Abstract
Effectively delivering work within an organization represents one of the most challenging tasks that organizations regularly undertake. It requires identifying the most profitable opportunities and committing to work efforts, as well as marshalling skills and expertise from across the organization. This paper looks at an approach to understanding the core business components within an organization and provides process steps developed to systematically address delivery of a portfolio of projects.
Introduction
No matter what the economic cycle, companies pursue revenue growth to further their market position. Many use strategic initiatives to deliver against ambitious plans for new products, new services, or new concepts to enable competitive practices, market efficiencies, or cost containment. But too often such efforts flounder, leaving companies to reexamine their approach to understanding, or worse, falling short of their goals. Our research provides insights on the importance of understanding, choosing and implementing the right process for managing strategic initiatives, and practical guidance on how to effectively implement a solution.
The strategic initiatives referenced above can be presented as a more utilitarian concept: work. As companies develop ideas on how best to compete in the marketplace, identifying customer needs that are not being satisfied, as well as on a host of other thought processes, at some point a unit of work will take shape. These units of work will need to be methodically captured and evaluated on their merits for delivering business value. In most instances, companies view work endeavors through two lenses—1) as on-going endeavors (i.e., operations), and 2) as opportunity exploration (i.e., new programs or projects). This distinction helps to simplify the task of evaluating the work endeavors, assigning ownership, and acquiring or devoting resources. Before we get into the details of the work delivery process, let's first introduce a framework to provide a common context.
A Framework for Success
Research and experience indicate there are five core business components crucial for companies to understand and actively manage (Exhibit 1):
Exhibit 1: Enterprise Management Framework™.
First, executive leadership guides and directs the organization as a whole. Enterprise planning is a systematic process for developing a plan for the overall course and direction of the company for the purpose of optimizing business value. Company leadership must address a number of questions: What are the current market conditions and how does this bode for plans for new products, services, or other initiatives? What are the financial expectations to be met? How will the various regulatory and compliance requirements be addressed? How are these requirements summed up into a cohesive enterprise and portfolio strategy and an effective management approach?
Second, leadership looks out into the organization and to the next level of detail by dividing control and management among business areas. Several terms are used, but we choose to follow the concept of a portfolio or portfolios. Although the term is borrowed from finance, its intent is to logically group activities around business processes. At this level, company directors address additional questions: What are the enterprise operating parameters that must be worked within? Given the business and portfolio objectives, what is the roadmap of items that should be addressed? Within the organization, what capacity exists? Stated another way, what resources are needed, which are available, and how are resource shortfalls to be addressed?
Third, focus starts moving away from planning toward management tasks. Portfolio management is the central effort focused on producing a prioritized list of work as well as a realization plan for its delivery. This component is central because it is where planning meets practice. Many questions are addressed here: Where do ideas and work requests get originated and/or introduced? What information is needed? How are the endeavors evaluated, measured, and valued? What are the prioritization criteria, and how are those criteria followed? How and how often is progress measured?
Fourth, work management provides the channels for the actual delivery of work endeavors. Depending upon the needs and complexity of the organization, work streams occur concurrently in order to accommodate various types of work. This component positions the organization to leverage the concept of specialization to achieve greater scales of resource and time economies.
Finally, operations management brings together the facilitating processes that provide supporting functions to all the other components and processes. It represents the link between governance, project/program management, financial management, operations management, and capacity management—including resource planning and management—as well as ongoing maintenance and support. The Enterprise Management Framework™ has been developed over many years within many types of organizations. The process components can be rolled up or decomposed to low levels to provide an effective process flow for functions critical to any size or type of organization.
The Work Delivery Process
Turning attention to the inner workings of the portfolio management component, we make some simplifying assumptions. First, we make the assumption that the planning components (i.e., enterprise planning and portfolio planning) have been completed and all information from those functions is provided. Second, all of the subsequent management components (i.e., work management and operations management) are in place, functioning, and out of scope to further discussions.
Naturally, companies differ in their need for process and the complexity required to effectively represent the tasks involved in day-to-day operations. Larger, mature organizations utilize higher specialization, while smaller, developing organizations tend to combine more processes. We recognize this need and have found that although companies may label processes differently and may combine various roles and responsibilities, different sized organizations essentially complete the same process tasks. From a division of labor perspective, however, they allocate the responsibilities differently.
