A portfolio management system

by Joan Knutson, Contributing Editor

AS PROJECT CLIENTS AND management teams become more sophisticated in the practice of project management, their focus shifts toward the front end of the project management life cycle. Let's explore an upfront Portfolio Management System consisting of the following four phases: Solicitation, Selection, Prioritization, and Registration. More specifically, let's explore the up-front phase of the project, which starts with congealing an idea into a proposal or a business case (Solicitation), the presentation of the Business Case to the-powers-that-be and receiving or being denied an approval to proceed (Selection), the prioritization of the project relative to other projects (Prioritization), and ultimately the placement of the basic information concerning the approved project into a portfolio database (Registration).

Categorization of Projects. Projects may originate at the top of the organization, out of a strategic planning process, or from the bottom of the organization, stemming from an individual's or group's initiative to recommend a project that they believe will add value to the organization.

Strategic Projects. The driving or gating projects within an organization are those that were isolated through a high-level management process to support the strategic plan. Even these pseudo-blessed projects must go through the Portfolio Management System. In other words, the top-down projects require a business case as developed in this project solicitation phase as well as prioritization and registration. The purpose is to ensure that these projects in fact are cost justified and will add business value after their completion.

To keep a handle on multiple projects, start early and systematize the initial steps.

Bottom-up Projects. Many good ideas are generated by people who “work in the trenches.” To ignore them would be foolhardy, possibly losing a meaningful opportunity. However, if those folks who have these bona fide recommendations don't have a forum and a process to express these suggestions, they will either never act on their dreams or they will proceed with no approval. For those that proceed with no approval, organizational resources will be spent without being monitored or tracked and/or irrelevant, meaningless, wasteful projects will be conducted sub rosa.

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Joan Knutson is founder and president of Project Mentors, a San Francisco-based project management training and consulting firm. She can be reached at 415/955-5777. Send comments on this column to editorial@pmi.org.

Consider now how each of these types of projects moves through this process.

Project Solicitation. This phase of the Portfolio Management System consists of documenting the idea in such a way as to facilitate the selection and prioritization decisions coming up in the next two phases. For both strategic and bottom-up projects, that means developing a business case or project proposal.

Here are some guidelines to follow during the solicitation phase: The person (people) writing the document must know ahead of time (1) the process the project proposal will follow; in other words, who will be reviewing it, how long it will take to get a decision; (2) if and how to use an appeal process should the project not be approved; (3) the consistent format, layout, content that is required to be presented; and (4) precisely on what criteria the project will be approved or denied, and ultimately prioritized.

At the end of the solicitation phase of the Portfolio Management System, the proponents of a project have generated a business case or a project proposal following the guidelines provided to them. In some cases, after finishing the solicitation documentation, the proponents may realize that their project will never get through the selection hurdle, or if it does, it will be so low on the priority list that they will never get the resources to do the job. Therefore, the proponent will not even present the project for consideration, thus saving a lot of time and energy for everyone concerned. If these proponents feel that their project is still justified, they will move it into the selection phase.

Project Selection. In this phase, a group of decision-makers that represent a cross-section of management will review the various projects that are up for consideration. In some cases, the project must go through a tiered progression. In other words, one's department or division management must approve the project first before it goes to the top management selection committee. Here again we are positioning a filter so that only the most justifiable projects are sent to top management for consideration.

This decision-making group will review each project using a predefined criteria checklist. They will consider the value of the project not only relative to its financial justification but also relative to the impact on the staff, the impact on or synergy with other projects, the image within the marketplace, and so forth. These criteria may be a scoring of the project relative to meeting or not meeting the criteria or it may be a rating of the project positively or negatively relative to the criteria. Of course, there will be tangible data considered, such as financial benefits as compared to financial costs, resource requirements, technological constraints.

The decision-making group will either require a presentation from the proponent(s) or will review and discuss the proponent's solicitation document. This may be an iterative process during which the decision-making group can ask for additional information. However, because the proponents are well aware of the criteria upon which their project will be evaluated, this need for iterative data gathering is usually minimized. Using the selection criteria, this group will either approve or disapprove the project. If the project is denied, the decision-making group will give the proponent the reasons why their project was not approved. In some organizations, the proponent will have a court of appeal.

There are several guidelines that must be followed in this selection phase: protocols must be established and followed; the proponent must enter the process not with an emotional desire to “win” but with a professional attitude that their project will be evaluated on its merits and may not be selected; the decision-making group must put aside their functional area concerns and focus on the good of the organization.

For those projects that have been approved, selection is only the first hurdle. The next hurdle is project prioritization.

Project Prioritization. The same criteria that were used in the selection process are used in prioritization. Therefore, the hard work has already been done in the selection phase. The decision-making group now needs to review the scoring to assure themselves that it has remained the same; and if it has not, to change it. The prioritization scores go through the Portfolio Management System, which sums the scores and rank orders the new project relative to the other projects being considered and relative to the current projects that have been prioritized; some of which are under way and some of which are in the queue.

After the system has “run the numbers,” the decision-making group looks at the new project priority list, verifying that the new list makes good business sense and that no intangible, nonquantifiable variables need to be taken into consideration.

Starting to track the portfolio of projects after the project has already been planned is like coming into the middle a movie.

These folks are “boss.” They have the right to modify the priority list as they see fit, with two caveats: (1) that they are doing it from a strictly objective, business perspective, and (2) that they have every intention of adhering to these priorities.

The new projects have been prioritized and merged into the priority list with other older projects that were considered at a previous session. Lastly, these new projects go through the registration phase.

Project Registration. The registration of projects consists of assigning the project a Project ID No.; indicating the person who will be the project sponsor or champion of this project (note that it may or may not be the proponent); documenting all the current project players, their department, telephone and e-mail numbers, and so forth; articulating the project charter or the statement of work; and reconfirming the priority position that this project has as compared to other projects. This file becomes the central core record of the high-level organizational information concerning the project. There are other data fields which you may include, such as who was on the selection/priority setting team, and on which criteria did the project rate particularly high and particularly low.

Automation. As I have been discussing this Portfolio Management System, I have attempted not to imply that it is an automated system. It could certainly be a manual, pencil-and-paper system. However, can you see how each of these segments could be automated? For example, the project proposal from the solicitation phase could be filled out online using word processing software; the criteria used to approve/disapprove and prioritize the project in the selection and prioritization phases could be manipulated using spreadsheet software; and the core organizational information concerning the project could be resident in a relational database. As long as each of these is linked ultimately to the Project ID No., we have begun our project knowledge-based system or our automated project notebook.

There are several Project Portfolio Management Systems on the market; not necessarily using the same phases nor automating them using the same types of software that I have suggested.

TOP MANAGEMENT IS LOOKING for a way to “get a handle” on the portfolio of projects that are being conducted within their enterprise. Starting to track the portfolio of projects after the project has already been planned is like coming into the middle a movie.

Top management may want to consider addressing the management of projects across the enterprise at an earlier point in the project life cycle, right at the beginning. Establishing a Portfolio Management System during the initiation phase sets the stage for true enterprisewide project management. The Portfolio Management System requires all new projects across the enterprise to be proposed in a consistent fashion (Solicitation), chosen under the same criteria (Selection), rank ordered objectively relative to all the other projects in the enterprise (Prioritization) and codified in a singular informational database for enterprise access (Registration).

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