The project funding is the primary issue that
The process of resource allocation for IT project funding is the primary issue that Dr. Matulovic faces. Inadequate funding from VWoA’s parent company ($60 Million compared to the $210 Million requested) forced a new prioritization system to determine which IT projects receive funding. The prioritization process is a centralized approach that aims to align the organizational activity with corporate goals and strategy.
The new system is a significant improvement from the previous unstructured debates among executives because it clearly evaluates what and why projects are funded.However, many initiatives do not qualify for funding based on the theoretical nature of the prioritization system. Managers from certain business units are unhappy with the process because they feel they cannot do their job without the requested funding. The new prioritization also meant that the partially completed supply flow project was left underfunded—a project of high importance to VW’s global supply chain. Dr. Matulovic must assess the appropriateness of the new prioritization process and determine how to allocate future IT funding.
The following criteria is recommended to determine the most effective allocation of IT funding: 1. Organizational Benefit: Fund projects that contribute to VW’s corporate goals in North America and on a global scale while helping the organization establish a competitive advantage within the market. 2. Financial Benefit: Fund projects with the highest ROI that will provide revenue growth and/or long-term profitability through efficiency gains and cost savings. 3. Management Support: Allocation of funding is understood and accepted by all management, ensuring commitment to the corporate strategy across the organization. .
Decision Making Input: Allocation process involves representatives from all groups affected by the funding decisions. 5. Long Term Sustainability: Fund projects that are required for VWoA’s sustainability within the industry due to new regulations, competitive activity, or customer demand. Alternatives: 1. Drop lowest ranked goal portfolio – This would eliminate funding to the supply flow project and thus free up a portion of the IT budget.
However, in doing so, VWoA risks creating tension with its parent company due to their globalization initiatives.This will therefore not provide organizational benefit. It limits long-term efficiency gains and does not provide long-term sustainability because it disadvantages VW’s competitive position. Without supply flow representatives, a decision-making input criterion is not met and allocation of funding will not be accepted across the organization. 2.
Apply Equal percentages of funds to each goal portfolio – This does not fit with the corporate goals that were previously ranked and it challenges the prioritization process.Decision-making will not involve all stakeholders and management will not support such decisions. Financial benefits and long-term sustainability risk being compromised by funding of less critical projects. 3. Cut apart each portfolio and prioritize funding to projects involving the most critical goals – This option better aligns funding allocation with corporate goals. Management will be more supportive based on the increased merit for funding decision and all stakeholders are still incorporated in the decision making process.VWoA is more likely to reap the financial benefits and establish long-term sustainability because funding will not be wasted on initiatives within an enterprise goal that are less critical to the company’s success.
4. Reallocate some enterprise funds to business unit projects: Enterprise projects create value across all business units and reducing funding to such projects compromises the top criterion. It is unlikely the specific business unit projects will provide greater sustainability and financial benefits.Decision-making can still incorporate all stakeholders and management support is possible depending on the allocation process implemented amongst the business unit projects.
It is recommended that Dr. Matulovic pursue option three. This option incorporates all four strategic goals of VWoA while optimizing the limited budget by funding specific projects without wasting money on less critical projects within the goal. Action Plan: Continue with existing allocations for the current year to avoid disruptions to already approved initiatives.To maintain momentum in VWAG’s globalization initiative, Dr.
Matulovic should team up with Klauss and the supply flow unit to make an argument for additional funding from VWAG. The group should emphasize the benefits to the global supply chain position of VW. This project must be re-implemented immediately upon receipt of funding. For next year’s allocation, together, Dr. Matulovic, the ELT and the DBC must establish weightings for each enterprise goal (i. e.
ustomer loyalty – 30%, new vehicle – 19%, stable infrastructure – 18%, pre-owned – 17%, supply flow – 16%). These weightings will allocate the budget amongst the goals. Within each enterprise goal, projects will be evaluated against the above criteria. Projects best meeting the criteria within each goal will be considered most critical. Each goal’s allocated budget will be distributed to its highest ranked projects.
Existing processes for receiving requests from business units can still be used to gather the necessary information for the funding assessment.