Enterprise investment management simplified: Budget efficiencies

With a finite budget, resources, and capacity for change, your enterprise is challenged with how to effectively manage budgets. Prioritization within the enterprise portfolio is key to optimizing the right spend for the right initiatives. Using key prioritization data for the portfolio helps with determining what to focus on.

In Harvard Business Review, a leading business strategist, Michael Porter, highlights the three principles of strategy as differentiation, organizational fit, and trade-offs. Making trade-offs is paramount for prioritization and shifting spend and other resources to the top priorities. With finite budgets challenges, find key areas, or budget efficiency levers, defined at ways to to find efficiencies and reduce spend. Pulling these levers will be key to scale the enterprise. Table 1 showcases example budget efficiencies levers.

Table 1

Lever Description Benefits Category Potential Risk
Reduce Unit Cost Find project & operational work areas to reduce spend or stop non-prioritized work Optimizes technology spend Cost Savings Low. Reduce spend and making trade-offs is key
Shift from “Operational” to “Incremental” Move spend & resources from operational work to the incremental projects to net new budget needs Reduce net new spend on project work Cost Savings Moderate. Places support throughput at risk (substantial work done as “Operational”)
Optimize Resources Lower cost for workforce resources. Achieved through sourcing, shared services, or hiring Creates more future workforce resource flexibility Cost Savings Low. Risk of service drop during switchover. Hiring and retention more challenging in some regions
Defer Postpone hires, projects, purchases to a later time period, to focus on higher current prioritized work With more time comes better info about approach, ROI, etc. Cost Avoidance Moderate. Places current service quality and benefit at risk
Increase Manager to Associate ratio Move senior level support resources into execution lead roles Build more execution focused roles Efficiency Gains Moderate. New opportunities, career growth, some uncomfortable new change

There are three categories of budget efficiencies, defined in table 1:

  1. Cost savings
  2. Cost avoidances
  3. Efficiency gains

Cost savings are the ways that actually reduce tangible spending. Cost avoidances are ways that postpone spending to later time-periods or avoid future potential costs. Efficiency gains are ways to leverage resources more effectively.

To optimize budgets, work on better alignment of spend to the right priorities, making the right trade-offs, and finding ways to reduce spend to allocate to strategic initiatives.

Other Posts in the Series

  1. Enterprise investment management simplified: Business case
  2. Enterprise investment management simplified: Prioritization
  3. Enterprise investment management simplified: Budget efficiencies

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s