Know The Difference Between Work Intake Versus Stage-Gate


What is the difference between a work intake process and a Stage-Gate process? This is important to distinguish, especially for newer PMO’s that are setting up portfolio management processes.

Work Intake

The work intake process refers to the steps of developing a project proposal and bringing it to the governance board (or PMO) for a go/no-go decision. This process works in conjunction with Stage-Gate, but can also be a standalone process. When PMO’s are first established, an intake process needs to be defined so that the PMO can manage incoming project requests. Once the portfolio governance team is established and familiar with the intake process, a full Stage-Gate process should be developed.

The work in-take process is important so that all project proposals are created in a consistent manner with common tools and processes.

The unintended consequences of not having a work in-take process include:

  • Organizational confusion—employees will be unclear on how project proposals get brought forward, resulting in fewer project proposals from within the organization
  • Time delays—without a clear understanding of the process, project proposals may be unnecessarily delayed from being reviewed
  • Quality erosion—the quality of the proposals may erode and further delay the process since participants may not be aware of the information needed for project reviews.

In order to have a successful work in-take process, all of the roles and responsibilities of each participant in the process needs to be documented and communicated. Some questions that need to be answered include: who will write the proposal (project manager, business analyst, executive sponsor)? What information is needed? What templates need to be filled out? What format must the information be presented? Are there any IT systems that need to be utilized (e.g. SharePoint, portal, portfolio management system)? Are there any time constraints for submitting proposals? Is a presentation needed? Who will make the presentation?

Another important reason to establish a work in-take process is to help control the work in progress (WIP) within the organization. At one Fortune 500 company I worked with there was no “single entry” to the organization. Rather, requests came in through system managers, process engineers, subject matter experts, and other employees. It was nearly impossible to track all of the work being done because there was no “single source of truth”. A lot of shadow work was being done in the organization and it was very difficult to stop it because there was no established or enforced work in-take process. This shadow work eroded portfolio value, took valuable resources away from key projects, and was ‘death by 1000 cuts”.

Work in-take success factors:

  1. Having a single “front door to the organization”
  2. Clear roles and responsibilities of all participants in the work in-take process
  3. Clear understanding of what information needs to be submitted
  4. Clear communication about the templates and systems need to be used (if applicable)
  5. Clear timetables for submitting requests and making presentations

 

Work Intake and Stage-Gate
Work Intake with Stage-Gate

Stage-Gate

Stage-Gates are a governance structure to evaluate, authorize, and monitor projects as they pass through the project lifecycle. Each gate represents a proceed/modify/hold/stop work decision on the part of the portfolio governance team. Although the Stage-Gate process parallels the project life cycle, the two are not exactly the same. For more information on the project lifecycle please see the Project Management Body of Knowledge Guide 6th Edition (PMBOK) by the Project Management Institute (PMI).

Stage-Gates are a critical component of project selection. A winning portfolio must contain winning projects, therefore the portfolio governance team must be able to discriminate between good projects and great projects. The decision gate process enables the project governance board to review these projects based on predetermined strategic criteria at each gate review of the Stage-Gate process. At each of those gates, important project information is provided to the project governance board to make a go/no-go decision related to the project. Without this mechanism, unnecessary or poorly planned projects can enter the portfolio and bog down the work load of the organization, hampering the benefits realized from truly important and strategic projects.

 

 

Conclusion

New PMO’s should start by establishing a work intake process to ensure there is one clear path for project requests to reach the PMO. Later, as the organization adopts the work intake process, a full Stage-Gate process can be added on to increase the quality of project proposals and help ensure the portfolio contains winning projects.

Portfolio Reports – Part 2


In the previous post, we reviewed very basic portfolio reports that can easily generated with initial data. In this post we will continue examining portfolio reports with an emphasis on intermediate level reporting.

Pareto Chart (Financial Contribution)

All companies should have a breakdown of project cost, but not all companies capture project value. For those that do, a Pareto chart ordered by financial contribution (e.g. NPV) provides aggregate portfolio visibility of the most valuable projects. We also find that the 80/20 rule often applies (20% of the projects deliver 80% of the portfolio’s value). This type of Pareto chart provides great visibility of the entire portfolio and highlights how a subset of projects support overall financial contribution.   It is a great report for focused discussions regarding how to manage the long tail of low value projects. It is critically important for the portfolio governance team to recognize this tail of projects and how to deal with it. The minimum required data to generate this report is a financial metric (cost, dollar savings, NPV, etc.) and the Project Name or ID.

