Even before Brexit, Britain’s vote to leave the European Union, bad economic news has been all around us, especially so in Alberta, Canada. It affects organizations with reductions in revenues and potentially staff, cutting of expenses and greater scrutiny of expenditures. For many it is easy to conclude that now is not the time to be investing in project and portfolio management tools and processes. In fact, the opposite is true. We have 5 reasons why:
- Strategic Alignment
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 work at ensuring that all fully understand what will drive the organization forward for the next planning cycle by developing strategies that will address each organizational goal. Functional managers may address their strategies to their respective organizational areas and translate these into projects. All come away from the meetings with a sense of accomplishment on a job well done, and a feeling that real internal alignment has taken place.
The success or failure of executed projects to deliver real strategic value to the organization will hinge upon how well understood were the strategies, how aligned the projects were to the strategies, or other issues such as a lack of skilled resources, budget, or external factors. If, over time, projects fail to deliver their intended results then the strategic definition cycle will start all over again with potentially the same results.
What is required is a rigorous course of action to effectively execute against strategy. Project Portfolio Management (PPM) is the process that ensures the right projects are executed. It is all about helping organizations realize their potential by identifying, selecting, managing, and delivering project portfolios that align with their strategic priorities. Teamed with good project management discipline and project selection processes, executed strategically-aligned projects can deliver the organizational values desired.
Organizations that have adopted good project management processes to ensure consistency, fully appreciate the accrued benefits of such adoptions. The same is true for Project Portfolio Management processes. The need for a structured, decision-making framework is essential.
Following a “Who, What, When and How” approach:
- Who makes decisions? Individuals? Groups, like Portfolio Decision Boards? The PMO?
- Who tracks projects through their life-cycle?
- What decision thresholds are defined? FTE’s? Budgets? Project type?
- What are the decision-making criteria? Financial? Strategic impact? Risk? Resources?
- When are decisions made? Ad hoc? Quarterly? Annually?
- How is consensus achieved for portfolio decisions?
- How do projects get initiated? Prioritized? Funded? Cancelled?
Putting a governance structure in place takes time, so you need to start early and do it iteratively to minimize resistance and disruption.
- Fact-based decision making
Although predictably less in number during economic downturns like what is now happening in Alberta and elsewhere, 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 we appropriately compare these two proposals in a way that rules out an emotionally-charged decision, or a decision made in favour of those with the most political clout or connections?
The answer is to develop a way to measure proposals in some form of “common currency” so you can evaluate proposals based upon how they contribute to attaining the organization’s or the department’s business objectives. By selecting 7 to 10 strategic business drivers/objectives; prioritizing them as to their relative importance; and, determining the impact of the list of proposals to the prioritized business drivers/objectives, one will derive a “strategic value” for each proposal. This provides a way to compare proposals to one another in a structured non-emotional way.
Now that there is 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 constraints on cost and resources.
- Optimizing the use of constrained resources
Whether in hard economic times or not, there are never enough skilled resources, budget or technology to proceed with all proposals. And, 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 – optimization – 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; or, alternatively, “the best bang for your buck”. 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”.
- Increasing project portfolio management maturity
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 PPM maturity may be, 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, rollout 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, be they dollars or people, are more constrained than ever thus 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.
In future posts, we will delve deeper into each of the five reasons for investing in Project Portfolio Management with specific examples of how each can be achieved.