Project Management Institute

Making the link from strategy to projects--what's the payoff?

Marge Combe, Director of Agency Development, Northwestern Mutual

Most of us think about the link between strategy and projects as a top-down exercise, driving strategy down to projects. But really successful links between strategy and projects flow both ways. It's important that senior management view projects as a means to accomplish strategy, and institute practices that best position the company's projects to get their strategy implemented. But it's just as important that the organization's project managers understand the company's strategies and know how to ask the right questions, maintain focus, and bring into consensus the right people to actually get the strategy successfully implemented as intended. Only when the project—strategy linkage flows both ways does the organization get the real payoff.

Does it matter whether projects and strategy are linked? A story from Northwestern Mutual is illustrative.

In late 1997 we analyzed the mix of projects we had just approved for 1998 budget and resourcing. We classified projects as Required (e.g., Y2K, legal/regulatory requirements), Operational (generally, improvements to systems and processes in the company), and Strategic (supplying a significant contribution to achievement of a strategic growth goal—including such things as product development, expansion of sales capability, integrating new businesses, etc.). Out of an $85 million project budget, only 20% ($17 million) was scheduled to be spent on strategic projects.

Our senior management was genuinely astonished at what they saw. They realized that their strategic plan, which included new lines of business and integration of acquisitions, had no reality—it was only a wish list without the funding and resourcing to make it happen. While they were busy visualizing a changed company, the “silos” were going about their business, industriously making good “continuous improvements” to the way they did their current work. For senior management, the payoff for making the link from strategy to projects is getting their strategies implemented.

The biggest complaint I hear from project managers is that management originally gave them thumbs up for their project, but are not following through on supporting it as expected, and the project managers feel they are overseeing the implosion of their project as a result.

A KPMG, Peat-Marwick (1997) survey of over 1,400 executives found that lack of top management commitment was a key factor in failed projects. To what projects are top executives likely to be committed? They may support a continuous improvement project, but they'll more likely commit to a strategic project.

At the 1999 PMI Symposium, Greg Githens and I gave a presentation on popcorn priorities, the tendency of project priorities to bounce around, given heat that brings one project temporarily to the top, until the next one heats up. Projects that are demonstrably linked to the strategy of the organization are less likely to be buried in the popcorn of newly heated-up projects. For the same reason, these projects are less likely to suffer funding fluctuations.

Think how much easier it is to sell your project to top management when you understand what they are trying to accomplish and can sell it in their terms, translating your benefits into something meaningful to them. Consider the following from a real-life presentation I heard to our senior management. “This project's chief benefit is that it will create a data store for all our financial records that will be accessible on multiple levels.” What if the project manager, had said instead, “We will now be able to get rolled-up financials for all subs and lines of business, and the ability to query and do projections based on any variables,” knowing that a strategy of the company is to expand its number of subs and lines of business, and to analyze their profitability?

For Project Managers, the payoff for making the link from strategy to projects is getting sustained management commitment for their projects.

The remainder of this paper defines techniques to get the payoff for linking strategy and projects.

Linking Strategy to Projects

Strategy Statements

To drive strategy to projects, you've got to start with a good strategy.

Strategy, by its nature, is not very precise. It does not equate to requirements. But to drive a project effectively, you've got to get that pie-in-the sky strategy down to a more tangible level.

There are some things that can be done with the actual strategy statements, and some devices that can be used to provide a bridge between strategy and projects.

The wording of a strategy statement is important in linking it to projects. A strategy must define both the end game (the long-term vision) and the chosen path for the organization to get there. Let me illustrate why this is important in linking projects to strategy.

Let's say you're the Harley-Davidson Company, and you've stated your strategy as “Dominating market share of recreational motorcycles.” If I want funding for a project to build a new style of motorcycle, can I likely get it in this strategy? What if I am pitching a project to build 10 new dealerships? A project to bring all Harley owners together for a Millennium HarleyFest?

Now let's say I clarified that strategy by defining the path I want to take toward that goal:"Dominating market share of recreational motorcycles by intensifying brand loyalty, and thus, repeat sales.”

You can see that selection of the most critical projects to achieve company goals is enhanced by defining both the goal and the path.

