Project Management Institute

Ready for volatility

to navigate a turbulent marketplace, organizations must master portfolio management

BY SARAH FISTER GALE

PORTRAITS BY ALEJANDRO VALDÉS

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Bart Doyle, PMP, PgMP, PfMP, Mainstream Renewable Power Chile, Santiago, Chile

Portfolio management has always been a good way for organizations to align individual projects with broader business goals. But during times of market volatility and disruption—the new normal for most sectors these days—it can provide the essential competitive advantage.

A Profession in Flux

We asked practitioners: What's the biggest change you're seeing in portfolio management?

img The portfolio management practice is maturing and becoming more widely accepted. With that growth comes discipline; it becomes a science instead of an art. But just as one size doesn't fit all in project management, the same is true for portfolio management. Different sizes and types of companies will have different needs when it comes to managing priorities. Portfolio managers need to strike the right balance so as not to stifle the creative, entrepreneurial spirit alive in many companies.”

—Denise Rogers, PMP, director, portfolio and project management, Cox Media Group, Atlanta, Georgia, USA

img The biggest change I'm seeing in portfolio management is the ability of the portfolio to be agile in response to a volatile, uncertain and constantly changing and evolving business environment. This requires organizational intelligence, because an understanding of portfolio strengths and weaknesses is key to responding to the changing uncertain environment.”

—Leabetswe Bomvana, head of shared portfolio management services, Liberty Group, Johannesburg, South Africa

img The change that I can see is the emphasis toward managing benefits. Executives want to know what business value will be reaped by authorizing a project in the portfolio. Benefits management illustrates and measures how projects and programs add true value to the enterprise. Portfolio managers need to ensure that benefits are assessed at the start of the portfolio life cycle and are constantly monitored for realization during the life cycle.”

—Venkatraman Lakshminarayanan, PMI-RMP, PMI-ACP, PMP, specialist, portfolio management, Sidra Medical and Research Center, Doha, Qatar

img With ongoing cost pressures, companies seem to increase their focus on functions that control how resources are spent and that ensure what is spent leads to maximum benefits. These functions haven't always been called ‘portfolio management,’ but they increasingly are.”

—Henning Kruse, PMP, PfMP, assistant vice president, Credit Suisse, Zurich, Switzerland

img In terms of organizational structure, the biggest change I'm seeing is separating the management of the enterprise portfolio from the management of information technology so that the former remains under the direct purview of non-IT executive management.”

—Bernie Hill, PhD, PMP, PfMP, enterprise portfolio strategist, Virginia Community College System, Richmond, Virginia, USA

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“The portfolio management practice is maturing and becoming more widely accepted. With that growth comes discipline; it becomes a science instead of an art.”

—Denise Rogers, PMP

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“While a strategic initiative may be staying on scope or budget, if the market changes, it can affect the ultimate ROI or value of that project.”

—Lori LaBeau, PMP, Vaco, Cincinnati, Ohio, USA

Shifting market demands, new products from competitors and regulatory upheavals all can affect a portfolio's risk level and value to the organization. Having agile portfolio management practices in place enables business leaders to gain a bird's eye view of programs and projects. That, in turn, allows them to mitigate risks, track the current and future value of initiatives, and quickly make adjustments based on internal and external factors.

“While a strategic initiative may be staying on scope or budget, if the market changes, it can affect the ultimate ROI or value of that project,” says Lori LaBeau, PMP, organizational change leader for recruiting and staffing firm Vaco, Cincinnati, Ohio, USA.

AHEAD OF THE CURVE

In other words, a well-oiled portfolio management process doesn't just confirm that all projects align with the organization's strategic goals. It's an ongoing and dynamic process that examines the current state of the business and the marketplace, and determines which projects should be prioritized—and which might need to be ended.

“Invariably the costs and benefits will shift,” says Raed Skaf, PMP, senior manager at KPMG in Riyadh, Saudi Arabia. “They have to be carefully monitored to guide the entire portfolio toward the most beneficial outcome for an organization.”

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“If invisible innovation efforts aren't brought out of the shadows, they can quickly turn into ‘zombie projects’ that move slowly and aren't headed anywhere.”

