The sum of all parts
Find your portfolio's strengths, FILL THE GAPS, and frame a strategy for success.
BY NATALIE BAUER
Project portfolio management is about as wonderful as last year's birthday present.
Packaged as a practical, structure-based solution to the chaos of an organization's project environment, business leaders have taken eagerly to the methodology like a child to a birthday gift. In fact, almost 98 percent of organizations rate project portfolio management as an important tool.
Portfolio planning must be an inclusive process, calling on project managers and executives to use their particular expertise to paint a fuller picture of a company's current asset base and its strategic priorities.
Singular resource managers can enhance cohesion and enable better selection of resources based on capability rather than selecting only on availability.
Encourage development of resources, but start every project on a template to mitigate lesser talent.
Synergizing the portfolio will enable flexible, fast reactions to sudden market shifts.
Portfolio management will add to the bottom line only by selling the procedure through visible results across the entire enterprise.
However, now that the excitement has worn off, executives are left with crumpled-up wrapping paper, confusing assembly guidelines and complex usage instructions.
Many organizations say they are only “moderately satisfied” with their current portfolio management techniques and are “fairly weak” in optimizing their portfolios, according to a study by the Center for Business Practices (CBP), Havertown, Pa., USA. Meanwhile, fewer than 20 percent of Forbes Global 2000 companies have the portfolio management expertise or tools required to chart a course for competitive positioning, according to META Group.
“When companies look at their portfolios, very often they don't have a portfolio,” says Frank Winters, a founding principal with New England Project Services, Westford, Mass., USA. “They have a collection of projects that they can't even enumerate. They don't even have a complete list of their projects.”
Executive sponsors can reinvigorate the practice by gaining an intimate understanding of the portfolio's strengths and weaknesses and by learning how to manipulate and capitalize on them for maximum performance.
Square Peg, Round Hole
Probably the most problematic yet beneficial aspect of portfolio management is the ability to plan and allocate resources optimally according to strategic direction. Using market indices, executives can see clearly where their organization needs to head, but they often can't see the tools they've got to get there. It's the square peg in the round hole scenario. Executives shouldn't try to force skill sets to fit all types of projects.
“You have to take into consideration the resources that are going to be at work, but companies usually just have a loose collection of people's skill sets thrown together without much direction,” says Melissa Kantor of Kantor Business Solutions, Dublin, Calif., USA, a specialist in human resources technology project management. “A lot of [planning] quite frankly comes down to who's available and who's not, rather than according to skill sets.”
Instead, executives and portfolio managers should work together to gain a clear, concrete view of the company's current facilities to select future projects. “To make portfolio decisions, there's a need to have that inventory of assets, but it's not just making decisions by the computer,” says George Pitagorsky, PMP, director of product development and senior vice president for International Institute for Learning (IIL), New York, N.Y., USA.
You must involve project managers earlier in the forward-thinking development, where their ability to deal with the ambiguity of strategy will add value to the process.
Program Director, Meta Project Management,
To align ambition with reality, portfolio overseers must stray away from technology and rely more on their project managers and experts in the field. “You must involve project managers earlier in the forward-thinking development, where their ability to deal with the ambiguity of strategy will add value to the process and demonstrate the strategic value of project management,” says Mark Ives, program director for Meta Project Management, Melbourne, Australia.
And in reverse, “the people who drive project portfolio management are often very analytical people,” Pitagorsky says. “If they drive off without getting the understanding of the senior executives, there can be a much more difficult and almost dangerous process that goes on because the information becomes too narrowly focused. You must diminish risk by including all sorts of people in the process.”
ALIGN YOUR STARS
Although it's a division of one of the world's largest technology companies, Armonk, N.Y., USA-based IBM Business Consulting Services executives use an age-old management technique to get a clear perspective on its portfolios and available resources. “It's all done through face-to-face communication and virtual meetings,” says Steven DelGrosso, PMP, a Raleigh, N.C., USA-based executive project manager and public sector program management community leader. “It's a back-and-forth dialogue between the program managers and the executives, who are evaluating the potential projects we're pursuing at least twice a month to get a feeling for the potential business. Really the communication between the executives and the program managers themselves is so frequent that everybody's plugged into the process.”
The division seeks to have certified project managers overseeing any project identified by the executive team as critical to the business strategy. To ensure a sufficient cadre of capable project managers is available, the management team conducts an annual evaluation process, where each practitioner commits to fulfilling a number of business and personal goals. The practitioner's direct manager then gives interim evaluations from project to project, and at year's end, management provides an overall assessment and helps the practitioner plot the next year's aims. “It goes hand-in-hand with the annual business measurement process,” DelGrosso says.
A positive correlation has resulted between the number of certified project managers and portfolio performance over the past four to five years since the project management development and certification became a priority, according to DelGrosso. “There's a definite business benefit in making sure that we have the right amount and mix of properly trained project managers and making sure they're managing the most important projects.”
Kantor says the “bubble method” enhances this requisite flow of information across organizational boundaries. Project teams are treated literally like bubbles, little worlds in which the project manager understands his or her team extremely well and can vouch for the team when a proposed project sounds like the right fit.
Strength in Numbers
Appointing a single resource manager also contributes to better portfolio planning. The resource manager, who serves as a sort of lifeline between executives and project managers, basically owns and understands the skill sets of various individuals across the enterprise. These managers track basic skills and personnel developments, such as certifications, and continually keep the company's knowledge base up to date, Kantor says.