Advanced Pareto Chart

We can take this Pareto chart a step further and overlay additional data points to make it an even more powerful report. In the example below, we have overlaid the cumulative R&D labor (as a percentage of R&D labor across all projects). By adding in this additional resource data, we can clearly see that we can still achieve 80% of the total portfolio value with only 65% of the anticipated R&D spend. In the absence of portfolio optimization, this insight can be valuable when managing bottleneck resources as it points to additional projects that can be accomplished without the use of critical resources. You can substitute R&D for any other role in your company that is a bottleneck to many projects.

These enhanced portfolio reports provide great visibility of the entire portfolio and how a subset of projects support overall financial contribution.   It is an even better tool for focused discussions regarding how to manage “the tail”. All you need is the following data: Financial metric (cost, dollar savings, NPV, etc.), project name/ID, Resource data or other categorical measurement.

Advanced Portfolio Pareto Chart
Advanced Portfolio Pareto Chart

Treemaps

Treemaps offer a graphical alternative to traditional risk-value bubble charts and provides a quick glance of the entire portfolio with categorical information included (e.g. box size = cost, color = project value, grouping by category). The basic information may be similar to traditional bubble charts, but the coloring and sizing can raise awareness of different problems or challenges in the portfolio and is a great report for identifying misaligned projects. I recommend using treemaps in addition to bubble charts (which we will discuss in the next post).  Treemaps are common in data visualization software such as Tableau and requires data such as: financial measure (cost, revenue, savings), risk measures (optional), project value (e.g. a value score). Instead of coloring based on value score, you could color based on alignment to particular strategic objectives or by business unit. The example below shows a basic cost/value treemap.

Portfolio Treemap Example
Portfolio Treemap Example

Summary

In this post, we have seen two great intermediate portfolio reports that will enhance governance discussions. These reports help move senior leaders away from a singular project view to an aggregate project view. Even though we adjust individual portfolio components (aka projects), our view is to identify an optimal portfolio.

Are you using advanced Pareto charts and treemaps in your portfolio meetings? Share a comment below.

 

Portfolio Reporting Part 1


In a previous post, I wrote that from a very pragmatic point of view, getting the right data to leadership at the right time is at the heart of good project portfolio management. If the right data is not available for decision makers to use, the issue will be mediocre results at best. In actuality, the right data needs to be used to create the right reports to support strategic decision making. Hence, strong portfolio reporting must be a core capability for any organization utilizing portfolio processes. If you are not creating the right reports, then how well is your portfolio process actually working?

In the next few blog posts we will look at various types of portfolio reports, starting with basic reporting and concluding with advanced reporting.

In this first example, we will look at basic bar charts, which can represent subsets of projects in multiple dimensions:

  1. By Strategic Goal
  2. By Project Type
  3. By Sponsoring Business Group
  4. By Sponsor

The intention is to provide a quick visual overview of a certain category of projects (e.g. that align to a strategic goal or which belong to a certain sponsor). These charts provide a quick glance of projects sliced in different ways. There may not be much insight, but simple charts like this could highlight possible gaps in the portfolio and are useful for focused discussions around certain types of projects.

Basic Portfolio Report 1

The next set of basic portfolio reports focus on portfolio metrics. Pie charts of portfolio data are very easy to pull together and can be viewed categorically in different ways:

  • Projects By Category (Count, %)
  • Projects by Category (Cost)
  • Projects by Category (Value generated)

Some categorical examples include: health status, project type, strategic goal, sponsor, organization

Pie charts are really just a snapshot in time, but when data is collected over time, we can also graphically depict trends, which can uncover portfolio gaps. Such gaps highlight areas that need more governance attention and help facilitate focused discussions around managing the portfolio.

Organizations need to collect the following data in order to create these reports: categorical data, financial metric (cost, value, etc.), resource hours, etc.

Basic Portfolio Report 2

In the next post we will look at more intermediate portfolio reports.  In the meantime, what are your favorite portfolio reports? What has worked well for your organization?

Resource Management and Capacity Planning Handbook


Book Review

The Resource Management and Capacity Planning Handbook by Jerry Manas is the authoritative source for any organization wanting to improve its resource management practices in the context of portfolio management.  The opening chapter does a great job of providing basic context of resource management and capacity planning and strongly leverages a benchmark study by Appleseed RMCP and expert practitioners in the field.

Organizations continue to struggle with the matter of resource management and “when you consider the constant change, lack of visibility into resource capacity, and no sense of which work is most important, the result is a perfect storm of resource management chaos.” In order to address this problem, Manas systematically covers key topics chapter by chapter that provide relevant help to companies seeking to improve. This book is not about mere theory, but gives literally hundreds of practical points based on corporate reality.

