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Putting the Short Term and Long Term in Perspective

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Published: 28Dec2008
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In these lean times, cutbacks, scarcity of funding, and the need to streamline are symptoms of a tough environment. However, many of these management practices should really be occurring in both good times and bad. In portfolio management, especially, it is important to manage a healthy balance between short term and long term considerations. It is all a balancing act, and the equation really only changes slightly during a downturn, such as we are currently experiencing. Actions may be more or less aggressive with short term tactics, but long term considerations should be relatively consistent.

In assessing the projects that will make up the portfolio, guidance typically comes from overall stated strategic objectives. These often tend to be "buckets" that are essentially categories of projects supporting a particular organization-wide goal. While this is important component of building the portfolio, over the set of projects being considered for implementation, there is another consideration - organizational capability - that, in my experience, is often overlooked. Considering organizational capability forces a long-term view of the portfolio.

There is a capability-focused consideration that should always be incorporated into the portfolio management team's criteria on projects. In fact, it should actually be one of the biggest considerations. For example, there could be research development going on in a particular area is under consideration, at least on a temporary basis, for cuts for economic reasons.

Such an R&D project could also be under scrutiny relative to other priorities related to other opportunities for the organization. What can put such a consideration into perspective is to thinking about how it contributes to the longer term organizational capabilities that will enable to organization to thrive when economic conditions eventually turn around. Research and development on a particular technology cannot so easily be stopped, as it can often mean the disbanding of a team, re-purposing of facilities, and loss of momentum in developing a solution. Often, once processes are stopped, starting them up again is essentially starting from scratch. Often, a continued drive toward the end result is necessary, or the effort and results will be lost indefinitely.

This needs to be considered oftentimes also with processes. Often times, organizations have processes that intermingle with projects. For example, organizational improvement requires a certain flow of projects of a certain type in order to continually advance and improve some aspect of the organization's operations.

If these projects are cut too much, the core capability of the organization can be weakened. This is particularly true in cases where the subject capability supports a major part of the organization's value proposition, the cornerstone of the organization's business model. It is not only the job of manager's to survive the present, but also position the organization to thrive in the future, and positioning adjustments to business models with precision timing is an important price of that responsibility.

The key assessment that needs to be made, albeit with a lot of detailed homework, is to identify those parts of the cost structure which really do not contribute to the short and long term health of the company's business model and value proposition. Often administrative costs are among the first to be reduced.

However, even administrative costs can at times be a source of value added, or can be part of the value proposition, within an organization. What is important is to avoid taking a 'plain vanilla' look, and determining that all costs must be reduced by a certain percentage. This might work in situations where managers are convinced that there is a relatively constant amount of 'fat' evenly distributed throughout the organization. I think that is taking quite a chance, and that the risk can be reduced by undertaking more selective and strategic pruning.

Capabilities are very important. People and processes are in place within organizations to accomplish certain goals. In many cases, even temporary cut backs to core capabilities can lead to the loss of both the people and the processes that are vitally important to the company's value proposition, and these can be very difficult to recover that for the future. While, sometimes, the projects representing these capabilities may not fit exactly into the strategic initiative buckets that have been determined for the organization, they nonetheless are of strategic importance and need to be weighed heavily.

John Reiling, PMP, PE, MBA is an experienced Project Manager and certified Project Management Professional. John's web site, Project Management Training Online provides online project management training for beginning managers and for PMP exam prep and PDUs. John also writes regularly in his blog, PMcrunch.com .

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