How to rescue an out-of-control project budget
Sometimes projects get off-track because of a major and sudden calamity—a vendor vanishes, your company is disrupted by a merger, a disaster strikes the building. Other times, it’s more subtle. When you know a key resource has upcoming parental leave, but a replacement can’t actually be found for the right price in the right timeframe, the delays or extra costs can ripple through the project for a long time after.
Sometimes the most responsible and sensible budget plan, with as much tolerance and leeway as any reasonable person could expect, gets knocked for a loop. Here’s how to deal with the uncomfortable red ink as gracefully as possible.
Don’t keep it a secret
Project managers are paid to sort out issues and find creative solutions to seemingly insurmountable challenges. They’re not incentivized to go running to executive sponsors and financial controllers every time a problem crops up. But budget crises need to be aired if they are to be overcome successfully.
“With a budget problem, you can’t keep quiet, because it’s a systemic issue and needs to be fixed,” says David A. Warford, managing partner at KnowledgePath Consulting. “The last thing they want to do is go up the ladder, but the board doesn’t want to come to the realization later that a project is over-budget and over-time.”
Vet mid-stream resources carefully
Onboarding costs can climb mid-project if the resources being rotated into a project don’t actually have the skills they need and have to do training on the fly. “Once you get to a certain depth in your bench, you find that you start filling in bodies who have some related experience in the task at hand, but haven’t actually worked in that area for years,” Warford says.
If those resources are internal, it pays to have a more robust plan to fully vet new resources and more accurately account for the cost to add them into the project. If they are coming from vendors or partners, you may be paying for on-the-job training which should be borne by their employer, not your organization.
Put some good news in the budget request
When there’s no choice but to ask for more money, it may be tempting to be terse and matter-of-fact about the tradeoffs:
Reward if granted: The project actually gets finished
Risk if denied: We all give up and go home
While true, it lacks flair. Build in some additional incentives. Chances are if the budget is out of whack, there have been problems with scope, visibility, or delivery as well. Don’t completely gloss over the reality that you are having to ask for new resources, time, or budget. But make clear that you’re not simply asking for something with no added value in return.
Paint a picture of a better world, not just one with an increased outlay. One with fewer unanswered (and unanswerable) questions about progress, time remaining, and critical path activities.
Have tough conversations about scope
If a budget overrun can’t be solved with more money, but abject failure is not an option, reducing scope is a viable alternative. The PM has to become a broker and help the stakeholders understand the risks and returns of, say, delaying functionality for the logistics operation, or reducing the amount of customization in a manufacturing project.
Rescue needs its own definition of success
At the risk of getting too meta, approach the project rescue process like it, too, is a project. (Except, not one that will also run over-budget and need rescue, because that would be ridiculous.) Your rescue mission needs its own plan of action, assigned tasks, and success criteria.