Decoupling Budget, Capacity and Prioritization

“We budgeted for it, so it’s prioritized!”

“We were clear about the 5 priorities for this year, so why are people still having priority questions?”

“We budgeted and prioritized, but I can’t get people to work on it!”

Lean Portfolio Management (LPM) is all the rage nowadays; prioritizing and optimizing work within capacity.  Part of Lean Portfolio Management is a move to more frequent, outcome-based budgeting. Frequent meaning quarterly or on-demand funding.  Outcome-based meaning that we invest in outcomes instead of deliverables.

These solutions are useful but they ignore one of the biggest problems in most organizations, the muddling of Prioritization, Capacity, and Funding.  In order to do any Lean Portfolio Management practices, you first need to decouple (or ‘detriple’) these three activities.  

If you increase budgeting frequency, without decoupling, you’ve just increased the frequency of your confusion.  You’ve become outcome-driven but no one can meet the outcomes. You’ve increased workplace frustration ten-fold because now we are scrambling to find capacity all the time.

This model also simplifies the budget grind* many companies face. The budget grind* is when companies spend the whole year fussing over budget numbers because the priority and capacity are implicit in the budget.   When you decouple these activities, the whole budget process becomes much simpler.

How do we fix it?

 
 
  1. Start with Prioritization.  Stop talking about budget and capacity until you prioritize the outcomes you want across the organization.  When you have your priorities, they need to be put in order. Yes, even high-level strategic goals need to be put in order.  Why? Because people will have to make trade-offs and they need the principles to make the decision.
    “We are supposed to be customer-focused but we are also supposed to cut costs, so should I give this customer a refund or not?”
    “I’m working on something strategic, but I was called into an operational issue today which will delay the strategic work. Which should I focus on?”

  2. Next, plan Capacity.  I am not talking about the chess-mastering resource allocation plans of olde.  I’m talking about who is going to work on that first item on your priority list.  And then the second one. And maybe the third. Until your capacity is full for the time being.  Don’t plan out the year, plan the now.

    Does capacity mean individuals or teams?  Yes. Start by planning capacity by teams, it’s way easier than planning for individuals.  You may find that your current team structure no longer serves the needs of your portfolio, so you’ll have to tweak it, maybe add/remove teams.

  3. Finally, allocate funding.  Once you have prioritized and planned capacity, and you’re ready to go, allocate funding.  This is the very last thing we do, allowing money to be free and flexible as long as possible.

    What frequency should we budget? 
    Ideally, you want to budget as frequently as possible, on-demand based on your governance model.  My assertion is that even if you stay with your current budget process, decoupling budget from prioritization and capacity gives you a staggering improvement in outcomes.


Brain Twist. Next time you are engaged in budget activities, take a step back and ask the group to agree on priority. Then agree on capacity. Did that make the actual funding easier?

*Budget Grind. For those of you aware of my objection to the word ‘grind’; Yup. Hypocrisy acknowledged. I couldn’t think of a better word. Suggestions welcome.