Prioritization Is the Compass

Prioritizing Projects With A Scoring Model


EVALUATE YOUR PROJECTS

In the previous post, we covered the detailed steps for building a prioritization scoring model. In this post we will cover the steps for prioritizing projects with a scoring model.

Step 4 – determine scoring values

The last part of the scoring model is to determine the scoring values. For each criterion in the scoring model, there needs to be some evaluation of a low, medium, or high score to drive a numerical score for that criterion. In practice we can expand this to “none”, “low”, “medium”, and “high” to give the decision makers a slightly wider range of options. We do not want too many options as this can slow down the scoring process, but we want enough options to help distinguish project evaluations. A common scoring paradigm would include 0 for none, 1 for low, 2 for medium, and 4 for high. If companies want to put even more emphasis on high value, they could use a 0, 1, 3, 9 scoring paradigm.

In the example below, each of the four qualitative values has a corresponding quantitative value. For each value, there is a definition to help determine to which value the project best aligns. If the governance team determined that a particular project has a medium alignment to strategic objective #1, it would score a 2. We will explore all of the calculations at the end of this post.

Scoring Model - Anchor Scores for Strategic Criteria
Scoring Model – Anchor Scores for Strategic Criteria

The definitions alone can significantly improve the quality of the project scores. The example below is relatively generic and requires the governance team to possess enough knowledge about the project and the strategic objective to properly determine the degree of strategic alignment. This can be problematic if the governance team “feels” that a given project has moderate to high alignment and therefore warrants a higher score. The scoring process is intended to make the prioritization process as objective as possible. This can be accomplished by more specifically defining the underlying criteria of “none”, “low”, “medium”, and “high”. In example #2, an IT department of a large Fortune 500 firm has a specific strategic objective to reduce the number of legacy computing systems. The criteria for each of the four options is far clearer with little need for interpretation. If the project actually decommissions a system, it scores “high”. As companies mature their evaluation process, the specific criteria for none through high can be enhanced.

Scoring Model - Detailed Strategic Scoring
Scoring Model – Detailed Strategic Scoring

For financial evaluations, it is important to set financial thresholds that will really set the winners apart. If the bar is set too low, too many projects will get “high” scores and the scoring model won’t be of much help to distinguish the highest value work.

For the riskiness evaluations, we need to flip the quantitative values so that the highest number corresponds to the lowest risk qualitative value. By doing so, we are giving more value to less risky projects. This makes sense especially if we have two projects which may be nearly identical in value but one is far riskier than the other; under normal circumstances if we could only choose one over the other we should choose the less risky option (i.e. better risk-adjusted value).

Scoring Model - Risk Scores
Scoring Model – Risk Scores

 

Step 5 – collect all necessary information

In order to evaluate projects or new proposals, some amount of information is needed to understand the scope, importance, alignment, cost, benefit, and risks of the project. Based on the actual scoring model you built and your current organizational processes, you may already have all the information you need to use the scoring model. In other cases, new information needs to be collected. Let’s break it out in further detail.

Strategic information: at some point during the intake/proposal phase, the project initiator for each proposal should have provided some rationale for how the proposed project aligns with one or more strategic objectives. Simply stating that alignment exists is not useful; there should be an explanation of how the project supports the organization’s strategic objectives. This information should be captured in a document for each governance team member to review. If this information does not exist (or does not exist for all current projects), the Project Sponsor can help explain strategic alignment when the governance team evaluates the projects. If most current projects are missing this information, the Project Management Office (or other team facilitating the prioritization process) should update organizational processes to include this information going forward.

Financial information: assuming that your scoring model utilizes quantitative financial information, it is very important to ensure that this information is available for all projects (a common challenge for many organizations). The best approach is to work with the Finance department to do some level of financial analysis to determine financial benefits for each project. This will lead to consistent financial information across the portfolio. Without Finance’s help, most organizations struggle to get meaningful financial benefits. The best alternative to getting Finance’s help is to provide spreadsheet templates to each project team to assist with calculating the financial metrics used in the scoring model.

