The troubled global economy has forced companies big and small to reevaluate their project portfolios, zeroing in on those projects that bring real value and cutting everything else. “Companies aren’t just slashing the top 25 percent [of their portfolios], they want to cut right 25 percent—trimming the fat and focusing their emphasis on projects that support the business more efficiently,” says Margo Visitacion, analyst with Forrester Research, Marlton, New Jersey, USA.
At global IT services firm CPM Braxis, based in São Paulo, Brazil, portfolio manager Renan Guedes, PMP, is taking a hard look at his project portfolio and rethinking where his organization invests its capital. “We are focusing on the big projects, making sure the payoff is at least what we expected. And we are cutting the smaller ones where the potential payoff is not enough,” he says.
Mr. Guedes is quick to point out that even though some of the company’s projects must go, they weren’t bad choices when they were launched.“But now everything has changed. We can’t bet on high-risk projects in this economy. We need to follow a safer path,” he says.
Organizations that have made a long-term commitment to portfolio management, however, are finding ways to capitalize on the struggling economy.
Ken Carter, PMP, is enterprise project office director for Mutual of Omaha, Omaha, Nebraska, USA. He says the moves his company has made over the past year when it comes to its portfolio has made the current economic situation easier to deal with. “We have a well-capitalized base and are looking at these times as an opportunity to expand our footprint,” he says, noting that his team has hired several new project managers to augment project expansion in recent months.”
Mr. Carter attributes his portfolio’s success to a focus on strong project management strategies, regardless of the status of the market. “The way in which Mutual of Omaha manages project portfolios is consistent with the way we manage our financial investments. Project funding decisions are based on proven cost-benefit analysis techniques, alignment with corporate objectives, risk assessment and the ability to resource the project.”
Ms. Visitacion notes that organizations such as Mutual of Omaha that have formal portfolio management strategies in place are likely to feel the least amount of pain as they adjust to this economy, while the rest will have to work a lot harder to add rigor to their portfolio management process. “For years companies have paid lip service to the idea of portfolio management, but just now they are beginning to see the value of it,” she says.
And that could be the silver lining for portfolio managers as they weather this economic storm.
If you don’t have portfolio management strategies in place yet, get started. In troubled economies companies need tools that help them evaluate changing risk on project decisions.
Focus dollars and people on projects that have a guaranteed return. Nice-to-do projects or high risk ones are best to delay until the economy strengthens. Projects that seemed like a good idea a year ago may no longer be viable. Reassess your decision-making process for all projects using the current economic crisis as a measure for success.
For more information, read Managing During a Crisis from PMI Community POST and The Standard for Portfolio Management—Second Edition.
