Portfolio strategy panel

successful strategy execution through project portfolio management

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MILAGROS MOSTAZA, Moderator
Project Management Institute

LINDA AGYAPONG
JPMorgan Chase

LAILA FAIRDOON
Roads & Transport Authority

PHILIPPE GUITTON
Michelin

INKEN LASAR
EITC (du)

In an ever-more competitive global environment, where the status quo can be challenged through major paradigm shifts, successful strategy execution sets apart successful contenders from unsuccessful ones. This paper examines the role of project portfolio management in strategy execution and discusses the link between strategy and operations, the importance of considering human factors in portfolio management, and ends by highlighting key success factors and challenges.

Keywords: portfolio management, strategy execution, delivery, stakeholder management

PORTFOLIO MANAGEMENT AS A VEHICLE FOR SUCCESSFUL STRATEGY DELIVERY

Many organizations struggle to achieve their corporate strategy, due to many factors in which most known ones are the proper use of their investment and resource allocation. Portfolio management is the main tool executives could use to ensure proper implementation of the strategy:

Portfolio Management is the method of connecting the execution of an organization's projects to the fulfillment of its strategies (PMI, 2015, p. 2).

The success of portfolio management will be linked to the maturity of the organization. Organizations with mature project management practices complete 35% more of their programs successfully. They fail less often and waste less money (PMI, 2015, p.1).

Portfolio management enables executives to select the right projects and monitor the efficiency of associated resources. It is a great decision support tool that provides required data and metrics to track health of the strategy implementation for different levels of executives in the organization.

Having a proper structure of portfolio management governance is essential for the success of the strategy execution. Since different organizations use different portfolio systems for reporting and data collections, it is essential to define the associated processes and people before acquiring any technology solution. Clear roles and responsibilities of all involved in the organization with the portfolio management will furthermore contribute to the smooth running of the portfolio management system.

Based on the culture of the organization, the complexity or simplicity of the portfolio management is defined. The simpler the governance system, the easier and more effective the project executions. It is always advisable to keep portfolio management as simple as possible considering the variety of its users that span from top executives, middle management to project managers, each comes with a different point of view of the portfolio, thus sharing a common language between all is the main success factor; that language depends heavily on the culture of the organization and support from top management.

It is critical to keep the portfolio balanced, to be able to make the right decision at the right time to either continue or stop a project. Implication of such decisions in the organization is critical and should be approached carefully.

The corporate portfolio is the main tool to assess the strategy implementation and ensure that the right projects are being executed with the right resources; it is the health check of the organization toward achieving its strategy.

THE IMPORTANCE OF CONTINUOUS PORTFOLIO PLANNING, MONITORING, AND OPTIMIZATION

For portfolio management to be successful, it is important to control the selection of the best projects and programs for the company, and to enable delivery of their value as soon as possible at minimum cost. If the company engages employees into the portfolio process, the need for projects, the demand, will be important, rich and interesting. Indeed, it should be thought that after the emergence of a project idea, the exchanges and various discussions between different stakeholders will make it possible to filter out the bad ideas in order to retain only the good ones. However, it is normally the case that companies have many more interesting projects to pursue than they have resources to allocate. The reverse would be surprising and might be a signal that the company is not performing well in the market place.

In order to choose those projects that will be delivered, it is essential having a single system of prioritization, which makes it possible to order, sort, or rank the projects; it is generally based on the value brought to the business, the cost to be engaged, alignment with the strategic priorities of the company, even taking into account the complexity of the subject. Generally, there are two different kinds of resources, which function as constraints during project selection: budgetary constraints and human resource constraints. Generally, the budget is a hard constraint, which should be respected imperatively; resource allocation might be a little more flexible, based on different skill sets available.

The portfolio manager will be interested primarily in analyzing information of the portfolio in a coherent way and will draw from alarms if necessary: for example, if a project is small but lasts abnormally long, if the re-estimates leave the framework of the budget considered, if data quality is not sufficient for informed decision making.

It is very important to strictly follow the portfolio management process (i.e., to use the budget most efficiently and effectively through selecting the high priority projects in term of added-value for the company and not the most interesting projects).

