by Barb Schrage, Adjunct Faculty, Wisconsin School of Business Center for Professional & Executive Development
Unrealistic deadlines, scope creep, poorly defined goals, everything has to get done now, or whatever familiar refrain knocks around your organization, know that you’re not alone. Students in my professional development Project Portfolio Management class
empathize with eachother over these situations and feelings of being so overwhelmed, they don’t know where to start. There are solutions.
Project Portfolio Management is a set of business processes that allows organizations to select the right projects at the right time to achieve strategic business goals. The approved project portfolio represents clear direction and priorities for investments in budgets and in resource allocations toward the projects within that portfolio.
Here is a representation of the project pipeline in a non-project portfolio managed environment:
Project Management as a Solution
- Without an organization’s ability to prioritize proposed projects against each other, using criteria that directly ties to the organization’s strategic and business plans, it ends up being an implied decision to do all the projects because they’re all “high” priority.
- Without an organization’s understanding of the resource capacity (resources’ time and money), it ends up as an implied direction to force the resources to do all the projects, which leads to working excessive overtime or slowing down the pace of the projects to fit the resource capacity.
- Projects are started based on their sense of urgency or business value. However, without a collective view of priority and business value across all proposed projects that are vying for scarce resources, an organization may end up working on too many projects that have low business value and some that don’t directly tie to an organizations’ strategic and business plans.
- Without a transparent view of the project portfolio within and across business units, or at the executive level, can lead to a lack of clarity of priorities of where to allocate resources. This may result in projects being worked on with inconsistent decision criteria, such as working on the easiest projects, the “pet” projects, or the exciting projects without regard to alignment to the organization’s business strategies nor the business value to be achieved.
- Starting too many concurrent projects, without due consideration given to resource capacity (people and money), clogs the project “pipeline” and slows down the overall throughput. People spend small amounts of time on many concurrent projects, which stretches out the timelines for each concurrent project instead of focusing efforts on one or two projects at a time.
The goal of project portfolio management is to work on the right projects at the right time for the right costs balanced to resource capacity to achieve the strategic and business objectives of the organization. Project Portfolio Management consists of three overall processes: Define the project portfolio (prioritization), manage the project portfolio (re-balance) and measure the project portfolio. The following steps are discussed in greater detail with experienced project managers and project management office directors in my course, Project Portfolio Management
7 Steps to define the project portfolio
- Create a solid business case for each proposed project that describes and justifies the need for the project. Questions to answer within the business case include:
- Why should we do the project at this time?
- What is the problem to be solved or the business opportunity to be achieved and what is the proposed solution? Include cost estimates, resources, and time.
- What is driving the timing of the project?
- How does this project support the achievement of business strategies and objectives?
- What are the business outcomes and value to the organization?
- Prioritize the proposed projects to create an initial ranked list
- Create ranking criteria based on business value, which include the tangible and intangible benefits that are critical to the organization. If there are too many ranking criteria, prioritization will become unwieldly and result in very few data spreads in the scoring. Ideally, the number of ranking criteria should be between four and seven. Optional: provide weights for each of the ranking criteria.
- Score each of the proposed projects against the ranking criteria. The ranking criteria data should be included in each of the business cases for the proposed projects. Sort by the total scores to create the initial ranked list of proposed projects.
- Analyze the results of the initial ranked list of proposed projects to confirm the highest priority projects provide the greatest business value to the organization, based on the current strategic and business objectives. Also, consider calendar timing and dependencies with other projects within the portfolio.
- Compare against the organization’s constrained resources (budgetary or resource capacity). Total up the estimated costs and resources (hours or percentage of full-time equivalents) for the initial ranked list of proposed projects. This data should also be included in the proposed business cases. Compare the total estimated costs and resources from the initial ranked list of proposed projects to the resource capacity (cost and resources) and indicate where in the ranked list of projects the capacity is exceeded.
- For the projects that fall above the capacity line, determine the correct timing and pacing of the projects and create a roadmap dashboard report. Within this report, each proposed project should show along a calendar timeline, the length of each project and within which month it should start. There may be a perceived pressure and sense of urgency to start all the projects at the same time, which will also clog the project pipeline.
