Better portfolio management — better results!
GRT CONSULTING LLP
This paper discusses a client's engagement on how the perspectives of portfolio, program, and project management were integrated and implemented for better business performance. It highlights how this approach enabled the design of an optimal portfolio, resulting in achievement of the strategic objectives of the organization.
The client was a conglomerate with diverse lines of business (LOBs). The business goals and the environments in which the LOBs were operating were inherently diverse. The client faced competition from multiple players, who were seriously eroding the market share. This was a serious concern to the client's top management, who had commissioned an engagement to redefine and implement the portfolio.
The paper describes how the organization went about:
a) Designing an optimal project portfolio to achieve its strategic objectives;
b) Obtaining benefits through program planning and delivery; and
c) Commissioning multiple projects to develop required products and services.
This engagement had a combination of top-down and bottom-up approaches, to address the continuity of existing change initiatives and stakeholder concerns.
We also emphasize that portfolio/program managers need to speak in business language in a consultative approach to ensure business buy-in and commitment.
Keywords: portfolio-business integration, portfolio management, benefits management, program management, transition management
Many companies excel in designing strategy. However, its execution poses more challenges. This is more so in an organization with diversified business lines. This paper addresses how the portfolio was redesigned in an ongoing business environment, and how challenges were addressed in a diversified conglomerate.
The client was a conglomerate in diversified business lines, including fast-moving consumer goods (FMCG), agricultural commodities (Agri), and consumer lifestyle product group (CPG).
These business lines were inherited from multiple group companies as a part of a family-owned business consolidation and diversification over a couple of decades. Whereas the individual lines of business (LOBs) were given autonomy to run their businesses independently, all the LOBs were using the common shared services, including human resources (HR), information technology (IT), and procurement. The business goals and the environments in which the LOBs were operating were inherently diverse. Whereas the FMCG operated in a highly volatile market, the Agri-commodity business was subject to regulatory restrictions. The CPG (mainly catering to home furnishings) was influenced by trends in lifestyle fashions and other factors.
The client's governance board, consisting of the CEO, the heads of the LOBs, and the directors/heads of shared services, centrally controlled their business from their headquarters. Since the business was diversified, the client faced competition from multiple players, including niche players, seriously affecting their market share.
The business problems the client faced included:
- Client market share getting progressively eroded due to aggressive marketing and new product development by the competitors;
- Client receiving complaints that the customer responsiveness needed to be improved in LOBs; and
- Progressive deterioration of internal processes, including product life-cycle management, shared services support, and marketing and sales, leading to avoidable delays and wastage and adding to costs.
The CEO and the top management were quite concerned about the state of affairs, and they took multiple steps to redress the situation. An internal study ratified their overall corporate vision, mission, and strategic objectives.
The client had also commissioned a consortium of consulting companies to recommend ways to address the business problems noted above. The consortium was asked to look into what kind of change initiatives the client should undertake to achieve the strategic objectives and how to execute them well to obtain the intended benefits.
The engagement approach was finalized after extensive deliberations and included the following major work:
a) Assessing the extent of alignment of the existing project portfolio with the strategy of the organization (this part coming under the realm of portfolio management)
b) Designing the optimal portfolio (including programs and stand-alone projects) required to deliver the strategy (this, again, coming as a part of portfolio management)
c) Designing and deploying an implementation approach, covering program management life-cycle, transition management, and benefits management delivery (this part coming more as a part of program management)
d) Developing/refining the project management approach to address various projects in the organization and evolving a uniform guidance for project execution for future projects (this coming as a part of project management/program and project interfacing)
This paper discusses how the multiple steps in the engagement were integrated and how this approach benefited the client immensely.
SUCCESS FACTORS FOR THE ENGAGEMENT
The client and the engagement team had agreed on the following critical success factors (CSFs) concerning how to measure the success of the overall initiative. They included, inter-alia:
a) The redesign of the project portfolio should lead to realization of the intended benefits, which were critical for achieving the strategic objectives of the organization. These metrics were defined and quantified (for instance, increase in revenue growth of the company by 15% in three years).
b) In addition, the client wanted to institute a robust system to enhance the project portfolio management (PPM) maturity of the organization in managing its change initiatives. The client was keen to cut down the cost overruns by at least 8% and time overruns by at least 5% for all critical projects, in so far as projects were concerned.