Riskiness information: information about the inherent riskiness of the project is useful for conducting this evaluation. It is important to keep in mind that this assessment is not about the specific project risks (although this could be useful), but about the inherent risk nature of the project. Answering questions such as: “how much organizational disruption will this project cause?” “How much experience do we have with this type of project?” “Do we have a sufficient skill set internally to deliver this project?” are important to evaluate the riskiness of the project. Ideally, some of this information is contained in the business case, project proposal form, or even in a project charter.

Step 6 – Educate

Everyone involved with evaluating and scoring projects must understand the relevant details of all projects in the portfolio. If your scoring model includes a strategic component, financial component, and riskiness component, we recommend the following roles for scoring projects:

  • Strategy: The Governance Team, representing the senior leaders of the organization is best equipped to evaluate the strategic value of each project
  • Financials: this is easily derived from the financial analysis and no additional evaluation is needed. A Portfolio Analyst or PMO Administrator should be available to compile this information and capture it in a single data repository.
  • Riskiness: The Project Manager or PMO Director will be in the best position to evaluate the riskiness of a project. The PMO Director could be the singular person to evaluate riskiness across all projects in the portfolio, which streamlines this evaluation. Alternatively, each Project Manager could evaluate and score individual and share the results with the Portfolio Analyst or PMO Administrator. A group of Project Managers could come together and work together to score their projects as individual Project Managers may interpret criteria a little differently.

In most cases, this requires a certain level of education so each project is fairly evaluated. This is not a small effort. Although the Governance Team may be sponsoring some of the current projects in the portfolio, they won’t be familiar with all of them. That will affect the team’s ability to evaluate and score the projects. Therefore, some level of education is needed to bring everyone up to speed. There are a few ways to accomplish this:

  1. Prepare summary information of each project for the Governance Team to read on their own before the meeting (examples include: business case, charter, etc.). The advantage of this approach is to expedite the scoring exercise.
  2. Prepare summary information of each project for the Governance Team to review during the meeting. Using this approach, the Governance Team would likely review a batch of projects and score them in the same session. The advantage of using this approach is that everyone will have dedicated time to review project information and discuss as a group. This option also takes longer than option 1.
  3. Conduct mini project reviews in a team meeting with the Project Managers in attendance to present and answer questions. The advantage of this approach is that it gives the Governance Team an opportunity to ask important follow-up questions as well as get to know the Project Managers better. This option takes longer than the previous two options.

Step 7 – Evaluate and Score

Tips for handling the evaluation and scoring:

  • Pilot the scoring with a handful of projects: pick a few representative projects (projects known to be high priority and lower priority, across various strategic objectives)
  • Conduct the pilot with the governance team in person: even after prioritizing criteria and discussing it as a team, there will still be questions about specific projects and how they align to the strategic objectives.
  • Build in adequate time for discussion: there will be different degrees of understanding of the projects and some projects will require more discussion than others. The value is in the discussion, so build in adequate time for discussion so participants do not feel rushed.
  • After the pilot, get agreement on how the governance team wants to finish scoring projects. Some teams will want to continue scoring as a group; others may want to do their scoring in advance and come prepared to discuss.
  • Take time to review and validate consistency of scores: some governance team members may be surprised about the scores of certain projects. It is not unusual for some medium and high scoring to be inconsistently applied. The group may have determined that a project was a “high” in one case but after review, it should really be a “medium” or vice versa.

In the next post we will cover the relationship between priorities and resources and the need to reinforce over-communicating priorities and how this affects resource allocation.

