How to Build and Maintain an Enterprise Program Budget

Congratulations! You have just been delegated to manage a really massive project budget.

If everything goes well, the experience will bolster your resume, bring accolades, fame (well, maybe at least within your organization…), and possible promotion.

But…what if things don’t go well? I think we know what can happen of the project doesn’t go well, or the budget is way off target. We don’t want that to happen!

The goal of this article is to share some budgeting insights and tips you can use today. Right now. No lengthy discussion of theory, charts, graphs, and methodologies. Just down home, field-tested budgeting.

Let’s roll.

Project Budgeting — The “Classic Definition”

Building an accurate enterprise program budget starts with a new way of thinking. The classic definition of project management success was: “Project completed on time, and within budget (or within agreed budget variance).” My recent article Don’t Throw Away the Wrapper covered the “on time” side of the success equation. Now let’s talk a bit about the “budget” side of the equation.

“What does “on budget” really mean? In the old days (well….even today), it simply means that some arbitrary budget, established way back at the beginning of the project must be maintained; any work done within the IAM Program must stay “within” that budget.

With such a definition, is it any wonder so many projects fail! (For a deeper dive on current failure rates, check out this excellent article: by Calleam Consulting Ltd.)

Before we grapple with building a successful budget, let’s review a few common factors driving many of today’s projects:
* Priority pressures . “Our current national widget marketing campaign cost more than usual. Certainly your “big IT program” can do everything it intended to do with two million less?”
* Political or threat pressures. “We’ll give you 75% of what you asked for, and you’ll have to cope with it. Or else, you will be pulled off of the project, or sacked.”
* Incomplete and/or inaccurate information. When program inputs are incorrect – intentionally or otherwise ‐‐ it’s impossible to create an accurate budget.
* Time or budget usage pressures. “Hurry up and get that budget out tonight. We have three orders pending with our technology vendor, and need to you have all program costs figured out ASAP so we can spend our budget before losing it.”
* Program or project manager budgeting error. In this scenario, the project manager may have accurate information and support, but is – for whatever reason – unsuited to the task of preparing a complex budget.
* Lack of experience and/or expertise in a particular solution. Big enterprise projects often require equally big and complex software and systems. Missing expertise in those systems impact accurate budgeting.
* Lack of flexibility. Do you ever wonder why we apply all these fancy ‘rapid’ models to development and agile process, but try to shoehorn static budgets?
* Over-reliance on formal project management “quadrants, methodologies, policies, processes and the like. Don’t get me wrong — successful project budgeting is an exercise in process. But, many organizations and managers confuse rigid process and some third-party “PM Methodologies” with real life. Real-world business. Today’s speed of business is far too fast for antiquated tomes or dogmatic project management doctrines.
* Insert any number of other factors here… And don’t forget one of the most important of all: “the economy“.

Why, in late 2013, do these things continue? After all, didn’t the past few decades of IT projects, show us what should work?

They continue for a variety of reasons, not the least of which is the old standby reason “because that’s the way we’ve always done it”. In reality, projects, vendors, and resources are just too dynamic. Today, even more so. Plus, most enterprise projects require months or even years to complete. How much changes in your personal life, just in a few months? Yep, mine too. And how much more so in a dynamic multinational corporation? Priorities shift, employees and contractors constantly shuffle between projects, management and company visions change, “the economy” comes along, technologies change, vendors change, competing projects sabotage each other, employees resist, requirements change, etc., etc., etc.

And there is a simple truth that many organizations miss: it is inaccurate to assume you have all inputs and requirements known before the project starts. Things will be missed, and that’s the nature of the game. It’s not about trying to hit 100% requirements before starting. It’s about how well you deal with the ongoing reality of change. Savvy budgeters will have contingency plans “B, C, D, etc.” ready and waiting.

“Ok, Corbin — we got it already. Now what can we do about it?”

Budgeting — A Different View

Let’s take a new view of the budgeting process. In my decades of doing big projects for companies like Disney, Microsoft, UBS Paine Webber, and PwC (to name just a few,) I’ve lived first hand what works well, and not so well. Here are a few things I’ve picked up along the way:

