Control costs or create value? – a case study

questionAn internal service group had been operating as a project office in a self-funding mode: internal clients “purchased” services and products via transactions or location code transfers. Budgets were based on head count, and offerings continued as long as clients saw value and voluntarily provided enough revenue to recover costs. In this mode, the group sponsored periodic events that became quite popular, offering attendees exposure to external experts and best practices that colleagues were implementing.

Shortly before one big project was about to complete, the organization came under an intense cost-cutting requirement imposed by senior management. The director above the internal service group unilaterally imposed cost controls to set the standard for the rest of the organization, believing the project was too visible and that people would not control costs on their own. This mandated action was in sharp contrast to the volunteer, self-funding model. The program manager was not asked how to conduct the project at lower cost but was told to either cancel it or make drastic reductions dictated by the director.

In this case the director placed higher value on a show of action for reducing costs than for completing a project that was perceived by many to be extremely valuable. People resented his message that took away their choice as to whether to participate. The program manager passionately argued to continue the project based on the carefully constructed set of offerings designed to meet client needs. By demonstrating costs of cancellation with no value received as opposed to continuing and receiving marginal value, he received approval to continue, but told to do so with one fourth as many participants.

The program manager’s focus all along was on offering a valuable outcome versus staying within budget or tracking the break even point. The belief is that if value is present, the funding will be there. This belief was tested by the director’s actions that seemed driven by other concerns. Passion and persistence by the program manager, together with courage to push back against oppressive pressures, saved the project (and also served as an educational “opportunity” for the director). Except for the pain they produced, the short term cost-cutting actions by the director were given little if no credit and were soon forgotten. Long after the event, however, people still remember the good things that the project delivered.

Randall L. Englund
www.englundpmc.com

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