A Guide to Building a Project Prioritization Scoring Model


PRIORITIZATION IN THE CONTEXT OF PROJECT PORTFOLIO MANAGEMENT

Portfolio management is about maximizing organizational value delivery through programs and projects. In order to maximize value delivery, the governance teams that approve work and prioritize projects need to share a common view of “value” in order to use a scoring model to select the most valuable work and assign the right resources to that work. Understanding the relative “value” of each program and project in the portfolio is at the heart of portfolio management and determines what work is selected, how it is prioritized, where resources are allocated, etc. In order to select a winning portfolio, every governance team needs to share a common understanding of value; without it, you’ll fail to realize the full potential of your portfolio.

However, the definition of “value” will differ at every company because every company has different strategic goals, places varying emphasis on financial metrics, and has different levels of risk tolerance. Furthermore, even within a company, each department may interpret the strategic goals uniquely for their organization. Hence, “value” is not clear cut or simple to define. Any organization that manages a portfolio of projects needs to define and communicate what kinds of project work is of highest value.

Portfolio Management Lifecycle
Portfolio Management Lifecycle

The Scoring Model is the Prioritization Tool

The tool for assessing project value is a scoring model, which includes the criteria in the model, the weight (importance) of each criterion, and a way of assessing a low, medium, or high score for each criterion in the model. A good scoring model will align the governance team on the highest value work and measure the risk and value of the portfolio. A poor scoring model will not adequately differentiate projects and can give the governance team a false precision in measuring project value.

In the context of the portfolio lifecycle, assessing project value is particularly important in the first two phases: Define Portfolio Value and Optimize the Portfolio. When evaluating new projects for inclusion in the portfolio, the governance team must understand the relative value of the proposed project in relation to the rest of the projects in the portfolio; this will help inform the governance team’s decision to approve, deny, or postpone the project. Once there is an established portfolio, the same value scores can be used to prioritize work within the portfolio. For many organizations, the process of selecting projects and prioritizing projects is merged together to develop a rank order list of projects where the governance team “draws the line” where budget or resources run out is an acceptable way to define the portfolio. Unfortunately, this approach does not result in an optimal portfolio, but is acceptable for lower maturity organizations. Strictly speaking, we should distinguish portfolio selection from project prioritization and for the purposes of this post we will focus strictly on using the scoring model for prioritization.

Gaylord Wahl of Point B Consulting says that priorities create a ‘true north’ which establishes a common understanding of what is important. Without a clear and shared picture of what matters most, lower-value projects can move forward at the expense of high-value projects. Even though experienced leaders understand the need to focus on a select group of projects, in practice it becomes very difficult. Good companies violate the principal of focus ALL THE TIME and frequently try to squeeze in “just one more project.”

Prioritization is About Focus

Prioritization is about focus—where to assign resources and when to start the work. It enables the governance team to navigate critical resource constraints and make the best use of company resources. Higher priority projects need the best resources available to complete the work on time and on quality. Resources that work on multiple projects need to understand where to focus their time. When competing demands require individuals to make choices about where to spend their time, the relative priorities need to be obvious so that high-value work is not slowed down due to resources working on lower-value work. You have to be sure that your most important people are working on the most important projects so that you can get the most important work done within existing capacity constraints.

Furthermore, when resources are not available to staff all of the approved projects, lower priority projects should be started later once enough resources are freed up to begin the work. However, not all projects can be initiated immediately. Understanding relative priorities can help direct the timing and sequencing of projects. In some cases, high priority projects may have other dependencies or resource constraints that require a start date in the future. In other cases, lower priority projects get pushed out into the future. In both cases, schedule priority helps answer the question “when can we start project work?”  Remember, prioritization is about focus—WHERE to assign resources and WHEN to start the work.

BUILDING THE SCORING MODEL

Assessing project value is at the heart of portfolio management, and the scoring model is the tool to help assess value. Therefore, building a good scoring model is integral to prioritizing work. In fact, as we will see, prioritizing the criteria in the scoring model is a major component of the prioritization exercise.

