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7 minutes reading time (1383 words)

Take the Portfolio Management Leap

“If I wait to deploy portfolio management practices until the organization is using more mature Program and Project practices, then it will be easier to adopt portfolio management, but we won’t be able to leverage the capability of portfolio management to help mature other PM practices as well.”

Following Project Portfolio principles within your organization, regardless of your job title enables and strengthens many of today’s best-practices.

Typically, before focusing on Project Portfolio practices, a higher level of Project and Program maturity must be achieved. Within Integrated PM, these practices are integrated, and seen as a single system happening simultaneously.

Given this system, the following capabilities are developed using Integrated PM. An iterative spiral of increased process maturity develops, due to the reinforcing feedback loop of your portfolios, that you may or may not even be aware of. This structure increases PM process maturity, which then increases portfolio management capabilities, which then enables better practices, which increases process maturity.

The message here is DON’T WAIT, start now, and your process will begin to mature, slowly at first, and more rapidly as capabilities grow. Focus your efforts in the following areas for the biggest initial benefit.

Organizational Change Management- Rapid changes in the economy, markets, technology, and regulations are forcing organizations to formulate new strategies or fine-tune the current ones more frequently than ever. As these strategies are translated into new initiatives supported by new programs and projects, portfolio management offers a framework to manage the change effectively. It helps you make the right investment decisions to generate value for stakeholders. It provides you with the right tools to rapidly alter the course of action in response to fast changes in the environment. As Portfolio Management policies and practices are used, opportunities to strengthen change management practices will increase.

Clear Alignment- A well-designed and managed formal portfolio management process ensures that projects are aligned with the organizational strategy and goals at all times. New project ideas are evaluated for their alignment with the strategy and goals, and no projects are funded unless there is clear alignment. In addition, the degree of alignment is continuously monitored as the selected projects go through their individual life cycles.

If an ongoing project no longer shows strong alignment, it may be terminated and the resources allocated to other higher priority projects. As Portfolio Management policies and practices are used, opportunities to strengthen strategic alignment practices will increase.

Value Creation- Portfolio management helps you deliver value to your stakeholders by managing project investments through a structured and disciplined process. The justification for the projects is clearly identified by quantifying the expected benefits (both tangible and intangible) and costs. Only those projects that promise high-value and rank high against the competing ones throughout their life cycles are funded.

Portfolio management gives you a bigger bang for your investment buck in the long run because you are managing the investments in a systematic fashion. As Portfolio Management policies and practices are used, opportunities to strengthen value creation practices will increase.

Value Balancing- For a profit-driven company, the organizational goal may be to generate the maximum financial returns possible for the owners or shareholders.

But if the projects selected for investment are based solely on financial value generation potential, interests of other key stakeholders may be compromised. PPM will help you create a balance among the projects to deliver not only financial value but other value forms as well. As Portfolio Management policies and practices are used, opportunities to strengthen value balancing practices will increase.

Long-Term Risk Management- When projects are initiated and implemented without the portfolio framework, project sponsors and managers typically focus on the short-term risks related to the completion of the project and do not pay enough attention to the long-term risks and rewards. Furthermore, they are oblivious to the collective risk profile of the project investments.

Under a portfolio structure, the risk-reward equation is examined for projects individually as well as collectively in the context of the overall business. By diversifying the investments and balancing the portfolio, you are able to create a proper mix of projects of different risk profiles and manage the risks more effectively. As Portfolio Management policies and practices are used, opportunities to strengthen long-term risk management practices will increase.

Termination of Projects- Just because a project initially shows a strong business case does not nec-essarily mean it should continue to receive funding through its completion. Projects that no longer hold a strong business case as they go through their life cycles should be terminated. This helps you focus on those projects that will generate value and kill others, thereby maximizing the value of the portfolio as a whole. In most organizations, once a project receives authorization and enters into the implementation phase, it will most likely continue to receive funding until its completion.

Terminating projects is a taboo in most organizations. It is a highly political and emotional issue for many decision makers and executives. Portfolio management helps make the project termination decisions more objective and less political or emotional. As Portfolio Management policies and practices are used, opportunities to strengthen project end-of-life practices will increase.

Better and Faster Decision Making- Portfolio management brings more focus to the decision-making process, making it faster and more effective. An integral part of PPM, portfolio and project governance provides a formal structure and process for making go/ no-go project investment decisions. It places the responsibility of decision making in the hands of independent parties-rather than the project sponsors with possible self-interest that can evaluate competing projects more objectively using the same measurements, metrics, and standards.

As Portfolio Management policies and practices are used, opportunities to strengthen decision making practices will increase.

Reducing Redundancies- It is not uncommon in relatively large organizations to face a situation where the "left hand doesn't know what the right is doing." Organizational resources are sometimes wasted on different projects trying to produce the same output. The PPM process helps you eliminate or reduce redundancy yielding significant savings to the organization.

When the portfolio management process is standardized across the whole enterprise, projects become more transparent and adequate checks and balances can help you detect redundancies early. As Portfolio Management policies and practices are used, opportunities to strengthen redundancy-identification practices will increase.

Better Communications and Roadmapping- Many organizations have "silos" around each function that block effective communication, a critical ingredient of success for cross-functional projects. PPM is a mechanism that opens the channels of communication for people from various business and technical functions. Silos also undermine innovation that is critical to organizational success in today's hypercompetitive environment.

PPM breaks the silo barriers creating opportunities for people to learn new insights from each other and become more innovative. As Portfolio Management policies and practices are used, opportunities to strengthen communications and roadmapping practices will increase.

Efficient Resource Allocation- One of the biggest challenges for any organization is the efficient allocation of resources-both monetary and human. While every manager claims that she would like to see the biggest bang for her buck, only a few organizations have proper systems in place to prioritize her projects based on their return on investment. Allocation of the right people to the right projects at the right time is an even bigger challenge.

You can rarely find a detailed inventory of the human resources vs. the project needs, that is, supply vs. demand. The situation becomes even worse when the project resources also have ad-ministrative and other operational responsibilities. One of the advantages of portfolio management is that it provides the structure and tools for efficient advance planning, needs prioritization, and resource allocation.

As Portfolio Management policies and practices are used, opportunities to strengthen resource allocation practices will increase.

Consistent Performance and Growth over Time- One of the key portfolio management processes is the evaluation of projects for their financial value-generating merit. This involves forecasting the future cash flows of every project and its outputs over its life cycle. Cash flow analysis for the entire portfolio over future time increments enables you to estimate any investment gaps and corresponding projects to match the growth targets of the organization.

The portfolio thus can offer consistent long-term growth and performance for the organization. As Portfolio Management policies and practices are used, opportunities to strengthen performance and growth practices will increase.

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Tuesday, 25 September 2018
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