Blog / One project won’t move your EBIT. A portfolio will.

Leadership Perspectives

One project won’t move your EBIT. A portfolio will.

A cost-reduction project on a high-volume line comes in on time and on target. The quarter closes, and EBIT hasn’t moved. More than 80% of improvement initiatives end the same way, with no meaningful financial gain.

The project didn’t fail. The assumption behind it did: that a project can be judged on its own.

Every project changes more than its target

Products in a plant share equipment, labor, and overhead. Take cost out of one, and the shared cost it absorbed moves to the others. Raise price on another, and if volume drops, its fixed cost shifts onto everything else.

We’ve seen a process running at 6% EBIT pushed to negative 2% by well-intentioned cuts that ignored those effects.

A single project is a local optimization. The P&L is a system.

Manage the portfolio, not the project

The answer isn’t fewer projects. It’s running them as a portfolio: simultaneous initiatives judged by one combined outcome. Protect top performers, target cost in the mid-tier, and reprice the tail, with the balance set by product mix and volume.

Project returns are usually estimated one at a time and summed into a business case. With shared resources, the sum is almost never the answer. Two projects that each promise a point of margin can deliver three together, or none.

The question isn’t what a project will save. It’s what the portfolio will earn.