Project Management Institute

Project portfolio goes to public sector

a change driver to pass through complexity

Luca Romano, PMP

Project Director, Nexen – Gruppo Engineering

Roberta Grimaldi, PMP

Head of IT Planning & Control – DCOD - Inail

With Project Portfolio Management (PPM), top management are able to connect where they want to go with the budget available and with what they are doing. PPM also controls that the expenditure for what they are doing is spent in actions and projects that push their company in the right direction. PPM is usually part of a change program of a company, but PPM could be a good reason to change and a change could be built around a PPM. In our case study, PPM was one of the changes planned in a very big change program and this could be too much for any organization. What we discovered is that when a change program is under stress, PPM could be helpful to an organization to drive the change. The reason for this is that PPM changes the connections between things inside a company, provides a justification for what is done, and gives so much visibility and so many benefits to management through complexity, that it is worth the effort.

Part I – Authors’ Presentation

I1: The Authors

Luca Romano: 20 years of international experience in business consulting, project management, portfolio management, organization, operations management, and training. Executive manager, Nexen Business Consultants, as part of the engineering group.

Presently in charge of consulting teams implementing on-field management systems related to project portfolio management, project management, and project management office (PMO).

Professor of international project management and operations management at European School of Economics. Professor of project management at MiNE Master – Cattolica/Berkeley Universities and assistant chair at engineering school of Roma Tre University in two courses: organization and project management.

Roberta Grimaldi: 20 years of experience in the public IT sector, expert in project management and operations management. Head of the IT planning and control department within the Directorate for Digital Organization (DCOD) in Inail.

Part II – Project Portfolio Management as a Change Driver

II1: Introduction

Project Portfolio Management (PPM) is a well-known discipline within project management field; there is a Project Management Institute (PMI) global standard on PPM and over the last several years, this topic has been discussed frequently in articles and at PMI global congresses.

PPM is usually part of a change program at a company. Typically, top management wants to increase the ability to control projects within the organizational structure and assure that these projects are aligned with the strategic direction they want to follow.

What is not a surprise is that PPM could be a good reason to change and that change could be built around a PPM. Since a good PPM implementation needs good sponsorship, this “change implementation project” can be very powerful within a company and can be a real change driver to pass through complexities.

II2: Project Portfolio Management and the Change

The Standard for Portfolio Management – Third Edition (PMI, 2013b) states:

  1. A portfolio is a component collection of programs, projects, or operations managed as a group to achieve strategic objectives. The portfolio components may not necessarily be interdependent or have related objectives. The portfolio components are quantifiable, that is, they can be measured, ranked, and prioritized
  2. A portfolio exists to achieve one or more organizational strategies and objectives and may consist of a set of past, current, or future portfolio components. Portfolios and programs have the potential to be longer term with new projects rotating into the portfolios or programs, unlike projects that have a defined beginning and end
  3. At any given moment, a portfolio represents a view of its selected portfolio components and reflects the organizational strategy and objectives
  4. If a portfolio is not aligned to its organizational strategy, the organization should reasonably question why the work is being undertaken. Therefore, a portfolio should be a representation of an organization's intent, direction, and progress

Basically, portfolio management methodology aims to connect strategy with actions.

Implementing a PPM system within any company creates a stress for the organization, as PPM is something that permeates the whole structure vertically and horizontally. There is a need to change the culture, processes, habits, training programs, and the organization of roles.

Let's analyse the change needs related to some of the key statements about what PPM is.

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Exhibit 1: Project portfolio management impacts.

PPM is a real change for any company; it should be applied when there is a good level of project management culture since it needs wide support and sponsorship for success.

PPM implementation should be designed, planned, sponsored, communicated, progressively implemented, monitored and controlled, tailored, and supported. This could take many years and could be a key transformation for a company.

In our case study, PPM was one of the changes planned in a very big change program and this could be too much for any organization to undertake. What we discovered is that when a change program is under stress, PPM could become a help for an organization to drive the change. The reason for this is that PPM changes the connections between things inside a company, provides justification for what is done, and gives great visibility and benefits to management through complexity, so that it is worth the effort.