Step 1 – Define the Scoring Criteria

The first step in building the scoring model is to identify and define the criteria in the model. In the past, expected financial benefits would be a singular way of measuring project value. Although this is a tangible and quantitative way to measure value, experience shows that merely selecting and prioritizing work based on financial benefits fails to yield optimal strategic results. In high performing organizations, value can include intangible (qualitative) factors such as the degree of strategic accomplishment, customer impact, and organizational benefits.  Therefore, we recommend a combination of quantitative and qualitative criteria. At the very least, your scoring model should include three categories of criteria: strategic alignment, financial benefit, and risk. This is your highest tier of scoring criteria (what we will refer to as “tier 1” criteria). Within each of these categories are the sub-criteria that will actually be used to evaluate projects (referred to as “tier 2” criteria). Why are two tiers of criteria needed? Let’s look at the strategic category. Some organizations simply want to evaluate the degree of strategic alignment, but since nearly all organizations have two or more strategic objectives, for the purposes of assessing project value, you should evaluate the degree of alignment across all of your strategic objectives. Projects that positively impact multiple strategic objectives are generally more valuable. In addition, having a discrete understanding of which strategic objectives each project supports will further enable the governance team to prioritize work. Each strategic objective is a sub-criterion (tier 2) used to assess project value. The three recommended scoring model categories are defined below.

Strategic Criteria: Portfolio management is focused on strategic execution, so measuring strategic alignment as part of your scoring model is important. This would include your organization’s strategic objectives.

Financial Criteria: All for-profit companies should incorporate financial benefit into the scoring model such as net present value (NPV), return on investment (ROI), payback, earnings before interest and taxes (EBIT), etc.

Risk Criteria: Finally, a good scoring model takes into account the risk factors of the project. These are not individual projects risks, but a measure of the “riskiness” of the project. Just like a stock portfolio, each investment carries a different level of risk. Remember, if you could only choose one of two investments that each have the same return, you will always go with the least risky option.

Scoring Model Criteria
Scoring Model Criteria

Step 2 – Prioritize the Criteria

The second step is to prioritize the criteria from step 1. This is best done using pair-wise evaluations, a simple method of comparing two criteria against each other (also known as the Analytic Hierarchy Process, or AHP). This is easily accomplished in one on one sessions with each decision maker. This evaluation is perhaps the most important step in the entire process because it will not only determine the weighting of your scoring model, but even more it will test and ultimately align the governance team’s understanding of the organizational strategies. For example, when evaluating strategic criteria, the governance team will be asked to compare strategic objective 1 against strategy objective 2. On paper, everyone probably understands why each strategic objective is important but has probably not considered the relative importance of one strategic objective compared to another. Using AHP will force each person to really consider whether the two strategic objectives are equally important or whether one is truly more important than another (when making comparisons using AHP, a criterion can be equal to, twice as important, three times as important, four times as important, etc. to the other criterion). In the example below, Decision Maker #1 believes that strategic objective #1 is three times more important than strategic objective #2.

Scoring Model Prioritization
Scoring Model Prioritization

Step 3 – Review and Validate

The third step is to review the evaluations as a team. This exercise really highlights what is most important to each member of the governance team and affords a way for the governance team to have a common understanding of value. It is necessary to highlight where the biggest gaps are between the members of the governance team and discuss why each person holds their view. In this discussion, no one’s evaluation is right or wrong, but in the discussions as a governance team new information may come to light that helps everyone align to a common understanding of each strategic objective, financial criteria, and risk criteria. Based on experience, the strategic alignment discussion is of critical importance and can surface divergent views that would never have come to light without the pair-wise exercise. Without going through this exercise, it is impossible to determine if the scoring model truly represents the governance team’s understanding of value.

An example of a single comparison is shown below. In this example Decision Makers 1 and 2 believe that the first strategic objective is three times as important as the second objective. However, Decision Makers 3 and 4 believe that the second objective is four times and two times as important respectively. This governance team needs to come back together to discuss the discrepancies. The true benefit of this exercise is in the discussion that helps align the team to a common view of strategic value.