• Understand and appreciate the amount of money involved. Big projects have big stakes, and big stakeholders. More gates to pass, more approvals , resources, and working groups to manage. To paraphrase a waiter overheard many years ago in one of those over-the-top restaurants (the ones without any prices on the menus)….”madame, the price, is the price….”. Meaning, team members often get caught up on the size of the figure, and not the result. I understand the scope of such figures can be paralyzing to some people. 15+ million dollar budgets may seem may seem gigantic when taken at face value. I mean on a personal level, that seems like lottery-level money doesn’t it? But in the enterprise world, such numbers may actually be way too small for a large-scale project. But what happens? People get stuck on the figure itself (it sounds so, so…large!). Of course, the successful budgeter will stand firm on the proper amount for that particular project, regardless of what it “sounds” like. (Or how politically popular it may be.)
• Humans and emotions are very much part of the budgeting process. Building on the previous point, big money drives big discussion, big arguments, and big blame. Approaching the budgeting exercise as one person to another works wonders. Budgeting success depends more on getting buy-in and building relationships that will make the project successful.
• Politics are very real, well established, and not going away. Learn to love it. Embrace the politics of your organization and use them to your budgeting advantage. In the early days of my career, I used to think “no politics”, or “I hate politics.” But I learned quickly that’s the same as saying “no people on this project.” It “ain’t gonna happen”. As I’ve written before, organizations are just like people, with distinct beliefs, culture, and ways of doing things. And just like people, many moves defy logic and rationale. Things simply may not be fair. The epiphany for me all those years ago, was to embrace the politics, and work the system. It may not always be comfortable (it isn’t always for me), but failing to deliver the proper budget and a successful project outcome is much MORE uncomfortable.
• Ask your technology and staffing vendors for preliminary, non‐binding estimates on projects of similar scope and size. If you have a great vendor partner, this information can be hugely valuable. But be careful with this one. Some vendors may use this against you by sensing the overall size of the program, then hit you with sales pressure even before the project is approved. That said, vendors may also be one of your best planning resources. After all, they have sold projects similar to yours (yes, your project isn’t really that different….) and may have some idea of proper scope and pricing. A good vendor will support you in this endeavor in the manner of a true partnership.
• Don’t forget to calculate the task wrapper… See my previous article about calculating actual effort.
• Be sure to factor in the fully burdened rate for all team members not included in the vendor bid. “Fully burdened” is a capital planning term, in which an employee of a given pay grade, title, or other criteria, is assigned a comprehensive hourly rate. The comprehensive, or “fully burdened” hourly rate will include the employee’s base pay, divided by hours over a 49 or 50 weeks year, plus benefits, facility costs such as badges, office supplies, phones, lights, parking, training, management, computers and related equipment, meeting room use, taxes and insurance, paid time off, and anything else pertaining to the pay and maintenance of the employee.

  Some organizations apply a flat burdened rate, and others have rate charts based on pay grade. To have a real shot at creating a valid budget, you need this rate number. Getting accurate numbers may take a bit of research, and you may have to spend time talking to your PMO or HR contacts. And frankly, some organizations just do not want to provide this information. But it’s crucial — so discover it as soon as possible. Once you have the figure, check and double-check it against other projects. You’re after accuracy, even if you have to (gently..) ruffle a few feathers in the process.
  

• Be sure you have included everything in your draft budget. When you’re sure everything is included, send a draft to all relevant stakeholders. If your budget is accurate and flexible, be prepared for push-back. Stay strong.
• When possible, divide program funding into stages. Admittedly, this can be very tough to do in some organizations. Some organizations literally force premature budget decisions. However, it is not in your best interest as a PM to support company knee‐jerk approaches to budgeting. Programs and project do shift and adjust over time. What may seem like enough money for one set of deliverables, may be nowhere near enough after the program has been running a while, and the original scope has shifted three or four times. Therefore, the best approach is to project an end‐to‐end program estimate (with the caveat of “all things being equal”) and then request funding in stages. That way, two years down the road you’re not locked into a figure that seemed valid at the time,but has long since become irrelevant. And of course, deliver, deliver, DELIVER on tasks and ensure all decision makers are aware of your frequent progress.
• Keep the toolset simple. My favorite tool for project estimation and budgeting? You guessed it – a good old‐fashioned spreadsheet with formulas. No fancy custom tools or cloudy SaaS stuff. They only slow you down. You can always get fancier later on.
• Seek outside program and budget validation. Something our company does a lot of is validating enterprise-scale IT programs and providing budgetary planning assistance. This model is most effective when you use an independent vendor who is not tied to your project outcome, or providing staffing/software resources to you. As a general rule, I recommend seeking experienced outside validation of your budget before finalizing and presenting to senior management. This one small step can literally save you hundreds of thousands — or millions — of dollars down the road. Not to mention significant time and resource savings.
• “ABA” – Always be adjusting. Budgeting is, or rather should, be a dynamic exercise. Set stakeholder expectations up front that things can and WILL change..

May these tips, along with your own strategies, experience and intuition bring massive success to your next program or project!

Conclusion

In this article, I’ve shared a few thoughts on how to reach success in the project budgeting game.

Your turn. What tools or strategies have helped you create workable budgets? Leave a comment below, or share your story via the contact form.

Happy budgeting!