Everyone strives for ‘on time’ and ‘on budget’, but at what cost? Jeff Dutton, president and CEO of Fraser Papers, a custom paper manufacturer in Toronto, Canada, believes that if a project team’s only mission is to meet those two goals and they always do it well, then the budget is too high. “You should come in on time and on budget consistently, but you also have to be willing to take some calculated risks,” he says.
Mr Dutton points to a new specialty packaging product that Fraser launched during the recession in response to an opening his team identified in the market. Despite tight budgets, an uncertain economy and a corporate restructuring, Mr Dutton’s team believed it would be able to bring into the market a competitively priced, high-quality product. In the middle of the project, Mr Dutton faced a risky decision: invest heavily in new equipment to get the product to market faster, or pursue a longer, more labour intensive development process that would cost less but would cause the project to launch several months later.
With budgets tight, he chose the longer, less expensive route, tying project decision-making to the strategic needs and goals of the business. “If we measured this project by timeline alone we’d be beating ourselves up, but in the end we generated a higher return on the project because our capital spend was lower,” he says. “We took a risk to preserve cash flow and it was the right thing to do.”
In an economy where cash flow determines solvency, such decisions are worth the risk, he says. “In a mature industry, cash flow has to be a factor in every project decision you make. It’s the cost of continuing to do business.”
