Quite simple really, if you are doing the wrong projects right then your efforts are being seriously misdirected and your organisation is not achieving optimum business value.
Project Portfolio Management (PPM) can be defined as:
“The continuous process of identifying, selecting and managing a portfolio of projects in alignment with key performance metrics and strategic business objectives”
In essence PPM is doing the right projects right.
On the road to project maturity organisations will frequently improve processes first as it is a relatively easy win. They can typically engage those affected by the change in developing the processes. Achieving a fully optimised Project Management culture, the highest level of Project Management maturity as identified by the SEI and other bodies, is an aspiration that is very rarely realised.
Most organisations seeking to improve their Project Management maturity are lucky to achieve level 3 out of 5. Achieving levels 1 & 2 typically deliver gains that are out of proportion to the gains to be derived from persisting and aiming for level 5, the optimised organisation. Like any discipline the transition from novice to competent is fairly swift and satisfying, making the transition from player to elite competitor is much more of a challenge.
A big danger of being focused purely on the attainment of Project Management Maturity is that it can become self-serving or self-referential as it is exclusively focused on delivering projects on time, within budget and to the agreed standard (Scope/Quality) – nowhere in this lexicon is there any focus on business value or notions of success as far as the sponsor or customer are concerned.
Doing projects right is of little merit if the projects are wrongly aligned as far as corporate strategy is concerned. When Microsoft launched Project Server 2007 one of their stated aims was to raise the profile of projects undertaken by organisations and to more closely align projects to organisational strategy and objectives. The Portfolio Analysis companion product to Microsoft Project Server 2007 sought to address the growing demand for more rigorous, accountable and transparent project and portfolio selections.
With subsequent releases of the Project Server product Portfolio Analysis is a standard element of the product and as such offers many more organisations the opportunity to focus upon doing the right projects. The interface has also been improved with each iteration making the adoption of Portfolio Analysis a less overwhelming proposition.
For a lot of users however Portfolio Analysis is not an immediate requirement and in a lot of cases it tends to be regarded with a degree of suspicion, primarily due to a lack of awareness as to its capabilities and potential.
Whilst the configuration and creation of Portfolio Analysis is an involved and complex process it is well worth persisting
with as the results it can generate are invariably illuminating and sometimes surprising.
Portfolio Analysis is primarily focused upon achieving strategic value and the effective deployment of valuable resource or identifying shortfalls in available resource and identifying skills deficits and when they need to be resolved in order to support the portfolio.
As part of the Portfolio Analysis projects are ranked by priority as a result of Strategic Value Scoring, Project Impact Assessments, Pairwise Analysis and Strategic Driver Prioritisation – as I mentioned earlier the process is complex, however the interface for Portfolio Analysis in Project Server is logical and intuitive to follow in a step by step process. The results of this scoring approach deliver a list of proposed projects ranked by priority from highest to lowest priority with the sum of their priorities being 100% - do all the projects and you achieve 100% strategic value, simple!
For the more sophisticated amongst you it is possible to augment the Analysis with additional metrics such as Return on Investment – the only problem with these optional additions to the analysis is that they could provide some people with the opportunity to “game” the process by offering up values that distort and favourably misrepresent the value of their projects.
So far so what? Where Portfolio Analysis becomes intriguing is when we introduce limitations on both budget and resource. The Resource element is intriguing but for the remainder of this article I am going to focus upon the budget constraint.
With an unlimited budget we could undertake all proposed projects and supposedly achieve 100% business value, fantastic! Sadly it is highly unlikely that all the funding required to undertake all of the proposed projects will always be available.
Faced with such a situation the normal uninformed response would be simply to allocate the budget starting with the highest priority project and selecting further projects until all the funding available has been allocated, this would appear to be a reasonable and responsible approach.
Intriguingly Portfolio Analysis would deliver a subtly different selection of projects and in all probability deliver greater strategic value than the uninformed approach would achieve. A reduction in allocated budget is not reflected by a pro-rata reduction in strategic value, for example a reduction of the budget for a portfolio to 75% may typically see a Portfolio Analysis selection of projects that deliver 84% strategic value. This phenomenon has been christened the “efficient frontier” in Portfolio Analysis and can result in an unexpected selection of projects being proposed for a portfolio. The intent is focused upon ensuring that all strategic objectives are addressed and a balanced portfolio of projects identified.
Further nuancing can be achieved by including dependencies and mutual inclusion or exclusion. In essence we must do Project N if Project F is selected or alternatively there is no point in doing Project T if Project L is excluded.
A key benefit of the Portfolio Analysis process is that it eliminates politics and ego and reduces the Portfolio selection down to a population of Projects identified by agreed objective criteria.
I worked with an organisation that had an annual budget that could be allocated to research projects. Historically achieving consensus as to which projects should be undertaken was a time consuming and frustrating process – achieving common agreement was nigh on impossible as there was always someone adding one more consideration to the discussion thereby prompting yet another round of argument and counter argument. By adopting Portfolio Analysis there were clear “rules of engagement” and the selection process took a fraction of the time it used to take.
Whilst Portfolio Analysis provides a selected population of projects based upon agreed criteria it is possible to “force-in” or “force-out” selected projects. This introduces a human element to the selection process but can have a detrimental impact on strategic value. A Project Sponsor might demand that their pet project be included when the objective analysis has excluded it, however this will likely come at a price in terms of reduced strategic value – in such situations the ego may have to give way to pragmatism. Would you really be prepared to sacrifice 4% strategic value just so that your pet project is done?
With senior decision makers being faced with greater and greater accountability the Portfolio Analysis approach can provide demonstrable evidence that decisions on Portfolio Selection were taken on rational and objective criteria with the aim of maximising business benefit.
So how does this approach compare to techniques you currently employ when it comes to Project Selection? If you haven’t done so yet it might well be worth exploring the capabilities of this element of the Project Server offering.