(Part four of a series on the forces helping to drive a tactical to strategic transformation of the PMO.)
For many companies, the allocation of resources is driven from the bottom up. Allocation decisions are often disconnected from business capabilities, are commonly based only on one year of data, or are guided by a simple “allocate-or-not” mindset. Needless to say, these static and stagnant approaches are not very efficient.
One thing everyone can agree on – properly determining budget allocation can be difficult. But success can be achieved by starting with “the end in mind”. Identifying what is the ultimate objective of an investment in business capabilities is particularly important to drive effective allocation decisions. And the willingness to ask questions is essential.
Specificity invites ingenuity. Simple questions about investments, timing, governance, pace, and strategic targets can help drive successful resource allocation. The likelihood of desired improvements or transformations succeeding increases when the organization asks questions like:
- Do we create portfolios and allocate funds at the enterprise level, the program level, and the line of business level?
- What’s the investment horizon?
- If there are constraints (political, external, etc.) which are the most critical?
- Should investment decisions be governed by an all-or-nothing or proportional philosophy?
- What is the pace of investing?
- Are there any specific mandates or strategic ratios regarding run-the-business vs. grow or transform the business that need to be considered?
Those questions – as simple and straightforward as they are – force the organization to think about the choices they must make. They can also help draw to the surface any organizational tensions, limitations or constraints currently confronting the business. The resulting insights can help remove ambiguity. More importantly, they provide a basis for establishing an allocation hierarchy – capabilities, programs and projects for example – along with the rules needed to govern how those allocations are made.
Addressing allocation is crucial to ensuring that every investment is funded at the appropriate level, commensurate with its relationship to the organization’s strategy. But without a competency-based transformation roadmap, all we have are a bunch of good ideas. We need something to help us keep up with the amazing pace of investment and innovation. We need roadmaps, and that’s what I’ll talk about in my next post.