hence when we have an outline view for strategy formation, planning and execution, it must be supported by an outline view for required resources and budget. Below we recap the essence of outline and ‘just-in-time’ views from the previous article.
An outline view is an overall view for key aspects (goals, outcomes, customers, etc.) of the entire strategy, plan and execution approach:
It is based on what we know as of date.
With a true indication of confidence level. Note: It is absolutely okay if the confidence level is low.
A clear view of assumptions being made, especially if the confidence level is low.
The ‘just-in-time’ view concentrates on the immediate slice and focuses on:
A refined understanding of the goals and outcomes, view of internal and external customers.
Separating assumptions from certainties.
Understanding activities required to test assumptions upfront through an experiment-based MVP approach in order to mitigate risk of progressing on delivery execution based on assumptions that may result in costly failures.
Ensuring that the planning is done in a way that the experimentation activities set a high confidence and certainty-based foundation for intended value delivery progress.
Understanding budget and resource requirements for experimentation and value delivery activities.
Processes for value delivery with a focus on optimisation through removal of ‘delivery wastes’.
Processes to ensure value delivery assurance with the right roles/partners.
Processes to ensure value delivery confidence to stakeholders and for portfolio review.
The ‘just-in-time’ planning and execution of the immediate delivery slice also results in refining the overall outline view for applicable aspects.
The refined budget and resource requirements for the immediate slice, along with the outline view of budget and resource requirements for all the slices, is submitted for portfolio review.
The slicing approach enables the dynamic, on-demand (just-in-time) allocation of resources and budget (confirmed at a level of high certainty) which is done at a portfolio level. As organisations mature on these aspects, the portfolio focus shifts from project/program and operations delivery to the concept of timely, benefit driven, risk managed value delivery.
The project/program/operations roadmaps can continue to exist in the background, however, each value delivery slice in these roadmaps needs to be assessed for the following parameters at a portfolio level for priority of resource and budget allocation:
View of outcomes (and associated value) from the given slice(s) delivery.
The degree to which the delivered value is risk managed, sustainable and scalable.
Degree of coupling with other slices from the overall outline plan.
Budget and resource requirements.
Each slice will have budget and resource requirements for experimentation and optimisation activities. Where there is a low level of confidence and a high number of assumptions for optimisation activities, especially where innovative approaches are being adopted, then the portfolio review and approval is:
First done for the budget and resource requirements for experimentation, and;
Then later, at the end of experimentation, to review confirmed budget and resource requirements for the optimisation activities. In this case the confirmed budget and resource requirements are provided at a high level of confidence based on the insights and validated learnings from the experimentation phase.
This two-step process can be further streamlined to include the optimisation activities approval for the current slice and experimentation activities approval for the next slice in a given instance of portfolio review and approval.
It is important to understand the right process for budget and resource approval to infuse the right amount of ‘adaptability and responsiveness’. This is considering that:
The portfolio processes deal with all the work being done within the portfolio – projects, programs, minor enhancements, operational work etc.
A high level of understanding of the nature of the work being done in the portfolio for the mentioned categories and the level of adaptiveness and responsiveness required within these pieces of work.
This understanding is necessary to infuse ‘Inspect and Adapt’ points for the portfolio process at the right time intervals. This also provides a foundation to align the ‘Inspect and Adapt’ points at a portfolio, strategy formation, planning and execution level – a key factor contributing towards intended outcomes.
Note: The right process of ‘Inspection and Adaption’ at a portfolio level will evolve over a period of time based on the insights from the slices of work being submitted for budget and resource approval (and the understanding for the adaptive and responsive requirements for the overall piece of work).
Now that we have understood the ‘WHY’ and ‘WHAT’ aspects, let us focus on understanding the ‘HOW’ for adaptive and responsive budgeting.
Once the business goals and organisational goals have been understood, sliced as per agreed delivery approach discussed at a strategic level, it results in an outline view of the entire desired roadmap.
Enterprise roles are involved to understand the value delivery streams within the organisation to deliver roadmap goals/outcomes. This provides an outline view of the enterprise areas (depts/functions/teams) involved in the delivery.
Collaborative discussions with the mentioned areas results in a refined, more confident and in- depth view of the areas involved in the delivery.
Inputs from these areas helps in refining the outline view in terms of work involved (typically based on known approaches that have been adopted to deliver similar goals in the past). It is important to know that these collaborative discussions are based on:
The foundation of the aligned understanding for the ‘WHY’ and ‘WHAT for the goals defined in the outline view.
As well as insight into cost of delay for the desired goal timelines.
If known approaches do not do justice to the desired timelines and/or outline view of the budget, then:
A clear view of ‘Must have’ and ‘Nice to have’ requirements for the given slice is understood and an informed decision is made to descope the ’Nice to have’ requirements to align with acceptable budget and delivery timelines.
Innovative approaches may be suggested and agreed as per the acceptable risk appetite to ensure delivery within timelines and cost for the expected benefits.
If either of the first two points is not possible then, where applicable, approach to mitigate cost of delay/justify budget overheads by finding ways to enhance the intended returns (benefit profile) is explored and agreed.
If none of the above is possible, an informed decision is made regarding the delivery slice which may result in:
Rescoping/descoping the delivery slice considering the above challenges.
Review coupling with other slices and its contribution to the overall outline view of the delivery.
This may result in the outline view for planning, budgeting and resource allocation being rescoped/refined.
Note: The above discussions do not aim for the most accurate risk averse view, but use more of a guideline-based risk managed view to make informed decisions in a timely manner. Hence the usage of a timebox approach to ensure timely, maximum benefit and risk managed outcomes from these discussions. Usage of ranges instead of absolute precise estimations, usage of confidence level indicators and a clear, aligned understanding of the assumptions/certainties is key. This prevents analysis paralysis on certain aspects and allows for timely and informed decision making.
The above steps evolve the desired view of the roadmap to a more feasible view based on a foundation of collaboration and aligned understanding across all levels and teams involved.
The slices of the feasible roadmap contribute to the portfolio view for budget allocation and resource allocation. In a traditional approach, the entire delivery is treated as a single unit vying for the overall budget and resource requirements upfront. The key shift with the new approach is that the entire delivery is sliced and coupling between the slices is understood.
Based on the broad range outline view, the immediate slice (or set of slices which are coupled) are focused for a ‘just-in-time’, refined and more precise view for the delivery plan, budget and resource requirements for the given slice/set of slices.
The refined view for budget and resource requirements is reviewed with a portfolio lens and is approved based on the previously mentioned parameters (considering guidelines for different pieces of work in the portfolio; project, program, operational, portfolio buckets for budget and resource allocation etc.).
The review and retrospective process at the ‘Inspect and Adapt’ point after each delivery slice provides a level of confidence for the value delivered/value delivery progress achieved. This forms an input to the portfolio process along with the refined view of planning, budget and resource requirements for the next slice (or set of slices).
In conclusion, adaptive and responsive budget and resource management enables the most effective usage of organisational resources by ensuring that the allocation is done:
Based on the right parameters for prioritisation which is focused on minimising risks and contribution to ensuring maximum ROI.
To the right pieces of work at the right time (enabled through a sliced approach).
With flexibility to make informed decisions to divert budget and allocation in a timely and risk managed manner, based on insights and learnings from the ‘changes’ happening around you.