In times of economic uncertainty, businesses often encounter stormy waters.
Contractions bring unique challenges that can threaten an organization’s stability and growth.
However, in the face of adversity, project portfolio management can serve as a guiding compass, helping businesses weather the storm and emerge stronger than before.
The right PPM strategies can help businesses identify potential risks, allocate resources efficiently, and capitalize on emerging opportunities, ensuring their resilience and adaptability in challenging economic climates.
In this article, we will explore effective strategies for project portfolio management during an economic downturn.
Read on to steer your organization toward success, even amid economic uncertainties.
How recessions affect businesses and project portfolios
Economic declines are tumultuous periods that can significantly impact businesses across industries.
In the US, small businesses with fewer than 500 employees made up 43.5% of the GDP in 2014, a decrease from 48% in 1998. Additionally, those with fewer than 100 employees contributed 30% of US wages and 35% of employment from 2012 to 2016.
Even large companies are affected by contractions. In 2020, 244 filed for bankruptcy protection, the highest number since 2009. Sectors such as energy, retail, and consumer services experienced the most significant impact.
With these insights into the wide-ranging impact of economic downturns, let’s explore the key ways in which uncertainties can affect businesses:
- Budget constraints: reduced budgets require careful project evaluation and prioritization, making resource allocation decisions more challenging.
- Increased risk: heightened uncertainty necessitates proactive risk management to mitigate the impact of market fluctuations and supply chain disruptions.
- Stakeholder expectations: evolving stakeholder expectations may require continuous communication and alignment of project goals and OKRs with changing priorities.
- Talent retention and acquisition: workforce reductions and limited job markets make it more difficult to retain key resources and attract new talent.
Understanding how recessions affect businesses and project portfolios provides the foundation for organizations to adapt their PPM strategies to proactively navigate adverse economic climates.
How to adapt project portfolio management strategies to tough economic times
Effective project portfolio management strategies are pivotal in ensuring organizational resilience and success.
Let’s explore actionable steps for adapting PPM strategies to economic downturns, empowering businesses to navigate the storm resiliently.
#1 Identify and prioritize high-impact projects
It becomes imperative for businesses to identify and prioritize projects that can generate the highest impact and value during the financial crisis.
Here are key considerations to help you identify and prioritize high-impact projects during challenging economic conditions:
- Strategic alignment: prioritize projects that directly contribute to core business strategies and align with the organization’s long-term vision.
- Risk analysis: prioritize projects with lower risks and higher resilience in the face of economic uncertainties, considering their potential to address existing risks or mitigate threats.
- Customer and market demand: prioritize projects that align with current market trends, changing customer needs, and emerging opportunities for competitive advantage.
- Stakeholder engagement: engage key stakeholders in the project prioritization process to consider diverse perspectives and gain stakeholder buy-in. You can engage them early during project chapter creation.
- Resource optimization: assess resource requirements and prioritize projects that can be executed efficiently with available resources or have a high potential for optimization.
- Flexibility and scalability: prioritize projects that offer flexibility and scalability, allowing for adjustments as market conditions evolve.
Practical hint: use our top-13 prioritization framework guide to select the appropriate projects for involvement.
Once high-impact projects have been identified and prioritized, conducting a comprehensive budget review becomes essential to effectively align resources and optimize financial allocations within the adapted PPM strategies for tough economic times.
#2 Conduct a comprehensive budget review
Businesses face the challenge of managing limited resources efficiently in times of recession.
Here are the key steps to conducting a comprehensive budget review during a harsh economic downturn:
- Assess financial constraints: understand the financial landscape and adjust project expectations to match the current economic conditions.
- Review project costs: evaluate budgets and identify opportunities for cost optimization, such as negotiating better pricing or streamlining processes.
- Prioritize essential expenditure: allocate resources to projects directly contributing to core operations and strategic objectives.
- Identify cost-saving measures: implement measures to reduce costs without compromising project quality, such as optimizing resource allocation or exploring outsourcing options.
- Return on investment: evaluate projects based on their potential financial returns, cost savings, efficiency improvements, and revenue growth within a reasonable timeframe.
- Monitor budget performance: implement robust budget monitoring mechanisms to track project expenditures and make timely adjustments if necessary. Use project portfolio management tools like PPM Express to automate this process.
- Seek out funding or cost-sharing opportunities: explore external funding sources or cost-sharing arrangements to support critical projects and alleviate financial constraints.