—Raed Skaf, PMP, KPMG, Riyadh, Saudi Arabia

Ideally, companies want to set key business objectives for each portfolio, such as revenue generation, global expansion or product innovation, Mr. Skaf says. This is especially important in companies that base their future success on the ability to bring game-changing products or services to market. Innovation is a constantly moving target, so companies need to be sure their innovation investments align and shift with what's going on in the marketplace and in their own business roadmap, he says.

Yet based on the assumption they need space and freedom to bring the best ideas to the surface, “many companies allow their most innovative projects to develop in the shadows,” Mr. Skaf adds. “If invisible innovation efforts”—meaning those outside of the formal project portfolio—“aren't brought out of the shadows, they can quickly turn into ‘zombie projects’ that move slowly and aren't headed anywhere.”

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Even the most bleeding-edge ideas need to be aligned with business objectives and weighed against the rest of the projects in the portfolio to determine whether those investments will pay off.

Investments in portfolio management do tend to pay off. PMI's 2015 Pulse of the Profession®: Capturing the Value of Project Management report shows that organizations with high portfolio management maturity have a significantly higher rate of successful projects than those without this level of maturity. It also found that as the business environment becomes more dynamic and complex, the need for excellence in project, program and portfolio management will become more important to achieving long-term strategic goals. Despite the benefits of portfolio management, though, only 21 percent of Pulse respondents said their organization always practices portfolio management. Just 16 percent rate their portfolio management maturity level as “high.”

A comprehensive and agile portfolio management process is especially important on projects with long development cycles, Ms. LaBeau says. “Changes in the market can put you behind the curve of where you want to be.”

For example, in her previous role as lead portfolio manager at Vantiv, a payment processing solutions company, the sales team wanted to develop a new version of one of the company's products. The update would meet the clients’ short-term interest, but the system was scheduled to be discontinued in three years. The project seemed like a good idea to them, but when it was reviewed in light of the broader portfolio, it didn't make good business sense, she says. The takeaway was clear:

“Without a good portfolio management process, companies can be short-sighted and neglect to analyze the broader impact a project has on the organization and its resources.”

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A Mainstream wind farm project site in Carrickeeny, Ireland

CASE STUDY

Taking Portfolio Management Mainstream

A renewable energy company needed to think carefully and globally, so it turned to a portfolio professional.

For many organizations, getting to the point where they can effectively execute a portfolio management process is a complex journey that can take years and much iteration to achieve.

Bart Doyle, PMP, PgMP, PfMP, general manager for Mainstream Renewable Power Chile in Santiago, Chile, is in the middle of this journey. His renewable energy development company has roughly 70 projects ongoing in Chile, South Africa, Canada, Ghana and the United States, as well as offshore projects that are part of a separate business.

When Mr. Doyle joined Mainstream six years ago, he became responsible for all project controls, project management and administration of the company's onshore wind farm project portfolio. Since then he has been helping to build his organization's portfolio management process to better adapt to volatility in the marketplace and create a more uniform approach to project selection and management.

“We needed a strategy for spreading risk more effectively and to make better decisions about the projects we pursued,” Mr. Doyle says. It still hasn't reached the level of maturity that he would like, though the company has made tremendous progress.

When Mr. Doyle joined the company, each country's team ran its projects differently, with its own project management process, lingo and strategy for determining which projects to invest in. “It caused the usual problems,” he says. These included inaccurate budget estimates and a lack of risk identification that often led to project delays.

His job was to implement a formal project, program and portfolio management process. He began by implementing metrics for assessing value and risk, and a standardized work breakdown structure for scheduling, budgets, permitting, document control and resource management.

“In a volatile global market, it's not enough to be the best project, it also has to be the right time and place for that project to be successful.”

—Bart Doyle, PMP, PgMP, PfMP

Eventually, these tools gave stakeholders a way to evaluate the entire portfolio in each country—its project components and their performance. “It was a struggle at first, but we eventually started to see improvements in the way we allocated resources,” he says. It also helped the leadership team make better go/no go decisions.

Those decisions are frequent: Up to 50 percent of early-stage renewable energy development projects at Mainstream will eventually be shut down due to “project killers” like permit application refusals or the ROI coming up short, Mr. Doyle says. “We make a lot of little bets and hope some will pay off,” Mr. Doyle says. “With the portfolio management process, the biggest improvement we saw was the ability to kill projects sooner when the overhead on them was still low.”

“The secret to our business is to kill projects early that won't make it, before they suck up too much valuable capital.”

