A sea captain needn't be a meteorologist to lead his or her crew through a storm. As a project leader or project manager, you may not be an economist, but you must prepare to deal with the consequences of an economic downturn on your projects.
Some of us (those with grayer hair or grown children) have been through this before. Our experiences with IT projects in the early 80's, early 90's, and 2001-2003 help us know some of what we can expect as the economy slows. History tells us organizations that respond quickly and adeptly are more likely to survive and prosper than those that ignore the problem or deny it until it is too late.
How Will Organizations Respond?
Costs increase. Revenue slows. Profits dwindle. Money available for discretionary spending drops. In the public sector, tax revenues drop, squeezing budgets. Executives in your organization will be under increasing pressure to reduce spending. Some organizations will deal with this more thoughtfully than others.
Inexperienced or poorly managed organizations will implement "across-the-board budget cuts," threatening the viability of mission-critical efforts as well as nice-to-have projects without regard for the risks, rewards, or operational priorities of the organization.
Healthier organizations will review their project portfolios with an eye toward triage, making tough decisions about how increasingly limited resources are allocated:
- High-risk projects may be canceled if they aren't mission critical, or they may be slowed or delayed to reduce their resource-burn rate.
- High-cost projects will be reviewed to check their expected return on investment and to confirm they are valuable.
- Infrastructure projects promising long-term value but near-term disruption may be slowed, paused, or scaled back.
- Required projects (contractually or legally) that "must be completed" but do not reduce costs or increase revenue in the near term may be reduced to deliver only the essentials of compliance.
- All projects can expect to have proposed spending and hiring reviewed more critically
What Can You Do To Prepare For The Storm?
Conducting business as usual while watching the storm approach and hoping that it passes without affecting you is foolish and dangerous. A good captain anticipates the weather, and a good project manager anticipates change. Here's a list of activities you should consider to support your organization, your project, and your team:
- Review the value your organization expects your project to provide. Significantly lowering costs or increasing revenue is good. Significantly improving products or services to attract new customers or retain existing customers is good. Meeting mandatory contractual or regulatory requirements for survival is good. If your project doesn't meet any of these criteria, its viability is (and should be) suspect. You must understand and be able to explain why your project is important to the organization or be willing to suggest cancellation or delay to support other organizational priorities.
- Meet with the project's sponsoring executives individually to candidly discuss their perspective on the six- to eighteen-month forecast for the organization. Do they see organizational priorities changing? Do they anticipate the priority for your project will change? Are some components of your project higher priority to sponsors?
- Review requirements for your product or service. Could you partition your project or phase it to accelerate delivery of higher value functions and delay lower value functions? Having such proposals at the ready gives sponsoring executives welcome options.
- Review your project's identified risks. An organization's sensitivity to risk often increases in lean economic times. When funding is tight, risks that result in increased costs or delays in realizing a project's value may have a higher impact.
- Review your dependencies on external suppliers--some of your suppliers may fail outright, while others may be going through this same prioritization process and delaying delivery of products or functionality that you are dependent upon. Supplier pricing for items not yet procured may increase. Perhaps you could negotiate contracts now to lock in pricing?
- Review your personnel risks. Many organizations slow or halt hiring when budgets are tight, so lost team members may be more difficult to replace.
- Review your project's historical performance against expectations. If your plans are not credible, now is a prudent time to review and revise them. Perhaps your project SHOULD be cancelled or delayed. Take responsibility for providing the best information available to support sponsor decision-making.
- Review your proposed spending and hiring plan. If there is fat to trim take the lead in identifying it and proposing alternatives. Can some of your project expenses be safely delayed?
- Keep the business perspective in mind, and don't save the wrong dollar. Some individuals and organizations overreact to financial constraints with a knee-jerk elimination of all "discretionary" spending. Be prepared to make a business case for prudent expenditures. If delaying procurement of memory for your development team's workstations saves $5,000 in expenses but costs you five hours per day in team productivity, you will have paid for the memory in lost productivity after about ten days. This is dumb. Frame the discussion in business terms and present it politely and discreetly.
- Lead--don't panic and don't whine. Your team will look to you for guidance. Be prepared to explain the business rationale behind some of the hard choices that may be coming. Engage the team in planning and prioritization. It is better for morale when the team can participate in hard decisions, because it eliminates some of the fear and uncertainty.
Before we can have interesting projects, fulfilling work, and enjoyable technical challenges, our organizations must survive to support these efforts. Project managers and project leaders who take the initiative to support thoughtful business decisions help their organizations survive. There is no better way to demonstrate your value to the organization as well as awareness and sensitivity to the realities it faces.
From a personal career perspective, watch to see how your organization responds to the turbulence. Some organizations won't respond rationally or promptly and may not survive. Now is a great time to refresh your professional network (before you need it), invest in professional reading and education, and assure that your skills are up to date should a job search should become necessary. If the ship you are on seems destined to sink, remember that you were looking for a job when you got this one ... and you are probably smarter and more experienced now than you were then.