Projects and programs act as vehicles to drive and execute organizational strategy. Organizations group these initiatives under portfolios based on different criteria such as shared resources or aligned vertical markets. An organization's project portfolio defines its strategic direction, thus it is important that the portfolio manager, portfolio management team, organizational executives, and other stakeholders have accurate information about the portfolio context and status. This information assists in making better, more- informed decisions. Taking leverage of business intelligence (BI) concepts, methods, and tools can reveal important insights about the portfolio and its underlying components to the portfolio management team, empowering them with information that becomes the basis for better decision making.
The objective of this paper is to propose portfolio reporting through dashboards and other BI tools, while utilizing both structured and unstructured data that is generated in the portfolio. The complete cycle for BI implementation for project portfolios has been discussed in detail. Along with that, certain KPIs that should be considered at the portfolio level have been proposed as part of the sample portfolio dashboards.
This paper acts as a guideline for organizations to:
- Understand different forms of data and its importance in project portfolios.
- Understand portfolio requirements for reporting and decision-making.
- Select portfolio key performance indicators (KPIs).
- Understand the BI implementation process in project portfolios.
- Understand the factors that help in selection of the right BI tool set.
- Implement portfolio dashboards that assist the portfolio management team to make informed decisions.
This paper also acts as the basis for proposing Business Intelligence Framework for Project Portfolios (BIPPf), a framework that adds to the growing knowledgebase of project management.
Business intelligence (BI), in a broader sense, is a set of concepts, methods, applications, and technologies, which are utilized to transform raw data into meaningful information that can be utilized by stakeholders to make informed decisions. Organizations utilize BI practices, tools, and techniques to understand their state of affairs, competitors, and market conditions. This enables organizations to address existing business concerns and develop organizational strategies that provide them a competitive advantage in the market.
Organization's existing project portfolio depicts the organizational direction and strategy, thus there is a clear linkage between project portfolio and BI. It is therefore important for organizations to apply BI practices and implement BI tools to the project portfolio, so that they can understand the status of the portfolio, trends, history, and information about underlying components.
Predictive analysis capabilities available in BI tools can also be applied to utilize past information in order to derive models and analysis that help the portfolio and its underlying components and future outcomes. Application of BI provides visibility and assists in decisions that help in proactively managing projects, programs, and portfolios.
Before directing the discussion towards application of BI practices to project portfolios, we will review some important dimensions of project portfolios.
PMI defines portfolios as a collection of projects, programs, sub-portfolios, and operations managed as a group to achieve strategic objectives (PMI, 2013). The objective of this grouping is to coordinate interfaces and prioritize resources between components in order to reduce uncertainty. The program and projects within a portfolio are temporary; however, portfolios are, generally, permanent organizations within parent organizations, which are focused toward certain organizational strategic goal or objectives. Portfolio components may not necessarily have similar objectives and the grouping can be based on vertical markets or organizational functions.
Organizations always have a limited availability of resources, and it is challenging for the management to execute every proposed initiative. Components within the same portfolio compete for scarce resources, which include finances, human resources, machineries, hardware, and other resources within the same organization. Thus it is important for the management team to clearly define the organizational strategy, so that initiatives are selected for execution based on their alignment with strategic objectives. An organization's project portfolio provides a clear snapshot of its current strategic direction.
PMI (2013) defines portfolio management as the coordinated management of portfolio(s) in order to achieve organizational strategic objectives or goals. This coordination requires consistent monitoring and decision making to refine and implement the firm's strategic goals through optimal allocation of available resources.
The key dimensions of portfolio management include strategic alignment, consistent monitoring, resource allocation, decision making, coordination among components and inter-component risk/issue resolutions. Portfolio management ensures that organizations follow a formal process to prioritize, select, and agree on the right projects based on business strategy.
The five main objectives of portfolio management as defined by Dickinson et al. (2001) are
- Defining goals and objectives,
- Understanding, accepting, and making trade-offs,
- Identifying, eliminating, minimizing, and diversifying risk,
- Monitoring portfolio performance, and
- Establishing confidence in achieving a desired objective.
The portfolio management team ensures that the resource utilization is optimized and the financial value of the portfolio is maximized. In case there is a shift in organizational strategy, it should reflect on the project portfolio. Similarly, the performance of the portfolio also has an impact on the organizational strategy. An example would be a product development initiative that delivers earlier than planned, which may eventually influence the organization to enter a certain market earlier than anticipated. Thus the portfolio management team has to warrant the linkage between project portfolio and organizational strategy.
