Peter Piper picked projects for his PMO portfolio, but how many prioritized projects shoud Peter Piper have picked? Plus, does Peter Piper have the proper personnel for perfect project planning?

Tom Nieukirk, Director, CGN & Associates

Anoop Raghunandan, Senior Manager, CGN & Associates

The Dilemma

We arrive on the scene of an organization in turmoil. Really this isn’t any different from any organization we look at---only the size, location, and culture are the sources of variation. This organization is struggling with keeping their diversified portfolio (global product lines, financial services, and core operations) balanced and getting the effort of the organization to support the strategic vision. Everywhere we looked, one thing was a constant; people were busy, very busy. There was conceivably no bandwidth to handle any new initiatives. and each time a new initiative occurred, employees had to say goodbye to more time with loved ones. Although they were proud to be working for a company with such prestige, no one felt that the company was looking out for them or for anything but the bottom line. Through the organization, only a fraction of those working on the initiatives had an understanding of how their tasks were related to organizational success.

So who are we? We are the change agents for this organization and we have our mission. We are going to help Peter Piper, an executive at a leading manufacturer, figure out how to help his portfolio and project management team to pick from a peck of projects, and make the delivery of those projects successful. Having successful projects is a key factor in rebuilding employee morale in the organization. It is our mission is to create a culture that embraces the decision-making needs of the organization at all levels and implements the tools that enable proactive decision making needed by the organization for financial health and competitive advantage. This is not a quick or easy task in any organization.

Getting Started

As we work through the organization, we divide the organization into three levels (Exhibit 1): executive (organizational direction), portfolio (inter- and intraservice lines), and project execution. All three levels are critical to the success of our efforts and to the ultimate success of the organization, because each has different responsibilities to the organization and requires different communication/perspectives. Working with each level, we look to gather the critical business decision points, critical success factors, elements of positive/negative risk, and the capabilities of the employees (human capital) to include the cultural environment (internal and external).

The Three Levels of the Organization

Exhibit 1—The Three Levels of the Organization

At the executive level, we find that change in leadership causes great disruptions due to shifts in objectives. The ability to make decisions based on the pulse of the organization is compromised because of inaccurate or misdirected information. Risks are primarily involved with the volatility of the North American market while the global business was still profitable. Being successful primarily revolves around the ability to provide shareholder value.

At the portfolio level, the struggles in the organization come between conflicting priorities. The product side of the business is less profitable than the financial services offerings, yet the company is known for their products and not for their financial services. Product lines faced risks and prioritization issues due to the rising costs of fuel and economic trends. The long development cycles for the organizations’ products make the decision to switch from a previously established direction very difficult.

At the project execution level, there are resource-based issues everywhere. Employees are not motivated by the organization, primarily due to very poor communication throughout. Employees are allowed to ignore the current needs of the projects to work on the “fire drill” needs of the organization. Too many projects are expected to be done without the appropriate staffing or funding levels to be executed successfully. Many projects meeting deadlines are fraught with short cuts that directly impact the sustainability of the project objectives.

As in other organizations, the root causes for these dilemmas are twofold: (1) a framework for decision making that is not sustainable and/or is nonexistent in the organization, and (2) a lack of understanding of how to implement human capital management (primarily communication and management training).

Corporate Decision Cycle

Based on our findings, we determine that this organization needs to implement a framework for making decisions. Our corporate decision cycle (Exhibit 2) is comprised of five cyclical elements: (1) decision simulation, (2) portfolio management, (3) project management, (4) efficient workflows, and (5) human capital. The cyclical nature requires appropriate and constant communication, so that none becomes a silo which will degrade the capability of the organization.

Corporate Decision Cycle

Exhibit 2—Corporate Decision Cycle

The corporate decision cycle is designed to work at each level of the organization and will be rolled out in a phased approach to increase our probability of success in the organization.

Implementation

The first order of business is to educate Peter, his team, and select others to understand the corporate decision cycle framework and what it entails. We review that a decision framework enables simulation and that simulation takes into consideration the critical success factors, risks, and limitations. When thinking of critical success factors, we are thinking about the core triggers that cause a decision to be made, and, as we all know, multiple triggers can be involved in and create complexity in the decision-making process. The key to developing critical success factors in a corporate decision cycle framework is the dependence on three things: velocity, sustainability, and human capital. The major roadblocks that we are going to face in the organization include resistance from experienced team members, tunnel vision, and the overall maturity of the organization. The decision framework is going to move to a maturity level that most in the organization do not think possible or relevant.

We also communicate how to change the current portfolio management role within the organization. Beyond the cultural and organizational change between management and the portfolio role, there are four major aspects to successful portfolio management: (1) portfolio rationalization, (2) reporting, (3) expectations, and (4) lessons learned. Following this, we communicate the critical areas of linkage between the management of the portfolio to the management of the projects. The key to areas of linkage are through the cost drivers of the organization and the mechanisms put in place to assist projects when trouble is communicated.

Finally, we communicate the importance of continuous improvement. Continuous improvement is important not only at the task and activity level, but at the portfolio and project management level as well. Most importantly, the employees need to feel empowered for these initiatives to be successful.

