pm-lotus by Howard Vaughan

Posts Tagged ‘Governance’

Sorting the Best from the Rest

For most organizations, a critical component of portfolio management is a framework for prioritizing project work. This involves evaluating the merits of current and candidate projects against a common set of criteria and using the results to rank-order the importance of those projects for the purposes of optimizing the portfolio (see “The Goals of Portfolio Management”). But which prioritization criteria should be used?

Strategy Drives Priorities

Criteria should be directly driven by strategies – assigning a single criterion for each strategy is a good starting point. They should also be multi-dimensional in the sense that they appropriately balance strategic concerns across differing perspectives, such as financial, technical, commercial, process, people and customer; typical examples include:

Financial

• Revenue, Profitability, Investment cost

Technical

• Solution complexity, Innovation quotient, Technical risk

Commercial

• Market need, Market growth, Commercialization risk

Process

• Efficiency, Quality, Time to solution

People

• Skills development, Existing resource leverage, Functional interdependence

Customer

• Business impact, Customer satisfaction, Image

Note that criteria lie on a continuum of tangibility; while some are easily quantifiable for any project, the more intangible may be challenging to rate.

Keep it Simple

Once established, each project is scored against the prioritization criteria to determine its strategic fit and importance. Well-defined prioritization criteria and scoring models allow for clear differentiation between “clear winners” and “obvious losers”. Too often however, this all gets over-complicated. Here are a few guidelines to ensure that the prioritization framework is practical as well as accurate. Criteria should be:

• few in number
• measurable
• mutually exclusive
• linked directly to a business strategy
• appropriately balanced for the portfolio’s type of projects.

To quote Einstein: Keep it as simple as possible – but no simpler.

Not such an easy target

Project portfolio management is gaining traction inside organizations as business imperatives, competitive pressures and the availability of better tools create a compelling value proposition. Effective portfolio management responds to fundamental questions, such as:

• What projects are going on?
• How well do our projects support business strategies?
• Are we investing in the most appropriate way?
• How far are resources overstretched?
• How well are projects meeting performance targets?
• Are project priorities clear and being acted on?
• Are projects delivering anticipated benefits?

Three Overarching Goals

All these types of questions point to measurable indicators of portfolio efficiency, which is itself driven by achievement in meeting the three primary goals of portfolio management:

1 – Align Projects with Strategy

WHY? To validate that each project is evaluated on it’s own merit for contribution to strategic objectives.

HOW? Establish impartial criteria for judging project importance. Strategies must be the starting point for determining these criteria – which naturally implies that strategy needs to be clear. Weight the criteria to reflect the more important strategies and avoid excessive focus on financials.

2 – Maximize Value of Utilized Resources

WHY? To achieve the best return from available funds and people.

HOW? Consider alternative investment options for each individual candidate project. Insist on accurate resource forecasts for all projects. Use phase-planning on major projects with stage-gates to control execution. Optimize project resource utilization in conjunction with strategic importance.

3 – Achieve Balance

WHY? To ensure appropriate attention is given to necessary, internal capability-building projects as well as those exciting, high-earning customer-facing projects.

HOW? Set up separate sub-portfolios or ‘domains’ for projects of a similar nature, each with their own relevant prioritization criteria. Systematically re-assess project investments, execution performance and delivered benefits across domains.

The Bottom Line

Getting all this done requires (a) strong top-down support, (b) the right framework to operationalize portfolio optimization, (c) a highly effective Portfolio Support Office, and (d) proper project management in place across the organization. Deficiencies in any one of these will always compromise success.

Getting there - slowly

It’s good to see more organizations finally getting serious about project portfolio management. But why is it taking so long? While all the process elements have been understood by an enlightened few for many years, progress in putting portfolio management into widespread practice has been disappointingly lethargic.

The reality is that most organizations have a great deal to do to make portfolio management work for them. Meaningful portfolio management standards and usable software applications have been painfully slow to emerge. In addition, several pitfalls often derail implementation efforts. Here are four of the biggest:

Lack of Ownership

Managing a portfolio is the responsibility of executives and this is a message that does not always get driven home. Portfolio management provides the crucial linkage of project work with strategy and ultimately the enabler of that strategy. It is not just another level of tactical project management. Executives have to take ownership, get firmly involved and be supportive.

Ineffective Process

In the same way as projects need some form of process to facilitate successful execution, a portfolio requires a structured methodology for establishing oversight procedures, prioritizing projects, balancing resource capacity and demand, and optimizing project funding, scoping, integration, sequencing and resourcing for strategic value. Portfolio management is a discipline.

Mismatch with Maturity

Often lost in the conversations about project prioritization frameworks and strategic alignment is the simple fact that without solid planning and tracking at the individual project level, portfolio management can never achieve its primary goals. Proper portfolio management needs proper project management.