Handy template: use this project budget template to simplify your budget review process.
Following a comprehensive budget review, it is crucial to proactively assess and mitigate risks to ensure the financial stability and successful execution of projects within the adapted PPM strategies for tough economic times.
#3 Proactively assess and mitigate risks
As M. Porter said in “Competitive Advantage: Creating and Sustaining Superior Performance”, “Risk is a function of how poorly a strategy will perform if the ‘wrong’ scenario occurs.”
Businesses face heightened risks and uncertainties that can impact the success of their projects and overall organizational stability in tumultuous economic periods.
Here are some key steps for proactively assessing and mitigating risks during challenging economic conditions:
- Identify potential risks: conduct a comprehensive risk assessment involving stakeholders and experts to identify a wide range of risks.
- Prioritize risks: focus on high-impact and likely risks to allocate resources effectively and implement targeted mitigation strategies.
- Develop mitigation strategies: proactively develop risk management strategies tailored to specific risks, such as contingency plans or supply chain diversification.
- Monitor and evaluate risks: continuously monitor risks, evaluate mitigation effectiveness, and adjust strategies as necessary.
- Foster a risk-aware culture: cultivate a culture of risk awareness and proactive risk management throughout the organization.
- Build resilience and contingency plans: establish contingency plans to mitigate the impact of unforeseen events and build organizational resilience.
- Foster collaboration and knowledge sharing: encourage collaboration and knowledge sharing to enhance risk identification and develop innovative solutions.
Just so you know: you can use our 150+ pre-built Power BI reports templates to work with risk identification and mitigation.
By proactively assessing and mitigating risks, organizations can streamline processes and improve efficiency to enhance the resilience and adaptability of their PPM strategies during a severe economic recession.
#4 Streamline processes and improve efficiency
UK office workers are productive for only around 2 hours and 53 minutes of the working day, with social media and news websites identified as the primary distractions impacting their productivity.
Shockingly, businesses face significant annual productivity costs, including up to $1,250 per employee on spam, approximately $1,800 on unnecessary emails, and $2,100 to $4,100 on poorly written communications.
During harsh economic downturns, when every minute is valuable, organizations need to maximize operational efficiency and optimize resource utilization.
Here are the key steps to streamlining processes and improving efficiency within project portfolio management during tough economic times:
- Conduct process analysis: analyze existing processes, identify inefficiencies, and gain insights from project teams and stakeholders.
- Standardize project management practices: establish standardized practices and templates for consistency and efficient decision-making.
- Automate manual processes: utilize technology solutions to automate routine tasks, document management, reporting, and communication. Consider leveraging AI as a part of your project portfolio management tools stack.
- Eliminate redundancies: identify and eliminate redundant processes, tasks, or deliverables to optimize resource allocation.
- Optimize resource allocation: assess resource utilization and reallocate resources for maximum efficiency.
- Continuous process improvement: embrace a culture of constant improvement by evaluating and refining processes based on feedback and performance metrics.
Handy hint: use our resource management guide to improve your resource management processes.
Streamlining processes and improving efficiency go hand in hand with fostering clear and open communication, as both are essential components of adapting PPM strategies to navigate challenging economic conditions effectively.
#5 Foster clear and open communication
A survey involving 2,058 US adults found that 69% of managers feel uncomfortable communicating with employees in person. However, 72% of employees believe their performance would improve if managers provided corrective or negative feedback.
So, effective communication is essential for adapting project portfolio management strategies to tough economic times.
Here are some key steps to fostering clear and open communication within PPM during difficult economic circumstances:
- Establish communication channels: set up formal communication channels and protocols using project management tools, email, and virtual collaboration platforms.
- Share strategic objectives and updates: communicate the organization’s strategic goals, OKRs, and project alignment, and provide regular updates on progress and milestones.
- Carry out feedback workshops: conduct training sessions to promote effective feedback practices and enhance communication skills.
- Encourage two-way communication: promote open dialogue, active participation, and a culture of feedback to foster collaboration and innovation.
- Clarify roles and responsibilities: clearly define and communicate the roles and responsibilities of project team members, stakeholders, and decision-makers.
- Encourage regular project reviews: conduct periodic monitoring processes to assess progress, identify challenges, and share lessons learned. Create automated project status reports based on Power BI or similar reporting platforms.