Project Portfolios and Organizational Strategy
We have all worked on projects that seemingly were going well but ended up in cold storage with resources being allocated to other initiatives. The stakeholders lost interest in the initiative, the project lost direction, and the commitment level from the executive sponsor simply faded away. The project team cannot do much about such circumstances as these situations generally arise due to a change in organizational direction or a shift in strategic priorities. The scope of the project gets redefined, the priority of the project is revisited, the resources are moved to other initiatives, or, in some cases, the project gets terminated. That's what strategic alignment is all about.
It is important for the portfolio management team to stay aligned with the organizational strategy so that the organizational resources are optimally utilized. This alignment can only occur when the portfolio management team understands the vision and mission of the organization. More importantly, the organization has to clearly identify and define the strategic objectives and the underlying goals. The communication mechanism between the executive board and the portfolio management team should be seamless. Any change in strategic direction should be communicated to the portfolio management team so that portfolio's strategic alignment is secure.
Based on the portfolio dimensions discussed previously, there are some core functions that the portfolio management team fulfills. These functions include but are not limited to:
- Strategic alignment, which means ensuring that the portfolio remains aligned with the organizational strategy and that the portfolio's status is communicated to the executive team for review of the strategy. The strategic alignment includes selecting the right projects, terminating the projects not needed, and allocating the resources based on the component priority.
- Resource optimization, which means that the organizational resources are optimally utilized and allocated to different components of the portfolio as discussed previously.
- Monitoring and control portfolio, which means monitoring and controlling the portfolio and its underlying components. The portfolio acts as a governance entity for the underlying projects and programs. Any decisions, risks, or issues above the defined threshold level are reviewed and handled by the portfolio management team.
- External perspective, which means monitoring and influencing the external environment. The portfolio management team should consistently monitor the external environment to ensure that external influential factors are taken into consideration while making portfolio decisions. External factors may have a strong influence on the organizational strategy.
- Summation of components, which means executives have a holistic view of the components at the portfolio level. Even though the performance of components is important, what matters at the portfolio level is that the overall portfolio should perform well and deliver value as a whole.
- Stakeholder engagement, which ensures that the executive management is aware of the portfolio status. Along with that, the portfolio management team needs to ensure that the leaders of the underlying components should have a clear idea about the organization's strategic direction and the standing of applicable components in the organizational strategy.
The Realm of Portfolio Data
Project portfolios generate substantial data on a daily basis. Some of the data is captured through software applications that are being utilized by organizations to manage portfolios and their underlying projects and programs. However, a considerable amount of data remains uncaptured and is never considered as part of the portfolio performance analysis. The uncaptured data are mostly unstructured and capturing this will not add much value unless the data are organized and structured for portfolio analysis. Structured data can be analyzed; however, large amounts of unstructured data that can provide important insights of the portfolio are wasted.
This unstructured and structured data can be utilized in conjunction to understanding portfolio performance from multiple dimensions. Consider a construction portfolio that has a project associated with the construction of a bridge in a populated area, performing within the defined thresholds of time and cost. However, analysis of tweets and Facebook feeds could reflect that the affected population is quite unpleased with the resulting noise and pollution. Such an analysis will allow the project team to devise a strategy to manage stakeholder expectations that will increase the chance of project success.
The evolution of technology has made data capturing and reporting a relatively simple endeavor. Organizations should select KPIs that have to be measured and reported so that portfolio insights can be understood. These KPIs can act as a benchmark to capture data through the use of different tools and technologies.
Reporting of the component's progress and status to the portfolio management team is the responsibility of the component's management team. However, the portfolio management team needs to create high-level or executive reports that should be disseminated at the right time and with the right information to executive management and relevant stakeholders. This information delivery ensures that the executive management will be able to make accurate and timely decisions related to the organizational strategy and the portfolio in question.
At the portfolio level you need to ask two key questions:
- What is important at the portfolio level? This information typically depends on functions executed by the portfolio and the KPIs that have to be reported at the portfolio level.
- Which project/program data is important at the portfolio level? This information helps in deciding the specific features that can be utilized by interested stakeholders who can reach the right level of information when required.
In addition to the answers to these questions, it is important that the communication frequency, method, and format, defined by the portfolio management team, meets the following requirements:
- The reporting should be aligned with the stakeholder needs.
- The reporting format is aligned with the reporting content.
- The reports should deliver information that is sufficiently specific and current.
