Standing up the Portfolio Management Office (PfMO) Part 7 – Resource Allocation
“I have no money, no resources, no hopes. I am the happiest man alive.” Henry Miller
“Managers today have to do more with less, and get better results from limited resources, more than ever before.” Brian Tracy
How does your organization strategically allocate resources? I am sure you have a planning process where budgets are developed and resources are assigned to various sub organizations, and those organizations also have planning processes where resources are deployed at the granular level. That type of process is Budgeting 101.
But how do you know that your resources are being deployed against strategic priorities? If your organization has a strategic priority of “Delivering world class customer service with each encounter”, how do you allocate resources, monitor and track that? In most organizations a priority like that would cover multiple budget areas because of the different potential areas for customer interaction. You may have a retail website, a call center, order fulfillment and even a physical store front. Each of those would be managed in different parts of the organization, but they all needed to be “connected” to the strategic priority.
That is one of the primary roles of the PfMO. The PfMO responsible for that strategic priority would conduct an internal environmental scan to determine all the work streams that are aligned around that strategic priority. As part of the scan, the PfMO would determine the stated purpose of each work stream and how they believe they contribute to the strategic goal. Finally, an assessment of how much was being allocated to each supporting work stream would be completed and documented.
You may end up with a pie chart that looks like this:
Is this the appropriate resource allocation? Does senior leadership know that the organization is spending so much on order fulfillment and so little on email marketing? Furthermore, does the organization really believe that order fulfillment is actually spending that much on customer service, or is creative accounting being employed?
The PfMO can provide insight into exactly how the resources are being allocated in support of the strategic goal, and the organizations senior leadership can determine if the mix is correct. If it isn’t, the PfMO will provide guidance to the participating portions of the organization on how to adjust their resources in support of the strategic goal.
This is an incredibly important function of the PfMO. Resources often flow to different areas in the organization based on the negotiating skills of those leaders, not necessarily because that is the highest and best use of the resources. Furthermore, once an item is codified in a budget it often continues to get funding without being questioned. The PfMO can force the hard discussions around resource allocation by causing the organization to question past budget decisions and determine the optimal resource allocation based on the strategic priorities of today.
An important part of that discussion is developing and imposing measures. We will discuss that next.
I once had an executive mentor tell me that “there are no small Directorates, just small Directors.” I believe that is a true statement. Over the course of my career I have seen individuals build incredibly powerful and influential organizations, and then when the executive was reassigned the organization began to wither and lose influence. Those same dynamics apply to funding. A talented executive will be able to attract and retain resources, however the organization needs to ensure that those resources are in alignment with a stated strategic goal.