Part III – The Case Study

III1: Introduction

In 2014, in Rome, Italy, it was our (the presenters) role to support a Directorate for Digital Organization (DCOD) to implement the IT planning and control department and the new PPM system. At the time, Inail (the National Institute for Insurance against Accidents at Work) was running a big change program within the IT structure to change the way they work and to increase efficiency and effectiveness in such a challenging environment.

Inail is a public non-profit entity safeguarding workers against physical injuries and occupational diseases.

Inail's objectives are:

  • reducing injuries
  • protecting workers performing hazardous jobs
  • facilitating the return to work of people injured in the workplace

Worker protection, as a result of recent legislative changes, has increasingly taken on the characteristics of an integrated system of protection, including: preventive actions at the workplace; medical services and financial assistance; rehabilitation and reintegration of victims of workplace accidents; professional diseases; social life; and work.

The insurance (compulsory for all employers hiring subordinate and parasubordinate workers in the activities that the law defines as risky), protects workers against damages due to work-related accidents and occupational diseases. The insurance releases the employer from liability resulting from the damage caused by his employees.

In order to help reduce workplace accidents, Inail also realizes some important initiatives aimed at the continuous monitoring of employment and injury trends, training, and distribution of advice to small and medium-sized enterprises in the area of prevention, and funding companies that invest in security.

The Directorate for Digital Organization (DCOD) in Inail supports all the central and local offices responsible for managing the “business” of this public structure. This business could be summarized in: health, insurance, inspection, rehabilitation and reintegration, research, and prevention. One of the key points in this case study was the need to cope with complexity. When we talk about this kind of public business, we are talking about these numbers:

  • Insurance positions within the Italian territory: 3,800,000
  • Number of controlled companies: 22,950
  • Number of claims for injuries: 745,000
  • Number of claims for working illness: 47,500

At the same time, for the DCOD point-of-view, the “clients” are all the other central and local offices and the citizens that need to interact with the structure.

The change program initiated in 2013 from the DCOD was called “WeNext.” There were many objectives in WeNext, not only PPM. The changes were focused on: 2014-2016 IT strategy definition, process reengineering, new roles and organizational structures definition, training, external and internal communication, and project management. This program had many objectives, many stakeholders, strong sponsorship, and high complexity.

Within the change program WeNext, the decision from Inail was to concentrate all activities related to strategy, portfolio, and project management into the same office. This office is now called IT Planning & Control (IT P&C).

This was a good idea. Concentrating all the rings of the chain from the strategic objectives definition and management to the implementation of the projects within the same controlling system, kept everything under more control. However, in contrast, it became more complex to start-up and manage.

It's very interesting to read through the key roles assigned to the IT P&C structure:

  • Define the IT strategy and manage the IT strategic plan
  • Manage the acquisition of the “needs” expressed from the Inail central offices and within the DCOD (demand management)
  • IT projects annual planning and monitoring
  • Define and monitor the IT Budget
  • Monitor and control the level of the IT services
  • Measure and monitor external vendor performances

It was a very challenging assignment and more challenging if you think about how it happened in a public structure.

III2; PPM Context Analysis

At the end of 2013, the WeNext program was under implementation and the newly born IT P&C office was trying to organize the activities to define the 2014 portfolio of IT projects. The context where the project portfolio management project was implemented is summarized in Exhibit 2.

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Exhibit 2: – PPM context.

These were the several “forces” pulling the 2014 project portfolio in four different directions. These were also the stakeholders involved.

2014-2016 Strategic Plan

The DCOD strategic plan for 2014-2016 was released at the end of 2013 and was focused on the key strategic objectives defined for the DCOD IT structure within the strategic objectives of the whole Inail organization.

These objectives were divided into five macro objectives and 40 objectives. These objectives were focused on actions like “services virtualization,” “social services development,” and many other objectives related to “internal processes optimization.” They were basically divided into “front end” objectives to improve the services delivered to the final clients and “back-end” objectives to improve internal efficiency and effectiveness.

As the process was young from a PPM point of view, what was missed at the beginning of 2014 was:

  1. A prioritization of the several objectives
  2. A breakdown of the objectives into actions
  3. A definition of the set of key performance indicators (KPIs) to measure and control the successful implementation of the actions related to the objectives

The breakdown of objectives into actions caused problems in the release of the 2014 portfolio, as without this breakdown, the connection between new and old projects was done “ex-post” to “justify” their presence from a strategic point of view.

