If I would believe every business case I would have no people left

That is what an SVP leading a 2,000-person field service organization told me. Yet he would still approve these projects to move forward. The main problem is not that the business case is flawed, but that the leader has already made up his mind whether or not to support an initiative regardless of what the numbers say.

This is an example of how we make decisions based on emotion, and use logic to justify the decision. Companies fail to adapt to this innate human trait, and continue to demand elaborate business cases supported by reams of data and elaborate projections. Enormous amounts of effort are expended supporting budget cycles, funding allocation discussions and investment decisions.

To get their pet projects funded leaders will go as far as telling their teams to “just add a few million” to the revenue or savings projections in order for the project to hit a certain ROI or NPV target. This will make it virtually guaranteed to be approved by the corporate decision making body. However it leaves the team delivering on the initiative with a problem. They now have to deliver to the artificially inflated benefit numbers, without a clear path on how to get to these numbers.

Another way these pre-made but unspoken decisions manifest itself is that teams spend weeks preparing detailed business cases and presentations only to be shot down in less than 10 seconds when presenting to the executive decision maker as this does not make it high enough on her priority list. This is not only a waste of effort with a significant opportunity costs, but it is also wildly demotivating for the team that poured their heart and soul into the proposal only to go down in flames in front of their peers.

The business cases themselves can be improved by moving towards lightweight / Lean business cases and goal setting focused on Objectives and Key Results (OKR).

Your budgeting / funding allocation process however is where there is a bigger opportunity. Essentially you are trying to match a Top down process of goal setting and funding allocation with a Bottom up process of funding requests for individual initiatives with benefit cases. For larger companies this would even play out at multiple levels e.g. Corporate level <-> Division <-> Business unit / Geography <-> Initiative.

This process is a leading indicator of how well your strategy is deployed throughout the organization and how it is tied to execution (i.e. the initiatives). Your strategy (where to play, where not to play) must be translated to tactical plans on Business Unit / Geography level (Why, How, What, and Who) and be known and understood by all employees. For instance pursuing a top line (revenue) growth strategy will require very different investments from a bottom line (margin / profitability) growth strategy for a business. In the former case you will likely be focused on some mix of delivering new products / services to the market, and expanding existing products / services to new customers / markets. In the latter case you will likely be more focused on productivity enhancements, or reducing material costs. Most likely your strategy will be a mix of all of the above, but a clear understanding of the relative priority will enable your teams to focus on fleshing out the right initiatives and put other ideas on the back burner.

A best in class deployment of your strategy in your company will yield many positive results, reducing the time and energy spent and improving the outcome of your budgeting / funding allocation process is just the tip of the iceberg.

In your experience, what has worked well, and what did not work at all?