Ensuring these measures increases the confidence of stakeholder in reports and reporting mechanisms. It is also important to understand the timing and content of information, because the validity of information is a key aspect.
Component reporting and communication begins from the initial phases; however, the frequency of reporting as well as its content may evolve during the component life cycle, based on various factors, such as component performance and other component attributes. It is therefore important to set up a reporting framework for the portfolio, which clearly defines all attributes of the reports that have to be received by the portfolio management team from the component leaders. In addition, the framework should also define the requirements for reports that are to be submitted by the portfolio management team to the executive management.
Planned and On-Demand Reporting
As part of the portfolio's reporting framework, the portfolio management team receives reports and communication from the component's management team and, in turn, provides reports to the executive management and other relevant stakeholders.
The schedule and mode of communication from the portfolio management team depends on the communication management plan and is a management-level responsibility. The reports are reviewed and analyzed by the portfolio management team, and executive reports are generated. These reports are disseminated to the portfolio stakeholders based on the defined schedule.
However, there is always a need for on-demand reporting, because different stakeholders, such as external regularity authorities, may request additional communication and reports at different stages of the portfolio. It is the responsibility of the portfolio team to ensure that these reports are created and submitted to relevant entities.
Most of the reporting is done based on the agreed communication management plan or governance plan; therefore, this can be considered as a planned activity. In cases where the portfolio management team receives continuous requests for additional reporting, it is imperative to review the communication plan and revise it accordingly. The participants of this reporting mechanism include the portfolio management team, executive sponsor, governance board members, program management office members, and, occasionally, external authorities.
The Concept of Business Intelligence
Business intelligence (BI), in the broader sense, is a set of concepts, methods, applications, and technologies, which are utilized to transform raw data into meaningful information that can be utilized by stakeholders to make informed decisions. Organizations utilize BI practices, tools, and techniques to understand their state of affairs, competitors, and market conditions. This enables them to address existing business concerns and develop organizational strategies that provide them with a competitive advantage in the marketplace. In order to make informed decisions, organizational data should be accessible to all relevant stakeholders. This accessibility ensures that the business users can perform their own analyses while freely sharing insights with team members.
BI systems manage organizational metrics and present them to decision makers through intuitive dashboards, reports, and self-service capabilities. The data management and analytics component of BI systems have the capability to consolidate complex internal and third-party data from multiple applications into a central framework for conversion into actionable information. This consolidated data can be analyzed in-depth and compared to other metrics or performance indicators.
Reports? Dashboards? BI? All the same?
Business intelligence has different meanings to different people. People equate BI with dashboards; other consider BI to be a software application. BI is not a tool and not a niche domain. BI is not a concept that is exclusive to IT professionals. BI is, however, a simple notion that anybody can understand; it is about willing to base decisions on facts. While good information leads to smarter decisions and better results, important decisions of any nature in any business should be based on facts. BI supports the decisions that are made with facts and figures.
BI platforms are technology based solutions that usually include the following components:
- ETL tools,
- Master data management and governance tools,
- Data warehouse,
- Multidimensional database or cubes,
- Tools to design dims, attributes, facts, and/or measures,
- Reporting and dashboard tools or platform,
- Analytics tools or platform, and
- Self-service tools.
Reports are one part of the BI capability. Reports provide typical static information that is used by organizations to fulfill daily and weekly operational needs, whereas BI provides organizations with the flexibility or ability to look at the same information from different perspectives using granular capabilities without running a new report.
Dashboards are a mechanism used to present information in a more visually appealing interactive manner in order to enhance the user experience and to present the information in concise manner. Organizations design dashboards in such a way that the most relevant information is presented to the relevant stakeholders in a presentable and understandable manner. Dashboards are one part of the BI equation, which are focused on providing information in a graphically appealing and understandable manner.
Typical BI Challenges
Although BI allows the consolidation and customization of information required for decision making, enabling the strategy process and optimizing business operations, the information and figures needed for consolidation are spread out throughout the company. Moreover, finding the right scenario for every user is often trickier than it sounds, because all users interacting with data do not have the same needs; top-level strategic insights and c- level day-to-day work require different information. To obtain BI, the challenge of producing reliable and relevant figures needs to be addressed.
In some cases, there may be multiple sources of information, which may result in conflict reports. There could be scenarios where the information collection frequency and the content of the reports are not aligned with the stakeholder requirements. This generally results in a lack of trust of the business owners with the information obtained from the reports.
Figure 2 depicts different issues that result in this confidence dearth.
