Benefits Realization Summary

The purpose of validating benefits is to ensure that real value has been delivered from projects post-implementation as well as increase value from future projects when shortfalls have been identified in present projects. Although the business case promises to deliver a certain amount of value (in most cases), few companies take the time to ensure that real value gets delivered post-implementation. It requires real organizational discipline and rigor to do it well. The following three questions capture the full scope of benefits realization:

1. What benefits are we expecting in the future?

2. What benefits have we realized?

3. How do we ensure we realize full benefits on future projects?

Question one starts with the business case, specifically with cost-benefit analysis. There are no benefits to measure in the future if they don’t get captured before the project is fully initiated. Business case development is an important capability in portfolio management. Reasonably mature organizations will develop the capabilities of measuring anticipated benefits, often with the help of a senior business analyst. Unfortunately, some organizations are jaded when it comes to cost-benefit analysis and may not do it because of bad experiences in the past and the lack of accountability in the process. The purpose of tracking benefits is to help the organization ensure it gets the value it is expecting and to take action when the value is not realized.

Question two focuses on measuring the benefits after a project has closed down. The person accountable for delivering the project benefits (e.g. project sponsor) should use the same metrics documented in the business case to help track and validate the project benefits. In a mature organization, the effort to track benefits will resemble the effort at the start of the project to document expected benefits. The problem many companies face is that a gap often exists between the stated benefits and the actual benefits. This leads to question three.

Apparently, tracking benefits should be the end of the validation process. However, question three addresses the problem of gaps between anticipated and actual benefits. The scope of validating benefits is complete once gaps are addressed and resolved. This requires that the company take the time to analyze why the benefit gaps exist and to capture lessons learned that will be used by future project teams to do a better job of realizing benefits. This step completes the portfolio lifecycle of selecting the right projects, optimizing portfolio value, protecting portfolio value, and delivering portfolio value.

Virtually all of the benefit to a company comes after a project has been delivered. In order to increase the benefits realized from its projects, the organization should track the benefits that are actually received. According to Gaylord Wahl of Point B, such post-implementation evaluations can help improve business case development, which, in turn, increases the odds that the project portfolio will contain more winning projects going forward.

Greater Value From Portfolio Management Systems

Portfolio management systems have a very real place in making PPM processes successful. These systems have the potential to drive value in a number of ways, some of which are highlighted below:

1) Enterprise repository (“single source of truth”)—having a single system that contains up-to-date and accurate project and portfolio data is valuable. Gone are the days of maintaining multiple versions of static Excel files that contain the current “authorized” list of projects. This value is magnified the easier it is to access the system and the greater the number of users who access the system.

2) Process enabler—on top of merely storing project and portfolio data, portfolio management systems can better enable portfolio processes through workflow automation. This is particularly useful for stage-gate project reviews that have a number of review steps and need approval by multiple parties.  Portfolio management system can also better enable project management and capacity management processes. Thus the tool reduces the amount of work needed to carry out these processes, reducing lead time and costs.

3) Portfolio tools—portfolio management systems commonly come with tools that make portfolio management easier overall. One clear example is portfolio optimization, which is difficult (if not impossible) with spreadsheets and other databases. Portfolio management systems can make this otherwise difficult job easier by providing the tools needed to effectively get the job done.

4) Reporting and analytics—one of the greatest benefits of utilizing portfolio management systems is to get accurate and up-to-date reports on the status and health of projects, programs, and portfolios. Buying a portfolio management system and not utilizing the reporting capabilities or analytics is like buying a car with only two gears—you’ll make progress but not as quickly as you will by providing decision makers with insightful information and up-to-date reports.

The critical question then is, “how much value are you getting out of your portfolio management system?” If the cost of the system plus the cost of entering data plus the cost of maintaining the system exceeds the value of the information coming out of it, senior leadership either needs to reconsider its ways or change its portfolio management system.

As we discussed in an earlier post, leadership plays a huge part in making sure the right data gets fed into the system at the right time. Yet, leadership plays just as big of a role in making sure the organization gets value from its portfolio management system. Let’s quickly review the four areas where companies can derive value from portfolio management systems and the potential risks.

1) Enterprise repository—if employees and managers do not access the system often, or if there are competing places to get similar project and portfolio data, the system loses value.