Portfolio Level

As we work with Peter, one thing becomes very evident. The busy nature and constant fire drill approach to the projects are wearing thin and consequently impeding the organization’s ability to meet objectives. We help Peter identify the cost drivers for the organization and their relationships to the current process and upcoming projects. These cost drivers were originated at the executive level in the organization, but previously, the impact to these cost drivers was not parlayed down to the portfolio level. We capture these in a value map, as shown below (Exhibit 3). This map makes it easy for Peter and others to discuss and understand the cost driver relationships between the in-process and upcoming projects.

Value Map

Exhibit 3—Value Map

Using this information, the relationship to the cost drivers is put into a framework to use in a simulation model. The model takes in consideration different cost variables, resource requirements, risk factors, and expected timelines. This framework ensures that the values used in the decision are documented and can be discussed to improve continuously the decision-making process through lessons learned. An example is shown below (Exhibit 4).

Portfolio Decision Input Framework

Exhibit 4-Portfolio Decision Input Framework

After running simulation, we quickly determine that the organization has far too many projects to complete them all successfully. This is driving short-cut behaviors and resulting in poor quality of deliverables. Much of the poor quality must be addressed by teams, and the drastic increase in quality problems overwhelms the bandwidth of the quality teams to be effective. This is a vicious circle of productivity loss throughout the organization. Below is a screen shot of the simulation output and the report showing the impact of the projects and the organizational priority based on cost drivers (Exhibit 5).

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Portfolio Decision Output Framework

Exhibit 5—Portfolio Decision Output Framework

The output of this is that by eliminating the low-value added projects, quality would improve and an expected increase in revenue to the organization would be 54%. In addition, the simulation shows higher throughput with lower cost and resource requirements. With this information, Peter has the data necessary to discuss with the executive team and his peers to enable the organization to implement the necessary changes to the project make-up to improve itself. Through careful discussion with the executive team, the projects are scaled back and removed from the pipeline to match the expectations of what the organization can deliver.

Project Level

At the project level, Peter is still very concerned about the ability to execute these projects and adequately adjust for resources as risk plans are put into effect. These changes ultimately affect the portfolio of projects and have the potential to push up resource utilization as well as increase the cost impact to the organization. The organization’s current capability to forecast resource requirements for upcoming projects stresses the portfolio management side, and Peter needs a solution to help his project managers forecast their needs as well.

Currently the organization’s project managers are forecasting their needs through various methods. Spreadsheets, project plans, and online tools are all being employed to various levels of success and without consistency through the organization. Aside from high-level methodologies, there is an absence of understanding of what it actually takes took to do the job. The projects are not in chaos but are disorganized, and a lack of control is definitely evident.

Because of the global nature of the projects and their diverse background and requirements, we choose not to implement an organization-wide project management solution. Instead we decide to carry out a standardized method of estimating and forecasting the needs of each project. This method takes into account factors such as resource cost/experience and time requirements, project duration, and complexity/size of the future projects. We are then able to load these projects together for a subset of projects to forecast the cost and resource requirements over a specified time period.

The key to this is the standardization across the board. Below (Exhibits 6, 7 and 8) are examples of some reports that were produced from this study.

Gantt View demonstrates the timelines across multiple projects as well the effort associated by month for the captured projects

Exhibit 6—Gantt View demonstrates the timelines across multiple projects as well the effort associated
by month for the captured projects.

Role Summary: Number of Individuals Required for a particular department to support the initiatives’ current process and proposed projects

Exhibit 7 Role Summary: Number of Individuals Required for a particular department to support the initiatives’ current process and proposed projects.

Cost as it is accrued the projects are executed. Another report also shows the financial gain from the project in the same format

Exhibit 8 – Cost as it is accrued the projects are executed. Another report also shows the financial gain from the project in the same format.

With these tools, Peter is able to forecast with confidence that the same drivers and techniques are being employed to forecast the amount of resources and associated costs per project. This is the foundation for continuous improvement and helping the project managers improve estimation accuracy.

Success

In conclusion, Peter Piper has a daunting task ahead of him to pick the right projects and make sure that the resources can deliver the triple constraints of cost, quality, and schedule. His journey has just started, Phase 1 is implemented, and his success is enabled by the framework that we built as a team. From building a decision framework that leverages the power of simulation into the portfolio and project needs impacting the human capital of the project, he can impact the bottom line and, ultimately, the success of the organization. The measure of success boils down to metrics as they were yesterday to where they stand today. The ideal dashboard at each level would focus on improvement of five factors: financial performance, employee satisfaction, product delivery, product quality, and organizational risk. Today the portfolio that Peter is delivering has made the following improvements: a 40% increase in delivered projects, 250% reduction in quality rejected projects, 150% improvement in employee satisfaction, and 35% direct line of improvement to revenue!

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2008, Roy Bullivant, Tom Nieukirk, Anoop Raghunandan
Originally published as a part of 2008 PMI Global Congress Proceedings – Denver, Colorado, USA

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