The Summit - March 2023

I cannot stress enough the importance of Stage Budget Control (SBC) fore the successful delivery of projects within your portfolio. Yet, when we talk about it with companies there is still some reluctance from managers to make the effort to try and use it as a technique. While it can seem daunting to attempt to stop a project's momentum, in reality, SBC doesn't tend to be anywhere near as difficult as people might think. Here are some of the things that you can do to establish Stage Budget Control within your project portfolio and how you can deal with the real-world situations that will arise.

START WITH THE STATEMENT OF WORK

When customers read the word "the parties agree that that each stage of this project is not authorized to consume budget allocated to a future stage", they respond favorably. This is because it gives them comfort that the project's budget will not run away with itself. This is not exactly what the words are saying, but when they are read, this is the feeling they give. Even if the customer was spooked by your SOW wording the resultant conversation about this topic during the negotiating phase is a great one to have and can be used to separate you from your competitors. 

"Yes, we adopt an approach that ensures that any stage that exceeds it allocated budget escalates to the project sponsors for immediate review. This is the level of care and attention we place on providing customers with successful project delivery." Having had this conversation many times with customers they are always delighted to be working with a firm that recognizes the danger in the journey that is about to undertaken. Remember however that we are not trying to scare the customer, but give them comfort. I find this a challenging concept sometimes if a customer is not exhibiting any fear. You don't want to unnecessarily start talking about fearful concepts such as failure and job risk, but yu can start asking about elements of the journey that you know to be challenging.

SET UP REPORTING BY STAGE

Does your PSA allow you to break the project into stages that can be budgeted separately. While some PSA's allow you to do this, they do not do it specifically for this purpose. However, if it can be done, do it so that you can get the reporting you need. Maybe you can set a trigger that notified you when a budget stage has been 75%, 90% or even completely consumed.

If your PSA can't do this then try tracking it separately by adding some custom fields that track the current stage and allocate the total budget that would be consumed at the end of that stage. For example, knowing that the Build stage only has $25k assigned to it and that the previous stages of Kickoff and Design had consumed $15k then you know that once the budget consumed reaches $40k that the Build stage has consumed all of its budget.  This might take a little more management by the project managers but getting this information and knowing when to act on it is critical to determining which projects in your portfolio need your attention.

If you still can't get this reported then it is a simple statistic that you want shown at every sponsor review meeting. Regardless of how you get this information, the important outcome is that you are able to establish customer contact once the stage has consumed its budget and say "Let's discuss what happens next."

NEGOTIATING AN OUTCOME

As a part of my project management certification we are going to teach the very important concept of generating leverage through early action. Stage Budget Control was initially designed to do exactly that. As a project progresses the customer wants leadership. They give the service provider the proverbial rope to hang themselves with by sitting back and saying, "You lead". At the same time the customer has a tendency to disengage, or the at least, the customer's project sponsor gets distracted by other priorities. During that time the project does not progress as planned primarily because of a lack of quality information or engagement that was meant to be provided by the customer. If SBC helps you escalate consumption of the project's stage budget earlier, then it allows you to use the customer's failure to participate as one of your negotiating items. If you leave it until the next stages overconsumption then you leave yourself open to the argument of, "If this was so important, why didn't you escalate it then?"

While I believe you can negotiate positive outcomes even when we fail to escalate in a proactive way, it sure does impede your ability to achieve awesome outcomes. Hence, you must see it as a priority. Being able to say to the customer, "Your repeated misses have caused this stage to balloon beyond its original estimate" completely changes the stance with which the customer comes to the table. I've been through so many of these negotiations and they all follow the same sort of pattern. 

Instant denial and an attempt to transfer the ownership of the situation back to the service provider. At this stage we clearly articulate that while we like for it to be that simple, we have clearly spent a good amount of time asking the customer's organization to participate in the project as required and we have been met with repeated misses and resistance to using our time to make effective progress." This usually brings about the retort, "That's because this is far more complicated and you have not done a good job of leading us to make decisions." 

In some situations this may be true but usually it is as a result of the Business Transformation Paradox rather than the fault of the service provider. This paradox simply states that it is impossible for a customer to understand and make perfect decisions about a future solution that is being built in a product that it doesn't understand. Hence your negotiation must shift to the careful handling of this paradox. "We understand that you are finding it difficult to agree to specifications that you do not completely understand however projects continue to consume budgets for every minute that we work on them. The focus must be on getting on with the project and not delaying it unless you are prepared to pay for the time it will take to get a greater understanding of your design."

In reality we have found that this begins the process of the customer becoming more amenable to shared resolution. This is not when you should agree to it however. At this stage you are still pushing all out for the customer to fund all of the overage. It is only when you give up on that approach that you begin to look for the "shared" result. At this stage we have found that offering that the customer pay for the required overage and then should that overage be consumed that you will provide an additional overage at your expense is very successful. For example you could say, "We propose that you fund the remaining 100 hours of design work and should that work be completely consumed we will provide you with another 50 hours of free work as buffer." In most situations I'm prepared to go to 1:1 on my offer knowing that in most cases these hours do not get consumed. This is for two reasons. The first is that our team now has a much better understanding of what it is trying to achieve as "Done" for this stage. But more importantly the second reason is that the customer has now had to suffer a penalty for not engaging and is far more likely to engage correctly. This rapidly improves your teams effectiveness and the project has a much better chance of achieving its stage objectives.

In short, making the customer feel adequate consequences for the negative impact they have had on the project's stage helps set a much better level of engagement for the rest of the project.