—Bart Doyle, PMP, PgMP, PfMP

Still, as the number of projects grew, it became difficult to know how to best deploy resources within and between different countries. “In a volatile global market, it's not enough to be the best project, it also has to be the right time and place for that project to be successful,” he says. That's where the strategic benefit of an organizational portfolio management process proved its value.

To appropriately allocate its global pool of resources—rather than allotting a percentage of the budget to each country—Mainstream needed a way to compare projects across countries. So in 2013, the company adopted a global portfolio management process, requiring each country leader to make a pitch for resources to support existing and future projects. Pitches include a business case featuring data on global and local issues including costs, risks and projected profitability. The leadership team then ranks the projects according to projected benefits and risks to determine which ones to approve and/or continue, and which ones to dial back.

This global portfolio management process is delivering strategic goals for the company, Mr. Doyle says. It ensures company executives use metrics and data to make investment decisions, rather than just listening to the loudest voice in the room. And it helps achieve the right balance of diversification and risk across the portfolio.

Portfolio management processes have also helped the company make decisions about projects that are just too risky to continue. For instance, in early 2014, the leadership team recognized that the U.S. market was not delivering the value it had anticipated. Electricity prices had stagnated and unlike other regions, the company faced stiff competition from bigger companies that are able to secure cheaper capital to bring similar projects to market.

“We realized that we couldn't get the same ROI in the U.S. that we can in other markets,” Mr. Doyle says. So just months after implementing the review process, executives made the decision to pull out of the U.S. market. The company was slated to wrap up its last project there by the end of 2015; it was too far along to shut down last year.

“The secret to our business is to kill projects early that won't make it, before they suck up too much valuable capital,” he says. “Robust portfolio management processes and tools are ideal for this purpose.”

By shifting the portfolio away from the U.S., Mainstream both avoided further losses in that country and freed capital to invest in projects in countries including Ghana, South Africa and Egypt, which have a much better potential ROI, he says. “If we had a more ruthless portfolio management process in place before, we would have gotten out of the U.S. much sooner.”

Heightened levels of risk management and ROI are exactly the kinds of benefits portfolio management is designed to bring to an organization. But achieving them isn't quick or easy, Mr. Doyle warns. “This has been a long process, but it's made us more competent as a business.” PM

Portfolio Path

We asked practitioners: What career path did you take to become a portfolio manager? How did you get there?

img Mine is not a linear track. I have never been formally responsible for program management. I combined engineering and business education to develop IT programs for various government agencies, but then jumped into business management at a consulting firm. I started getting involved in specific projects and then started to coordinate small portfolios.”

—Lucio A. Lopez, PMP, PfMP, IT deputy director, Banco Santander, Mexico City, Mexico

img In my case, the portfolio management role and discipline was developed over time, with each step designed to solve a specific business problem. I spent several years in program and project management for large telecoms, followed by work building a PMO for a consultancy where I also managed the pipeline of work for a telecom client. I was later hired by that client's primary business stakeholder to direct planning and analysis for a company that offered technology services to small businesses. Seeing an opportunity to better manage the supply and demand of the IT organization, I began to implement components of portfolio management such as work intake, resource capacity management and a common prioritization model that would be used across the company.”

—Denise Rogers, PMP, director, portfolio and project management, Cox Media Group, Atlanta, Georgia, USA

img For me, it was linear—but I became a portfolio manager quite by accident. Opportunity presented itself after I had achieved consistent success managing projects, and then managed a series of projects as a program manager. Each step prepared me for the next. If I went directly from being a project manager to portfolio manager, I would have had more of a knowledge gap. Instead, I had a natural career progression, building my knowledge to step up and understand unique nuances.”

—Marion Chang, PMP, project director, Travelers Canada, Toronto, Ontario, Canada

img I served in project teams, then took on my own projects and then found an interest in project oversight. As a generalist with an affinity for numbers, I consciously decided not to proceed into delivery-oriented program management, but rather into portfolio management. In my industry, it offers exciting ties to finance as well as resource management.”

—Henning Kruse, PMP, PfMP, assistant vice president, Credit Suisse, Zurich, Switzerland

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“If I went directly from being a project manager to portfolio manager, I would have had more of a knowledge gap.”

—Marion Chang, PMP

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 2015 WWW.PMI.ORG
DECEMBER 2015 PM NETWORK

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