2) Process enabler—if project and portfolio processes are not regularly followed, then the effort to load the system with data to enable those processes is a waste of time.

3) Portfolio tools—if the organization does not leverage the tools available in its portfolio management system, then it paid extra money for tools it doesn’t use.

4) Reporting and analytics—if senior management does not pull reports and use the data, then all the effort to ensure that quality data is going into the system is a waste of time. Even worse, if management does not communicate that it uses the data and demonstrate how it uses the data, the organization easily becomes skeptical of the value of portfolio management.

What value do you currently get from your portfolio management systems? Have you encountered any of the problems mentioned above?

Be Sure To Use The Portfolio Data

Data represents a major facet of successfully implementing project portfolio management (PPM). In a previous post, I discussed how data drives the portfolio management engine and some of the key components for getting good data into the tool. Some important portfolio data types includes: financial data, resource data, schedule data, and benefits data. Leadership plays a pivotal part in the whole process from determining which data is needed to using the data for better decision making. This post will concentrate on the last part of the process—how to use the portfolio data.

Use the Portfolio Data

Data quality is never perfect at the beginning of a portfolio management process. Collecting data takes time and effort, and with so much demand on individual’s time, people do not want to waste time collecting data that is unnecessary or won’t be used. This is why it is so important for senior leaders to use the portfolio data. When leadership uses the data, they will understand what data is truly needed for higher quality decision making. Moreover, once the data gets used, the gaps in the data will be readily apparent and will give senior leaders an opportunity to reinforce the importance of the portfolio processes (that collect the data in the first place).  However, using the data is only the first step in a three step process. Next, leadership needs to communicate that the data is being used.

Communicate that You Use the Portfolio Data

Communicating that the portfolio data is being used is a conscious effort on the part of the senior management team, but is something very easy to do. It can also easily be overlooked. Think about it. Project managers and resource managers can put data into the PPM system not knowing if it is simply going into a black hole or is actually helping the organization. Without communication, they may never hear whether the data is actually being used. A prime example occurs with resource data and capacity management. In order for capacity management to be successful, good data is needed, which takes a lot of effort by project managers and resource managers. If the project managers and resource managers do not believe that the data is actually being used, there will be less effort going forward in entering and maintaining the data. Even when an organization is mandated to use a PPM system, the data can be compromised by a small number of people who do not take the process seriously. Communicating that the data is being used is necessary for reinforcing the importance of the portfolio processes, yet senior leadership needs to take one more step—demonstrate how the data is being used.

Demonstrate How You Use the Portfolio Data

Communicating that the data is being used is good, but demonstrating how the data is being used is even better. This will send a clear message to the organization of how important it is to maintain accurate and up-to-date information in the portfolio system. If the data is being used to drive decisions around strategic project investments, staffing plans, bonuses, etc., then people will be more likely to spend the time to enter, update, and maintain the data. However, if the data is used to create a report that merely scratches the itch of a curious executive, then the people involved with the portfolio processes won’t have much interest in making sure that the data is accurate and up-to-date.

Using portfolio data, communicating that the portfolio data is being used, and demonstrating how the data is being used are the responsibilities of senior leadership. None of these steps are difficult, but need to be taken on a regular basis if the organization wants to be successful with portfolio management. Collecting data comes at a price, and if the data isn’t being used, it is better for the organization to stop wasting its time and focus on things that move the organization forward. A small amount of effort on the part of the senior leaders can go a long way toward making portfolio management successful and useful. Data is the fuel that runs the portfolio engine. Bad data will clog the engine; good data will help the organization sail forward. Using the data, communicating that the data is being used, and demonstrating how the data is being used will not only make the difference in being successful at portfolio management, it’s also smart business.

 

Use the portfolio data
How to use the portfolio data

Tactical or Strategic PPM

Fundamentally, portfolio management is about strategic execution and maximizing value to the organization through important project investments. Through various processes, leadership teams can determine how well their project investments align to key strategic goals. Optimization techniques can further enhance the value of the portfolio, ensuring that organizations get the biggest bang for their project buck. Nevertheless, some organizations turn to portfolio management to merely help at the tactical level—getting projects done—and are less concerned with using portfolio management for strategic execution. Organizations should be mindful of their portfolio management approach—is it strategic, tactical, or both?