- Another option is to add graphics that represent what percentage of the proposed projects’ total cost or total resource hours fall into specified categories. There are many different types of these categories. One example of a specified category could be which corporate or business strategy does each project most align to and directly support. These types of graphics can answer the question: does the portfolio contain the right mix of projects?
- Work with the project portfolio governance team to gain approval on the proposed project portfolio, which is the list of proposed projects that fall within the resource capacity. Strategic decisions are made at this point. Are these the right projects for the organization to commit resources to? Is it the right mix of projects? Do these projects represent our organization’s intent, direction and priorities? Also, there may be questions and discussions by the governance team about how to increase resource capacity (money and/or people), or how to increase efficiency, or how to reduce the cost and/or resource estimates for each of the projects that either fall above or below the budget and/or resource capacity line so that more projects can get done.
Publish the approved project portfolio along with the project roadmap dashboard report that shows the pacing for each of the projects along a calendar timeline.
How to Balance Project Portfolios
Once the project portfolio has been defined and approved, it needs to be optimized and re-balanced for performance and business value within resource capacity constraints. The frequency depends on the size of the projects and programs within the portfolio. For example, a company with fast moving, quick projects, could re-balance monthly or quarterly.
There are various factors that could trigger a need to re-balance the project portfolio. The goal is to ensure the right projects are being worked on at the right time for the right cost and still fall within the budget and resource capacity of the project portfolio. Here are some examples:
- External and internal factors may cause organizational and business strategies to change. For example, an external factor might be a new regulatory requirement or a change to the business or competitive environment. An example of an internal factor might be a change in corporate direction – perhaps a merger or acquisition or perhaps an internal reorganization. The project portfolio may need to incorporate changes to align with the new direction to ensure optimal business value.
- There could be new project proposals submitted that may actually have higher priority than other projects currently in the portfolio.
- Project status and performance of in-progress and completed projects can also affect the portfolio. For example, if the target date for an individual project is forecasted to complete later than planned, it may take more money and more time to complete the project, which may delay the start of new projects in the portfolio. If the actual costs for a completed project are overrun, it may affect how many projects can get done within the portfolio.
Once the portfolio has been re-balanced with recommended changes, it should be presented to the project portfolio governance team to re-gain approval. Questions to ask during this process include:
Set and measure the results of the project portfolio
- Is the project portfolio still aligned with the right projects at the right time to achieve the strategic and business objectives?
- Are the investment targets for the portfolio (budget and resource capacity) still viable? Is there a way to increase capacity and/or efficiency?
- Are there any mid-course corrections needed, such as adding new projects, deferring projects or cancelling projects? With project portfolio management, there is a much greater degree of transparency in visualizing the impacts of a non-performing project on the entire project portfolio.
- Do the project budgets and resource needs still fall within the financial and resource capacity?
- What else can be done to help ensure success of the entire project portfolio?
There are two types of portfolio measures; the aggregate business value achieved by the projects within the portfolio and project performance of each of the projects within the project portfolio. Tracking each project’s individual business value contribution, both forecasted (for in-progress projects) and actuals (for completed projects) to the portfolio and then totaling for all projects within the portfolio is one way to measure business value.
Project performance measures are based on the “triple constraints” of project management; were the project’s final deliverables completed on time, within budget and according to scope and requirements? Track each project’s performance measures, both forecasted (for in-progress projects) and actuals (for completed projects) within the portfolio.
Both of these types of measures are integrated within the portfolio’s fiscal calendar timeframe. As mentioned earlier this could be on a rolling quarterly or annual basis, depending on the size of projects and how fast the projects are moving through the project pipeline.
Coupled with a strong project management foundation of excellence in planning and executing projects, using these project portfolio practices will help to ensure success in optimizing resources and achieving an organization’s strategic and business objectives. The approved project portfolio represents clear direction and priorities for investments in budgets and in resource allocations toward the projects within that portfolio. If project performance metrics are tracked on an annual basis, they may show internal trending results of a steady percentage increase in projects, year after year, in meeting their target dates, project budgets and scope/requirements. The goal is to get more projects completed within a fiscal year using the same number of resources.
Barbara Schrage, PMP, MCPM, teach Project Portfolio Management at the Wisconsin School of Business Center for Professional & Executive Development. To learn more about her upcoming courses, please contact firstname.lastname@example.org.