- Manage stakeholder expectations: proactively communicate project status, risks, and changes to stakeholders to manage their expectations.
- Communicate change effectively: provide reasons and impact analysis to manage stakeholder expectations and support.
Pro tip: integrate your project and portfolio management tools with a communication app like Microsoft Teams to streamline your collaboration.
By fostering clear and open communication, organizations create an environment that encourages innovation and creative problem-solving, enabling the effective adaptation of PPM strategies during a severe economic recession.
#6 Encourage innovation and creative problem-solving
Tough economic times require organizations to think outside the box, seek innovative solutions, and embrace creative problem-solving approaches.
According to the Annual MIT SMR and Deloitte study, 81% of respondents from established companies view innovation as an organizational strength. By comparison, only 36% of respondents from developing companies and 10% from early-stage companies share the same perspective.
According to Deloitte’s study, organizations with mature innovation programs are more likely to set and measure targets for creating and converting ideas into products (50% vs. 39% of all respondents).
An innovation culture is therefore an absolute must for handling a financial contraction.
Here are the key steps to encouraging innovation and creative problem-solving within project portfolio management during challenging economic conditions:
- Embrace a culture of innovation: foster an environment that encourages innovation, rewards creative thinking, and promotes collaboration.
- Provide resources for innovation: allocate dedicated resources, such as time, budget, and technology, to support innovation efforts.
- Encourage experimentation: promote a mindset of continuous improvement and provide a safe space for teams to experiment and learn from failures.
- Foster external partnerships: seek external partnerships to access new perspectives, expertise, and emerging technologies.
- Empower frontline teams: encourage and empower frontline teams to contribute innovative ideas and solutions.
- Foster a learning environment: create a continuous learning culture where successes and setbacks are seen as opportunities for growth and improvement.
Helpful prompt: gather all the ideas in one place and create flows to choose the right ones with your teammates.
By encouraging innovation and creative problem-solving, organizations can cultivate strong relationships with stakeholders, fostering collaboration and adaptability within their PPM strategies to navigate tough economic times effectively.
#7 Cultivate strong relationships with stakeholders
Maintaining strong stakeholder relationships becomes paramount for project portfolio management success during a recession.
Here are the key steps to cultivating strong relationships with stakeholders during difficult economic circumstances:
- Identify and prioritize key stakeholders: engage them based on their influence and impact on project outcomes.
- Understand stakeholder needs and expectations: gain insights into stakeholders’ needs, expectations, and concerns through open communication and stakeholder analysis.
- Establish clear communication: establish effective communication channels and tailor communication styles to match stakeholders’ preferences.
- Engage stakeholders in decision-making: involve stakeholders in the decision-making process to foster collaboration and shared responsibility.
- Manage expectations proactively: be transparent about project constraints, challenges, and potential risks to manage stakeholder expectations.
- Demonstrate value and results: regularly communicate projects’ positive impact and tangible benefits to showcase value to customers, teammates, and stakeholders.
- Build long-term relationships: view stakeholders as long-term partners, invest in rapport building, and explore collaboration opportunities beyond individual projects.
By cultivating strong relationships with stakeholders, organizations can establish trust and collaboration, enabling them to continuously monitor their financial health and make informed adjustments within their PPM strategies during tough economic times.
#8 Continuously monitor financial health
Maintaining a vigilant focus on financial health is essential for an effective project portfolio management strategy.
Here are the key steps to continuously monitoring financial health during difficult economic circumstances:
- Establish key financial indicators: determine relevant financial indicators aligned with PPM goals, such as revenue, cash flow, profitability, ROI, cost variance, and budget utilization.
- Implement regular financial reporting: set up a system for accurate and timely financial reporting using clear and concise reports or dashboards.
- Assess budget performance: regularly monitor and analyze variances between actual and projected costs and revenues, taking corrective actions as needed.
- Evaluate cost management strategies: review cost management strategies for areas of improvement, optimize resource allocation, and reduce non-essential expenses.
- Monitor cash flow: pay close attention to cash flow, ensuring sufficient reserves to meet obligations and implementing measures to improve it.
- Engage financial experts: seek advice from financial experts to gain insights, analyze data, and identify areas for improvement.
Top tip: use prebuilt reports to see the big picture of your financial resources and refer to the Harvard Business School guide on assessing financial health.
Through continuous financial health monitoring, organizations can proactively build and maintain a cash reserve, bolstering their financial resilience and ensuring the effective execution of project portfolio management strategies during tough economic times.