Tactically, portfolio management as a discipline can help organizations execute projects through better portfolio planning which includes: short-term resource capacity management, managing dependencies, and sequencing projects.

1) Resource capacity management from a short-term tactical perspective (less than six months) enables organizations to minimize over-utilization and unnecessary multi-tasking, both of which increase the risk of failed project delivery. By protecting organizational capacity, projects are more likely to have key team members available when needed to accomplish project work. In addition, fewer projects usually means less multi-tasking which is a known killer of project success.

2) Managing dependencies at the portfolio level starts with identifying all the upstream and downstream relationships to each project in the portfolio. More dependencies means more complexity and increases the overall risk to portfolio success. This is not merely a program management function, but is part of portfolio planning because such dependencies can span across the entire portfolio. When organizations understand the dependencies between projects, the portfolio management team (PMT) can make better tactical decisions to ensure that upstream projects do not negatively impact downstream projects.

3) Project sequencing is another part of portfolio planning because it is related to managing dependencies. Some dependencies affect project schedules (finish-to-start, finish to finish, etc.) and in order for these projects to be successful, project sequencing needs to be managed. The PMT should understand these relationships in order to initiate projects at the right time otherwise projects could be launched too soon only to find out that other work needs to be completed first (resulting in delays and likely re-work).

Although project portfolio management (PPM) has been traditionally performed to support strategic execution, some organizations may use a sub-set of the portfolio processes and adopt a more tactical approach to portfolio management. While this may seem less than ideal to seasoned portfolio management practitioners, it still yields benefits for existing projects and programs, and can ensure greater success than if no portfolio processes were utilized.

Prioritization Matrix

In a recent LinkedIn discussion, questions were asked about the short-comings of prioritization matrices. I would like to highlight the strengths and weaknesses of using such a tool for portfolio management. Firstly, a prioritization matrix differs from a more traditional scoring approach in that it offers a limited number of priority selections. The most simplistic prioritization matrix has three choices, low, medium, and high. Of course, to be effective, every choice should have some predefined criteria. Otherwise, the matrix is of little value because decision makers can have wildly different views for what is of high importance versus low importance.

Strengths
Prioritization matrices have three primary strengths: simplicity, speed, and applicability to all types of work. Prioritization matrices are easy to understand and simple to use. Calculations are not required for determining the relative priority of a project. Basic criteria should be developed for each part of the matrix, but once complete, decision makers can apply the criteria to various types of work. Because of its simplicity, prioritization becomes a much faster exercise and allows decision makers to quickly distinguish important projects from less important projects. In addition, various kinds of work can be prioritized using a prioritization matrix. With a traditional scoring model, it is difficult to evaluate “keep the lights on” type of work, but with a prioritization matrix it is easier to compare priorities for project and non-project work.

Weaknesses
Prioritization matrices are unable to produce a rank ordered list of projects in a portfolio. At best, such a matrix can provide a categorical ranking of projects in the portfolio, but this won’t help prioritize projects within the same category. Prioritization matrices cannot do a good job of evaluating projects based on multiple criteria, and therefore cannot do a thorough job of distinguishing important projects from less important projects. When evaluating multiple large projects, a scoring system will provide a more accurate analysis over a prioritization matrix.

When Should a Prioritization Matrix Be Used?
Prioritization matrices are good for organizations new to the portfolio management process. Due to the simplicity, organizations can quickly get the benefit of prioritization without spending the time to do a thorough scoring of each project. Even in organizations where projects are scored and ranked, prioritization matrices can be used for “pre-screening” purposes to do a preliminary prioritization. This would be commonly used in a stage-gate process before a formal business case has been developed. A governance team could quickly determine a categorical priority for the project at an early gate review. Prioritization matrices can also be used to triage large volumes of project requests to focus the organization on the hottest projects. I have seen this approach used in an organization that received a high volume of small project requests. In this case, scoring would be an over-kill; the organization just needed to determine the most important work at that time.