Chapter 2 addresses the road to maturity for improving resource management. I am a big believer in assessing organizational maturity, and Manas does a great job of acknowledging that organizations are on a road to maturity, and through the help of expert practitioners, gives examples of how organizations have matured their resource management processes.  The chapter also addresses the matter of time tracking and does an excellent job of providing a balanced view of why to do it and how to make it work.

In chapter 3, Manas presents a systems approach for diagnosing the root causes of poor resource management. He brings out a number of points that should strike a chord in any organizations. In the latter half of the chapter, he uses systems thinking to deep dive on estimating resources and tasks. The Resource Management and Capacity Planning Handbook demystifies the complexities of resource capacity and demand management and offers clear ways for maximizing your limited resources to drive business growth and sustainability.

Chapter 4 addresses the much needed topic of leadership and organizational change management. I was very pleased to see an entire chapter devoted to these two subjects, because most of the time in portfolio management literature, the emphasis is either on process or tools, with little regard for the people dimension (which is very critical). Much of the chapter is spent on the “50 ways to lead your users”, which is a systematic and structured approach to leading change in the organization.

Chapter 5 addresses key roles for making resource management and capacity planning successful. One of the key takeaways is that successful organizations very often have dedicated resources to support capacity planning exercises. He also takes time explaining the expanding role of the PMO.

Chapter 6 is an enjoyable chapter on strategic alignment and how not to manage resource capacity management like failed military leaders in the past.

Chapter 7 is a great chapter focusing on the human side of resource management. As chapter 4 addressed the people side of leadership and change management, this chapter does an equally good job of explaining why it is important for organizations to pay attention to the human side of project execution and resource productivity when trying to improve resource management.

Chapter 8 expands upon a white paper Manas wrote called “the Capacity Quadrant”. This chapter speaks more frankly about the topic of portfolio management and the need for visibility, prioritization, optimization, and integration of the portfolio. I loved his white paper on the topic and felt that this chapter could have been moved up earlier in the book to provide a clearer view of resource management and capacity planning within the context of project portfolio management.

The final chapter, chapter 9, concludes with industry specific challenges of resource management and capacity planning. This chapter turned out to be the cherry on top as it provided insight into unique challenges faced by different industries. Learning about challenges faced by other industries actually gives greater context to the capacity planning problem and puts readers on the alert for identifying and solving these problems in their own company.

My Conclusion to Resource Management and Capacity Planning

The Resource Management and Capacity Planning Handbook is a must-have book for PMO directors and senior leaders struggling with making the best use of limited resources. Jerry Manas has a great writing style that makes the book easy to read and easy to understand. He also does a fantastic job of blending theory with reality by explaining key topics and then providing numerous tips on how to be more successful with resource management.

Rating: 5 out of 5 stars

Communicate Portfolio Value


I recently finished a project helping a CPG organization within a large retail company implement a product portfolio management process. The company as a whole tends to avoid developing business processes, but this CPG organization recognized the need for greater process discipline around its product pipeline and work in-take. Any endeavor to implement portfolio management can be difficult due to the organizational change component, but one factor that makes it easier is to communicate portfolio value.

Portfolio communication is a significant component of good portfolio management and often requires communicating along the four PPM lifecycle steps shown below:

Communicate portfolio value
Communicate portfolio value

However, as it relates to managing organization change, to communicate portfolio value is to communicate how the portfolio process benefits the organization. Success stories must be shared to reinforce how new changes should be welcomed and adopted.

Communicate Portfolio Value Through Success Stories

Within the first few weeks of the new process, a project manager told his peers that the work in-take processes actually helped him determine that a new product he was about to propose was not a good project after all. He elaborated by saying that the extra rigor required him to ask tough questions about the value of the project, which led him to the conclusion that his proposed product was not worth bringing to market! Prior to a product portfolio approach, numerous project managers would have brought forth new product ideas with little governance or oversight. Now, with greater scrutiny over new product proposals, it was easier to determine early on whether a product idea was worth going after or not. This kind of testimony should be widely circulated throughout the organization to help communicate the value of the portfolio process.

Another project manager approached me recently to share another success story about how his project team believed that making a change to a single product would result in a one-time costs saving of $100,000. However, as a result of the increased cross-functional collaboration required by the new Stage-Gate process, the project team discovered that these changes could be applied to an entire product line resulting in an annual savings of $1,000,000. This was a huge win for the team and is another success story to help the entire organization adopt the Stage-Gate/product portfolio process.