Control is carried out at several levels: at the tactical level by a monthly meeting between customers and providers in order to analyze the financial situation, resources, demands year to date (YTD), and year to go (YTG); and also at the operational level between the portfolio manager and the project's leaders to permanently improve information which adequately reflects the projects’ performance.

Finally, the customers of the portfolio will be satisfied if all the budget was used, if the projects were delivered on time, without exceeding their allocated budget, and if they were able to create maximum value within the shortest time period possible.

THE “HUMAN COMPONENT” OF PORTFOLIO MANAGEMENT—STAKEHOLDERS AND THEIR ROLES AND RESPONSIBILITIES

“Satisfying stakeholders is the mantra of the project manager” (Business Coach, n.d.)—It has always been about people!

It is an established fact that portfolio management is much more than allocating resources to multiple projects. According to (Dye, 2012), this is a critical fact because if resources are vigorously being assigned to projects that do not support the organization's strategic agenda, then “who cares how robust the resource allocation process is?” (Portfolio Management Processes, para. 5). Within portfolio management, the first critical task is to ensure that all stakeholders have been carefully identified as early as possible, because all the important decisions made during the major phases and milestones of the portfolio are made by these stakeholders. In the general sense of the word, anyone who takes part in the activities of the project / portfolio, or is affected by the deliverables of the project/portfolio, could be classified as a stakeholder (Business Coach, n.d.). Although stakeholder identification is an ongoing task, any omissions or significantly late identifications can potentially impact the portfolio negatively. After their identification, these stakeholders must be managed and engaged effectively with the cultural and geographic variables kept in mind. The goal is to ensure that their involvement and influences are all factored in obtaining the overall objectives or deliverables of the portfolio.

To achieve these goals and objectives, each of the stakeholders has an individual responsibility and a role to play. Since there are different types of stakeholders within the portfolio, their collective roles and responsibilities are as follows: they should provide accurate requirements for all the projects and programs within the portfolio; they should promptly communicate any critical changes regarding the portfolio as well as make decisions in a timely manner; they should assist in the planning, execution, implementation and training of the deliverables of the portfolio; they should conduct periodic recalibration sessions to ensure that the projects and programs within the portfolio fit within the overall strategy of the business; they should commit to providing appropriate resources to the portfolio; they should resolve all issues and risks in a timely manner; and, lastly, approve key deliverables of the portfolio including the final sign off or acceptance of all the respective milestones within the portfolio (Business Coach, n.d.).

PLANNING FOR SUCCESS—PUTTING IN PLACE KEY ENABLING FACTORS FOR PROJECT PORTFOLIO MANAGEMENT

There are four major success factors in order to ensure seamless strategy execution through strategic portfolio management: Executive buy-in and support, setting the right governance with clarity of roles and responsibilities, active stakeholder engagement, and clear measurement of overall portfolio health and progress. First and foremost, putting in place a strong portfolio management function, be it as a separate department or as a cross-functional mechanism, such as a “portfolio review board” requires strong executive sponsorship. Senior executives need to have a clear understanding of the value that portfolio management can bring in helping them steer strategy execution and should champion its establishment. A portfolio function that reports directly to the C-level is much more likely to achieve results than in any other organizational context. Furthermore, the portfolio function needs to be equipped with the right governance mechanisms and rules in order to function well. Most organization have a dedicated portfolio manager or team, however, portfolio decisions require the review and approval from a large number of stakeholders—that is why most organizations set up a portfolio review board. This board needs to be empowered and be embedded into the organization's ecosystem of processes. Setting the right governance alone, however, will not enable the portfolio management processes to work seamlessly. It is important that the portfolio manager takes into account the human component of portfolio management, in terms of the interests, the likes or dislikes of the senior stakeholder on the portfolio review board, such as financial concerns from the finance department, resource issues from the project management function, diverse views from the business units, and so on. The portfolio manager has to establish an open dialogue and be experienced and well-versed in conflict resolution and mediation in order to succeed. Last but not least, setting up portfolios is not enough. It is very important to continuously monitor different portfolios, using a number of objective key performance indicators (KPIs), such as timely progress, delivery on scope, objectives, project benefits/net present value, and so on. Having this objective information at hand is vital in deciding on which portfolio performs well or not.

