A medical products manufacturer needed to reduce complexity in the company project portfolio. Anecdotal evidence, interviews, and analysis indicated that the organization was attempting to conduct too many projects. The portfolio ran the gamut from strategic product development projects to essential business maintenance projects ranging in scale from quite small to very large. The company project portfolio lacked focus as a whole, while individual projects were seldom well defined, planned, or implemented. The project staff felt overwhelmed by the number of responsibilities assigned to them and frustrated by their inability to get things done.
Packed with projects? Filled with frustration? Here's what you can do to prevent overload and focus your resources’ attention appropriately.
Does this sound familiar? Is it project proliferation? You bet!
To avoid this trap, R&D organizations should use techniques for developing and managing a portfolio of projects that follow a step-by-step process: clarifying corporate strategy and objectives, assessing corporate project capacity, building a database of projects, analyzing project data, and making decisions on which projects to keep, kill, or delay.
David Sandahl, practice leader, Andrew Longman, PMP, and Wade Speir, consultant, work at Kepner-Tregoe, an international management consulting company headquartered in Princeton, N.J.
Optimal Project Portfolio Process Flow
Exhibit 1. The Kepner-Tregoe approach uses decision analysis to help companies select the best projects for their business.
The Optimal Project Portfolio. Many projects run over time and over budget. Among the factors cited are inadequate definition, shortages of key human and other resources, poor management skills, conflicting priorities. With projects a way of life and so many factors contributing to project performance, there is a clear need for a systematic, integrated approach to improving project portfolio performance.
The Kepner-Tregoe approach to optimal project portfolio management helps companies select the best projects for their businesses. Decision analysis is applied, incorporating consistent objectives, rigorous evaluation, risk analysis, and database management to guide client decision-making. Exhibit 1 shows the process flow for the optimal project portfolio. Once a portfolio is selected, skills for planning and managing projects can be practiced effectively. Lastly, the social and technological environment in the company must support improved project performance.
Corporate Strategy. Corporate strategy frames the products and markets an organization will pursue and the projects necessary to serve them. The key contribution of strategy to the project portfolio is a set of weighted, measurable business objectives. Each project is evaluated according to these objectives to determine its place in the portfolio. Some projects will be critical, some will be necessary, and some projects will not survive this strategic assessment.
Capacity Analysis. An analysis of project capacity—a compilation of the workdays available to do project work—should be completed before data on individual projects is collected. Data from company reports can be supplemented by interviews with resource managers estimating the percentage of staff-time available for work on projects. The result is an estimate for the whole company, by department, of the number of days available each year to conduct projects.
The Project Database. Because projects themselves are complex, and a portfolio of projects even more so, effective evaluation depends upon a project database characterizing each project. Basic project descriptions, including name, objectives, work breakdown structure, and an estimate of resources by department in specific reporting periods provide a common basis for evaluation. These data are gathered on formatted spreadsheets and consolidated in a database. Depending on the consistency and sophistication of the existing project management methodology and software tools this can be easy, or very painful, but it is always revealing.
Each project is evaluated using a questionnaire-style worksheet, assessing performance on such objectives as financial return, market impact and regulatory compliance. Adverse consequences (risks) for each project are also assessed.
A database accumulates the project descriptions and the project evaluations. The database, which can also be used for other large-scale decision analysis efforts, facilitates accumulation and reporting of information on more than 100 projects.
Project Data Analysis. The project database allows comprehensive reporting on the project portfolio. Reports sorted by weighted score, by risk, and by net present value can also be formatted to show department and division responsibility and a range of other descriptive factors.
The database also facilitates graphical analysis of the aggregate project to indicate the project capacity constraints the company faces and the relative performance and risks of the projects in the portfolio. Links to other software, such as MS Project and time reporting systems, are easy to establish.
The compilation of project data, in combination with the capacity analysis, provides a number of useful comparisons. What resources are committed to projects compared to the resources that are available? Which projects generate the highest return with the lowest risk? Which projects must be completed to ensure compliance with government regulations? Where are there resource bottlenecks in particular departments? A consistent method of evaluation shows that some projects clearly meet company objectives better than others.
Decision-Making. The analysis and reporting tools enable client decision-makers to move easily between a macro view of the entire project portfolio and a more detailed view of each project. Tradeoffs between projects can be understood and effective decisions made. A more realistic balance is achieved between what should be done and what can be done.
An ongoing system of project portfolio management requires that each proposed project be characterized using consistent logic and data. It is then possible to evaluate each new proposed project both against the strategic objectives of the organization and against projects already under way to determine the best-balanced portfolio of projects within the company.
Social and Technical Systems. The rigor of the optimal project portfolio requires both social and technical changes. The performance system must encourage teams to work together. Project management skill training sets clear expectations for project definition, planning, and implementation. Appropriate review, at the project performer, project manager, resource manager and executive levels helps to keep the portfolio balanced and performance high.
THERE IS CONSIDERABLE EVIDENCE that the shift to project-based work has not been accompanied by sufficient development of management tools to establish and maintain priorities among projects. The optimal project portfolio, driven by strategy and supported by social and technical systems, is a powerful tool for shaping the projects that will create the future of your company.
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