Demand

When we talk about demand in DCOD, we talk about the obligatory process that must be followed to collect all the “IT needs” from the INAIL central offices.

This process regards the organization of formal meetings with the offices’ representatives. During these meetings, the DCOD reports the status of the projects in the actual year and collects information about the new needs for the next year.

There are about 20 central offices to meet, and this process could last 15 to 25 days and involves a large number of people.

These meetings are an important point of contact with the “clients” of the DCOD, but at the same time, these meetings are very time consuming and complex to manage, as there are many people to meet, and many of them are important directors of the structures. In addition, the process of collecting the “needs” is tricky, as it is not easy to prepare standardized templates to uniform it. Moreover, every central office unveils most of their needs as high priority projects. At the end of 2013, (beginning of 2014) the total number of needs collected was 193.

Existing Projects

A company usually has a portfolio of projects already on-going each year when the PPM process starts all over again. As the new process begins, each one of these projects must be analysed to understand their potential capability to help the structure to achieve the strategic objectives defined. At the same time, a project already on-going is something that a company has already financed, so these existing projects usually have a priority in the selection.

There is something important to be said about the implementation activities performed and related to the projects. There are many external vendors involved in the projects, as the role of the DCOD is focused on managing the projects implemented by external companies that won a tender to support Inail in a definite area. This means that the internal and external stakeholders involved are many, and that the decisions related as to whether to continue, stand-by, or terminate a project can have a major impact on many people, as well as a social impact.

Organizational Change

As already mentioned, the PPM activities were one of the many actions that led to the decision to develop the “WeNext” change program.

From a theoretical point of view, a well-sponsored change program is a great opportunity. From a public sector implementation point of view, this was also a strong organizational stress for the employees that were (and still are) moved from a slow and still way of doing things, to a project-oriented environment with performance indicators.

One of the key things we took care of was to constantly remember that in this environment, even if top management decided on a change, it doesn't mean that it will succeed if employees are not on board.

The 2014 portfolio was influenced by these four forces and the IT P&C office was asked to manage the situation, finding the right balance between them.

The first key finding was that strategic planning was hauling the “WeNext” change program. Next, came demand management. Demand management was not directly connected with the IT strategic objectives, as demanding structures were following their objectives regardless of what was stated to be right for the future of the DCOD.

Also, the way to include and manage the existing projects in the portfolio was the real issue to solve, as they were considered at the same time: a) “the only real thing among statements and useless workshops;” and b) “the old way of doing things that must be changed for a better future.”

And they really were both:

a) The existing 2013 projects were the playground of many people and many interests. Especially for the “IT application development area,” these projects were the only real point of contact with the Inail structures. These projects were essentially satisfying their needs. With these projects, the DCOD was improving the IT applications to increase the level of service provided to the internal and external clients. Regardless of any top-down strategy, these things were what the clients were asking for.

b) The existing way of doing the projects was more short-term service-oriented than strategy-oriented. “As Inail structure asks, I do it.” The level of project management culture was also low and projects were more of a sequence of work packages than something initially defined in its scope and then broken down in a work breakdown structure (WBS), and so on.

The organizational change was something already happening, something that would have happened even without a project portfolio. The DCOD structures (organization dept.) involved were moving with too much autonomy and too little communication for the “projects world.” This happens often.

We could summarize the 4 forces in this matrix where the dimension of the circle indicates the focus/sponsorship of the matter.

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Exhibit 3: The 2014 DCOD forces.

III3: The 2014 PPM Implementation

In this context, at the end of 2013, we were asked to support a justborn IT P&C office to perform demand management: taking care of the strategic plan and the existing projects to define the 2014 project portfolio.

With a strategic plan already defined and in the context just described, one could have chosen one of these options:

  1. Breakdown the strategic plan into objectives and objectives into actions. Translate these actions into projects and then manage the expected resistance from the “demand” way of doing things and from the existing projects already in place.
  2. Collect the demand from the central offices, merging this information with the existing projects (that are already known), and then finding a contact within the strategic plan, connecting wherever possible, the resulting portfolio with the direction defined by the strategy.
  3. Consider the existing 2013 projects already approved that will continue in 2014, and negotiate with the central offices to limit the number of new projects, rather than verify the alignment of the actual portfolio with the strategic plan and accept the expected disconnections.