The major steps involved in this engagement were:
a) Assess the existing project portfolio and its strategic fitment.
b) Redesign the organizational portfolio to address the strategy.
c) Implement the programs and obtain the benefits.
d) Execute the projects for delivery management.
e) Enhance the organizational project portfolio management maturity.
We detail out the major steps taken for this engagement.
a) Assessment of the “as-is” portfolio
The client had an ongoing portfolio of change initiatives across multiple strategic objectives. Though these initiatives (including programs and projects) were initially broadly aligned to prior strategic objectives, over the course of years, many of them became redundant or misaligned with current strategy.
As the client's vision, mission, and strategic objectives were reiterated, we (from the engagement team) were entrusted with the responsibility of designing/updating the portfolio for the conglomerate. We undertook a PESTLE (political, economic, social, technological, legal and environmental) analysis to understand the forces affecting the client business and their relative strengths. Different LOBs in the client business lines were impacted differently by these PESTLE factors (for example, the Agri-business was getting more impacted by regulatory and compliance-related factors, and the CPG and FMCG divisions were more influenced by economic forces).
The PESTLE analysis was followed by a SWOT (strengths, weaknesses, opportunities, and threats) analysis, which highlighted the strong and weak points of the client. Since the client has been in business for a long time, they had a good brand name and loyalty. However, the levels of service and innovation had slowly deteriorated over the years, leading to erosion of its market share.
We had also undertaken an exhaustive analysis of existing portfolio of change initiatives. This indicated:
i) Multiple initiatives supporting the same strategic initiative, indicating duplication;
ii) Projects and programs not having a strong correlation with achievement of any of the strategic objectives (indicating they could be reviewed for elimination); and
iii) Few strategic objectives not having adequate support from the change initiatives.
By this analysis, it was demonstrated that close to 20% of the existing change initiatives’ budget could be reduced by rationalizing the applications. The client undertook this pruning, which also released valuable resources for implementation of the redesigned portfolio.
b) Redesign the organizational portfolio to address strategy
The team then determined the core strategies for LOBs. For Agri-business, customer intimacy was paramount, whereas for the FMCG LOB, being a cost leader was the chosen strategy. The CPG LOB focused on product differentiation. These strategy routes enabled the client to consider various change initiatives.
The client had also applied balanced scorecard techniques (Kaplan & Norton, 1996) to ascertain which initiatives to take up at financial, customer-facing, internal process, and learning/development perspectives. For instance, for the Agri-business, unprofitable product lines were stopped and the resources released (from the financial perspective). From the customer-facing perspective, new products were developed in co-creation with intensive customer involvement. Supply chain processes were tightened from the internal perspective, and the field agents were given extensive training on product features (from the learning and development perspective). Similar change initiatives were designed for other LOBs based on the corresponding strategic themes and the value maps. The overall set of change initiatives selected constituted the first-cut portfolio.
This portfolio was assessed in terms of the company's overall capability and its long-term objectives. We had enabled the client to reorganize their portfolio office, which played an important role in its rationalization.
Since there were ongoing change initiatives, it was necessary to accommodate them in the overall design of the portfolio appropriately.
Existing initiatives were reviewed in terms of strategic fitment during this inclusion. As noted earlier, this very reorganization of the portfolio enhanced its delivery capability with focus. This blending of top-down and bottom-up portfolio definition enabled the client to devise new initiatives to address their strategy, at the same time not upsetting the ongoing initiatives significantly.
The portfolio prioritization criteria were appropriately set for various LOBs to ensure that critical projects and programs did not lose out to higher-value support types of initiatives. The consortium consultant team, along with the client senior management, finalized the portfolio deployment plan. This process involved multiple iterations to get their buy-in. We also worked with the portfolio office to devise portfolio progress tracking systems and dashboards.
c) Program management—enabler for benefits management
Once the portfolio got defined, constituent programs were launched. We did extensive work in benefits profiling and understanding which projects to take up to get which benefits.
