It is "Slap my forehead" time; we are all prioritising change portfolios - again!

Nearly everyone I know who is involved in planning and managing change is currently partaking of the annual portfolio prioritisation ritual. This is something I have seen year after year, yet still seems to come as a surprise to senior management, causing stress and uncertainty for much longer than necessary. I should stress here that I am talking across financial services and not just a single company.

I plan two posts on this. The first will be an analysis of why this happens, year after year. It is slightly enhanced (simplified in places, emphasised in others) in the hope that the reader can recognise and empathise with the situation. Please do tell me if it is way off.

The second will be some practical thoughts on portfolio prioritisation, based on a number of years doing this at a corporate level and forever trying to fight the dreamers on the one hand and those hell bent on spurious precision on the other.

One thing I have learnt is that we waste so much management time trying to create something, ie a change agenda, that will at best be only ~60% correct when reviewed with hindsight. The other 40% will be changes in plan, genuine errors, and unforeseen and unforeseeable needs and events. If we recognised and accept this truism we might find that Q4 each year can be made into a much more productive period.

Part 1

The root causes are, I believe, pretty simple.

STEP 1: A planning process that starts from the bottom up, with business units/lines generating more of a wish list than a strategic plan. Rarely is anything co-ordinated across units, relying instead on untested assumptions and supported by little more than the most basic data. If there is any articulation of benefits, it is usually optimistic with only limited understanding of the sensitivities and alternatives.
 
This happens despite the best intentions of many who draw up templates, guidelines, etc. and try to run an integrated process. There is something of a kid in a candy store mentality that descends when it comes to building most business driven change agendas
 
STEP 2: Someone (the PMO?) consolidates the data and, wonder of wonders, the total is almost certainly a serious multiple of what could be afforded and/or delivered in the current period. What reason is there to believe that the organisation has the capacity to drive and absorb 3x or 4x the currently acheived levels? We still ignore that basic sense check, time and again.
 
This is usually the first wake up call that it is not going to be easy. A common response is to challenge if it is all needed. The usual outcome is a minimal reduction by shaving some costs, a few per cent here and there, and removing those ideas/proposals that are clearly pure fantasy. This rarely solves the problem.
 
STEP 3: Put the inflated change apettite into the corporate mixing bowl and find that the financial targets that supposedly drove the planning from the start are unachievable. Now, as the circular logic hits home, the first signs of panic set in. Some management, usually the planning and financial teams, realise that the company can only deliver the sales, profits, etc if they address all that "change", but the organisation cannot afford it all and so won't get the income which will make the ratios worse. What to do? It seems so easy when it is just numbers on a spreadsheet. When you have to deal with a diverse set of people/interests and consider many implications, not just monetary aspects, it is so much more difficult.
 
STEP 4: There is a realisation that the information gathered so far is nowhere near good enough to really assess and prioritise the opportunities or to understand the full implications of not doing any one item. Linked to this is the realisation that there is not enough time to start again - there are almost always external timetables that have to be met.
 
Of course there can be some subjective tinkering and whittling of the list, but this rarely has any chance of being enough. There are too many interested parties fighting for their own rewards. A little horse trading may occur, but the old adage of follow the money (ie who gets the best rewarded for what) is no more true than in this process.
 
STEP 5: Decouple the financial budget from the composition of a detailed change agenda, and set a change budget that fits the targets and allows a set of financial figures to be submitted - even if the full business implications are not yet quantified.

This leaves a situation where low level business expectations still exceed high level management promises and considerable uncertainty remains about what will be needed or indeed delivered in the year ahead. This is very uncomfortable for many and still needs resolving if the "planners" amongst the management teams are to do what they do, ie plan, for next year.

The language that is often used is "deferred (to later years)" or "phased" rather than "dropped" and one would hope that there would be a rolling programme of work that these fall into, but as often as not, next year is a new year, with new management and new business ideas.

In practice this experience will most likely be repeated again, despite claims that the organisation has learned and is doing something better than the last time. In scenes reminisence of the film Ground Hog Day  most "actors" fail to recognise the repeating cycle.

This is where it seems many organisations are right now at the end of November.

Please share any insights that support or counter this post as comments.

I will shortly post Part 2 with some practical thoughts on how the change profession can help mitigate this situation.

 
Note: Of course it is possible that the avaialbility of internal and external resource could be a limiting factor, but in my experience, in most cases, the financial constraints hit first.