Misalignment with Culture

Portfolio management, like project management, is scalable. It has to be designed to fit the organization’s culture and the way in which decisions are made and work gets done. Misaligning the intensity of portfolio information needs, analysis and control with a firm’s culture is a guaranteed showstopper. Each activity should not only deliver real value – it has to be widely supported.

The Good News

On a positive note, portfolio management is getting increased executive level attention. There is a realization that the option to “Do Nothing” incurs a very significant cost in unrealized strategies, overstretched and demoralized project teams, a lack of knowledge and control over what’s really going on, and dissatisfied customers. No longer can organizations afford not to respond. The call to action is gaining traction.

This might have been alternatively titled “Questions we are Occasionally Afraid to Ask”. Here’s the situation:

You’ve been appointed to project manage a new initiative. You know that effective project sponsorship is a critical success factor and so you set up a meeting with the project sponsor.  You want to be sure you’re starting out with the right kind of backing. The sponsor wants to discuss the budget (or maybe golf) but first, you have some big questions you need answers to…

1 – Do you understand your role?
Its a fact – many project managers I meet complain that their sponsor has little idea about their role and responsibilities. You may need to help them out here.

2 – Do you know what you want?
There’s not much more frustrating than a sponsor who isn’t sure about what should or should not be included in the project. A fuzzy sponsor means you could be in for a long road trip of about-turns – do, undo, redo, …

3 – Can I count on your support?
Or more specifically – will you truly champion our project? This means advocating the project at higher levels, helping maintain visibility and interest in the project with key stakeholders, providing adequate funding and obtaining resources.

4 – Will you be available?
No doubt about it, sponsors are typically busy executives. This means their time is limited and they may be hierarchically or geographically remote. You DO need those face-to-face meetings. Lock them into their calendar.

5 – Can you give me clear priorities?
What are the primary project objectives? Which is least flexible – schedule, scope or resources? (Hint to sponsor- you can choose only one). Which is most flexible? Why?

6 – Do you understand that project management is a discipline?
In pushing to ‘just get it done’, countless projects ignore the importance of proper planning and systematic tracking… and pay a high price. A sponsor who doesn’t appreciate this means we’re already in trouble.

7 – Do you know what a solid project plan looks like?
The sponsor has to approve the plan that lays out what will actually be done- so it might make sense to ensure they actually have an understanding of what a good plan looks like. If necessary, give them a Plan Review checklist and an ‘Executive Briefing on Tactical Planning’ (so they know a WBS from a critical path).

8 – Will you inspect what you expect?
Not much point in a sponsor’s list of expectations if the relevant questions are never going to be asked. Generating information, reports and updates that don’t get reviewed is a fast track to morale hits and trust breakdown.

If the sponsor answered these questions correctly, you’re likely to be in good shape. (Hint for sponsors- the correct answer is “Yes” to all questions). If not, then you just identified some additional risks to the project…

RIP project triangle

Its good to see the PMI moving with the times and dispensing with the sacred Triple Constraint. Now we’re advised to balance additional constraints such as quality, risk and resources. So no longer is project success to be measured per the old PMBOK 3, in which we learned that “High quality projects deliver the required product, service or result within scope, on time and within budget”.

This change has been nicely acknowledged by Telstra, Australia’s privatized telecommunications giant. According to itnews.com.au, the telco recently revealed payment of a $2.2 million bonus to its ex-COO for outcomes relating to its IT transformation program despite it running $200m over budget and behind schedule with currently only half of the legacy systems planned for consolidation switched off. The chief exec declared it a ‘good result’ apparently.

I wouldn’t mind trying for just a mediocre result under this new approach – say half the bonus for double the cost overrun… the Triple Constraint has a lot to answer for!

All good portfolio managers know that their organization should select and value projects with respect to its chosen strategies. This is intuitively rational given that strategy lays out future direction and projects exist to transform that vision into reality by satisfying needs for change and improving on what was or what is.

Blue Ocean or Misty Ocean?

The reality however is that core company strategies are oftentimes not widely communicated, or at least, they are not well understood across the organization. I confess this does not make much sense to me. Why spend time conceiving Blue Ocean strategies or creating Balanced Scorecards if the outputs (and importantly, the consequences for project work) are not plainly articulated to all? (Ok, I’m forgetting the cost reduction or downsizing strategy which tends to be conveyed without much ambiguity).

The Future is Now

There are some exceptional standouts of course – I once consulted at a global bank that had its core strategies posted on everyone’s cubicle – but in the main I meet disturbing numbers of managers and PMO staff who readily confess that their organization’s strategies are pretty much invisible or at best opaque. (When I hear this, my mind heads off into scenes from the visionary 1927 movie “Metropolis” which portrays a segregated world of workers slaving underground, achieving goals without vision, while the ruling elite above the surface – the Thinkers – make grand plans without knowing how things work).

Without clear strategy, we have no context of purpose. The entire organization needs context of purpose. Purpose inspires. Without clear strategy, good ideas and smart programs cannot be developed, projects cannot be optimally aligned, evaluated and prioritized, and resources cannot be effectively mobilized and motivated.