Priority Matrix Sample

The Right Portfolio Data at the Right Time

From a very pragmatic point of view, getting the right data 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. Portfolio management is about selecting the right projects, optimizing the portfolio to deliver maximum benefit, protecting portfolio value to ensure that that value is delivered, and improving portfolio value by maturing organizational processes. At every step, data is required. The quality and quantity of data correlates to portfolio maturity. Some less mature organizations will collect insufficient data which leads to sub-optimal decisions. Other organizations may try to collect too much data before they are ready to utilize it and can do more harm than good by burning out employees with burdensome processes. Mature organizations will have the discipline and rigor to collect the right amount of quality data.

Therefore, understanding the data needed upfront is a success factor for portfolio management. There are several types of portfolio data:

  • Strategic data
  • Resource data
  • Schedule data (forecasts and actuals)
  • Performance data
  • Financial data (estimates and actuals)
  • Time tracking
  • Request data
  • Etc.

Senior management bears the responsibility for identifying the right data to be used in the portfolio management process. In addition, senior leadership needs to drive the accountability for collecting the right data. Without active engagement and feedback from senior management, data quality can suffer.

Organizational processes are very important for ensuring that the right data is collected. Selecting the right projects requires that good data is collected about each candidate project. Such data must be relevant to the senior management team that makes portfolio decisions. Data that is not used for decision making or information sharing is considered a waste. Collecting data comes at a cost, and organizations need to put the right processes in place in order to collect good data. From this angle, portfolio management processes are about collecting a sufficient amount of the right data. Without good standards and processes, important portfolio data will be collected inconsistently resulting in confusion and possible error.

Portfolio tools have a very important place in the portfolio management ecosystem, but only after leadership has identified what is required and lean processes have been created to facilitate data collection. Portfolio systems store and transform project and portfolio data for general consumption (aka reporting and analytics). For less mature organizations with fewer data requirements, simple portfolio systems such as Excel and Sharepoint can be used in the portfolio process. Maturing organizations should select portfolio software that meets the needs of its data requirements.

Lastly, senior leadership needs to use the data in the system for making better portfolio decisions. Strong portfolio systems will generate the reports and analytics necessary to support better investment decisions. Good data is the fuel that makes the portfolio engine run! Without good ‘fuel’, senior management will be unable to drive the organization toward its strategic goals. The data perspective of portfolio management begins and ends with senior leadership.

Data-Perspective-of-PPM

The Value of Time Tracking

What is the real value in tracking time for project and non-project work?  The fact is collecting accurate time measurements across an entire organization can be time consuming and potentially expensive. Collecting time for the sake of collecting time is a huge waste of good organizational energy. I have compiled a list of six reasons for tracking time with the corresponding assumptions for each benefit.

1) Calculate variance metrics (e.g. earned-value management)

Assumption:  managers or project managers actually use the variance reports to take good corrective action. Some organizations collect earned value metrics or other variance metrics but do little with the data. “Doing” earned value management is a waste of time unless positive action is taken as a result.

 

2) Calculate time to complete (based on effort-driven scheduling)

Assumption: project managers have built an effort-driven  schedule. I have never met a project manager that built a truly effort-driven schedule, let alone use time tracking to drive estimated completion dates.

 

3) Track overall project costs

Assumption: it is important to track actual project costs. If a customer will be billed for work done on a project, then it makes sense to track time. However, for many organizations that serve internal organizations, trying to track actual costs may not be the best use of company resources. Of course senior leadership would like to know the final cost of a completed project, but the big question is how will that information be used in the future to drive strategic decision making? Very few organizations look back at completed projects to get a better understanding of the cost of similar future projects. Unless there is high data integrity and dedicated resources to analyze historical data, you are far better off improving your resource estimation and capacity planning processes as this will improve portfolio decision making.

 

4) Track capital expenditures

Assumption: capital expenditures are a recurring part of doing business. With the tax benefits associated with capital expenditures, time tracking here makes a lot of sense and can be limited to the people associated with development, not for every person on the team.

 

5) Collect historical data for future parametric estimating

Assumption: organizational discipline is in place to use historical data for parametric estimating.  As good as it sounds, parametric estimating requires a high degree of discipline and rigor to make it successful.  Only mature organizations will be able to do it.

