How to recession-proof valued projects

Failing retailers, banks and the car industry are in crisis; yes, it's officially a recession, which many of us have known for months. There are very few businesses now immune from this sudden, global and vicious downturn - a recession like no other in past decades. People, projects and operating costs are being decimated, only kept if they add real value.

But is ‘slash and burn' the best approach?

Projects are undertaken for good reasons, usually to improve efficiency and competitive performance, or transform customer service. Is it sensible to dump these essential investments now? The questions to be asked must include:

• What practical steps can be taken to avoid compromising the business later?
• What can be done to align key investments with new budgetary constraints?
• How can you judge what to spend money on, or rein back?
• Is ‘mothballing' an option, with the risk that, if you resume a project in two years time, important people may have left and, in any case, business requirements may have changed?

This is where you need a prudent strategy and maybe an appropriate tool to see what's going on; you need to determine what the priorities are, which projects stand the best chance of delivering expected returns on investment, and then make a balanced judgement.

Most organisations will have a number of large and small projects in their portfolio or operating plan. In boom times, ideas get funded with a robust business case and continue regardless. Rarely is the case reviewed again. Clearly this is not the right approach, even in times of plenty.

To ensure it still stacks up, the business case needs to be rigorously and regularly checked throughout the project lifecycle.

In addition, something that is not done often enough is to look at the vital risk of non-delivery. Today, the project may feature a great business case in terms of benefits, but if the risks of either not achieving them, or of non-delivery, are significant then a decision about whether to go on should be made immediately.

Quality gates and cost surgeries

Many organisations I have worked with use the concept of quality gates. While the exact use of these quality gates varies between organisations, the basic rationale is the same: do not just let projects carry on without regular checks and balances. Some quality gate processes will only release funds, enabling the project to continue to the next such gate, if the sponsor or change board is still happy with the business case and the level of risks. This is a powerful and practical process as the project cannot proceed without passing a significant hurdle, i.e. it will have no cash to continue.

Draconian but very effective.

If you have saved money by scaling down or stopping some rightly questionable projects, then there is still more to be gained by reviewing the rest of the project portfolio.

Another technique I have used is to conduct cost surgeries. This is where the project manager has to formally present his or her project, complete with its costs and assumptions or forecasts, to a panel.

The panel usually contains the sponsor, head of finance, and head of project delivery. The very act of formally presenting to this august and demanding group tends to quickly focus the mind of the project manager. To ensure objectivity and fair judgement the surgery works best when it uses a standard format for the reporting templates and the meeting. Systematically, the panel can ask questions to get a realistic sense of costs and the facts, or assumptions, being used.

For example, has the project manager assumed people work more than 220 days a year? If so, then once holidays and sickness are taken into account it's a wrong assumption, likely to badly affect the project's costs (and delivery). The costs of external resources should also be reviewed. This is one area where strong challenges can be made if the figures are out of kilter with normal external costs; sometimes the case where a ‘pet' supplier has been used.

Cost surgeries are an important, practical and immediate way of scrutinising projects and gaining a realistic view. I have always found these to be a very constructive and effective method, which can generate valuable cost savings. It promises, at the very least, to achieve a more accurate cost projection for the project, which in turn may put it into question.

It may not work

Here's a war story: when I sat on the panel of a firewall cost surgery and we had nearly finished the meeting, the project manager was asked, what was the biggest risk to his assignment? Gathering up his papers he replied, "Oh, it may not work!". Being an extremely critical project to the business, we politely invited him to sit down and explain himself. Without this surgery, I doubt whether the ‘risk' would have come to light until far too late.

Another tip: avoid stripping out so many resources and costs from a project that it cannot possibly deliver properly. With the current recession or at any other time come to that, it is always tempting to get rid of expensive resources and replace these with cheaper ones. This is a dangerous tactic. My preference in running large scale projects is to have fewer, but good and expensive people, rather than lots of cheaper but inexperienced resources. The results are more certain and reliable.

In hard times like these, it is prudent to review business cases and stop related projects if necessary. However, it is also important to scrutinise the remaining projects in your portfolio.

Take the approach I advocate here and you will put your company in better shape for the upturn. Let all your competitors take a knee-jerk approach, but it will likely hinder their chances of recovery.

David Walton is managing director of Bestoutcome Ltd