Fundamentally, only a few processes are necessary to provide the appropriate rigor for managing a portfolio of work (Exhibit 2).
Exhibit 2: Portfolio management.
—Each of these processes takes place within every company. In fact, they happen either actively or passively. Companies that do not formally establish mechanisms around each of these processes find that the processes and tasks are performed passively within the organization.
A passive approach does not position the organization to succeed. Two frequent challenges involved with a passive approach are less consistency and lack of transparency. From a consistency viewpoint, processes should be repeatable and unbiased. Keep in mind that the processes are conducted by human beings and the presence of subjective components will present outcome variances. Each time a work request is reviewed, an established set of steps should be followed so that the outcome variance that results is as little as possible. Unbiased results come from having a process that all work requests must follow. It should not matter which business unit, department, or area of the organization makes the request—all should follow the same guidelines and each should stand on its own merit. From a transparency viewpoint, a well-understood and visible process lends itself to review and scrutiny. If all work requests are treated equally, a critical review of the process should provide evidence of the value that each work request is to provide the organization and reveal that no favoritism is being applied.
On the other hand, an active approach to managing the process establishes the precedent of a set and known mechanism as a guide. As we shall see, actively managing the work delivery process positions the company for success.
Work Intake
In your company today, at what point are work requests started along the path of being undertaken as projects? What is the entry point to making the decision to dedicate resources and effort to them? If a great idea is generated to contain or reduce costs, where does it begin its journey toward delivery? Where do new product or service ideas get their start? On a broader view, how many resources are being expended on projects that have marginal value or little chance of success?
Work intake can be characterized as “the front door.” It is the point of entry where work requests and ideas pass to begin their journey. Having a single, known point of entry has many benefits. For one, it provides for individual identification and tracking. At this early point, we begin by creating a work entity with a unique identifier, a unique name, and a description, as well as additional identifying information to further understand it. Many organizations establish a checklist of items that should accompany the submission of a work request. These requirements vary depending on the industry and on the maturity and size of the organization. A judicious requirement at this juncture is a business case as well as initial supporting financial expectations for the endeavor. The business case should be developed thoroughly enough to communicate the need and value to the company. Although more metrics will be captured and evaluated during work qualification, expectations should be set at this step as to the type and depth of information required.
A rigorous entry process can be a double-edged sword. One major benefit of rigorous processes is well-developed and thought-out work requests and ideas. How much of your organization's resources are currently being devoted to work efforts that represent the best use of resources? Are you getting your money's worth on the investment? When organizations invest in requiring rigorous review and evaluation of work requests before devoting scarce resources, typically their return on investment (as well as return on equity) improves significantly. On the flip side, major costs associated with this analysis include increased overhead as well as possible lack of participation. Certainly, adding more rigor increases the amount of administration, and administrative efforts typically contribute little incremental value in isolation. The value is derived from not expending resources on efforts that end up being cancelled due to poor preparation. Too much rigor may also result in a lack of participation or a deadweight loss from trying to work around the process. As with many processes, a delicate balancing act determines the proper amount of structure. Organizational maturity and size should serve as guides.
Work Qualification
Does your organization have a consistent, unbiased, and transparent set of measures used to understand the value a work request may bring? Are all work requests subjected to qualitative and quantitative review? Do requests get categorized and evaluated on the basis of metrics such as level of effort, organization benefit, risk, and complexity?
Broadly, work qualification determines the impact to the company of pursuing the work request or idea. During this step, efforts center on understanding the benefits as well as the costs, both explicit and implicit. Several measures and metrics have already been discussed as part of the work intake process, and work qualification provides for a full qualitative and quantitative review. Explicit benefits and costs should be calculated to systematically capture and review the financial as well as other important business factors. Return on investment calculations should focus around discounted cash flow methods (e.g., net present value, internal rate of return, discounted payback period). This means involving expertise from areas of the organization equipped with the skills to perform such tasks. Typically, IT departments do not possess such skills. Implicit benefits and costs should also be evaluated and recorded. Opportunity costs and market costs can also be used to weigh value. A word of caution: the company should establish a weighting factor for explicit and implicit cost comparisons, with the predominate weight being placed on explicit factors. It is well understood that work requests arise with high implicit benefits that are difficult to justify from an explicit point of view (e.g., a competitor offers a product that you must offer even though it will be a loss leader). By convention, these types of endeavors should be a slim minority and typically involve executive leadership in the decision.
