S4 Ep. 5 Making the Tough Choices: How do you develop your initial Resource Allocation plan?
Are you a product leader who is dreading the prospect of reorganizing your teams?
Are you not sure where to start and how to keep it under wraps to minimize disruption to your teams?
You’re not alone.
In the 5th episode in our Resource Allocation mini-series we answer the question: How do you develop your initial Resource Allocation plan?
Hope Gurion: Welcome to the Fearless Product Leadership podcast. This is the show for new product leaders seeking to increase their confidence and competence. In every episode, I ask experienced and thoughtful product leaders to share their strategies and tactics that have helped them tackle a tough responsibility of the product leader role. I love helping emerging product leaders shorten their learning curves to expedite their professional success with great products, teams, and stakeholder relationships. I’m your host and CEO of Fearless Product, Hope Gurion.
The origin of this entire series is a conversation I had with a leader I was coaching through her portfolio and resource allocation decisions. She asked me if there were other resources available to support my recommendations, and I realized how little there is available to help product leaders make these tough decisions.
Frequently when I’m working with a product leader, they have an event or illumination like the triggers I mentioned in our first episode of this series, Setting the Stage for Resource Allocation Decisions.
Product leaders in growing companies may be fortunate enough to receive incremental investment to expand their resources and teams to pursue new avenues of growth. But in companies with slowing or contracting growth, the only way to fund necessary resource allocation changes is through a reorganization.
Product leaders know that their company's current approach to organizing teams around existing and emerging products is not sustainable. If they maintain the status quo, they will fall short of expectations from leadership, investors, and customers. If they don't act, they risk losing customers, market share, and equity value.
It may sound dramatic, but leaders won’t tackle a reorg unless they feel this degree of discomfort in their status quo. Experienced product leaders know that when a potential reorg is in the air, uncertainty and anxiety among employees skyrocket, and productivity plummets.
Reorganizations are uncomfortable, which is why product leaders try to minimize the stress on their organization and employees, by taking it on themselves and making most of their reorg decisions alone.
I frequently coach the product leaders I work with through team topology and reorg decisions so they don’t have to make the decisions alone and they increase the probability of getting it right. The only thing worse than a reorg is having to reorg the reorg just a few months later.
In this episode, I share my rule of thumb for making the initial draft of the resource allocation. I ask for feedback from one of the world’s experts on this topic, Barry O’Reilly, author of Lean Enterprise: How High Performance Organizations Innovate at Scale and Unlearn. Barry has written several articles and given many talks about managing product portfolio in organizations transforming from project to product-centric teams to drive growth and innovation. I’ll link to a few of my most recommended in the transcript for this episode:
How To Lead Product Portfolios - Barry O’Reilly
Let’s get into it:
Hope Gurion: I'm wondering if I can maybe test something with you. I have this rule of thumb that I use when I'm working with a product leader to come up with a proposal for how to allocate their... They always want more people. There's always more... projects, strategic initiatives, whatever, then we have people and want to have cross-functional teams. So if you have an initiative, there's only so many engineers, so many designers, so many product people that you're going to have to staff against these initiatives. So here's my proposed rule of thumb, and I want you to poke holes at it if you would, okay?
Barry O'Reilly: sounds fun.
Hope Gurion: Say your product is... not even yet a product, it's in the Explore stage. You want to have a team, that’s cross-functional. We want it to be cross-functional, but we can be flexible on what those roles are. Maybe it's a product manager. Maybe if we're heavy on prototype testing, maybe we want to have a designer. Maybe there's an engineer, or maybe to your point, we're using no code or low code options to do so. So whoever that team is, it's small. They have multiple things they're exploring. They're not committed to any one of them. They're running assumption tests for the most part. And so you want to have a small team with lots of ideas that they can explore. If one of those ideas gets to a stage where like, “okay, we think there's a there there, we want to invest.”
For a product in the Invest stage, we need to have a dedicated team. It needs to be a cross-functional, dedicated, durable team. This is no longer a project and their focus can no longer be split to multiple products. They are then dedicated to that. And maybe that will expand over time, but they're not also working on Sunset products, nor working on maintained products that they're dedicated to the product in Invest.
And then if you move into Sustain, if you end up being one of those people, you then maybe as you pointed out, you're still invest, maybe you're maintaining and sunsetting or maintaining and exploring new growth trajectories that might move something out of maintain into invest again. But my point of view is if you're an invest, you can't split your focus anymore. So what are your reactions to those rules of thumb?