In order to enhance the credibility of reports created by the portfolio team, it is important to ensure that the program team's reports meet the following requirements:
- Sources of information are identified and verified.
- Reporting mechanism is transparent, including the clear process through which the reports are created.
- Conflicting information between multiple sources is identified and resolved.
- Source used is accurate and relevant to the information required.
- Information is sufficiently specific and updated.
Another challenge is that organizations need to recognize that BI implementations are cross-organizational initiatives—not IT initiatives. Users of BI applications are business users and analysts who have a solid understanding of their particular business domain and who understand the data and enable decision making.
BI, as discussed, is a capability for business. Therefore, it makes perfect sense that any tool implemented to support BI should have little to no dependency on IT or other business functions. Business users should be able to access the right information at the right time based on their role in the organization. Organizations need to empower the business users so that they can access, analyze, and collaborate on critical business information to make the best possible decisions.
For example, with self-service capabilities, a portfolio manager can directly use business intelligence to review information to help identify the projects that are consistently performing well or those projects that are lagging behind for the last two months. The portfolio manager can then drill down on a project level to see which activities are causing these delays. This leads to informed discussion between the portfolio manager and the project manager allowing the underlying problems to be resolved more efficiently.
With self-service access to real-time information, employees can quickly analyze the current business context and make informed decisions based on information that is current and relevant to their role.
BI for Project Portfolios (BIPPf)—Enabling Decisions, Driving Strategy
Business Intelligence and Project Portfolios
Business intelligence is neither a product nor a system—it is a constantly evolving strategy, vision, and architecture that continuously seeks to align an organization's operations and direction with its strategic business goals. BI is a broad concept, which encompasses data capturing, cleansing, data warehousing, data mining, and performance management, along with reporting and dashboarding. This paper, while focusing on the reporting aspect of business intelligence, proposes a mechanism to determine the reporting and communication needs of project portfolios and provides guidance on building a BI solution that can enable portfolio managers to make informed decision. The application of BI to portfolio management helps portfolio managers, their teams and other stakeholders to understand how the portfolio has been performing over time and what decisions should be taken to ensure that the portfolio balance is maintained and optimized.
Effective reporting and communication is considered to be a key factor in improved decision making. It is important that information collection and dissemination frequency, mechanism of communication, and the content of reports are aligned with the stakeholder requirements. The stakeholders should not search for the information; rather the information should be presented to them based on their needs. In addition to that, the reports should present information that will assist the stakeholders in making informed decisions.
Project portfolios create substantial information that is lost because of ineffective capturing and dissemination mechanism. Even the information captured is not circulated in an optimized manner. Portfolio BI capabilities and dashboards provide interactive, summarized information that consolidates, aggregates, and arranges project and portfolio measures that are important for the stakeholders. These capabilities can be utilized to display the right information to the right audience on a single screen.
The following sections explain specific steps to implement BI at the portfolio level.
Identifying Stakeholders, Information Needs, and KPIs
The first step is to determine what information is required at the portfolio, program, and project levels so that the portfolio manager and portfolio team can manage, balance, and drive the portfolio more effectively. It is important to note that the information relevant at the project level could be insignificant at the portfolio level. One example of this is tasks that are delayed and do not impact the project's overall timelines; this information may be relevant to the project manager but will not be of much interest to the portfolio manager.
Traditional measures of time and cost, even though important, are not enough to measure the performance of the portfolio and its underlying projects. The importance of soft indicators, such as stakeholder satisfaction and quality of services or products, is of critical importance. Tracking whether the stakeholders are happy today is key to project success, and has an eventual impact on the portfolio level. It is important to do the following:
- Identify who needs what information, when, and in what format?
- Identify the core KPIs that are relevant to track component progress.
- Identify the core KPIs that are relevant to track portfolio progress.
- Categorize your stakeholders in different groups based on the information needs.
Based on experience and research, following KPIs are of prime importance at the portfolio level:
- Deviation of planned hours of work for components,
- Resource utilization and availability.
- Average of CPI, SPI, SV, and CV,
- Milestones missed and achieved on time,
- Average deviation of planned vs. actual duration of components,
- Escalated risks and issues—their status and impact,
- Percentage of components with missed milestones,
- Stakeholder satisfaction (based on different categorizations),
- Percentage of projects that fit organizational strategy (all of them should but sometimes they don't),
- Portfolio balance indicators (high risk vs. low risk, short term vs. long term and other attributes),
- Break even time for components,
- Percentage of overdue component tasks, and
- Number of new components in pipeline with their attributes and information.
