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The new iron triangle

There are three outcomes that managers in business are regularly required to achieve. I want to discuss these three outcomes, or more precisely the inter-relationship between them. I am going to use the example of projects. That is not because this is an article for project managers, but because projects provide a very clear example of the problems of trying to achieve these three outcomes simultaneously. The ideas in this article are widely applicable beyond the specific domain of projects.

The three outcomes are: meeting commitments, enabling flexibility and keeping resources 100% utilised. The main message of my article is simple: you cannot achieve all three. Constantly trying to do so is a waste of effort that misses an important opportunity.

 

In 1969 Dr Martin Barnes came up with the concept of the iron triangle. The iron triangle is something all project managers are familiar with. The iron triangle relates time, cost and quality – and argues that in a project you cannot change one of these without impacting the others (or put another way you can optimise two but not all three). The iron triangle is a simplification, but even so it is an extremely useful rule of thumb.

Three points of the triangle

The three sides of the new iron triangle are defined by the three business outcomes.

The first outcome, which all managers will be familiar with, is the need to make and meet commitments. A simple example – managers need to predict their annual budget, and they are expected to meet it. Managers are also required to make all sorts of other commitments and achieve them. A track record of achieving commitments is a widely agreed mark of success.

Meeting commitments is particularly obvious in the case of projects. A project is proposed, a timeline and budget is agreed. The success of project managers is regularly judged on delivering projects to time and budget - in other words, meeting their commitments.

The second outcome is to maintain flexibility. Business language has a history of language associated with flexibility. The current favourite is agility. The classic conversation goes along the lines in which an executive asks a manager to do some additional unplanned task, with the rider that there are no additional resources and the manager is expected to absorb this work within their existing workloads. The expectation of being able to flex to unforeseen demands is common across industry.

Flexibility is important in the case of projects. There are many reasons for this - needs change, people are bad at identifying their requirements up front, and understanding increases as projects progress. Hence another common measure of success for project managers is their ability to run projects such that they can absorb change to requirements and respond flexibly to their customers evolving needs.

The third outcome is to achieve is to keep resources fully utilised. The successful manager is generally expected to keep resources utilised at 100%. Everyone is expected to be busy, and money is expected to be spent. No one thanks managers when their team members are sitting by waiting for work to arrive, or there is excess money in their budget. The well regarded manager requests just the right amount of resource and uses it all up – needing no more and no less.

Projects are no different. Whilst experienced project managers understand projects need contingency budgets in reality they are not always provided. A typical example is when the eagle eyed finance director cut outs all contingency, with a comment along the lines “I thought you were an expert. If you are and you plan accurately surely you would not need contingency” provided as justification.

 

The real world

Life is of course complex. One resource is not another there are factors like skills and competencies. Commitment making is inherently risky as the future is never fully predictable. Flexibility always has its limits. But I want to ignore these features of reality for now, because they are not relevant to my point. Let’s assume for now that it is possible to make predict and meaningful commitments, maintain flexible resources, and keep people 100% busy.

Even if it is possible to achieve each of these independently – you cannot achieve all three simultaneously.

 

The triangle in tension

Each of these individual outcomes is laudable. Who doesn’t want commitment, flexibility and perfect resource usage? The trouble is that it is not possible to guarantee to meet commitments whilst also guaranteeing flexibility and keeping everyone busy. It’s one of those– choose two out of three situations. Yet people in business spend huge amounts of time and effort trying to optimise all three points of this triangle.

Some might disagree and propose there are techniques that balance these. But all techniques are a compromise. Let’s go back to the example of projects. Traditional waterfall project management tends to focus on commitment and can also be used to keep resources fully utilised usage. But anyone who has tried to build flexibility into a waterfall project knows this happens in one of two ways. Either by keeping some spare resources just in case they are needed (i.e. less than 100% utilised), or by the process of change control which results in commitments being altered.

The main alternative to waterfall is Agile. Agile focuses on flexibility. Agile projects may have a roadmap giving a sense of long term direction, but actual commitments are at best for the length of a sprint – a few weeks at most. Limiting commitment making to 2 or 3 weeks time is not what is normally regarded as effective commitment making in business.

 

Why is this a problem?

Experienced managers know that these three things cannot be all perfectly achieved. Yet even though it is not and people continuously try - business carries on. Managers and their teams muddle through. Work is completed, changes and handled and resources are kept adequately busy.

So one at this point might be thinking of the new iron triangle - so what? There are two reasons this is important:

  • Firstly, it is a waste of effort trying to optimise on three dimensions which are not simultaneously achievable. When people try to be flexible, committed and fully utilised you will tend to see ongoing and inefficient switching between tasks, as well as excessive multi-tasking and juggling. I have no quantification for the scale of this wasted effort, but in my experience it is significant.
  • Secondly, by pretending they are all achievable we miss an opportunity to have an important discussion. That discussion is to work out what is most important for an organization. There is no universal answer to this – sometimes flexibility is the most important factor, sometimes keeping precisely to commitments is, and on other occasions resource utilization is. By playing the management game in which we secretly know this, but explicitly try to do all three we avoid a sometimes difficult, but always productive, discussion. As an example, if you need both commitments and flexibility, there can be real value in not keeping resources 100% utilised – to effectively buy an option to future changes. Yet rarely do managers have this conversation.

The mature approach is not trying to achieve everything, but explicitly discussing and agreeing, and consistently implementing the most appropriate balance for you.  A shared understanding across teams and functions about the right balance between commitments, flexibility and resource utilisation is extremely powerful.

I have been involved in many large scale and business critical programs. I always try to ask my clients early on: “what’s important to you? Is it more important that I meet any commitments, give you flexibility to change, or use resources 100% effectively – you can only choose two.”  Not everyone likes these conversations, but it is a far better to have the debate than to put ones head in the sand and pretend all 3 outcomes can be achieved.

 

More thinking like this can be found in my books The Management Book and The Project Management Book.

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