#9 Build and maintain a cash reserve
Building and maintaining a cash reserve is critical for adapting project portfolio management strategies to challenging economic conditions.
According to a Harvard Business Review study and JPMorgan Chase Institute’s insights, businesses with less than two months of cash reserves faced challenges sustaining their operations.
Here are the key steps to building and maintaining a cash reserve during a severe economic recession:
- Assess cash flow patterns: analyze historical patterns to understand revenue cycles and seasonal fluctuations.
- Develop a cash reserve policy: establish a policy that outlines the target amount and criteria for maintaining the reserve.
- Prioritize cash reserve contributions: allocate a percentage of revenue or profits for regular contributions to the reserve.
- Explore cost-saving measures: identify opportunities for cost savings to generate surplus funds for the reserve.
- Manage working capital: streamline inventory management and optimize accounts payable and receivable to improve cash flow.
- Maintain financial discipline: implement budget controls and enforce cost management strategies to allocate more funds to the reserve.
- Continuously monitor and replenish: regularly monitor the reserve and refill it when it falls below the target amount.
Handy advice: use this comprehensive guide to build a cash buffer and stay resilient.
By building and maintaining a cash reserve, organizations can enhance their adaptability and agility, enabling them to navigate the challenges of contraction and effectively execute PPM strategies.
#10 Embrace adaptability and agility
Deloitte Business Agility Survey data stated that around two-thirds of businesses prioritize business agility, but nearly half need a clear articulation of why it is important. Additionally, three-quarters of these businesses need to measure outcomes.
In the face of an economic recession, however, organizations must embrace adaptability and agility in their project portfolio management strategies.
Here are the key steps to embracing adaptability and agility within project portfolio management during tough economic times:
- Foster a culture of adaptability: cultivate a culture that values adaptability, innovation, and continuous improvement.
- Monitor and respond to market trends: stay informed and be ready to realign projects to capitalize on new opportunities.
- Prioritize flexibility in project planning: incorporate flexibility into project planning and execution, adopting agile methodologies and fostering collaboration.
- Encourage rapid decision-making: foster a culture that values speed and agility, empowering teams to make prompt decisions.
- Build cross-functional expertise: develop expertise within teams to enhance adaptability and response to changing circumstances.
- Foster collaboration and communication: promote cooperation and effective communication among project teams, stakeholders, and departments.
- Regularly assess and adjust project portfolios: continuously assess project portfolios, adjusting them based on changing circumstances and strategic alignment.
- Learn from setbacks and successes: foster a learning culture, conducting post-project reviews and analyzing past projects for improvement.
Piece of advice: we recommend using a comprehensive project portfolio management tool like PPM Express to gather all the necessary information.
By effectively adapting project portfolio management strategies to tough economic times, organizations can unleash their power and resilience in challenging economic conditions, ensuring optimal project portfolio management and maximizing their chances of success.
Unleashing the power of PPM strategies in times of economic recession
Organizations face unprecedented challenges, which can significantly impact their stability and growth during financial instability.
By harnessing the potential of PPM strategies, companies can not only mitigate the negative impacts of a recession but also capitalize on opportunities for resilience, innovation, and long-term success:
- Strategic alignment: align projects with core strategies to prioritize initiatives contributing to business continuity, efficiency, and revenue generation.
- Resource optimization: evaluate and optimize resources to reallocate them strategically, maximize efficiency, and minimize wastage.
- Risk management: implement proactive risk assessment and mitigation strategies to minimize the impact of potential threats.
- Continuous evaluation and prioritization: regularly review and reprioritize projects based on returns, risks, and market conditions to optimize resource allocation.
- Agile adaptation: embrace agile methodologies for flexible project plans, accommodating evolving requirements, and seizing opportunities during economic uncertainty.
It is essential to remember that effective project portfolio management strategies are not just theoretical concepts; they require the right tools and technology to unleash their full potential.
We recommend PPM Express as an excellent platform for conducting project portfolio management in the storm.
With its user-friendly interface, robust project tracking capabilities, and real-time reporting based on Power BI, PPM Express empowers organizations to make data-driven decisions, optimize resource allocation, and achieve successful project outcomes even in challenging economic times.
Try PPM Express today to harness the power of project portfolio management strategies and steer your organization toward success, resilience, and growth.