HOW TO AVOID COMMON PITFALLS IN PUTTING IN PLACE A PROJECT PORTFOLIO MANAGEMENT SYSTEM

It is said that a large percentage of strategies fail in the implementation. While there might be a multitude of reasons behind this, a large number of issues arise in how information is shared and cascaded down in the organization and how well the organization engages its employees into the process. First, in a lot of cases, the way a strategy is communicated is handled in a very restrictive way, be it due to confidentiality reasons or because of a misunderstood sense of power in maintaining the information at a high level. However, it is crucial to make the strategy as clear and as understandable as possible to all employees, because what they do not understand they cannot execute or support. Furthermore, it is recommended to involve employees as much as possible in the process of strategy development, at least by giving them a rough frame and letting them detail it to define how they can contribute to the big picture. Research has shown that decisions that have been taken by the employee himself rather than by his line manager make him more engaged and more likely to fully implement or execute the strategy. People like to have a sense of purpose; they want to know that what they are doing is important for a bigger vision or mission, and, as a result, become happier, productive, and engaged.

CONCLUSION

Project portfolio management done right is one of the main enablers for successful strategy execution. However, as this technique relies to a large extent on the support and buy in of the stakeholders in this process, it is vital for the senior portfolio manager not only to be proficient in project and portfolio management frameworks, but to have the right executive support and the soft skills required, such as leadership, stakeholder alignment, and engagement.

ABOUT THE AUTHORS

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Linda Agyapong, PMP, is the 2015 James R. Snyder International Student Paper (ISPA) of the year Award recipient, presented at the PMI® Global Congress (2015)—North America. She is pursuing a doctorate in Project Management at Capella University. She is also a compliance manager at JPMorgan Chase with about 7 years of project management experience, ranging from software development to team management.

Laila Faridoon has 15 years of work experience and is currently the executive director at the Director General Office of the Roads and Transport Authority (RTA). Ms. Faridoon plays a pivotal role in facilitating decision making and analyzing the effectiveness and efficiency of the policies and functions of RTA. Ms. Faridoon is heading an Enterprise Program Management office in RTA. Ms. Faridoon is an active researcher in the field of project management She has received the best research award of the year (2006) from Sharjah University.

Inken Lasar is a seasoned Telecoms professional, with more than 15 years of experience overall, in areas such as project, program, and portfolio management; business strategy; management consulting; and marketing. Currently, she is heading the Project Governance division in du Telecom. She is an accomplished conference speaker, and her thought leadership articles have been published in publications such as The National and PM World Journal.

Philippe Guitton

Philippe Guitton is the director of quality and project office of IT of the Michelin Group. At Michelin, Philippe spent 15 years in engineering supply chain and eight years supporting the development of scientific data processing to support the research center. He is experienced in the management of global programs, operational planning between factories of semi-finished components and workshops of production for pneumatic tires.

CONNECT WITH US!

img Inken Lasar Linda Agyapong Philippe Guitton LailaFaridoon

Business Coach (n.d.). Project stakeholders. Their roles and contribution. Retrieved from http://www.1000ventures.com/business_guide/crosscuttings/project_stakeholders.html

Dye, L. (2012, July 10). Project portfolio management – It's not rocket science. [Web log comment]. Retrieved from http://blogs.managementconcepts.com/project-portfolio-management-its-not-rocket-science/#.Vsu3mfkrLIU

Project Management Institute. (2015). Delivering on strategy: The power of project portfolio management. PMI® Thought Leadership Series. Retrieved from https://www.pmi.org/~/media/PDF/Publications/deliver-strategy-portfolio-management.ashx

Project Management Institute. (2013). A guide to the project management body of knowledge (PMBOK® guide) – Fifth edition. Newtown Square, PA: Author.

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 PMl or any listed author.

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©2016, Linda Agyapong, Laila Faridoon, Inken Lasar, Philippe Guitton
Originally published as part of the 2016 PMI® Global Congress Proceedings – Barcelona, Spain

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