Scoring Model Evaluation
Scoring Model Evaluation

WARNING: It is tempting to skip these steps by arbitrarily picking scoring weights in order to quickly score and prioritize projects. One large company wasted hours in weekly steering committee meeting debating the weighting of each criterion. In the end, the excessive discussion wore down the committee; it did not produce the right discussion. Rather, focus on the relative value of each criterion compared to other criteria; the weighting will be a mathematical output of the pair-wise comparisons.  Additionally, if the governance team does not share a common understanding of value, the benefits of going through any prioritization exercise are greatly diminished and can cause more churn in the long-run. Based on experience with Fortune 500 companies, the pair-wise discussions are not only more effective but also more efficient (a single person can complete their evaluations in 15 minutes). The benefit is in the discussion among the governance team members to align on the criteria for evaluating project value.

By this point, the result of prioritizing the criteria is:

  • A governance team that has been calibrated around how to define value
  • A scoring model with criteria and weighting that has been validated by the governance team and can be accurately used to assess project value.

The simple example below shows what the weighting could look like after prioritizing the criteria.

Scoring Model Summary
Scoring Model Summary

In this post we have covered how to purposefully build a scoring model. The next post will cover the remaining steps in order to evaluate and score projects.

Improve Portfolio Health By Avoiding Two Portfolio Management Extremes


Two Simple Questions

You can measure your general portfolio health with two simple questions:

1) Do you approve all or almost all of your projects?

2) Are you approving so few projects that people would say you are “cutting to the bone”?

These are two portfolio management extremes that we will examine in this post.

Approving Everything is Bad

Question number one highlights a common trap for many companies, approving all or almost all projects that get reviewed.  This indicates that the project selection process is not working well. When governance councils have a project approval over 90%, it means very few projects are getting screened out and some poor projects are probably getting approved. Approving nearly all projects also means that significant diminishing returns kick in for this group of projects and executing this work likely requires unnecessary multi-tasking and exceeding the resource capacity of critical resources. While it is theoretically possible for an organization to do an outstanding job of selecting the best possible project candidates upfront and still have a high approval rate, I doubt this occurs very often. More likely, organizations operate in a reactive mode and approve projects as they get proposed; since most projects look good by themselves and almost always have a good reason for getting initiated, the project gets approved and funded. Therefore, one of the best portfolio governance council metrics to measure portfolio health is the project approval rate. We can illustrate these concepts with the graphic below.

Portfolio Cumulative Frontier - Extreme 1
Portfolio Cumulative Frontier – Extreme 1

Here we have a bounded curve of possible portfolios (in this case we can apply the cumulative frontier, which is the cumulative portfolio value based on the rank order of projects in the portfolio, not to be confused with the efficient frontier which is based on portfolio optimization). At the upper far right is the problem area in question. If organizations are approving most projects it means there is little to no discrimination among projects which is a symptom of not having enough project candidates to review and stems from poor ideation, work intake, and weak phase-gate processes.. When organizations have more project candidates than they can reasonably take on, the governance council is pushed to do a better job of selecting projects. Organizations can still do a poor job of selecting projects (or may simply ignore resource capacity and continue approving everything) even when they have more than they can take on, but the emphasis here is on increasing the project pipeline so that the governance council will become less reactive and more proactive and say no to projects that really should be screened out. Creating a strategic roadmap to identify important projects (top-down approach) combined with an employee ideation (process bottom-up approach) will help build up the pipeline of projects and increase the decision making rigor by the governance council.

Don’t Cut to the Bone

We can also evaluate portfolio health by looking at the other extreme where an organization is cutting costs so much that any further cuts will hurt the organization’s day to day operations (aka “cut to the bone”). In one place I worked, the cost-cutting measures had been in place for years and a number of good project candidates were hardly under consideration because funds simply were not available and a buildup of project requests was accumulating. A few high value projects got approved, but “money” was left on the table as a result of not taking action on those good project candidates. In some cases, the rigor to do a good cost-benefit analysis is absent and makes it difficult to communicate how much ‘value’ is being ignored by not taking on additional projects due to strong cost cutting measures. Such extreme cost cutting also has the negative residual effect of discouraging innovation among employees. We can also illustrate this with the same graphic.