It is important to ensure that relevant stakeholders understand the KPIs and their meanings. Otherwise they'll just see fancy numbers.
Capturing and Verifying Data
Once the information needs are identified, ensure that this data is captured through some means. As discussed previously, the data can be loosely divided into structure and unstructured data. Structured data are generated from applications already deployed in the organization. Unstructured data can be captured through analyzing memos, official letters, publicly available or organization-wide available data streams such as tweets, official emails, and other sources. Determine the source from which you want to obtain this information. When a system exists, integrate it, otherwise decide how you are going to capture this information.
It is also important at this point that portfolio manager, portfolio team, and other stakeholders who will be making decisions based on this data understand it and have faith on the reliability and timeliness of the data. Otherwise, the captured data and resultant KPIs will be of no interest to these stakeholders. Problematic data can do more harm in the decision-making process than add value. Decisions based on faulty data can be detrimental to organizations. For example, when data is faulty, it is possible to terminate a component that was performing exceptionally well or possibly initiate a project that has low strategic value. This process takes time—start early and routinely check data health.
Designing the Dashboards and Analytics Layer
Once the stakeholder roles are identified, information needs to be finalized, KPIs agreed upon, and data made available. At this point, develop the portfolio dashboards and start performing analysis. For a Tier 1 dashboard, focus on presenting charts and reports related to KPIs that are important at the portfolio level. Instead of making the dashboard cluttered with data, focus on the top five KPIs that are important to the current context. This will provide a snapshot of portfolio health—;not details about each and every aspect of the portfolio. In addition to that, the focus is not on individual components, which is a project manager concern.
Figure 3 provides a sample dashboard that has high-level details of projects and their health, in addition to the high-level information related to the project portfolio.
One key aspect of this dashboard is the availability of actions that a stakeholder could decide to take based on the available information. Dashboards that simply display data don't add much value. The actions should include, but not be limited to, requesting a detailed status update, sending an email, or requesting a meeting etc. The KPIs shown in Figure 3 may be replaced with the KPIs discussed previously.
Tier 2 dashboards should provide detailed information related to individual KPIs, where a user should be able to perform a detailed analysis related to a particular KPI. Another option to present at a Tier 2 dashboard is detailed information related to the component projects. This is useful when the stakeholder wants further details related to a specific aspect of a project, for example, resource utilization. The project dashboard provides information and KPIs that are important at the project level. Ensure that the navigation between different dashboard tiers is simple and seamless.
Figure 4, shows a sample dashboard for a project. In this case, the focus is on project-related tasks that were not important at the portfolio level.
When designing a dashboard, be sure to identify the relationships between the KPIs. KPIs that have dependencies on each other should be presented together so that the business user can make immediate sense of it. Examples of KPIs with dependencies are:
- Milestones missed and achieved on time, and
- Percentage of components with missed milestones.
These KPIs can be grouped together as both address the same business concern, that is, the milestone perspective of portfolio.
A key aspect related to analytics is the self-service BI capabilities present in various BI tools. There is no longer a need to depend on IT—anyone can perform these analysis functions. These tools (after some backend work) can provide metrics and dimensions for use in answering different questions through analytics. There is no longer a need to ask IT for another report. Create your own, learn insights, and share.
Portfolio's BI capability empowers stakeholders and improves portfolio management effectiveness. Portfolio's data (including external market data) is utilized effectively by converting the data into information and making this information available, discoverable, and transparent. Portfolio decisions are backed by insights into facts and figures, resulting in a decision-making process that is effective and more reliable.
Context-driven dashboards ensure that the right information is presented to the right stakeholder in the right format and at the right time. With BI, portfolio success is realized through relevant, quick, and easy access to actionable information. A well-designed BI capability at the portfolio level ensures that portfolio manager and relevant stakeholders have the ability to:
- Utilize dashboards to help gain insights to make better, confident, and timely decisions.
- Drill-down and aggregate data on different dimensions utilizing self-service tools.
- Better manage the project pipeline and effectively evaluate ideas by measuring the strategic contribution of competing requests to ensure strategic alignments.
- Effectively utilize resources by accurately measuring resource utilization and assignments based on organizational strategy.
- Maximize value from existing portfolio components.
In decision making, it is always important to value judgment and instincts. However, decision makers must eventually accept the results and consequences of their decisions. Complement the decision-making process with facts and figures. Implement BI and enable informed decisions.