One of the representative programs that we took up was related to improving the customer relationship management (CRM) system for the CPG LOB. This program consisted of multiple projects, including those for measuring customer satisfaction, reducing the customer complaints turnaround time, and improving the supply chain management system. Target key performance indicators (KPIs) were set for each of these programs, and the consultant team worked backward to identify the outcomes that needed to be placed and the detailed definition of project outputs that needed to get produced. Operational departments were extensively consulted on when the projects should be taken up and when the benefits were expected, in alignment with their change readiness.
d) Project execution and transition management
After identification of the projects, the initial scope inputs were taken from the concerned functional departments. These departments also were involved in monitoring the project progress under the respective program manager's supervision. Multiple programs were running concurrently, and they were giving feedback to the strategy on their closure. The project execution followed the typical life-cycle management. It became the responsibility of the program manager to sequence the components appropriately to obtain the benefits. On user acceptance of the deliverables, the transition management was undertaken.
Since the client had long-established processes, the transition management took more time, as the functional members needed to unlearn the old ways of doing and imbibe the current ways of doing as a part of operations. Lots of handholding and helpdesk support were provided here. The target operating model defined for the program got implemented appropriately using these programs. When the benefits got realized, (like increase in repeat orders from the customers for the CRM program), the programs themselves got closed, giving feedback to strategy.
Following is a list of key actions the client took to facilitate the success of this portfolio management initiative.
i) The client had constituted a portfolio review board for better governance. The board reviewed program progress reports along with a live dashboard depicting the progress of various initiatives.
ii) Reward and recognition systems were aligned appropriately to induce the senior managers to achieve the performance targets.
iii) Appropriate change management techniques, including application of organizational models for change management, were used.
iv) A centralized resource management group (RMG) was formed to effectively channelize the resource utilization across multiple change initiatives. This enabled effectively managing the dependencies across various change initiatives in light of resource constraints.
e) Enhancing the organizational project management maturity
Apart from project and program delivery, the client wanted to enhance the PPM maturity of the organization. A permanent center of excellence (COE) was set up for this purpose. The COE was instrumental in:
- Defining the best practices for project, program, and portfolio management;
- Creating the management dashboards and assisting in project and program reviews;
- Assuring the senior management that things were on track and the right governance was enforced; and
- Organizing knowledge portals and imparting trainings for PPM maturity enhancement.
The COE was instrumental in organizing health checks, facilitating assurance reviews and updating the knowledge portal, during the closure of portfolio components. The COE also facilitated project portfolio management maturity assessments and implementation of benefit sustenance plans to ensure that the post-program benefits continued to accrue and the conglomerate was constantly refining its PPM processes for continuous improvement.
The client rolled out the initiatives in phases. Initially there was a huge scepticism amongst some of the functional managers on its success, as they had seen many change initiatives being launched with big fanfare and then floundering. The sustained management commitment, championed by the CEO, made all the difference in its success this time.
By the end of the third year of the implementation, the revenues had gone up by 14% from the base level before the portfolio reorganization.
More importantly, improving top-line and bottom-line figures restored the staff's confidence, reducing attrition and increasing their morale. The conglomerate was also able to gain tighter control over the execution of its projects and programs, by using the best practices instituted by the COE.
An aspect that required improvement related to better-aligned reward and recognition systems with the personnel achievements. The director of human resources subsequently worked on this aspect, to ensure better congruence between project portfolio performance and rewards Supply chain management systems were also tuned up to ensure better operational efficiency towards benefits achievement.
ABOUT THE AUTHOR
S. Ramani – Director, GRT Consulting LLP
S. Ramani has more than 25 years of experience in the technology and management consulting industry, spanning key account management; project, program, and portfolio management; management consulting (with PwC Consulting); strategy/portfolio development for IT; and client relationship management.
He has more than 20 years of project/program management, including consulting experience, having successfully led multiple large projects/programs for ERP implementations, business-systems integration, and IT strategy development. These projects/programs were implemented in diverse sectors, including in discrete and process manufacturing, automotive, FMCG, retail, and finance.
Ramani holds multiple professional certifications, including PMI-RMP, PMP, PgMP, and PfMP from PMI. He has multiple practitioner certifications from AXELOS/APMG, UK, including PRINCE2®, MSP®, MoP®, M_o_R®, P3O®, Change Management, MoV®, Agile PM, and Benefits Management. His company, GRT Consulting LLP, specializes in providing niche consulting and coaching professional services in the areas of portfolio/program management and for PPM maturity enhancement.
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Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard. Boston: Harvard Business School Press.
© 2016, S. Ramani
Originally published as part of the 2016 PMI® Global Congress Proceedings – Barcelona, Spain