What Are Trade-offs in Project Management?

Key Takeaways:

  • Trade-off decisions are choices that entail giving up on the least preferred alternative.
  • A staple of Project Managers’ work, trade-offs are necessary to find and maintain the optimal balance between a project’s cost, time and performance.
  • At the level of a portfolio, trade-offs enable the organization to figure out the best way to allocate and utilize critical resources in order to maximize the overall value creation.

Managing projects is all about making decisions. The most challenging choices that Project Managers, PMOs and other Project Management professionals face are usually trade-off decisions — whereby you have to give up or compromise on one thing in return for another. Here are a few insights into Project Management trade-offs.

Defining the Notion of Trade-offs

Wikipedia defines a trade-off as “a situational decision that involves diminishing or losing one quality, quantity, or property of a set or design in return for gains in other aspects. In simple terms, a tradeoff is where one thing increases, and another must decrease.”

In other words, trade-offs are the opportunity costs of decisions. It is a choice that involves making a sacrifice. 

We all make trade-offs in our daily lives without even thinking about it. Going for a veggie salad even though you’d prefer a yummier (yet less healthy) pizza is a trade-off. Accepting to pay a little more for a plane seat with extra legroom is a trade-off.

You get the idea. Now let’s circle back to the Project Management realm. Organizations have limited resources, which means you can’t do everything. Deciding to launch a project will tie up funds and resources that’ll no longer be available for other project opportunities. Placing a premium on speed of delivery may require accepting extra costs. And so forth.Your personal preferences and even your mood will influence your choice of what to eat and how to travel. However, as a Project Portfolio Management professional, you should base your project trade-off decisions on value considerations. It’s about selecting whatever will create the most value for your organization.

Trade-offs at the Level of a Project

Project trade-offs are usually made to optimize the balance between time, cost and performance (which encompasses the quality of the deliverables, the ability to cover the expected scope, and the efficiency of execution). These three constraints shape a triangle within which Project Managers are expected to navigate in order to identify the best spot. 

However, intelligent and effective trade-off decisions should take into account factors that fall outside of the domain of pure Project Management. According to the size, available cash flow, and priorities of the organization, it may make more sense to accept slight budget overruns in order to maintain top quality, or to delay delivery a little bit in order to avoid a hike in costs.

The need for trade-offs at the level of a project may occur both during the planning stage and during the course of project execution, in case unexpected events and issues render the initial assumptions invalid and require charting a new course — which happens more often than not.

Trade-offs Between Projects

Additionally, Project and Portfolio Management professionals may be faced with the necessity to perform trade-offs at the level of a program or a portfolio. 

Making the decision to launch a new initiative and prioritizing across new and existing projects both require taking into consideration the big picture. Does the organization have the means and resources to take on new work? Would the costs associated with outsourcing some of the work exceed the prospective revenue at the portfolio level? Is it warranted to take a chance and prioritize a high-value, high-risk project over a safer but lower-yielding initiative? 

Based on the findings and conclusions of the analysis, Portfolio Managers and PMOs can make informed decisions and decide to start, terminate, accelerate or delay the projects under their purview. 

Such considerations usually involve many moving parts. Accordingly, the support of powerful digital tools offering hypothetical scenario simulation capabilities comes in very handy

Especially since making trade-off decisions at the scale of a portfolio or of a large program may affect many areas and stakeholders across the organization.

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Valerie Zeller

Valerie is Sciforma Chief Marketing Officer. Main interests: digital transformation, change management, strategy execution. Send your thoughts @valeriezeller