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Oct 29 2012

How to Survive Budget Chaos

Consider these strategies to deal with the looming cuts in federal IT spending.

The basis of the current federal budget crisis is easily understood: Government expenses are much higher than revenues, and borrowing to address the increasing gap is becoming much more problematic. Practically everyone in a leadership capacity regarding the federal budget agrees that the deficit must be reduced to a manageable level.

The budget sequestration agreement established in 2011 was a macro-level compromise to address the size of the deficit over the next 10 years. Many details were left unspecified, and the sequestration provides a great example of the adage, “The devil is in the details.” While many believe the full sequestration will never be implemented, it seems fairly clear that the federal deficit must be reduced. However, it is not at all clear how these cuts will be accomplished.

For government leaders and employees, and for the private organizations that support government, the effect seems clear: There must be action to cut the deficit, and part of the solution will require cuts to selected government programs. The agencies that have the most success in dealing with these cuts will be those that have in place an effective strategy for using the resources that remain at their disposal.

Lack of clarity regarding our economic playing field, and the role and impact of government on the economy, is the truly disruptive factor we face today.

How to Manage the Chaos

Under most scenarios, the federal budget is likely to sustain cuts in excess of 5 percent. Certainly, as agencies create operating plans based on such budgets, programs will sustain the overall cuts in varying proportions. Some will be cut less than the average, some more. I believe there are two strategies to employ, depending on the level of cuts being taken by a program or activity that supports agency operations.

For cuts of less than 5 percent, agency executives should be able to manage by continuing current programs and improving efficiency. Some pain likely would be involved in improving efficiency, as cost cutting to drive efficiency could reduce levels of both federal and contractor staff.

Absorbing cuts of 5 percent or more while maintaining the scope of federal programs would be much more difficult. Larger cuts require that programs be prioritized in terms of contribution to the mission, and that some of the programs that yield lower contributions be eliminated or significantly rescoped. This is very difficult work and involves a great deal of emotional baggage.

Here are a few strategies that federal IT leaders can use as they implement budget cuts:

  • Leverage the Team. It is human nature to come together to fight a common enemy.In this case, the enemy is budget cuts. Agency leaders will find increased cooperation as they seek ways to protect and accomplish the agency’s mission while absorbing the cuts. They should take advantage of this team spirit to push consolidation initiatives that remove stovepipes and inefficiencies from the agency’s operation.

  • Connect with external stakeholders. CIOs do not exist on an island; any unilateral decisions they make regarding budgets that impact services provided to agency customers could be undone in the decision-making process. Avoid this trap by reaching out to customers and their leaders and seeking a more collaborative process. It is more difficult to craft such a compromise, but the decisions made are much more likely to be implemented.

  • Focus on efficiency. Look closely at the organization and its activities. Identify and remove barriers to efficiency. Ensure that oversight activities are lean. Oversight can identify and address failing projects, but such operations tend to become bloated and bureaucratic. Include support contractors in these reviews and adjust contract tasks expeditiously.

  • Remember Moore’s Law. CIOs are in an enviable position. Most federal programs are people-driven, but IT is technology-driven. Each year the price/performance ratio of most technology improves. IT leaders must use that to their advantage. CIOs have a wide range of options to choose from that can lead to cost savings and greater efficiency.

  • Sell IT as a solution. CIOs have an important role in leading any re-scoping or restructuring to absorb cuts. The most important role might well be to serve as lead innovator, demonstrating to other mission executives how IT can be used to improve efficiency. IT leaders should set aside time to meet with other executives and help them find ways to get more done with less.

Absorbing budget cuts is always painful. In the end, decisive leadership provides the best path for moving forward after adjusting plans and operations.

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