Summary

To communicate portfolio value is not just about communicating the value of the portfolio, or of the individual project components in the portfolio, it also involves communicating the value of the entire portfolio process. This creates positive momentum for helping organizations adopt new processes, resulting in greater success in the future.

Who in your organization manages portfolio communication? How effective is the portfolio communication at your company?

Portfolio Review Meetings


Portfolio Review Meetings

Portfolio review meetings are a great way to review and assess the entire project portfolio with the governance team. Unfortunately in practice, these meetings can be overwhelming, time consuming, and unproductive. There are many ways to conduct a portfolio review meeting, but one of the key questions of the governance team is “what do they want to accomplish at the end of the portfolio review”? For some organizations, portfolio review meetings are about getting project status of every project in the portfolio. For other organizations, portfolio review meetings are designed to evaluate each project in the portfolio with the intention of updating priorities.

Options for Portfolio Review Meetings

With this background in mind, we can look at four options for conducting portfolio review meetings:

  • OPTION 1: A review of all in-flight projects, current status, relative priority, business value, etc. Some projects may be cancelled, but the primary purpose is to inform the LT of the current in-flight projects.
  • OPTION 2: A partial review of projects in the portfolio consisting of high-value/high-risk projects. This provides more in-depth information of critical initiatives and may result in a possible change of priority of certain projects.
  • OPTION 3: A high-level review of all projects in the portfolio with the intention of updating project priorities for every project in the portfolio.
  • OPTION 4: A review of portfolio scenarios that meet current business needs followed by a selection of a recommended portfolio

Option 4 comes courtesy of Jac Gourden of FLIGHTMAP in a 2012 blog post and is the best approach I have seen for conducting portfolio review meetings. I also have sat through long sessions (although not all-day sessions) of reviewing all the projects in the portfolio and it can be painstakingly tiring. Moreover, these types of portfolio review meetings wear out governance team members and do not yield much value.  While there is certainly a time and a place for review the status of all projects or conducting a lengthy review for the purpose of re-prioritizing projects in the portfolio, taking a strategic view is the way to go. Rather than merely focusing on individual projects, a portfolio team can compile a few portfolio scenarios that should be reviewed by the governance team. In many instances, there is significant overlap between the portfolio scenarios, but the emphasis is on the business goals of the portfolio and how a portfolio scenario supports a certain goal. Some examples of portfolio scenarios include:

  • Revenue Growth Scenario
  • Customer Growth Scenario
  • Market Growth Scenario
  • Reduced R&D Spend Scenario
  • Balanced Portfolio Scenario

These scenarios are easier to produce when efficient frontier analysis is applied. Even after a portfolio recommendation is accepted, there is further work to screen out the projects not included in the portfolio, and in some cases to make worthy exceptions for some projects that would have otherwise been removed from the portfolio.

 

 

What do you think? Have you tried this approach before? How successful was it? Let me know.

 

Increase the Value of PPM Systems


Today’s Environment

Project portfolio management (PPM) helps organizations make decisions that move the needle toward achieving their strategic objectives. In order to make those decisions, senior leadership needs the right information at the right time. This is where PPM systems come in, providing the quality data helping to inform sound decision making. Unfortunately, many companies assume that merely implementing a PPM system will improve their ability to execute strategy. There’s more to it.

Point B’s Perspective

In order for PPM systems to add value, organizations need to consider five important factors: business drivers, reporting, data, processes and people.

How to increase value from PPM Systems

Read the entire article here

 

Gate Review Filters


Phase-gate reviews improve project selection. If an organization wants a winning portfolio then the governance team must select winning projects. Therefore the project governance board must be able to discriminate between good projects and great projects. The phase-gate process enables the project governance board to review these projects based on preselected strategic criteria at the gate reviews of the decision gate process. At each of those gates, important project information is provided to the project governance board to make a go/no-go decision related to the project. Without this mechanism, unnecessary or poorly planned projects can enter the portfolio and bog down the work load of the organization, hampering the benefits realized from truly important and strategic projects.

The ability to screen out misaligned projects is based on the types of decision making criteria used for gate reviews. Another way to look at the criteria is that they act as gate review filters.  For instance, some companies may have no filters and approve every project; another company may only judge projects based on financial contribution and screen out very fewer projects; whereas other companies will makes gate decisions based on financial contribution, investment risk, and resource availability. We can see this by the image below.

