Dealing with a Project Budget Cut

The dynamics in business could lead to a project budget cut. While it’s disruptive and triggers emotion, the situation isn’t impossible to manage. Here are tips on dealing with a budget cut. 

• Keep calm. You might interpret a budget cut as failure. A budget cut is a business decision, which requires a well-thought out response. Continue to lead your team like the project is still viable…because it is. 
• Understand the rationale for the cut. You need to understand what triggered the budget cut to figure out how to respond to it. Discuss the cut with your sponsor to understand their thinking. Different responses are required when a cut is due to a business-wide cost reduction, versus something related to your project management approach or a project outcome whose priority has changed.  

• Review project priorities. The project still has expectations to meet and outcomes to deliver. Affirm those expectations and compare them to what the reduced budget will allow. Review project requirement priorities and change them as needed. Re-examine the project business case to help your prioritization. If you haven’t prioritized your requirements, do that first, and then determine what you can deliver with your reduced budget. 

• Look for cost-saving approaches. Reducing contractor hours, cutting extra product features, and cutting risky (and therefore costly) requirements are potential ways to reduce overall project cost. Create a comprehensive list of options for management review. When management decides which cost reduction actions to take, edit and refine your project plan accordingly.

• Communicate! Tell your sponsor and key stakeholders what the project’s new budget can deliver. Negotiate to figure out the best approach and align expectations. Share the new expectations and revised project plan with your project team. Emphasize that the project will continue to move forward. To maintain team morale, discuss the business outcomes the project can deliver. For added motivation,  ask your sponsor to communicate that message as well.

Have you ever faced a budget cut in a project? What emotions did it induce in you and your team? What steps did you take to “shake off” the feelings and think about how to move forward?

For more about project budgets, check out Bob McGannon’s Project Management Foundations: Budgets course.

Coming up:

LinkedIn Office hours-Overcoming Obstacles for Global and Remote Project Teams

August 9th at 1:00pm ET

Working remotely is a reality today: it’s increasingly important to pay attention to the quality of our interactions with our distant colleagues. Language, culture, and distance influence the way we work together with stakeholders on our projects. We can either leave these factors to chance, or we can learn to leverage them to improve our project outcomes.