Portfolio Cumulative Frontier - Extreme 2
Portfolio Cumulative Frontier – Extreme 2

Summary

In short, asking simple questions about the approval rate of projects and the cost-cutting measures of an organization can highlight general portfolio health. In both cases, organizations should be pushing toward the middle. Adding more project candidates will help ensure that only the most valuable projects get approved. In the case of extreme cost-cutting, companies should improve their ability to measure project value in order to communicate the ‘value’ left on the table. This is best accomplished when a company is doing reasonably well and not when the company is truly in dire straits. Cutting costs “to the bone” is never a good way to stimulate innovation, therefore careful attention is needed when companies are cutting costs too much and not investing in the future.

Cumulative Frontier - Healthy Portfolio

Benefits of Social Collaboration


The Potential for Social Collaboration

Innovation is a hot topic in business right now with an ever growing need for companies to deliver better products and services.  A key ingredient for fostering innovation is enterprise collaboration. Until a few years ago, collaboration was often limited to smaller teams, but this could introduce a higher risk of duplicative efforts occurring simultaneously in larger companies. With the development of enterprise social networks (ESN’s) comes improved collaboration to include all employees across all organizations thus significantly increasing innovation and quality across the company.

The promise of enterprise social collaboration comes from the power of the network with the ability to tap into the collective brain trust of the organization. The potential payoff for corporations is enormous as indicated by a 2012 McKinsey report identifying a potential for over $1 trillion in new business value to be created annually through the use of enterprise social networks (e.g. improved product development, work efficiencies, etc.)

Social Collaboration for Portfolio Management (PPM)

The 4 C’s of Social Project and Portfolio Management

In the context of project and portfolio management, social tools impact employee connection, communication, collaboration, and community (also known as the 4 C’s).

  1. Connection

The power of the network begins with having the right connections in the organization. Social tools enable employees to connect with a broader group of colleagues than would otherwise occur in day to day work. User profiles provide additional detail around work history, education, and other personal information that foster stronger connections on a professional and personal level. Project managers with a larger number of connections have a greater pool of resources to choose from when building out their project team as well as quickly identify subject matter experts to assist in critical phases of work.

A good project portfolio social platform can also alert users of other people who have managed similar risks and issues, or have worked on similar product lines or IT systems. By making these types of connections, project managers can reach out to the right people at the right time for help and leverage proven solutions rather than losing time developing a duplicate solution that already existed.

  1. Communication

Email is still the predominant form of business communication (per Email Statistics Report, Radicati) with over 100 billion business emails sent each day. Tremendous amounts of business knowledge is trapped in the inboxes of employees and is not searchable by other knowledge workers who would benefit from accessing those key conversations. Alternatively, conversations, discussions, and answers to questions within social platforms become searchable content that is continually being enriched by the users of the social platform. Project teams can proactively search for new information to discover other teams that have encountered similar challenges, learn how they solved problems, and re-use successful solutions. This fosters further communication and improves project delivery and quality.

  1. Collaboration

One of the promises of enterprise social networks is the ability for a broader group of people to work collaboratively within and across project teams. At the portfolio level, the quality of new project proposals increases substantially when employees can collaborate (“crowdsource”) on new ideas; great ideas can generate a lot of traction and be improved even before reaching a governance committee. At the project level, team members have greater visibility of work in progress and can comment on deliverables and other project work. These comments are made visible to other team members who can further build upon those comments to improve the overall quality of the work.