Gate Review Filters

Types of Gate Review Filters

There are many types of decision making filters available for companies to use, the key is to apply the filters that match the organization’s current maturity and culture. Let’s take a look at a few gate review filters (not an exhaustive list):

1)      Financial filter: this gate criteria requires some sort of financial analysis to determine the profitability (or value) of the project. Applying financial hurdle rates may be one way of screening out lower value projects. Using financial benefit (e.g. net present value) is one approach to rank ordering projects.

2)      Strategic filter: most companies implementing PPM recognize the need to evaluate projects in light of strategic goals and objectives. However, if the criteria is not detailed enough, most projects can be shown to align to strategy to a certain extent.

3)      Risk filters: risk criteria at gate reviews should really be thought of as investment risk. Detailed project risks may or may not be known, but based on the type of project being proposed and the initial analysis the riskiness (or risk nature) can be understood. Depending on the risk tolerance of the organization, more projects may be screened out based on the riskiness of the project.

4)      Resource filters: a more advanced criteria is resource availability or the utilization of key resources who are currently unavailable. Since many organizations do an inadequate job of measuring resource utilization, this filter may not be used as often.

5)      Portfolio filter: for simplicity, a portfolio filter takes an aggregate portfolio view when reviewing individual projects. It measures what the impact to the portfolio is rather than only evaluating the individual merits of the project. It also relates to the balance of the portfolio (short-term versus long-term, risky versus safe, good distribution among business units, etc.).

As organizations mature their project selection process, more gate review filters (criteria) should be used to ensure that right projects get included in the portfolio. More criteria often means fewer projects get approved which means that the project pipeline more closely resembles a “funnel” rather than a “tunnel” (see this post for details).

Five Uses of a Prioritization Scoring Model


Project prioritization is one of the most common topics in portfolio management literature. Within the context of project prioritization is the matter of scoring models because scoring models are the most widely used approach to prioritize projects. Although there are a lot of opinions on the effectiveness of common scoring models, they are nonetheless the most common method for prioritizing projects. However, most people may not realize the many uses of a scoring model and how it drives better decision making beyond project prioritization. In this post, we will look at five uses of a scoring model.

1) Project prioritization is the most common reason for using scoring models. As we saw in a previous post, project prioritization is for resource allocation. Since portfolio management is about delivering the most business value through projects, it is logical to ensure that resources are spent on the most important work. Ranking projects helps provide a common understanding of what is most important in the organization and scoring models are one of the easiest ways of establishing a rank order. For more information on using prioritization scoring models to rank order projects, please see Mastering Project Portfolio Management.

2) A prioritization scoring model is also used for project selection. The idea is to rank projects from highest value to lowest value and select projects until resources run out. This approach has merits over other approaches that do not sufficiently take account of strategic drivers. However, it can be shown that even simple optimization techniques can yield a higher value portfolio at the same cost. For organizations that do not employ portfolio optimization techniques, using a scoring model to rank order projects and fund projects until resources runs out is a reasonable way to go.

3) Portfolio optimization is very useful for identifying higher-value portfolios than merely using scoring models as discussed in the previous paragraph. The scores for each project can represent a “utility score” which can then be used as the input for the optimization calculations. In this way, projects are optimized based on all the scoring inputs, not merely on net present value or some other financial estimate. For more information about this technique, please refer to Richard Bayney’s book Enterprise Project Portfolio Management: Building Competencies for R&D and IT Investment Success.

Efficient Frontier Example

4) A prioritization scoring model can also be used to make go/no-go decisions at gate review meetings. There are at least two ways to accomplish this:

A) Organizations can predetermine a threshold score that projects must exceed in order to be considered for inclusion in the portfolio (known as a scoring hurdle).

B) An alternative approach is to use a scoring range to provide better input to the decision makers. In other words, if the scoring range were from 0 to 100, scores below 30 might represent high-risk/low-value investments that should otherwise be rejected, but may only get approved if there were other intangible factors not considered by the scoring model. Projects in the middle range of scores might be approved with more scrutiny, and projects in the upper range would likely get approved. The prerequisite to taking this approach is to have an adequate number of historical scores from past projects to compare against. Statistical analysis would further help refine this approach. Another assumption is that the scoring model would have to remain fairly consistent over time with few changes. Otherwise, historical scores could not be used to determine the correct range unless special adjustments are made to the scores.

5) Finally, scoring models provide the input to build risk-value bubble charts, which provide great visual information to senior leaders. The scoring model needs to contain both value elements and risk elements as inputs for the diagram. Normally, these scores are summed to become a single number, but with the risk-value bubble chart, we need to break out the total value score and the total risk score in order to correctly plot the data on a chart. With further data elements such as strategic alignment and expected cost (or return), more information can be displayed on the bubble charts (see example below).