 

6) Collect resource data for capacity planning purposes

Assumption: capacity planning is being done in the organization. Even though capacity planning is done with forecasted resource estimates, using historical data can help managers better understand how much time a resource really spends on project work. This information can then be used to block out non-project time, with the balance of time available as the resource’s project capacity.

Highlights from Day 2 of the Gartner PPM Conference

Benefits and Beyond: Rethinking the Strategic Value of Project, Program, and Portfolio Management (Mark Langley-PMI  and Matt Light, Gartner )

  • We need to be able to answer the question, “Why did we do what we did?”
  • Benefits realization is a process throughout the project management lifecycle (among high performing organizations) not just at the end.
  • We have an increased need for leadership.
  • We need two types of project managers: those who are project capable, and a select group of turn-around artists who can also train/mentor junior project managers.
  • Benefits realization = ACCOUNTABILITY, which requires a ‘culture of PPM’
  • Organizations should match talent with appropriate projects
  • If you don’t have a business case, you are guaranteed to not know whether you achieved anticipated value
  • Finally, it requires leaders to deliver benefits

 

Follow the Yellow Brick Road (Michael Hanford, Gartner )

Pros and Cons of Centralized PMO

  • Pros: Can develop a better project management culture faster, everyone reports to the same director
  • Cons: business knowledge ages, disconnected group from the rest of the business

 

Identifying and Harnessing Complexity in Projects, Programs, and Portfolios (Robert Handler, Gartner )

  • See: A Leader’s Framework for Decision Making for more information on the Cynefin model
  • Work in the Simple area of the Cynefin model should not be projectized
  • 80% of projects reside in the complicated area
  • 20% of projects are likely in the complex area (but drive 80% of the value).

 

PPM Marketscope (Daniel Stang, Gartner )

  • Out of the box report is weak for many PPM vendors
  • Most companies never get past time tracking
  • It can take 3+ years to resolve resource management challenges
  • With new implementations, start small and provide ‘just enough’ visibility

Highlights from Day 1 of the Gartner PPM Conference

I am attending my first Gartner conference and have included some of the highlights from day 1 below:

AM Keynote:
It’s about risk. Don’t apply process overhead to low risk efforts.
Today’s status has something for pleasing everyone, but the full truth for no one.
Don’t ask everyone to ‘run’ when walking is ok.
Business cases may be ‘adorable’ but emotions still drive executive decision making.
Take a holistic approach–focus on outcomes first, process second.

Power PMO (Matt Light – Gartner )
Defective business cases lead to defective portfolios.
“Only when you see value are you able to tell what is waste and then start to get rid of it”
Portfolio value at the beginning of the project lifecycle is not approving wasteful projects
Portfolio value at the middle of the project lifecycle is cancelling or fixing poorly performing projects
Portfolio value at the end of the project lifecycle is reviewing the project benefits and results

PPM Maturity Workshop (Donna Fitzgerald – Gartner )
Don’t throw process at a level 1 organziation
Slow down just enough for level 2 organizations
“Real” portfolio management begins at level 3.
No individual heroic effort will get you to level 4.  The enterprise must go with you.
Level 5 (if achieved) only lasts a few years and will fail after key senior leaders leave.

PPM Governance (Robert Tawry – Gartner )
Either get your process well established first OR buy a tool that is easily configurable.
You can optimize resources for speed or efficiency. If you optimize for speed, contributors should only work on 1 project. If you optimized for efficiency, you should do 3 or less projects simultaneously.

What Are We Optimizing? Part 1

Portfolio optimization entails all the steps necessary to construct an optimal portfolio given current limitations and constraints. These steps occur repeatedly in the portfolio management lifecycle and work in tandem with Stage-Gate processes for selecting the right projects. The purpose of optimization is to maximize the portfolio value under certain constraints. Understanding and managing these constraints is critical for making portfolio optimization a useful component of the portfolio management process.

We can optimize a portfolio in multiple ways:
1) Cost-value optimization (aka ‘efficient frontier analysis’)
2) Resource optimization (aka ‘capacity management’)
3) Schedule optimization (project sequencing)
4) Work type optimization (portfolio balancing)

The question then is, when we are optimizing the portfolio, what is it that we are optimizing? Many portfolio management computing systems promote efficient frontier analysis which commonly focuses on cost-value optimization. However, as useful as this is, it does not often take into account resource optimization, schedule optimization, or even work-type optimization.  It is possible for portfolio systems to include some of these constraints, but most are not advertised in that way.

