Walk the line
The global economy is on the mend,
but it's still not in the best of health. Yet for organizations willing to take chances, opportunities abound. For their portfolio managers, that means figuring out what those opportunities are—and how to mitigate the risks they present.
While global growth will climb to 3.7 percent this year and 3.9 percent in 2015, according to the International Monetary Fund, the long-term forecast is cloudy. In fact, a medium-term slowdown will keep growth figures low through 2025, the Conference Board predicts. Advanced economies are projecting a steady uptick in the near-term, but growth remains slow and emerging markets haven't been able to pick up the slack. Without government-backed stimulus spending, developing markets may see their growth engines stall. Even China has cooled.
For those organizations that strike a fine balance of flexibility, preparedness and focus, though, the economic climate may prove a blessing in disguise.
With shrinking margins for error, organizations need to keep a close eye on market changes and be prepared to respond quickly when opportunities arise, says Blaze Goraj, PMP, portfolio manager, Central and Eastern Europe, IT outsourcing at HP Enterprise Services, Poznan, Poland. The global IT infrastructure company is a PMI Global Executive Council member.
“It's important to understand what's happening in the market and how the client needs are changing and evolving,” he says. “You have to understand not only what is happening now but what is going to happen three years from now—and be able to respond in a flexible manner.”
To take advantage of new opportunities or successfully manage unexpected crises, organizations need to have access to two things: good information and deployable resources, Mr. Goraj says.
“If you create a management system for your portfolio that brings you key metrics, then you're able to act quickly based on the changes. You always need to have bandwidth to respond to changes, so managing a buffer of your capacity is key.”
To maintain this buffer, portfolio managers need to resist the temptation to use their available resources at 100 percent of their capacity.
“You have to understand not only what is happening now but what is going to happen three years from now—and be able to respond in a flexible manner.”
—Blaze Goraj, PMP, HP Enterprise Services, Poznan, Poland
“When you start an initiative, you have to have left yourself enough room on the resource and execution perspective so you have the leeway to change gears,” says Marion Chang, PMP, portfolio manager at financial services company Sun Life Financial, Kitchener, Ontario, Canada. “You can't allocate your resources so tightly that you don't have any room.”
Every portfolio manager has a few key players who can absorb extra work when the situation requires it, and some tap that extra capacity on an ongoing basis. But continually exploiting the emergency reserve can leave a portfolio exposed to increased risk, Ms. Chang says. Instead, she recommends splitting key resources between high- and low-priority projects so the team can react quickly to change.
“Eighty percent of their time you put them on projects of high visibility, but 20 percent is spent on projects that are not as important,” she explains. “So a top performer is always available to take on that high-priority project you have to do at a moment's notice.”
“Project delivery is not just about completing a task, but making sure it remains aimed at contributing towards the strategic objectives of the organization. The strategic objectives will move the organization forward, and the projects are the drivers of these objectives.”
—Marna Schoeman, PMP, Standard Bank Group, Johannesburg, South Africa
PHOTO BY MICHAEL TREE
USE YOUR HEAD
The fastest doesn't necessarily win the race, however, even in a tepid economy. It's not just about how quickly an organization reacts, but how informed its reaction is.
Making speedy, informed responses to market changes can set an organization apart from the competition, says Joel Eacker, PMP, PgMP, senior vice president, major programs in Houston, Texas, USA for CH2M Hill, a PMI Global Executive Council member. Failing to react can mean missing out on added profits—or even taking a loss.
“We try to be proactive; that's our goal. We try to work with clients to look to the future. But sometimes, you have to react,” Mr. Eacker says. “For instance, right now, people are trying to figure out what the Ukrainian situation means for the oil and gas industry in Europe.”
Escalated risks are leading some organizations to question whether they should continue projects in Russia, while others are considering opportunities to provide an alternative to Russian gas to Europe, Mr. Eacker says.
When changing conditions made it more attractive to build North American chemical facilities that rely on natural gas as feedstock, CH2M Hill first carefully weighed competing concerns: that proposed natural gas projects in Canada and the United States might create an oversupply and drive down gas prices, or that they could increase demand from non-North American sources and actually drive up gas prices. The organization also considered how these initiatives, which are outside its traditional infrastructure and engineering realm, could affect the available talent pool.
“There are risks and opportunities that we may not have looked at in the past because the economics may have changed,” Mr. Eacker says.
Regular updates about customer demands and competitive offerings in their sectors can help portfolio managers make better decisions, Ms. Chang says. If a portfolio manager learns that a competitor has just launched a product similar to one that his or her organization has in development, for example, he or she can tap contingency resources and work to recover or speed up the project.
“You have to ask, Do we need to rush it out or can we adjust the project so that it has a different scope or value?” she says. “That's the degree of flexibility you need to have.”