  1. Community

In addition to improving communication and collaboration at the project level, social communities can spring up around areas of common interest where participants can ask questions, share ideas and learn from one another. This further strengthens connections, communication, and collaboration. One example is a project management community of practice that can promote project management best practices across an enterprise. This not only uplifts the quality of project management within the company but creates a way for senior project managers to share valuable experience with younger project managers, who in turn, have more opportunities to develop and grow in their profession.

Challenges to Social Collaboration

The top two challenges to successfully establishing social collaboration are developing a collaborative culture and sufficient leadership engagement with social tools. In actuality, senior leadership is responsible for both.

Large scale social collaboration cannot and will not occur without an organizational culture of collaboration. Unless senior leadership fosters a culture of collaboration, most employees will be too focused on their day to day work to devote any attention to collaboration. Without this culture, there won’t be any true incentive to collaborate and any encouragement to use social collaboration tools will feel like a tax on people’s time to switch back and forth between traditional email and new social tools.

Additionally, senior leadership cannot merely sponsor a social collaboration initiative; rather, they need to lead by example to use the tools, which will have a powerful effect on the organization. When senior leadership demonstrates greater transparency and communication through the use of social tools, the rest of the organization will follow suit.

My Perspective

Changing an organization’s culture and the behavior of senior leadership are both very difficult. Only a concerted effort of organizational change management can redirect a company toward collaboration. Such change must be of high enough priority that it affects the daily behavior of senior leadership to embrace enterprise social networks. Based on Dr. John Kotter’s change model, senior leaders need to establish a sense of urgency around social collaboration. There must be a powerful guiding coalition to create a shared vision and communicate it across the organization. Then, both leaders and employees must act on the vision and rally around demonstrative, short-term wins.

The Bottom Line

Enterprise social networks have tremendous potential to improve project and portfolio management effectiveness—but only when the company possesses a culture of collaboration. Senior leadership is uniquely responsible for ensuring that such a culture exists before implementing social collaboration tools and must lead by example to improve adoption. With strong leadership and a collaborative culture, your organization can reap the many benefits of social collaboration in the context of project and portfolio management. This will result in a smarter and healthier company.

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

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

 

Book Review – IT Governance


Book review of IT Governance by Peter Weill and Jeanne Ross (Harvard Business School Publishing, 2004)

IT Governance

Synopsis

“IT governance is the most important factor in generating business value from IT.”

“Good governance design allows enterprises to deliver superior results on their IT investments.”

“Effective IT governance is the single most important predictor of the value an organization generates from IT”

The quotes above should draw attention to the importance of well defined and well communicated IT governance. Although not exciting, IT governance helps generate greater value from IT. The authors 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.”

Much of the book is spent developing two questions. The first question focuses on the types of decisions that must be made to ensure effective management and use of IT. The authors answer this question by describing five key areas of IT governance that require decision making:

IT Principles—a related set of high level statements about how IT is used in the business.

IT Architecture—the organizing logic for data, applications, and infrastructure, captured in a set of policies, relationships, and technical choices to achieve desired business and technical standardization and integration.

IT infrastructure—determining shared and enabling services.

Business Application needs—specifying the business need for purchased or intentionally developed IT applications.

IT Investment and Prioritization—choosing which initiatives to fund and how much to spend.

The second question addressed in the book focuses on who makes these decisions. The authors address this question by describing six archetypes (decision-making styles) used by enterprises in IT decision making:

Business Monarchy—top managers

IT Monarchy—IT specialists

Feudal—each business unit making independent decisions

Federal—combination of the corporate center and the business units with or without IT people involved

IT Duopoly—IT group and one other group (for example, top management or business unit leaders)

Anarchy—isolated individual or small group decision making

Much research and analysis was made by the authors in connecting the decisions being made with the right decision makers. They conducted an extensive survey of over 250 companies across 23 counties. Based on the results, they concluded that the best performers conducted IT governance differently from the low performers and drew conclusions of what distinguished the two groups.

