Implementing Portfolio Management

Gary Balaam

The time is right for Project Portfolio Management

Bad economic news is all around us and will affect most organizations with reductions in revenues, expense and staff cuts and greater scrutiny of all expenditures. For many it is easy to conclude that now is not the time to be investing in project management tools and processes. In fact, the opposite is true. Here are four reasons.

1: Strategic Alignment can never be more important than it is right now.

Many organizations are accustomed to spending numerous days in off-site meetings to define or re-define their organizational priorities, goals and strategies. There may indeed be a renewed focus on this to address the current economic climate. Business leaders and cross-functional teams will try to ensure that everyone fully understands what will drive the organization forward for the next planning cycle by developing strategies that will address each organizational goal. Functional managers will translate these goals into projects.

The success or failure of executed projects to deliver real strategic value will hinge upon the level of understanding of the strategies and how aligned the projects were to the strategies.

Organizations require a rigorous course of action to effectively execute against strategy. Project Portfolio Management (PPM) is the process that ensures that you execute the right projects. PPM helps your organization realize its potential by identifying, selecting, managing, and delivering project portfolios that align with your strategic priorities. Teamed with good project management discipline, executing strategically aligned projects can deliver the value desired.

2: Difficult decisions are better made based on facts than on emotions.

Although likely fewer in number during economic downturns, there will be project proposals to consider. But which proposals should go forward and how many? How do you determine if the Marketing department’s proposed new Market Survey proposal should advance and IT’s Network Application proposal should not? How do organizations appropriately compare these two proposals in a way that rules out emotionally-charged decisions, or a decision made in favour of those with the most political clout or connections?

The answer is to develop a way to measure all proposals in some form of “common currency” so the evaluation is based upon how they contribute to attaining the organization’s business objectives.
By selecting 7 to 10 of the organization’s strategic business drivers, prioritizing them as to their relative importance and determining the impact of the list of proposals to the prioritized business drivers, you will derive a “strategic value” for each proposal. This provides you with a way to compare all projects to one another in a structured, non-emotional way.

Now that you have a prioritized list of proposals showing their strategic value to the organization, the next step is optimizing the list by trying to maximize the total strategic value in relation to the portfolio’s constraint on resources.

3: Optimizing the use of constrained resources is essential.

Whether in hard economic times or not, there are never enough skilled resources, budget or technology to proceed with all proposals. In most cases, there are multiple constraints such as limited resource competencies, mandatory projects (such as legislated projects), project dependencies and more.

Maximizing the total strategic value in relation to the portfolio’s constraints is called optimization. It is best done using a mathematical tool involving the “Efficient Frontier”. The Efficient Frontier is defined as the set of investments that create the greatest possible value at the least possible cost. By calculating and studying the Efficient Frontier, you can compare your optimized portfolio solution against it to determine how your solution may be held back from achieving its “best bang for your buck”.

4: Increased Project Portfolio Management maturity leads to improved benefits realization.

Your organization may have a PPM process in place already, be it a simple check-list for project selection, an ad hoc approach or something more sophisticated. Whatever your organization’s level of maturity, increasing that level will provide increased benefits.

Start by understanding and documenting your present system and mapping it to industry best practices. Capitalize on existing processes that are working and further develop those that can be improved upon. Communicate the perceived increase in the value of change by introducing a proof of concept to run in parallel to existing planning activities. Once that value has been demonstrated, roll-out the new or improved PPM process iteratively, making sure you show positive results sooner than later and ensuring you are well engaged with business management.

As PPM maturity level grows, so too will the benefits from PPM accrue to the organization.

In this economic climate there is much less room for error and guesswork. Resources are more constrained than ever so identifying and delivering strategically aligned projects is essential. Project Portfolio Management will take away the guesswork and reduce errors by aligning your projects with corporate strategy, optimizing your constrained scarce resources and make project selection based on facts.

An investment in Project Portfolio Management maturity now will not only pay dividends in these tough times but will position your organization for growth in better times in the future.

Gary Balaam is Practice Lead for Enterprise Project Management Solutions. He can be reached at gbalaam@agorainc.com

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