Barry O'Reilly: Yeah. So I think there are a solid set of principles, right? Absolutely. And I think principles is the right word because the hard part of that is for most companies, the sort of underlying assumptions of those principles is that you have enough people and enough capital to create dedicated teams to focus on work. And for a lot of companies, that trade-off is exceptionally hard to make. I'll give you an example, right? So I'm working with a company that's focused in fertility benefits at the moment. They're amazing company, phenomenal mission, but in the work they're doing. But their engineering team is like 40 people and they've got like, I would say like one or two like massive products that are like their cash cows or their, their sustain, and then they've got like, let's say they've got like 30 other projects going on where. the people are sort of spending 10% on this or 5% on that, or they built it two years ago and it's in the sustain mode and if it breaks, they're the only one who knows how to fix it, right? So the arbitrage that's really difficult for companies that have that sort of scalar size or teams is that it's hard to create like just full focus for engineer three, seven and 12 and product manager eight to be just working on one thing and nothing else. So it's an extremely hard tradeoff for them to make. So what I often tend to see there is like, you sort of have to get to like a level of compromise, right? Because the principles that you're describing are absolutely sound. You should have dedicated teams focused on anything that is beyond the, let's call it the explore stage, where you're trying to scale, where you're trying to grow. Absolutely, they're going to be most effective if your company can do that. The challenge is like often companies don't have that amount of talent or budget to do it. So I think the directionally what often happens is the teams will say, right, like 70% of our time is going to be focused on the dedicated product. But I do need to have some capacity until we're able to sunset the legacy products or projects, or we can hire in people to take them and own them. there has to be some sort of capacity there available, right. Which means context switching and slowing the team down and all the stuff that is, is hard, right. But I think that's, that's sort of like when you apply those principles to many companies, I feel like that's the place that a lot of them end up landing. And I think it's fair to land in that way, but directionally, you know, if they're serious about being a high performance product organization. They have to get to this place of dedicated teams when they hit that tipping point of out of explore into exploit, like backing these, these sort of micro businesses, if you want to get to their maximum potential. And you need to have people dedicated to do that. So I think it's, um, it's just finding like what's those, the transitions, like what does the transformation actually look like in the company to go from, you know, a pool of people that are working on 12 projects, you know, and have no time a day, in context switching all the time and all the inefficiency that causes to like the ideal state where they are dedicated cross-functional teams like there has to be a stepping stone, you know, and that's where I feel also you can have that trade-off conversation because the CEOs or the growth sales teams like they want those businesses. to keep operating and be successful and not become brittle and just break. So that's definitely one that's, again, I feel like the principles are right on. And it's just what's your implementation plan to go from where you are to where you wanna be. And that sort of often, 70% of the time, these four people are gonna work on this one initiative that we really want to back, but we need to have a 30% that they can sort of fix the CRM system or they can solve the customer complaint system or whatever it is if that thing breaks or until we find people can backfill, you know.
Hope Gurion: Yeah, that makes a lot of sense. And you're right, there's sort of like the ideal. And then there's like, well, given the people and the time and the open headcount and whatever, how are we going to practically make this work? And one of the additional principles that I often use with leaders for their teams is one team, one outcome, one timeframe. And if you are in that situation where you've got like, I've got 70% on invest and 30% on this thing that needs to be maintained and bug-free, like, how do we create the time allocation? It can’t be this sort of fluid 70% and 30% where we're context switching all the time or being interrupted all the time, but that we're creating timeboxing for our work so that we can get the benefit of focus. So is it two months of the quarter we're doing this, one month we're doing that? How do we divide the time to try to create as much focus as possible to get the value, because that context switching is such a killer.
Barry O'Reilly: Right on, you know, and I think that's, if you say, as you're describing it, like, it's, it's building a model for how teams are going to work. Right. Because as you say, like, the easy thing when you hear like a 70 30 split, is it what like, if I don't know, hopefully people aren't working 10 hours a day, but just to make it an easier to conversation. And as you were sort of exemplifying there, like maybe they say, right, there's 12 weeks in the quarter, so 10 weeks they spend focused on the core thing we want to work on and two weeks they spend working on the BAU. And then you're down to like a work management problem, right, where your program managers can sit there and go, right, let's schedule this out so when we know we can work on it. Yeah, I think that's how you can capture that in a principle Hope, I think is a good one to add, as you say, to that list, which is a great list.
Hope Gurion: As we’ve discussed in earlier episodes, there are 2 major steps in making the resource allocation decisions.
The first step is to identify which products or innovation initiatives exist and then decide on their life stage. Existing products are either in Invest to scale and grow, maintain to keep them operational but with minimal resources, or sunset for the products that no longer are contributing value to justify their investment. Innovation initiatives are likely Explore stage products, that realistically may never become products.
The second step, is decide how many and what types of resources, which could be individuals, teams, systems or time, should be allocated to each of these products or initiatives. Check out the transcript to see an example of how to create your initial cut of the people to allocate to the products in your portfolio:
Here is a link to a Google sheet with some charts and templates to help you draft your initial resource allocation plan by product, business priority and timeframe (you’ll be asked to create a copy so you can edit it). Just as this episode was released, John Cutler posted a related article in his prolific The Beautiful Mess blog (TBM 249: Return on Investment (and Allocation ) that discusses the risks associated with return on investment and allocation traps in which well-intentioned leaders and teams can find themselves. Consistent with Cutler’s recommendations, I also recommend that the atomic unit of allocation and investment is the team and that the team focuses on a single outcome per timeframe. John states it perfectly when he writes “Due to the collaborative nature of product development, I believe the foundational element, or unit, for understanding return on investment is a team. Not specific individual allocations, not projects, but the team itself. If a team does more than one, two, or three things at a high level, then you probably don't have an independent team.”
In our final 2 episodes in the Fearless Product Leadership Resource Allocation series, we’re going to tackle how you make decisions about the specific people who are going to fill in those roles, and how to anticipate what could go wrong, and how to course correct if it does!
If you’re a product leader seeking to fearlessly lead your product teams through resource allocation decisions, I’d love to be of help. Please reach out on LinkedIn or send me an email to hope@fearless-product.com. I’ll respond with an FAQ about my coaching programs and a link to sign up for a free mini-coaching session about a challenge you’re facing.
Fearless Product: confidence through evidence.
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