Project Management Institute

From sight to insight


SAN RETNA is chief portfolio officer for AAA of Northern California, Nevada and Utah, the second largest AAA affiliate in the United States. The company provides an extensive range of services including auto and homeowners' insurance, travel, roadside assistance and financial services to more than four million members. Mr. Retna is responsible for ensuring value capture from a portfolio of more than 100 programs and projects across the 6,000-plus employee enterprise.

photography by SETH AFFOUMADO


Companies spend billions of dollars each year on change initiatives—think internal investments—designed to improve corporate performance, yet there are few structured practices to manage the overall process and provide timely and accurate feedback. For example, in 2002 U.S. spending on IT projects was a whopping $780 billion. It is estimated that 68 percent of those projects were not delivered on schedule or on budget, and a majority didn't track benefits postimplementation.

Clearly, there is an enormous opportunity for corporations to improve their project management methods and see a significant increase in return on internal investments (ROII).

Clearly, there is an enormous opportunity for corporations to improve their project management methods and see a significant increase in return on internal investments (ROII).

Over a two-year period that covered more than 150 enterprise projects and a significant investment in corporate infrastructure, IT, culture and values transformational initiatives, facilities and business process redesign, AAA of Northern California, Nevada and Utah successfully completed a remarkable 82 percent of its corporatewide projects. At one point, each percentage point equated to $2 million. It also realized 80 percent of the promised business benefits from all investments. These numbers are well above the industry standard for project success. The key was to move from just managing individual projects and programs to taking an overall corporate view and implementing portfolio management.

Portfolio management moves beyond traditional time and cost metrics. At AAA, we assess project performance against a predefined set of goals and objectives and focus on maximizing overall return; this also allows us to manage the risks associated with business investment. We make sure that the company has the operational capacity—people, systems and facilities—to successfully execute all of its projects and ensure that the organization can absorb the impact of the changes that are the result of implementing multiple projects.

In taking this top-down approach to project management, AAA's Enterprise Portfolio Management Office functions much like a financial investment manager. Just as individuals and institutions look to maximize return on a complete portfolio of investments, corporations should look to maximize their enterprisewide ROII.

The task of “orchestrating” an organization for portfolio management is not easy, though. Companies must take the time to track business benefits against all projects. Creating this culture of accountability can be challenging. “Best Practices in IT Portfolio Management” conducted by the Kellogg School of Management's Center for Research in Technology and Innovation showed that more than half of all companies have not established the criteria to define project success, and an even larger percentage have no way of assessing the benefits of their projects.

It is vital to make the business unit managers accountable for corporate benefits. By closing this loop, we were able to create an environment where investments are considered in the context of overall return to the organization. Programs are no longer isolated events, but are managed dynamically and in keeping with overall corporate objectives. In addition, we found that continuous tracking of benefits over several years allows for accurate benefit realization.

For this approach to be successful, the individuals in the portfolio management office must be seen within the corporation as change agents and contributors. They are “conductors” who help teams meet corporate goals—no longer just a project management overhead delegated to reporting and reviewing schedules and budgets.

The adoption of this new process management method carried inherent risks. We had to make a lot of internal changes, reorganize the project management office from the ground up, and work with a methodology that, at our decision point, was in its infancy with few, if any, success stories to point to. The risk paid off, and we are seeing rich rewards. AAA now surpasses industry standards for project delivery, and we have the methods, practices and people in place to replicate that success for all future portfolios. PM

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