Project Management Institute

In flux

by Carol Hildebrand

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Describing the world economic market of late as volatile would be an understatement.

It's turning into a bumpy ride for everyone, including project portfolio managers. The temptation is to do something, anything—fast. But spur-of-the-moment reactions won't suffice. There must be a long-term commitment to agility, efficiency, up-front strategic planning and risk management.

“There will always be things that will surprise you, but there are many ways to build some kind of insurance into the portfolio management plan,” says Michal Weisblech Karshen, PMP, a partner at Tefen Management Consulting, Tel Aviv, Israel.

And none of those methods revolve around a crystal ball that can magically predict the future.

“The ability to change and adjust is easier for companies that have invested in the tools, training and people that make companies agile and efficient because they have the necessary information to make good decisions,” says Keith F. Kerr, PMP, managing director, solution and practice development at Robbins-Gioia LLC, a program management consulting firm in Alexandria, Virginia, USA.

The first way to foster that ability to change is fairly basic: Keep an eye out for early warning signals.

“While some substantial changes do occur spontaneously, without warning, most significant changes occur downstream of events or other cues that are detectable using standard risk-identification methods,” says Gregory Woo, PMP, director of the bioscience project management office at Millipore Corp., Boston, Massachusetts, USA.

Assigning probability to those risk cues further clarifies the picture, says Mr. Woo. “If the risks have a high probability of occurrence, then sudden change is very possible. If there are multiple high-probability risks, the sudden change becomes likely.”

CHANGE YOUR WAYS

Unfortunately, project leaders aren't always privy to the specifics of just what might be changing. The current economic crisis is a prime example.

“Since the changes we're talking about are sudden and unknown, it is impossible to predict with precision and accuracy what specific actions will be needed,” says Mr. Woo. “However, there is a good chance that the leadership team can predefine the types of data, control and execution resources they'll need to make good decisions in the midst of a change crisis.”

from the trenches

Gregory Woo, PMP, at Millipore Corp., offers the following tips to help manage the impact of sudden change:

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Consider smaller work packages in areas where change is forecast to be more likely. It reduces the outstanding investment risk and will also provide greater flexibility. Resources can be added or redeployed because individuals aren't locked into long-running tasks, and the workload can be more easily distributed and shared.

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Allocate or plan for a person or group to drive the forecasting and management of change. This builds accountability and ensures the integrity of the change response plan is intact when it's actually needed.

At Millipore, teams meet periodically to review roles, responsibilities and required resources necessary for adapting to sudden change.

It even takes some practice runs.

“These exercises can be simulated drills or productive real-need change initiatives that the organization needs to execute anyway,” Mr. Woo says.

Norton Paratela, PMP, senior IT program and financial services manager at General Motors Corp. in São Paulo, Brazil, relies on simulation tools to evaluate and prepare for possible shifts.

“The project management office supports us with tools and techniques such as Monte Carlo analysis,” he explains. Mr. Paratela then taps into the skills and knowledge of business function experts to fully inform the simulation sessions.

STAY IN LINE

Shifts in the market lead to shifts in corporate strategy. And that, inevitably, must lead to shifts in the project portfolio. It's up to the project team to carefully monitor how economic changes affect corporate direction and be ready to adjust accordingly.

“Usually what companies do in times of crisis is increase the monitoring level and measure performance levels closely,” Ms. Karshen says. For example; how will a one-month deadline slip impact the value of a project with an estimated six-month ROI? Will it diminish the risk-to-reward ratio sufficiently to rationalize killing off the project?

“When stressed for money, most companies want to make sure they recoup their investments and more will go for efficiency,” Ms. Karshen says.

As with the stock market, companies are seeking a balance of risk and reward while also considering company strategy and market conditions.

“You need to have some bread-and-butter projects that lower risk and you know will perform according to goals, but you also want to look for projects that support your long-term goals,” Ms. Karshen says.

sign of the times

Here are some cues that Gregory Woo, PMP, Millipore Corp., uses to forecast sudden change:

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■ Trends of rapid growth or steady decline in market volumes

■ Volatility in the stock market in related business sectors

■ Rapid advancement of technology related to a company's business or product lines

■ Low unemployment and/or difficulty in recruiting qualified personnel

■ High customer interest in alternative product concepts and solutions that differ from your products' value propositions

■ Lack of clarity and focus around corporate strategy and priorities

■ A portfolio that includes significant exploration of—or dependence on—new technologies, tools and techniques

■ Lack of alternative suppliers, distributors or service providers

IN THE LOOP

When it comes to strategy, the mantra has long been that everyone should be on the same page.

“It is crucial to get aligned with the business areas,” says Mr. Paratela. “I consider that a critical factor of success.”

But the lesson takes on even greater importance in times of great volatility.

“Since the business strategy may have to evolve in the light of the sudden change event, the business unit is inextricably intertwined into the portfolio management process,” Mr. Woo says.

Not only should the business unit help formulate the portfolio management plan, but the portfolio manager must make sure everyone in the company understands the motivation behind decisions.

imgMost of the people in the organization need to understand not just the plan, but how it was developed and the rationale going into it. If the market changes, they will then understand why the plan was readjusted.img

—Keith F. Kerr, PMP, Robbins-Gioia LLC, Alexandria, Virginia, USA

“Most of the people in the organization need to understand not just the plan, but how it was developed and the rationale going into it,” Mr. Kerr says. “If the market changes, they will then understand why the plan was readjusted.”

Ms. Karshen stresses transparent communication and recommends a cross-functional portfolio management steering committee to work with participants and stakeholders to align the outcome and process expectations.

The strategy group in Mr. Woo's organization not only creates the portfolio management strategy, but is also engaged in the change-response strategy from its conception, he says.

“Chartering the portfolio management team will allow an advanced understanding of the methods, tools, data and criteria that will be used to forecast, manage and respond to sudden change,” he says. “The organization will have a much better chance of appropriately adapting their portfolio to change in an effective and efficient manner.”

And it always helps to have the right information. Populating a portfolio management system with data that tracks how resources correlate to specific strategic goals can mitigate risk and aid change management, says Mr. Kerr. Leaders can then go in armed with the information they need when redirecting those resources—gauging the assessment of cuts that may ripple through to priority programs.

“A lot of information is already out there, it's a matter of collecting it,” Mr. Kerr says. “But it requires a strategic plan that's measurable to some degree of accountability and the ability to track against that plan.”

Of course, these days, that plan could very well change again. PM

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.

PM NETWORK DECEMBER 2008 WWW.PMI.ORG
DECEMBER 2008 PM NETWORK

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