The clearer and more specific the strategy statements, the easier it is for the project teams to retain focus on the organization's real goals.

Adding measures to the strategy helps even more. If Harley said they wanted to increase repeat sales by 20% in five years, a project manager working on a project related to this strategy would find it easier to define requirements.

Project Prioritization

Prioritizing projects is one of the most wrenching decision-making processes in business. It is inevitably fraught with political implications, lack of information, and factionalization. Yet it is a crucial process to driving strategy to implementation through projects. How can it be made less painful?

As noted earlier, we classify projects by required, strategic or operational. Early in the budgeting process, when we set company budget targets, we now specify guidelines—at the top management level—on how much of the overall project budget will be allocated to each classification. For instance, for 2000, we were able to shift a percentage of money from the “required” classification to the other two (largely to the “strategic”) because of the wind-down of Y2K activity.

The strategic projects are then further allocated: what percent of the strategic project budget do we want to allocate to which strategies? The resulting guidelines are not intended to be rigid budgets, but rather to guide the prioritization process and reduce political wrangling.

We've also found that it is too difficult for top management to be the prioritization group. They aren't close enough to the action. So we've devised a process that has been well accepted in setting priorities.

The key to the prioritization process is the Review Committee. It is composed of people a level or two down from the five top management people, representing all major functions of the company. The Project Office assures that a set of common information about the projects is collected and provided to the committee, as well as the corporate project budget and the guidelines discussed earlier.

The Committee reviews the projects using a number of criteria and tools to help them analyze the projects. Criteria used in this consideration include:

• Demonstrable impact on corporate strategies

• Cost/benefit analysis

• Criticality of timing (must it be done now?)

• Risk.

Few projects are outright rejected. Instead, two major lists emerge: projects recommended for funding by type and strategy, against the allocation guidelines, and projects recommended for deferral—because of less critical timing, because risks may be too high at present time, etc.

Linking Projects to Strategy

Let's move now from the corporate structures to help assure strategy is driving projects. Let's look at how the project manager can help the strategy—project alignment. It's in your best interests as a project manager to assure that your project does not fail in its linkage to implementing the piece of strategy it set out to accomplish. What are the things that tend to get in the way of your project accomplishing that strategic intent?

• First, and unfortunately tremendously common, is a gap in understanding by the project team of the critical goals of the project. This can quickly bend the project's outcome slightly or more substantively off its intended track.

• Second, is unforeseen or emerging issues, limitations, or interdependencies.

I'll share with you some tools we use to mitigate the risk that your project will fail to implement the intended strategy.

There are several devices we've used to keep the project team focused on the strategic intent of the project.

The Project Charter

We spend a lot of energy in the project making sure the “guiding definition” of the project is highly focused. On the principle that fixing a problem is less costly the earlier it is caught, we try to spend the extra time needed up front to better guarantee the project's outcome will be on target.

A project charter is central to the project's definition. We've chosen to beef up the charter in a few ways to keep the strategic goals front and center in this key vehicle.

Three pieces of the charter help in this regard:

Business Issue:

Too often project charters start out by defining what the project is trying to implement. The project team then doesn't have the advantage of clearly understanding the “why” of that selected solution. Making a few changes in requirements here and there may not affect the stated deliverable, but could cause a reduction in the potency of the project to solve the business issue. We require that a business issue statement be in the charter, and not contain any embedded solutions, but rather define the business problem or opportunity.

Result of work effort:

We also require project managers to define the final product not in terms of an implemented system or process, but in terms of how the business problem will be addressed and to what degree. Usually this includes some measurable.

Interdependencies:

There are frequently other projects or strategic decision-making efforts going on in parallel to this project. Identifying them helps to keep the project team tuned in to potential areas of issues or risks to accomplishing goals.

Benefits Map

In addition to using a cost-benefit analysis, we are exploring the use of a benefits map for large, complex projects. Claiming benefits for a project consistent with the strategic intent is one thing; demonstrating how they'll be delivered and what assumptions are being made is another.

