Allocation Flexibility Test
Stress test to determine whether an organization can reallocate resources when environment changes.
Stress test to determine whether an organization can reallocate resources when environment changes. Simulates crisis (revenue drops 40% overnight) and evaluates ability to cut expenses by 40% within 30 days. Tests both theoretical flexibility (what could be cut) and execution capability (what would actually be cut given politics, contracts, emotion).
When to Use Allocation Flexibility Test
Run quarterly as preventive diagnostic. Essential before market shifts, during strategic planning, or when sensing environmental change. Use to identify 'sacred cows' that prevent necessary reallocation.
How to Apply
List All Expenses
Complete inventory of payroll, marketing, R&D, infrastructure, support, and all other costs
Classify Criticality
For each expense, classify: Core (company dies without, keep 100%), Important (company suffers without, cut 50%), Helpful (company weakens without, cut 75%), Nice-to-have (company survives without, cut 100%)
Questions to Ask
- Would we die without this?
- Would we suffer without this?
- Would we merely weaken without this?
Calculate Total Possible Cuts
Sum cuts across all categories. Does it reach 40% reduction?
Outputs
- Total possible cut percentage
- Remaining essential spend
Identify Sacred Cows
What did you refuse to cut that should be cut? If the answer to 'why can't we cut this?' is politics rather than strategy, you have an allocation problem.
Questions to Ask
- What are we protecting for emotional reasons?
- What contracts lock us into spending?
- What politics prevent cuts?