Portfolio Bubble Chart

PMI Standard for Portfolio Management Third Edition


The PMI Standard for Portfolio Management Third Edition is the first edition that is worth buying. Having read the 1st and 2nd editions and reviewed the exposure draft for the 2nd and 3rd, PMI has come a long way with the third edition. Nearly all the major components of portfolio management are referenced in this edition (gate reviews being the most significant omission). At the time of this review, I am preparing for the PfMP exam and have read over most of the 3rd edition twice and have studied several sections in detail. It is still not perfect as there are several inconsistencies and items I consider too theoretical (hence the 4 out of 5 star rating), but overall it is a worthy addition to the portfolio management library. 

Chapters 1-2 do a great job of giving an overview of portfolio management with the roles and responsibilities needed to make it work. Chapter 3 also does a pretty good job of creating a structure around which to organize the remaining chapters by setting each of the five knowledge areas (Portfolio Strategic Management, Portfolio Governance Management, Portfolio Performance Management, Portfolio Communication Management, and Portfolio Risk Management) in a table with the three process groups (Defining, Aligning, and Authorizing/Controlling). Chapters 4-5 in my opinion are the weakest parts in the book. There are some great additions such as the portfolio strategic plan and the portfolio roadmap, but some of the strategic processes seem out of order (e.g. prioritizing projects before they have been evaluated by a governance board) or are omitted (e.g. gate reviews). In addition, the Portfolio Charter deliverable is just too theoretical for most organizations to adopt. Chapter 6 does a good job of addressing resource capacity management and benefits realization (two big omissions in previous editions). I found chapter 7 to be very useful related to portfolio communication and I got fresh insight on portfolio risk management from chapter 8.

In short, the PMI Standard for Portfolio Management Third Edition is worth buying and offers great information for portfolio management practitioners.

Project Pipeline Management


Project pipeline management is an important component of project portfolio management (PPM) because it encompasses the work needed to “select the right projects”. Pipeline management involves steps to ensure that an adequate number of project proposals are generated, evaluated, and screened out at various stages of the intake process that meet strategic objectives. There are three major sub-components to pipeline management: ideation, work intake processes, and phase-gate reviews illustrated in the figure below.

1) Ideation
Ideation is the process by which new project ideas are generated. This is slightly different from the work in-take process by which project requests are formally brought forward to a governance board. Ideation is important for collecting the best ideas from the organization, for collecting a sufficient number of project proposals to generate higher quality projects, and to maintain a healthy organization by engaging employees to submit their ideas.

2) Opportunity Management
Opportunity management complements ideation and further strengthens the project selection process. Some ideas may be great, but for one reason or another, the timing is not right or some other constraint makes the execution of the idea difficult or impossible. For this reason, organizations should establish a “parking lot” of good ideas waiting to enter the project pipeline. This parking lot is really a collection of all of the opportunities waiting to be captured.  The processes for managing opportunities are similar to the processes for managing risks except that opportunities are future events that could produce positive outcomes for the organization. Opportunities often fall into the “should do” or “could do” categories, but enable organizations to achieve more or perform better than planned. Without an opportunity management process, organizations risk losing visibility of potentially beneficial future projects.

3) Work Intake
The work intake process refers to the steps of developing a project proposal and bringing it to the governance board for a go/no-go decision. This process works in conjunction with both ideation and phase-gate, but can also be a standalone process. When used with ideation and phase-gate, the work in-take process helps bridge these other two processes together.  The work in-take process is important so that all project proposals are created in a consistent manner with common tools and processes. The unintended consequences of not having a work in-take process include organizational confusion, time delays, and quality erosion.

4)  Phase-Gates
Phase-gates (also known as Stage-Gate™) are a critical component of pipeline management. A winning portfolio must contain winning projects, therefore the portfolio management team (PMT) must be able to discriminate between good projects and great projects. The decision gate process enables the PMT to review these projects based on preselected strategic criteria at the gate reviews of the decision gate process. At each of those gates, important project information is provided to the Portfolio Management Team to make a go/no-go decision related to the project. Without this mechanism, unnecessary or poorly planned projects can enter the portfolio and bog down the work load of the organization, hampering the benefits realized from truly important and strategic projects.

Project Pipeline Management

 

Portfolio Management Professional (PfMP)


Project Management Institute (PMI) recently announced that a new Portfolio Management Professional (PfMP) certification would be available later this year. This is very exciting since PMI had released their 3rd edition of the Portfolio Management standard yet had not made a certification previously available in portfolio management. The eligibility requirements are steeper than the PMP.