When a project team works together to create a benefits map, they in the process determine to what degree they really feel they can commit to the proposed benefits. A side benefit we've found is that often a less complex route to the solution, or less complicated set of requirements is ‘found’ by the project team during the course of the benefit map's development.

Once completed, the benefits map helps to reduce scope creep, as well as to communicate with everyone the steps in the process, the assumptions being made, and the measurable outcomes being committed to.

Again, it takes some time up front, but it really helps to get early focus and direction.

Issues Management

Another land mine for project teams is that they frequently run into “strategic” issues; those they cannot decide on their own.

Too often I see that the team tries to circumvent the issues, creating a project that provides less than its strategic intent—delivering what is possible instead of what is needed.

To hit those issues head on, it's important to name the issues and create a plan for dealing with them. Our project teams use an “issues matrix” to identify and keep surfaced open issues, so that they may be resolved and allow the team to move on.

The Right Project Team

Successfully linking projects back to strategy requires not just one, but a number of leaders working on the team, all with a determination to keep the project focused despite ambiguity, political agendas, and pressure for scope changes.

All must be well connected to the organization's goals, and to other people in the organization.

The sponsor must be someone who is highly vested in the strategic outcome (part of how his or her performance is measured), and it works best if this person resides “at the top.” Each of our strategic projects must have a top management sponsor, and that person has the strategic projects written into his performance plan for the year. Diluted sponsorship (wrong level, unconnected executive, multiple sponsors) often causes difficulty in keeping projects strategically focused.

The project manager must know more than how to manage schedule and scope. Strategic projects are, by their nature, big change. Strategic project intent is often sidetracked unwittingly by the project's stakeholders trying to minimize the disruptive effects of change. The project manager must maintain a highly active change management plan in order to both obtain the degree of change needed and keep it from disrupting the organization.

Communication Tips

Saying that communication is key to a project is almost trite. But in keeping projects linked to strategy, continual clarification of ambiguity, continual coming to agreement on the meaning of the strategy, continual fostering of organizational benefit over political agendas is absolutely crucial—and perhaps the most difficult thing to accomplish in the project.

Much more so than presentations, a key to successful projects regular, informal dialogue with key stakeholders. You'll pick up on issues that could hang up the project, disagreements on key requirements, etc. earlier, and with fewer fireworks, than by waiting for a presentation.

Written documentation is an excellent way to keep the project moving forward—if it is concise. Requirements documents are not read by senior management. We find that senior execs pay attention to things like issues lists and brief executive summaries.

But most of all, pictures or graphic representations work well to bring all audiences together on a vision without wordsmithing.

Keeping in mind that much of communication in projects is making the multitude of decisions that need to be made, strategic projects pose even more decision points—and often tougher decisions. Finding graphic ways to advance the decision process is critical. Such simple tools as using a 2 x 2 box for a scatter diagram really helps people to come to some decisions more readily, and with greater agreement. This also means, we find, that they'll hold better to the decisions, because they have internally agreed on the overall positioning of the decision.

Summary

To link strategy to projects—to actually drive strategy implementation through projects—the clarity of the strategy helps dramatically. Giving measures and time frames serves to tell project managers how big the effort must be to accomplish strategic intent.

A consensus-building prioritization process, using predetermined guidelines for where the budget will be spent, helps to assure that projects are properly directed toward strategy.

The project manager can do a number of things as well to assure that his or her strategic project is going to accomplish what management intends (even if management isn't exactly sure what they intend).

Clearly defining the issue the project is trying to solve, and graphically showing the major benefits of the project and how they will be approached, helps to elicit management's questions early in the project—and thus also obtain earlier buy-in.

Providing a structured means of resolving thorny issues as they come up via an Issues List helps to prevent projects from suboptimizing.

Many project leader skills are important to achievement of the project's strategy, but most critical is the project leaders' ability to effectively manage change. A formal change management process is helpful.

Communicating—even over communicating—is important, and graphic communication tools help dramatically to assure that messages are understood.

To get the real payoff—the satisfaction of senior management in achieving their strategic goals, and the satisfaction of project managers in bringing home a successful, unimpeded project—the link between strategy and projects must flow both ways, making use of many devices to aid in continually ascertaining that linkage.

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.

Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA

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