Organizations are incredibly complex, especially larger ones. These organizations inevitably make generalizations to try and simplify things. And sometimes those generalizations can be confusing, even misleading. Take budgeting, for example. Enterprises frequently talk in terms of operational budgets and discretionary budgets. Operational handles all the day-to-day running of the business, while discretionary is for all of the projects that the business chooses to invest in to grow, transform, or simply consolidate the organization. But, is your discretionary budget really discretionary?
Simple, and easy to understand. But generally wrong. Wrong because a lot of those discretionary investments aren’t really discretionary. They include maintenance and refresh work, initiatives that are continuing from previous business cycles that need continued funding, and regulatory and compliance initiatives. Some of those could technically be considered discretionary, but not without consequences, and some of them are certainly not discretionary – regulatory requirement changes being the obvious example.
The Challenge of Allocating Budgets
Organizations are incredibly complex, especially larger ones. Inevitably, people simplify things by making generalizations. Sometimes, those generalizations confuse or mislead. Take budgeting, for example. Enterprises frequently talk in terms of operational budgets and discretionary budgets. Operational budgets handle all the day-to-day running of the business, while discretionary budgets cover projects that the business chooses to invest in to grow, transform, or consolidate the organization.
Simple and easy to understand, but generally wrong. This distinction often misrepresents reality because many discretionary investments aren’t truly discretionary. These investments include maintenance and refresh work, ongoing initiatives that require funding from previous business cycles, and regulatory or compliance initiatives. While some professionals might see these as discretionary, cutting them often leads to significant consequences. Regulatory requirement changes, for example, are clearly mandatory.
The Challenge of Allocating Budgets
More than 90% of the so-called discretionary budget is allocated before any new work is approved in some organizations. This situation is not necessarily a problem if the organization understands those commitments and plans effectively around them. A project portfolio management (PPM) solution like Sciforma’s can help address this challenge.
The Value of Project Portfolio Management Solutions
PPM software platforms help organizations plan, fund, deliver, and measure the success of their strategic initiatives. These tools track all discretionary investments in one place, ensuring visibility into previous commitments, required work, and ongoing efforts.
Additionally, they align planned investments with the business’s strategic priorities. If companies can achieve this alignment they are provided deeper insight into why someone needs to decide whether specific investments are necessary or if someone needs to review them. For instance, a technology refresh initiative that supports a growing business area becomes more than routine maintenance. Conversely, programs that no longer align with current goals and objectives may need reconsideration.
If organizations choose the right PPM solutions, they ensure they are not overlooking key initiatives. With so many projects underway across various business areas, significant work can easily escape executive visibility. Businesses lacking this oversight wastes financial and human resources or results in them not delivering critical initiatives.
Managing Compliance with PPM
Nowhere is the potential of PPM solutions more impactful than in compliance projects.
Compliance and regulatory projects are the least discretionary of discretionary investments. Missing deadlines for these projects can harm an organization’s reputation, trigger financial penalties or trading sanctions, or even halt operations until issues are resolved. Such failures often have long-lasting consequences. Consider Boeing’s recent troubles as an example.
PPM solutions help organizations manage compliance projects effectively. Sponsors, program managers, and project managers gain real-time insight into progress and use powerful reporting and analytics tools to interpret data, identify trends, and recommend corrective actions. The Chief Compliance Officer monitors all regulatory work across the enterprise to ensure smooth progress.
Internal and external auditors can access data that shows work is being completed correctly and on time. They also verify that every decision and action is documented and traceable. By consolidating compliance-related work in one place, PPM solutions provide executives with peace of mind and ensure the organization stays compliant as the regulatory landscape evolves.
Without a PPM solution, organizations rely on standalone tracking tools, spreadsheets, and after-the-fact reporting. This approach increases the risk of missing compliance deadlines and submitting incomplete or inaccurate information to regulators. No organization can afford these risks. To remain compliant—and of course, you must—you need a world-class PPM solution. And if you make the right choice, that solution can help you answer the question, is your discretionary budget really discretionary?
What’s next?
Thank you for reading! This is the first of three articles we’re doing on similar topics. We have two more on the way as well as two short podcasts with tons more information from industry expert Andy Jordan. Be sure to follow us on LinkedIn and keep your eyes peeled for the upcoming content.