At the Department of Human Services MIS Division, Austin, Texas, USA, resource managers allow for just-in-time resourcing, enabling project managers to zero in on the project itself and not tangential issues such as staffing, says David Brandon, PMP, deputy director, corporate communications. “All I have to say is, ‘I need someone on my project; I need this skill set,’ and then there are managers who decide if that skill is available. If we don't have it on payroll, there are standard contracts to hire outsourcers. That way I don't have to worry about finding the people. Someone else goes and finds the resources—I just need to know what I'm asking for.”
Accurately documenting a portfolio's current asset base in real time provides ample justification for filling in its gaps and shaping its future trajectory. “It's a constant management issue,” Brandon says. “You've got your weakest link scenario.”
The updated portfolio provides a visibility that allows executives to develop a vested interest in cultivating and retaining skill sets to align with future strategic direction. By 2005, more than 50 percent of Forbes Global 2000 firms will institute a human capital portfolio approach to retain their best talent, according to META Group.
STEVEN DELGROSSO, PMP
But you can't have all the talent all the time. While Kantor argues that—despite higher costs—companies must pursue and retain top talent, Pitagorsky says companies must be able to mitigate their current resource gap by implementing strict, repeatable procedures. “There must be a model in place that even mediocre project managers will have to use,” Pitagorsky says. “Then there's less of a need for ‘star’ project managers.”
Working along this model also helps illuminate similarities and synergies among projects. Cognizant portfolio managers will use these overlays to the enterprise's advantage in buying time depending on the scheduling of similar projects and in adding profit by packaging products and services accordingly.
IIL, for example, has a set of tools used for performance measurement and maturity assessment that when matched up just make more sense. “We're making constraints on the measurement tools to have a look and feel that makes them more in sync with the methodology tool even though those tools can be sold completely separate from one another,” Pitagorsky says.
Enhancing these interconnections also provides the portfolio with some sense of flexibility, which enables quicker reactions to sudden market shifts. “You want [the portfolio] to have a set of really basic building blocks that you can put together in many ways to fit the marketplace,” Pitagorsky says.
To build on this synergy, careful steps should be mandated at the proposal stage. Each future project must be accompanied by a thorough business case illuminating exactly how the new project would flow into the current project mix to add value. “Business requirements come first,” Winters says. “It sounds simplistic, but it's not the way people behave.”
PLANNING FOR PERFECTION
Three years ago, very limited project governance existed at the Alberta Workers' Compensation Board (WCB), Edmonton, Alberta, Canada. Projects often started without executive approval, and executives received bare-bones feedback.
As a result, WCB executives utilized the Planning & Priorities (P&P) Committee to govern resource allocation and oversee projects. The P&P provided more visibility across the organization and enabled executives to plan projects according to strategy, based on four priorities:
- Returning people to work
- Leveraging prevention
- Ensuring accidents don't occur on the job
- Maintaining financial stability.
“A commitment to fairness is a major theme to our business,” says Jim Wheadon, vice president for business development and information management. “Primarily as an organization, we are about returning people to work. As we look at investments in our organization, claims management and adjudication of claims are core to what we are and what we do, and those projects take priority.”
Mapping out definite strategies according to the four priorities enables the P&P team to plan better projects that will yield stronger results. As a result, WCB's current focus is to refine its portfolio, drive value out of current investments and add incrementally to that base. It's not a “big-bang” plan, as Wheadon says, but a smart one that has shown promise in the three years since portfolio became a greater priority.
“We've achieved integrated IT. We're sharing data and consolidating technology,” Wheadon says. “From the business cases that we have, we're actually making sure that we're really achieving the benefits that projects assert when they start, and we're measuring those results to help us create a better picture for the future.”
Restricted budgets, though, can change behavior for the better, as Brenda Breslin, PMP, can attest. The director of the project management office for the Albany, N.Y., USA-based New York State Office for Technology says, “In the current fiscal climate, the value of each project must be exceedingly well-defined and justified before it can be funded. Also, identifying the risk is even more important, not because high-risk projects shouldn't be done, but because we need to put more emphasis on identifying and managing the risks to increase the project's probability of success. We cannot afford expensive mitigation tactics because we failed to navigate around an avoidable risk.”
Looking for synergies also helps illuminate gaps in the project mix. When a company has an effective strategy in place and a solid prioritization scheme mapped out, executive councils are better able to identify the gaps they want to fill and those they are better off letting alone.
For example, the Alberta Workers' Compensation Board, Edmonton, Alberta, Canada, has undergone a major transformation in the past three years to boost its project portfolio. In that time, executives have formulated strategic direction based on four concrete tenets (See sidebar, Planning for Perfection) to help prioritize what portfolio managers should pursue and what falls outside that radius. Jim Wheadon, vice president for business development and information management, says, “We're better using the resources we have both internally and externally.”
In the current fiscal climate, the value of each project must be exceedingly well-defined and justified before it can be funded.
Brenda Breslin, PMP,
Director, Project Management Office,
New York State Office for Technology,
Albany, N.Y., USA
But to veritably boost the project portfolio, executives such as Wheadon must continually illuminate this value and sell the portfolio process across the organization, not only in the corner offices, but in all corners of the enterprise.
“The value of the process must be demonstrated repeatedly to convince the masses,” Breslin says. “If no visible changes are made as a result of the information provided to the portfolio management process, support will erode and buy-in will be nonexistent. When that happens, the information required becomes more difficult to acquire. Thus, the key is to see visible decisions as a result of the process.” PM
PM NETWORK | APRIL 2004 | WWW.PMI.ORG
APRIL 2004 | PM NETWORK