Furthermore, it is fundamental to understand the limitations and constraints on the portfolio, for without knowing the constraints it is not possible to optimize the portfolio and maximize organizational value.  The constraint for cost-value optimization is the available budget. This helps us determine an optimal budget based on limited financial resources. The constraint for resource optimization is human resource availability. This can be measured in a number of ways and will be discussed in another post. Optimizing against critical resource availability is recommended. Schedule optimization is focused on project timing and dependencies. Work type optimization is focused on categorical designations (i.e. portfolio balancing—how much do we want to invest in key areas).

The Goal of Resource Capacity Management

Resource capacity planning is a hot topic in portfolio management discussions because it is one of the key steps for optimizing the portfolio, but it is also one of the most difficult processes to perform. For most organizations that operate in a multi-project environment, project demand far outweighs resource supply. Overloading the project pipeline puts added strain to organizational resources and reduces the likelihood of portfolio success. In organizations where human resources are over-utilized, excess overtime and recovery exercises can become common because project teams do not have enough time to complete all work on time. This can lead to delayed projects, and in the long-run, burns people out and lowers morale. Having under-utilized human resources can also be a problem, but not quite as serious as over-utilized resources.

The primary goal of portfolio management is to maximize the value an organization can deliver through its projects based on limited resources. The goal then of resource capacity management is to protect capacity in order to optimize the portfolio. In other words, the portfolio steering team needs to be very careful about approving projects that overload the system as this can very quickly increase the risk of not meeting portfolio commitments. Approving the highest value projects without overloading the system is a key success factor for portfolio management. The fundamental point is to make sure the organization is executing the most important work within the limitations of its current resource capacity. Therefore, capacity management therefore helps answer two fundamental questions:

  1. When do we have capacity to commit to additional work? (Portfolio oriented for portfolio optimization)
  2. Are resources available to complete our committed work? (Project oriented for project execution)

The first question is portfolio oriented because it is looking into the future to understand when new project work can be accepted into the portfolio. This step is critical because it directly affects project execution. Managing resource capacity at the portfolio level helps control work in progress (WIP). Controlling WIP directly benefits project execution because it limits the amount of bad multi-tasking. When resources are significantly over-committed, some activities do not receive adequate attention, thus raising the risk of schedule slides. Therefore, the first step in capacity management is to control the WIP by only approving projects when resources are available or when lower priority work is put on hold in order to free up additional resources for higher priority work. Understanding the organizational resource capacity helps draw a boundary (a constraint) around the amount of project work that can be reasonably accomplished by the organization. Without any boundaries, management may unknowingly authorize more project work and overload the system.

The second question is focused on short-term resource availability and is project execution oriented because the project manager needs to understand if resources are available to accomplish near-term work. If WIP is controlled, then fewer resources should be over-allocated, thus promoting more successful project completions.

Capacity Management Example

Phased Approach for Portfolio Software Implementations

In a previous blog post, I commented on doing portfolio management ‘by hand’ to learn the processes before adopting a robust portfolio tool. In a recent discussion on LinkedIn, one consultant commented that this most successful PPM software implementations occurred when companies took a phased approach to ease in the new solution. The first phase involved simpler tools to allow the organization to become familiar with portfolio management, followed by the full implementation with the advanced PPM capabilities.

After reading this I felt that there was a lot of wisdom in such an approach. Firstly, it gives the organization time to develop their own portfolio processes without the burden of learning a new tool upfront. Secondly, it allows stakeholders (ie. Project managers, steering team, etc) to understand portfolio processes and be comfortable using them. Third, based on the early experience with project portfolio management, the organization will better understand their own requirements for a full fledged tool.

In a great article on IT Project Portfolio Management, Jonathan Feldman asks organizations to consider the problem they are trying to solve and start with high level data rather than getting too detailed. “If you know what the end goal is, you can start to quantify how close you are to that goal”. Great advice as this too points to the need for a phased approach to implementing portfolio management.

What are your lessons learned with your portfolio management implementations?