We decided to choose option 2, as it was something in the middle between a too-strong innovation that could cause rejection from the stakeholders (option 1); and a too-soft approach that basically accepts passively the past (option 3).

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Exhibit 4: – 2014 PPM implementation.

We acquired the strategy from the 2014-2016 strategic plan. This was broken down into five macro objectives and 40 objectives that we clarified into more manageable descriptions. Workshops where the employees involved tried to define some actions and targets for the objectives were organized. Unfortunately, these activities in 2014 were more of an exercise than a real strategic planning process because while the processes were executed, the demand was already collecting the needs from the central structures in complete autonomy from the strategy. While we were building the “new,” we were forced to manage the “old” and run the demand as the DCOD was used to doing. From their side, the central structures were following their objectives, but we were lucky and for the most part, the “new needs” expressed were able to be linked to a strategic objective. Another good fortune was that the already started existing projects were confirmed in agreement with the central structures. All the projects collected in this way were more or less aligned with the objectives stated in the strategy and in 80% of the cases, this was done without forcing the connection. For the remaining 20%, there were some strategic objectives that were less detailed and more open to a wider description where we connected the remaining projects. All the projects were analysed with more attention to translate (mostly for the new projects) a title into a project plan and a budget. This was the final portfolio and the budget available in 2014 was sufficient to finance all the projects (a really incredible situation), so we didn't need to prioritize projects and choose only some of them.

In 2014, what we were waiting for happened, as when a company starts implementing a project portfolio management system, this process attracts the attention of all the people involved and quickly becomes one of the activities with more consideration within the company.

What became clear was that PPM was raised from one of the actions within the “WeNext” change program to a key role in the change process, as it was the link between everything.

Many other things that a company does to produce a beneficial change are not always just an end in themselves. They must be explained, justified, and conceptually connected. PPM has a clear end that could summarize many benefits in one new process and it's simple to communicate.

With PPM, top management are able to connect where they want to go with the budget available and with what they are doing. PPM also help control that the expenditure in what they are doing is spent in actions and projects that push their company in the right direction. If this equation results in something negative, they can change it. With such a result, how could a company not sponsor PPM?

PPM is like the WBS. When you start using it, you were no longer able to live without it.

Our PPM connected:

  • the strategy with the work packages, providing the right importance to what needs to be done daily
  • the strategy with the needs and with the implementation of projects, providing the top management with a system to be able to monitor and control the progress of the projects with a strategic point of view
  • the needs of the central structures (demand) with the strategy, evolving and improving the level of communication between them and the DCOD
  • the projects with the central structures via the demand process that became a more formalized and clear way to communicate

III4: What We Are Doing Now

In 2014, we launched the process, but we were really just at the beginning. The right way to manage a company applying PPM is to: define the next year's mission; define the next year's strategy; breakdown the strategy into objectives; define actions to achieve the objectives; align past actions with new actions; assess, catalog, and prioritize actions/projects in their ability to achieve the objectives defined; choose the right balance of actions/projects; finance and start them; control the direction; and review strategy and portfolio if needed. This system, when implemented correctly, works perfectly.

It could take years before this process becomes perfect, until the past is more pre-eminent than the future, there will be more work to do.

For the 2015 portfolio, we made some improvements. we started the process earlier in order to finish earlier; we confirmed the 2014-2016 strategy, instead of changing it; we negotiated in advance with the central structures to stay aligned with our strategy in defining their needs; we decided to limit the amount of new projects to 10% of the total portfolio (as many 2014 project were not finished); and we prioritized the projects, as the budget was not sufficient to finance all the projects (old and new).

This is not the most perfect PPM in the world and we are already thinking about improvements for 2016, but the process was improved and the IT P&C office now has a central role in the DCOD.

III5: Lessons Learned

Among many change drivers, financing a PPM is a good way to invest money.

We learned that PPM could be the wedge of a change program, as it justifies many other innovations/changes. PPM simplifies complexity.

We learned that is a winning idea to concentrate into a single department, the responsibility to supervise the process that horizontally flows from the strategy definition to the project's implementation.

We learned that theoretical PPM know-how is vital to be able to tailor theories and standards to the basics and thus, drive a company across a natural improving process.

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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.

© 2015, Luca Romano
Originally published as a part of the 2015 PMI Global Congress Proceedings – London, UK

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