Managing a portfolio of projects, initiatives, and programs can be remarkably similar to managing a portfolio of investments. Often, this is called project (or program) portfolio management or PPM for short.
At the portfolio management level, the portfolio manager has to demonstrate alignment with an organization’s goals and regularly demonstrate value generation and a lower cost, through the centralized strategy and management. A portfolio manager can be a separate role or they can be the head of the PMO, depending how the organization is structured. In my career, I have played a dual role several times.
Critical tools and processes to effectively manage a portfolio are as follows:
· Pipeline control and intake process
· Enterprise resource management
· Enterprise change management
· Portfolio financial benefits
· Portfolio risk horizons
Pipeline control and intake:
There are limited resources that can be utilized to achieve espoused objectives within a specific time horizon. Therefore, it is necessary to control the pipeline.
All projects and programs should be assessed for strategic fit and benefits must be quantified for larger scale efforts. After the enterprise resource management model is in place, more and more accurate costs estimates for internal work effort can be compiled. A business case should be compiled and reviewed/approved by executive leadership to formally charter new work under the portfolio. If senior management is not involved in this process, that is a risk and could indicate perception issues. In order for the portfolio management to be successful, executive engagement is a prerequisite. All projects and programs should have quantifiable benefit estimates that have been verified. As the pipeline process matures, the benefit estimates will improve in accuracy.
Additionally, the phases of all of the projects and programs should be monitored to allow for more appropriate control and leveling, if necessary. If a gap appears in the pipeline where there is extensive resource downtime or perhaps a capital shortfall, this should be proactively identified and addressed through the portfolio monitoring process.
In practice, what I recommend is focus on strategically aligned efforts that provide the greatest return for the lowest cost along with smaller, incremental improvements which can be delivered at a low cost. This will allow you to optimize the enterprise resource load and continuously demonstrate improvements from your portfolio.
Enterprise Resource Management:
Projects and programs require resources in order to reach completion. The enterprise resources (e.g. IT, PMO, HR, Legal, etc.) must be efficiently and effectively deployed at the right time and at the right priority. As part of the intake process, an important element is obtaining executive approval on the prioritization of the efforts under a portfolio.
Based on this priority, the resource efforts are monitored and corrective action is taken when necessary. For example, capacity monitoring is a key tool to use in this process and when there are periods of over capacity by key resources, all work for those resources will be at risk. Proactive monitoring and modeling will forecast this in advance to allow for the mitigation of this risk.
Personally, I have not found an effective way to do this without requiring those who participate on projects to charge their time within a monitoring tool. This does require training and additional effort, but the payoff is well worth it due to the valuable data that is captured.
If resource management is effectively monitored and controlled, the chances of portfolio success greatly increase.
Enterprise Change Management:
Change control occurs at the project and program levels. However, it can also occur at the portfolio level if objectives and strategic direction change. If that occurs, an appropriate mechanism should be in place to effectively evaluate the portfolio and identify areas where a realignment should occur.
Additionally, changes from the lower levels should also roll up to the portfolio level for enterprise level tracking and resourcing, if necessary.
Portfolio Financial Benefits:
Mastering the Narrative: Metrics are an important part of every story. The PMO is no different. To be successful, the PMO has to demonstrate its value with metrics that are meaningful to the organization. This usually does not include Earned Value metrics, as they do not have much meaning outside of PM. This does include demonstrating that projects/programs are delivered on time and on budget, compiling the cost savings, process improvements, and new revenue that the PMO has delivered. Personally, for the savings and revenue, I demonstrate this as a multiple of the PMO total operating expense to drive the narrative that the department is a force multiplier.
Similar to my “Mastering the Narrative” section from my PMO Success and Failure article, demonstrating value on the strategic goals of the organization will ultimately determine the perception of success or failure. Reporting and tracking capabilities need to be developed and implemented in order to continuously gather portfolio benefits, costs, and then convert it into a consumable format that is easy to understand. Many executives have a short attention span, so you need to be impactful. That is why I do not suggest highlighting Earned Value unless you are in a more projectized organization that values those types of metrics.
As the Enterprise Resource Management becomes more mature, the cost estimations will become more accurate. Furthermore, as the intake and business case process become more and more formalized, the benefit estimations will improve as well. When the process is less mature, benefit estimates should be discounted unless the assumptions can be independently verified.
Portfolio Risk Horizons:
Similar to changes, risks should be matriculated upwards to the portfolio level and reviewed by the portfolio manager. The objective is to understand what represents a systematic or pervasive risk across the portfolio. Additionally, even for acute risks to projects or programs, this exercise is important as more significant projects/programs that are at risk can significantly alter the portfolio benefit delivery estimates if the risk manifests itself.
Today, there are several PPM and optimization tools that can assist with these critical portfolio processes. However, if the underlying processes are flawed, applying automation will have a negative effect and simply cost the company more money. Re-engineer the processes first and then apply automation, not the other way around.
-Jonathan Ozovek