“PfMP Eligibility Overview
To apply for the PfMP, you need to have either:

A secondary degree (high school diploma, associate’s degree, or the global equivalent), with at least seven years (10,500 hours) of portfolio management experience within the past 15 consecutive years.

OR

A four year degree (bachelor’s degree or the global equivalent), with at least four years (6,000 hours) of portfolio management experience within the past 15 consecutive years.

AND

Since portfolio management focuses on strategic investment matters and high level organizational decisions, it is pertinent to have a foundation of professional business experience. All applicants must possess a minimum of eight years (96 months) of professional business experience.

The PfMP Exam Content Outline is expected to be made available by September 2013. Applications are expected to be made available in Q4 2013. The first opportunity to test during the pilot is expected to be late Q4 2013.”

I can’t wait for the Portfolio Management Professional certification to be officially available.

 

Portfolio Management V-Model Part 2


In part 1 of the portfolio management V-model we looked at the left side of V (process and data) that drives better decision making. In part 2 we will look at the right side of the V (leadership and governance) and then tie everything together. Let’s start with governance.

PPM V-Model

Establishing portfolio management governance is a critical component for successful execution of PPM. Peter Weill and Jeanne Ross, authors of IT Governance, define governance as “specifying the decision rights and accountability framework to encourage desirable behavior in using IT. Governance determines who makes the decisions. Management is the process of making and implementing the decisions.” They make the point that IT governance is the most important factor in generating business value from IT and that good governance design allows enterprises to deliver superior results on their IT investments.

Governance is the foundation for all of the other portfolio mechanics, and without it, PPM doesn’t work. All benefits of project portfolio management hinge on the execution of portfolio governance. According to Howard A. Rubin, former executive vice president at Meta Group, “a good governance structure is central to making [PPM] work.” Furthermore, “Portfolio management without governance is an empty concept”. These quotes highlight the need for a well-defined and properly structured governance in order to manage the project portfolio.

Leadership is a critical component that brings the governance framework and the visionand goals of the organization together. Good leaders will develop the right goals and strategies for the organization. At the same time, good leaders will also develop the necessary governance infrastructure to make good decisions that will drive the execution of the strategy they have put in place. Moreover, good leaders will hold management accountable for following the governance process and will take ownership for achieving the organizational goals. In sum, leadership drives accountability.

Good governance processes enable better decision making but do not ensure it. The real decision makers on the portfolio governance board should be strong strategic leaders who make the right decisions at the right time. Portfolio management requires prioritization and trade-off decisions, which can be difficult tasks amidst strong politics and/or dynamic environments. True leaders will not compromise and accept mediocre results, even when that is the easiest path to take. Good strategic leaders will make difficult decisions (aka “the right decisions”) in the face of difficult circumstances. This is why leadership is needed in addition to governance for making better strategic decisions.

We can connect all of the components together now and see how they fit together. Good decision making requires having the right data at the right time, and it also requires strong leadership to utilize that data for making the best decision possible at any point in time. In order to have good data, organizational processes are required to collect the data and maintain it. Governance processes are also needed to ensure that the governance board operates efficiently and effectively. Even if there are good governance processes and place, and the roles and responsibilities are well understood, real leadership is needed to make difficult decisions that best utilize resources and accomplish company goals (even when not popular among all stakeholders). These decisions relate to the projects and programs in the portfolio that will execute strategy and meet company objectives. The simple portfolio management V-model helps tie together four critical components of PPM that lead to better decision making and result in greater strategic execution.

Portfolio Management V-Model Part 1


I recently constructed a portfolio management-oriented V-model. The traditional V-model has been used in software and product development, but this PPM variant differs in that the end result comes together at the point of the V. This is not an exhaustive list of PPM components, but does represent critical components and how they come together to drive better decision making resulting in optimal strategic execution. The model also makes a big assumption that the organization has sufficient strategy development capabilities in place.

Let’s work backwards (from the point back to the tips of the V) to understand how components on the left side supports the model.

 PPM V-Model

One of the primary goals (if not the foremost goal) of portfolio management is to execute strategy. There is an important distinction between strategy creation and strategic execution. Possessing a strategy (and spending the energy to create one) is meaningless if the organization cannot accomplish the strategic goals. Although many people acknowledge that strategic projects are vehicles for a accomplishing a strategy, senior leadership needs to make the right project decisions at the right time to advance the goals of the company. Hence, making smarter and better decisions is a precursor for solid strategic execution.

