How do you handle budget overruns or shortfalls in a program?

In my experience, to proactively avoid budget issues, a program manager should: Set realistic budget targets Conduct regular cost reviews Implement effective financial tracking Foster stakeholder communication Prioritize activities based on available resources Manage risks Identify cost-saving opportunities Communicate budget updates Seek financial expertise Learn from past experiences

Setting clear objectives, defining milestones, and identifying risks cannot be overstated. The idea is not to create a plan and then stick to it. Instead, it's about using the plan as a living document that guides decision-making and enables adjustments as the project progresses. Leaders should aim to foster a culture of proactive management, where continuous tracking and reporting of actual performance against the plan is done to identify deviations early and make corrections, as necessary.

As a Program Manager one needs to start thinking about cost and resources right away. The best approach in my opinion is to start with: 1. Understand the scope of the work and expectations clearly. What needs to be delivered by when. 2. Make sure there is a customer sign off 3. Work on the R&Rs with the teams and resources involved and ensure alignment 4. Identify risks that can lead to delays and subsequently result in cost overruns. 5. Work on the mitigation plan if risk materializes. 6. Create a communication plan for stakeholders. Walk them through the progress regularly and proactively call out what's coming up next. 7. If a change occurs, have a change management plan. Communicate the impact before accepting the change.

This is most definitely the most important step. Plan your work with scenarios or options. Then, work your plan. If your budget is less than you planned, your planning activities should have already evaluated those “decrement scenarios “.

Understand that things cost more in the future. Anticipate that SOMETHING will uplift prices. Don't ignore the inevitable. Stop using non-indexed benchmarks. (well, the last time we did this X years ago, it cost this much less)

To avoid budget issues via improved communications & negotiations Maintain open & transparent communication channels with stakeholders. Clearly articulate the impact of budget deviations on pgm outcomes. Seek stakeholder input & address their concerns to gain their support. Regularly update stakeholders on budget status and progress. Effectively negotiate with vendors to ensure favorable contract terms. Collaborate with stakeholders to identify cost-saving opportunities. Present data-driven analysis to justify budget decisions and reallocations. Anticipate & address potential conflicts promptly. Dev strong relationships with stakeholders to facilitate negotiation. Engage in proactive communication to address emerging issues.

Communication and negotiation are not just tasks; they're a means of building relationships with all stakeholders. Transparency and clarity in communication, especially about the program's status, are fundamental to maintaining trust and satisfaction. It's about open dialogue, explaining the implications of budget changes, and seeking feedback and support for necessary adjustments. Negotiating with vendors is more than getting the best deal; it's about establishing a partnership that adds value to the program and resolves conflicts in a mutually beneficial way.

My Top tips to Raj - the frustrated project manager: Understand and use the Communication cycle i.e. Who (communicates) - What - (to) Whom - When - (and) How, where Who = author What = content Whom = interested party When = time/ frequency How = mode/ medium The challenge (I say based on my experience of having been across companies, countries, and industry sectors, in different roles, including as auditor) for the Raj's of the world is that they do not know their Interested Parties. Then I give him this Interested Parties ManagemenT Cycle: Know (interested parties)-Establish (their needs & Expectations)-Draw plans to meet the same-Act per plans-Check effectiveness-Go back to Interested Parties to seek their satisfaction levels.

To proactively optimize and prioritize the program's budget, a program manager can: 1. Identify cost-saving opportunities and evaluate alternatives. 2. Conduct regular cost-benefit analyses and adjust priorities accordingly. 3. Implement efficient project and resource management techniques. 4. Engage stakeholders to align priorities and maximize resource allocation. 5. Continuously monitor and update the budget based on changing needs. 6. Leverage data and metrics for informed decision-making. 7. Implement effective change management strategies. 8. Foster a culture of innovation and continuous improvement.

My Top Tips to Raj - the frustrated project manager: Sometimes its good to have some 'jacks' (of all trades) - those who can multitask, who know all, who are willing to unlearnt-to-learn, and who can reskill and upskill fast according to the project's requirements. Those who are willing to put on big boots when needed.

The purpose and objective of this stage: "To identify and reduce whenever possible complexity and uncertainty that are within the program" particularly but not uniquely surrounding your critical risks where mitigation and regular monitoring is essential.

Optimizing and prioritizing isn't only about efficient resource management but also about aligning resources with the program's strategic goals. - Reducing costs and increasing efficiency are essential; however, we should also prioritize tasks based on their value and urgency to the program's objectives. This often requires making tough decisions about deferring or modifying less feasible components. This also means understanding that each choice has consequences and taking responsibility for the outcomes.

Pilots carry extra fuel in the event of a delay or unexpected issue. It's mandated by CAA and FAA; often pilots carry even more..

To proactively mitigate and escalate budget issues: 1. Identify and evaluate risks, develop contingency plans. 2. Implement risk response strategies, monitor progress. 3. Escalate major issues for guidance and intervention. 4. Seek expert advice, collaborate with stakeholders. 5. Maintain transparent reporting, prioritize resources. 6. Learn from past experiences to improve mitigation efforts.