Sometimes, changing priorities can put ongoing projects on the shelf. However, shutting down an initiative immediately can lead to inefficiencies and wasted work. That's why a phased approach is important, says Marna Schoeman, PMP, program manager, finance business services in treasury and capital management for financial services company Standard Bank Group, Johannesburg, South Africa.
“When you start an initiative, you have to have left yourself enough room on the resource and execution perspective so you have the leeway to change gears.”
—Marion Chang, PMP, Sun Life Financial, Kitchener, Ontario, Canada
“When a business case is created, we ensure that we follow a phased approach. Thus there is always a logical stop within a project at the end of a phase. This enables a project to stop at a logical point, and thus restart is easier,” she says. “It's no longer just about finishing a project; it's about value-add and realizing business benefit throughout the project life cycle.”
“We try to be proactive; that's our goal. We try to work with clients to look to the future. But sometimes, you have to react. For instance, right now, people are trying to figure out what the Ukrainian situation means for the oil and gas industry in Europe.”
—Joel Eacker, PMP, PgMP, CH2M Hill, Houston, Texas, USA
STAY ON POINT
A slow-growth environment puts all the more pressure on organizations to ensure their projects are aligned with their strategy, says Ms. Schoeman.
In 2013, Ms. Schoeman's portfolio budget was reduced to accommodate a new strategic initiative, and in 2014, the budget remained flat even as the scope increased. Given that financial reality, every project—and every deliverable—must support a specific strategic objective to keep getting a piece of the funding pie.
“Project delivery is not just about completing a task, but making sure it remains aimed at contributing towards the strategic objectives of the organization,” she says. “The strategic objectives will move the organization forward, and the projects are the drivers of these objectives.”
To keep the portfolio on track when the strategy shifts, Ms. Schoeman maintains a three-year road map and revises it annually. This helps ensure every project delivers its intended business value, she says.
People in Place
While slow growth puts more urgency on securing the right people for the right projects, global talent shortages have made those people harder to find.
Worldwide, 35 percent of employers report having difficulty filling jobs due to a lack of available talent, according to a 2013 study by Manpower-Group, a global workforce solution provider based in Milwaukee, Wisconsin, USA. This is the highest proportion of employers expressing concern about talent shortages since 2007, when it hit 41 percent.
The talent shortage makes it even more important to select the right projects and programs, says Blaze Goraj, PMP, HP Enterprise Services, Poznan, Poland.
“As the right resources are very expensive, it's vital to make the right investment,” he says. “Deciding where to invest is crucial because we have a limited number of people with the right capabilities.”
More than half of the companies surveyed by the ManpowerGroup said a lack of qualified talent was impacting their client-facing abilities. And an increased number of organizations said talent shortages were hurting business outcomes.
The necessity for understanding local and cultural differences can further shrink the available pool, Mr. Goraj says. “In different cultures and different countries, you deal with a crisis in different ways,” he says. “Sometimes you need to deal with things face-to-face rather than making a phone call to deal with the situation.”
When talent is in short supply, the cost of replacing individuals who leave an organization rises. Investing in retaining those people can reduce the costs of attrition and make a portfolio more successful, Mr. Goraj says.
“We need to be able to quantify that losing person A will cost us X amount of money,” he says. “We can and we should invest that amount of money to avoid that. It is the risk management aspect of people management.”
“When a business case is created, we ensure that we follow a phased approach. This enables a project to stop at a logical point, and thus restart is easier.”
—Marna Schoeman, PMP
Of course, mapping deliverables onto strategic objectives is easier said than done, says Ms. Chang. While mission statements and published annual goals paint one part of the picture, often it's internal objectives that more concretely define where an organization is trying to go.
“Sometimes it's very easy to make out what your organization values, and sometimes it's difficult. You have to do some investigation work to get that understanding,” Ms. Chang says.
Only once portfolio managers have that strategic understanding in place can they work toward achieving it, she says. “When you know what that success picture is, it's lining up your team, lining up your skill set and lining up your portfolio structure to get you there,” she says.
TAKE IN THE WHOLE PICTURE
To help their companies excel amid timid growth, portfolio managers have to take a broad view of business value and ROI. Looking at the overall value of the portfolio, not just individual projects, allows portfolio managers to identify efficiencies and discover hidden value, Mr. Eacker says.
For instance, a chemical company's project to build a plant that produces ammonia may not seem to be a high-value endeavor—until it becomes clear that the ammonia will be used as a raw material in producing a higher-value product. A strong understanding of these relationships can help ensure the portfolio is optimized properly, Mr. Eacker says.
And when growth is hard to find, every advantage, no matter how small, can make a big difference. PM
PM NETWORK AUGUST 2014 WWW.PMI.ORG
AUGUST 2014 PM NETWORK