The output of the qualification process is an unbiased and clear disposition of work requests by the factors identified as important to the organization. As a start, companies want to understand the level of effort, organization benefits, risk, and complexity. The type, timing, and duration of both capital and human resources must also be evaluated. Availability and possible acquisition of resources requires understanding, as it will influence work qualification as well as other downstream decisions in prioritization. As indicated previously, organizational benefits should be understood from both explicit and implicit viewpoints. Sometimes implicit benefits outweigh explicit costs. This should occur very infrequently and does not provide anyone carte blanche to override the processes (this includes the executive suite). Risks associated with a work request should be evaluated and quantified to the extent possible. Many companies start with a simple numeric scale and take two primary viewpoints: market and organizational risks (i.e., internal and external risks). The key to success is to provide repeatability and objectivity. A brief description of each scale value and standard perspectives of market and organizational risk help standardize responses. As for complexity, it initially centers on the organizations' capability to deliver given its existing resources. Depending on the company's level of maturity, even leadership may not have the requisite knowledge and experience to adequately support success. Workers may not have the capabilities, or the market might not be able to readily provide the expertise. These are all factors that should be evaluated and synthesized before an initiative is undertaken.
Work Prioritization
Does your company develop a prioritized list of requests? How does your company match limited resources—both capital and human—to requests to understand feasibility?
To get to this step, many tasks have been completed to set up success. A single point of entry offers a mechanism for identifying and tracking a work request. The front door sets the stage for acquiring addition information about the request during qualification. The output of qualification is an unbiased qualitative and quantitative understanding of the effort required to complete the request. During prioritization, this assembled information serves as the foundation to make the next major decision—the priority of the work requests. Here, perspectives broaden to include concepts of prioritizing at the enterprise level as well as at the portfolio level, aligning new endeavors with existing projects and understanding the overall availability of resources for assignment to the new requests.
Evaluating work requests for prioritization typically occurs on two levels: the enterprise and the portfolio. Prioritization at the enterprise level is the device used to identify those requests that will ultimately be delivered. Funding and allocation of resources typically come from the enterprise level. In most organizations, the coffers are controlled at this central level. At this juncture, all work requests are arrayed from most to least beneficial. With this stratification, the exercise is relatively straightforward, as you identify and sum the costs until you are near the appropriate overall budgeted amount for the period. Since the budget and spend figures rarely equate precisely, there may be excess funds that are not enough to cover the next project on the list. From this point, companies proceed differently. Most commonly, organizations put the remaining funds into reserve to cover budget overruns as they occur. Once prioritized at the overall enterprise level, the portfolio-level prioritizations take place. As stated, we imply two separate efforts exist. In practice, most companies undergo one consolidated effort by which portfolio investments decisions are made in joint consideration with enterprise investment decisions. Alternative approaches do exist and typically depend upon the organization's size, maturity, and structure.
Two critical aspects of prioritization deal with coupling resources to the prioritized endeavors and providing updates to the portfolio realization plan. The realization plan is the output of the process providing the roadmap of projects to be delivered. Getting to a final realization plan requires evaluating impacts to current work efforts and resource requirements. Most companies have many efforts ongoing simultaneously, and in order to maximize investment, they develop approaches to leverage existing work as much as possible. These details generally fall to portfolio leadership, as they are closest to the efforts and can more readily provide effective solutions. In the simplest case, all impacts can be localized to one portfolio and thus one chain of management. In more complex cases, cross-portfolio alignment necessitates teams to negotiate and gain commitment on impacts shared across organizational lines. People, process, and technology solutions may all be involved.
Before leaving this process, here is what happened to all the work requests and ideas that have been evaluated up to this point. All requests are placed into three categories: prioritized, rejected, or deferred. The prioritized requests go forward to the work management component identified in the Enterprise Management FrameworkTM. Depending on the size and maturity of the organization, there may be several channels established to deliver the work. Channels include routine work that periodically recurs, release work that may bundle work items together providing a scheduled release of functionality, and, finally, project or program work for larger-scale efforts. The rejected requests simply return to the originators. Some are returned earlier in the process than others, and there can be many reasons for rejection. Possible reasons include poor concept, poor market timing, or poor ROI. Deferred items are those that had significant merit when evaluated alone but not when stacked up against others available for investment at that time. These requests typically return in subsequent cycles.