The Need to Develop a Deep Understanding of PPM

Portfolio Management practitioners need to thoroughly understand the implications of various portfolio management practices and disciplines. I read an article last year discussing the misapplications of Lean principles. In contrast to other companies, Toyota’s success with the Toyota Production System is rooted in a deep understanding of the principles and theories so that they can adapt the principles in new situations. Unfortunately, wannabe Lean practitioners (or Six Sigma practitioners, or Theory of Constraints practitioners, etc.) may barely understand the basic theory and principles (but completely lack a deep understanding) and end up misapplying the methods or fixate on tools. The end result is that the methodology is criticized as not working well.

I think we could make a similar case for portfolio management. People commonly talk about various tools such as prioritization without fully realizing the cultural change and governance required or the breadth of influence portfolio management can have on an organization. When well executed, portfolio management can touch many sectors of business not limited to: finance, sales and marketing, engineering, information technology, and operations. Walking in sync with the various functions to make better decisions is a large part of what portfolio management is about. When people fixate on portfolio mechanics, or worse yet, on portfolio software, the whole organization may miss the boat.

With any kind of management discipline or quality improvement methodology, having a deep understanding of the principles and theories is very important in order to best apply the principles to a given situation. One person likened this to teaching someone how to drive a car; there are standards and rules to follow when driving a car under normal circumstances, but during unusual circumstances, an expert driver may adjust the way he/she drives in order to accommodate the conditions. A similar view could hold true with portfolio management—the application depends on a deeper understanding of the methodology. Unfortunately, people are often too quick to develop a deeper understanding and rush into applying the tools. Some time later without realizing the intended benefits, the methodology is blamed rather than the persons who improperly implemented it.

Bubble Charts and Normalization

Bubble charts are common place in portfolio management processes. Without a designated portfolio management tool, I have designed bubble charts by hand using Excel and PowerPoint. To determine a ‘value’, we use our prioritization value scores and compare that among projects. We have risk scores as part of our prioritization criteria that drive the ‘risk’ portion of our bubble charts. The challenge in the past was how to interpret a score. Is a score of 500 good or bad?  Since my organization was experimenting with a new prioritization process, we didn’t know what was good or bad. Therefore, I made the decision to normalize the scores so that we could fairly compare good or bad projects within the portfolio rather than try to determine a threshold for ‘good’ projects. This has been helpful in identifying which projects drive more overall value to the organization compared to other current projects in the portfolio. The downside of this however, is that you are always going to have a few projects that look bad. Until now, I had been normalizing only among current projects in the portfolio, yet it suddenly dawned on me this morning, that I should also normalize among all projects, past and current in order to understand whether we get more value now than in the past.

One advantage of a bubble chart is to locate those projects that are higher value and lower risk and ask the question, “how can we get more of these types of projects in the portfolio?” Likewise with the lower value higher risk projects, we should ask how to avoid those types of projects. By normalizing with respect to past and current projects, we will see whether or not the projects are moving toward the higher value lower risk quadrant.

Can we absorb all the changes?

In the book, Project Portfolio Management: A View from the Management Trenches, one of the questions posed is ‘can we absorb all the changes?’  At first glance I dismissed the question and instead focused on the four components of the portfolio lifecycle. However, after further reading, it became clearer to me that from a portfolio management perspective, it is very important to understand how much change is being pushed out to the respective organizations. If there is too much change going on, it is hard for employees to absorb it, adapt to it, and accept it. This leads to excessive churn in the organization which has negative implications such as burn out, lowered morale, inability to get work done, etc.

In my experience as a portfolio analyst, I have heard of other organizations complaining about the amount of change we were introducing to them, particularly at the wrong time. Individually, a system manager or project manager may communicate an individual change to an organization or group of users, yet have no idea about the magnitude of changes coming from other system managers and project managers. This is where portfolio management needs to understand both the amount and the timing of change to the company. As the book points out, it is possible to measure the amount of total change and the timing. Having such visibility give senior management a way to optimize the portfolio by adequately sequencing work so as not to overload the system with too much change at any given point in time.

Of course this is a communication issue, where both the project team needs to communicate implementation dates and the project beneficiary needs to communicate “black out” dates. However, without the portfolio level visibility, it is hard to maintain proper surveillance and protect organizations from receiving excessive change.