In order to make smarter and better decisions, the right data needs to be available at the right time. I have written about this in the past. Senior leaders should know what data is important and valuable for making the right decisions at the right time. Data collection costs money as does data analysis. Organizations should be mindful of the amount of effort needed to collect data and only collect data that is most important to the company. In another post, I wrote about a virtuous data cycle by which senior leaders need to actually use the data collected, communicate that the data is being used, and explain how the data is being used. This will encourage higher quality data collection resulting in better decision making. However, in order for the right data to be collected at the right time, processes need to be in place to facilitate the data collection process. Processes for work in-take, business case development, status updates, and resource management help provide the right data in the portfolio management lifecycle to promote better decision making.

The next post will explore the right side of the model and tie all the points together.

Using Gamification to Teach Portfolio Management Principles


This is a fun blog post with tips on using gamification to teach portfolio management principles (PPM). Portfolio management is not rocket science, but quickly conveying key concepts to people not familiar with project and portfolio management disciplines can be difficult. I learned this the hard way recently through my participation at two business competitions in Seattle. As I was working to come up with a simple message to explain portfolio management, I was reminded of a game I used to play in high school called Klax that actually contained many portfolio management principles. Klax is similar to many other puzzle games requiring players to connect multiple objects together of the same color. The basic game play involves colored tiles coming down a conveyor belt and the player needs to catch the tiles before they fall off and successfully drop them into a holding container (5 tiles by 5 tiles big) where points are scored by lining up at least three tiles in a row of the same color. The player can hold up to 5 tiles in order to better plan when and how to drop colored tiles into the bin.  When colored tiles are lined up, points are scored and the tiles disappearing clearing up more space to drop more tiles. A vertical stack of three tiles scores the least amount of points, horizontal connections score more, and diagonal connections score even more. Skilled players can connect 4 and 5 tiles together to score more points and lining up tiles to form an “X” scores a massive bonus. The game becomes more and more challenging as the number of colored tiles increases and come faster down the conveyor belt. The game ends when a player has missed too many falling tiles or fills the container bin (demo).

Connection to PPM

As you can probably guess by now, such a simple game has some interesting correlations to help teach portfolio management principles. Each tile could represent a project proposal and aligning three or more proposals of the same type (color) to organizational goals or strategies drives greater value to the organization. The holding bin itself could represent organizational resource capacity to complete project work. Each vertical section of the holding bin could represent a different business unit or customer. Some projects (vertical stacks) focus only on a single customer or business unit, whereas other projects (horizontal and diagonal connections) are developed for multiple business units. Clearly, these sets of projects are harder to complete when multiple stakeholders are involved and represent higher risk to the portfolio. Vertical stacks of 3 tiles are the easiest to complete but score the lowest amount of points. Higher scores are generated by lining up 4 and 5 tiles together, which requires more skill and planning to make those connections. Players need forethought of when and how to place the tiles in order to generate maximum points. Certain levels also have certain goals that need to be achieved before the player can advance to the next level. For example, the player may need to complete five diagonals before the level is over. Creating vertical and horizontal stacks may still earn points and may be needed to clear space in the bin but does not directly achieve the required goal.

Portfolio Management Principles

Here are a few of the portfolio management principles that are easily displayed through the game:

1) Governance: the paddle that catches the tiles could represent a governance board that needs to decide which projects to do and when to do them. If too much work is proposed (on the conveyor belt), the governance board loses control, and chaos ensues.

2) Value maximization: a governance board should not only focus on getting work done, but ensure that the right work gets done at the right time to generate greater value. In the game, a vertical stack of three tiles helps clear the board and generates a few points, but nowhere near the value of larger horizontal and diagonal stacks.

3) Organizational goals: just as the game has a goal to be achieved before a player can advance to the next level, so organizations have their own goals and it is important to realize that not all projects support the goals of the organization. Appropriate portfolio planning is needed to achieve organizational goals.

4) Portfolio Risk: larger horizontal and diagonal stacks are harder to achieve and could represent organizational risk. Trying to get too much work done at once (setting up multiple diagonals or horizontals) jeopardizes the entire organization and could result in nothing truly getting done unless adequate attention is paid to managing the portfolio risk.

5) Pipeline management: the conveyor belt represents the current pipeline of project proposals and the speed at which the tiles come down the conveyor belt is a significant factor for determining the difficulty level of the game. Likewise, ensuring that there is a steady flow of projects that are dispatched appropriately is a success factor for portfolio management.

Try out the game and let me know what you think and how well it applies to portfolio management principles. A newer version of the game can be found here, but is only available for Apple products.