Portfolio Roadmap
A great deal of effort has been expended thus far—so are we finished? Not quite. The ongoing effort to keep the best-laid plans moving forward is active management of the realization plan and the portfolio roadmap. The realization plan is formally validated and approved by leadership to be in alignment with stated company and portfolio objectives. The individual work efforts, now projects, are mapped back to the objectives, and resources are assigned for delivery. It is important to continue communication and reaffirmation activities. As project leaders and management from within the organization start to take control, they need to understand the original intent of the project and the value it is to provide the organization. Communication is a critical factor.
As projects take flight, it is important to periodically review them for progress and to determine if they are on track to deliver the expected results. As business conditions change, resources transition, and other factors influence the delivery teams, portfolio leaders must often deal with change. Two known change items are new projects coming online on a periodic basis and existing projects being realigned or cancelled. Most times, new projects coming online deal with matching of resources or market timing. This process can be controlled from period to period and scheduled with fair reliability. Project realignment and cancellation typically produce more complexities. Larger projects provide a bit more stability and predictability because of their longer duration. Oftentimes, they receive more rigorous controls as well as upfront scrutiny. Mid-sized to small endeavors tend to churn more sporadically. Although they are a bit more unpredictable, the upside is they have less affects on resources.
This final process is an ongoing step that requires continuous attention. Changes to the business environment occur, necessitating changes and maneuvering to bring efforts back in balance on a frequent basis.
Capacity Management
As a final topic, we address capacity management. In and of itself, capacity management is a process requiring volumes to explain; however, it is briefly presented here so that its importance can be understood. Capacity management is a process that resides in the operations management business component identified in the Enterprise Management FrameworkTM. Capacity management is a function that by nature is shared across the organization. It encompasses two key functions: resource planning and resource management.
Resource planning is the ongoing process of creating strategic resource plans to meet demand. Demand in this instance is defined as work requests—or demand—from the organization. Thus, resources can be viewed as supply, and supply must equal or outweigh demand as projects come online to be delivered. As the organization grows and demand increases, the need grows to understand resourcing approach options earlier in the process. Utilization plans must first identify the needed capacity for operational efforts (i.e., ongoing endeavors). These need to be covered before any thought is given to discretionary efforts. Any remaining or excess resources provide capacity for project efforts (i.e., opportunity exploration). As capacity reaches its limits, resource acquisition plans identify shortages and gaps to be filled. Possible solutions to bridge these gaps is an ongoing effort.
Resource management is the process that works jointly with resource planning to evaluatecreate a disposition of and implement changes to resource forecasts, resource reservations, and resource commitments. Resource forecasts are an integral part of overall enterprise planning efforts and generally include capital as well as human resource forecasts. From a human resource perspective, the supply management function creates, reviews, and updates resource forecasts on a periodic basis. All work, existing and planned, is taken into consideration when the forecasts are being created. A sound practice is to prepare rolling 12-month views as a guide to what resources are needed and when to acquire them.
Resource reservations are created as the timeframe nears for work to start. Resource reservations are triggered by updates to the portfolio roadmap, scope and phase changes during ongoing work, as well as resource pool fluctuations. Resource commitment provides for the allocation of the requisite resources to complete the work efforts during the active phases of work delivery. Although these process components provide rigor around managing the process, actual timing and delivery of the resources is a much more complicated practice.
Summary
Work delivery within an organization can be effectively and efficiently accomplished, provided that the organization is willing to actively manage a few process steps. Portfolio management entails coordinating work intake efforts through a common point of entry. This allows for upfront identification and establishes mechanisms for effectively capturing and storing information about the work request. The next step gathers measures and metrics about the work requests so that a qualification process can be undertaken. The goal is to provide a qualitative and quantitative evaluation of the work requests in order for each to be compared on its own merits. Prioritization takes the information captured and establishes a value-arrayed list of the work requests. Coupled with resource availability, this allows the creation of a portfolio realization plan. This plan includes all endeavors that are to be actively worked during a specific period. Management of the portfolio roadmap is the ongoing process of staying on top of the commitments to make sure the business is realizing the value expected.