Once you have assessed the situation, you should be prepared with a recommendation. That could be a trade off, a new approach or even a change in resources. With these considerations, working with the team and leadership you are well prepared for the difficult conversations, yet will come across as being thoughtful.

Maintaining a continuous vigil on risk, mitigating it, and knowing when to escalate it, are all fundamental. The goal is to identify and assess possible risks, fostering a proactive and risk-aware culture within the team. Risk, inherently, can materialize as either a threat or an opportunity. In the execution of risk response strategies, it's crucial first to distinguish whether the risk presents a threat or an opportunity. Subsequently, response strategies should be selected accordingly: - Threat: avoid, transfer, accept, or mitigate. - opportunity: Exploit, Enhance, Share, Accept And in case of significant issues, we need the courage and the wisdom to escalate them to higher authorities, seeking guidance and intervention.

My Top Tips to Raj - the frustrated project manager: The biggest challenge in managing risks is 'not knowing them'. Actually, I tell him a story of not being a pigeon - who closes its eyes on seeing a cat (ignoring the risk or not realising the risk), while the risk materialises and it becomes very easy for the cat to eat the closed-eyes pigeon. A parallel is drawn that we must first identify and admit the risks in the project - then only we will be able to manage them. I tell Raj more - Its good to talk - seek help if you need it - escalate the risk if you are not able to manage at your level.

To proactively learn about and improve the program's budget: 1. Conduct regular audits and performance evaluations. 2. Collect and share lessons learned with the team and stakeholders. 3. Apply feedback to enhance future budget planning and monitoring. 4. Invest in professional development to strengthen budget management skills. 5. Continuously refine cost estimation and tracking methodologies. 6. Analyze historical data to identify patterns and improve budget accuracy. 7. Foster a culture of continuous improvement and knowledge sharing. 8. Seek external benchmarks and best practices to inform budgeting strategies.

My Top Tips for Raj - the frustrated project manager: Do not reinvent the wheel. Start from where other projects ended i.e. the repository of the lessons learnt. The challenge here is that most organisations make these 'lessons recorded' rather than 'lessons learnt'. There is rarely a quality check on the content. Lessons are generally recorded at the end of the project when it just becomes a formality. And the best for Raj - please do not miss to update the knowledge repository with all good, bad, and ugly that happened in your project - to help the other project managers.

Learning and improvement are at the core of a thoughtful leader's ethos. Experiencing budget overruns or shortfalls provides valuable opportunities to learn, adapt, and improve. Regular audits, performance measurement, and gathering lessons learned are vital activities that support continuous improvement. It's about encouraging a culture of learning, sharing experiences, and applying lessons learned to enhance individual and collective skills and performance.

Even when you don't meet your plan, there is something to celebrate. I like to celebrate the interim milestones as it helps everyone remember how far we have come, while recommitting to the remaining work.

The power of celebration and reward in fostering motivation and commitment. Acknowledging and appreciating the contributions of all team members, stakeholders, and vendors, and recognizing their value and impact is essential for maintaining morale and engagement. Celebration is not just about the big milestones but also about small victories and personal growth. And rewarding oneself is not a mark of vanity, but an important recognition of one's own journey and achievements as a leader.

A few more things to consider are 1. Forecasting and Scenario Planning 2. Cost-Benefit Analysis 3. Change Management 4. Resource Management 5. Contingency Planning

What are the common reasons for Budget Overruns? 1) Scope creep - Ruthless scope management is key to project success. Teams need to ensure and follow change request guidelines(back log prioritization) 2) Inaccurate Estimation - Generally incorrect budget estimates are due to lack of clarity in requirements. Getting clarity on scope and monitoring the budgets are key. 3) Technical Reasons - Due to technical reasons, teams may need to invest more time in fixing issues or there could be need to buy certain tools to fix issues. These could have not been discovered in the initial phases. Technical reviews will need to be in place during there build and test periods. Have contingencies in budget and look for early signs of budget overrun

Keep a close eye on scope breach. Define RACI to ensure all stakeholders involved are aware of their roles and dependencies on them. Set up accountability for stakeholder engagement and their deliverable Communicate RAG of project and escalate at the earliest possibility. Track project actual costs and estimated costs using KPIs

There cannot be a project or program where you wouldn’t expect any change as the project progresses from day-1 kickoff till the completion and there are likely several situations would arise as the team progresses where there are changes from the original planned scope due to various reasons. The most important thing is how effective is your Change Management work process and how efficiently it is being actually followed in your program in collaboration and alignment with all stakeholders of the program.

In my view, apart from above mentioned, we also need to keep track on the below for effective Budget Control; 1. Risk Management: Identify potential budgetary risks. Develop strategies to mitigate financial uncertainties. Implement contingency plans to address unexpected challenges. 2. Benchmarking: Compare budget performance against industry standards. Analyze variances to identify areas for improvement. 3. Resource Allocation: Optimize resource distribution for cost-effectiveness. 4. Adaptability: Be flexible in response to changing circumstances. Adjust the budget as needed to accommodate evolving project requirements. 5. Documentation: Provide a transparent audit trail for accountability.