Commentary

IT Governance was very useful to me personally as it is the most thorough work on the topic that I have read and provided a lot of good insight into how to make governance work. Project portfolio management (PPM) is tightly linked with IT governance, “Portfolio management without governance is an empty concept” (Datz). In order to make portfolio management processes successful a proper governance structure must be in place. Project governance is very much about the types of decisions being made and the people who participate in the decision making. The Project Management Institute’s Standard for Portfolio Management 2nd Edition briefly discussed governance but did not go into the same level of detail as this book. Another well respected PPM expert, James Pennypacker, developed a portfolio management maturity model which identifies governance as a key criteria. This book strongly supplements that maturity model.

This book enlarged my view of IT governance particularly with the five key areas of: IT Principles, IT Architecture, IT infrastructure, Business Application Needs, IT Investment and Prioritization. PPM is very focused on the last area of investment and prioritization, but the four preceding areas lead up to the point of making the investment decisions. It was very clear that a governance structure needs to be set up to account for all five areas.

This book also strengthened my view concerning the people involved with governance. I liked the quote stating, “IT governance is a senior management responsibility. If IT is not generating value, senior management should first examine its IT governance practices—who makes decisions and how the decision makers are accountable.” Governance cannot be delegated to someone else. The authors made it very clear that one of the critical success factors of IT governance is the involvement with senior/executive leadership. Without the adequate leadership, solid governance is likely to fail. In addition, “If business leaders do not assume responsibility for converting [IT capabilities] into value, the risk of failure is high. With high risk comes the likelihood of frustrated business leaders who often respond by replacing the IT leadership or abdicating further by outsourcing the whole ‘IT problem’”. Here the point was made that outsourcing IT may come out of a frustration by the business leaders with IT. Yet, the source of the frustration may very well lie in the poor governance structures established.

Another striking point that affects my current work is the need for improved communication with senior management. Governance communication cannot happen too much. The authors found that “the best predictor of IT governance performance is the percentage of managers in leadership positions who can accurately describe IT governance.” They found that most senior managers could not explain their own governance processes, which would explain why their IT governance doesn’t work properly. These points reinforce my need to continually educate senior management and communicate both the process and the results of our governance procedures so that we have greater project success.

The book was reasonably well written. Although the content was great, I felt that the case studies and diagrams were really lacking. I normally like case studies, but I do not feel that the cases used in this book added any value to me. Many of the diagrams could have also been explained better. As far as improvements, the topic of project portfolio management was barely discussed and is quite important in terms of executing strategic change within an organization. I overlooked it because of the book’s value to the topic of governance, but I definitely feel the authors should have spent more time on this topic. Otherwise, this is a great book for a topic that is overlooked but very necessary. I would definitely recommend it to anyone that is involved with portfolio management or any part of IT governance.

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.

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

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

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

Define leadership


Define leadership. Not easy. There are so many views about leadership that it is difficult to create a concise definition. I am taking a multi-quarter leadership course right now, and one of our tasks as a class was to define leadership. As a result of the values we instill in a definition, it is difficult to reach consensus on a definition. However, the exercise is worthwhile as it has challenged us to consider the most important aspects of leadership and convey it in a clear and simple way.

My personal definition of leadership has a more pragmatic view. I am more focused on accomplishment rather than the ideals of great leadership. As a result, my definition reads: Leadership is the ability to engage, empower, and energize people to accomplish significant goals according to a shared vision.

Firstly, leadership is more than a mere act or process, but is an ability. Good leaders engage those around them (in turn making them a team), which is not easy in large stagnant companies. These leaders then empower their people to work together collectively and collaboratively.  In the process, this group or team is energized to take action. Yet, the action taken is towards the accomplishment of common goals according to a shared vision. The vision may or may not have originated with the leader, but in the end, the leader can communicate the vision so that it is shared by the larger community for the purpose of accomplishing significant goals.

This is the kind of leadership needed for strategic execution.

Good Organizational Infrastructure Manages the Chaos


At a recent project/portfolio management event, there was a comment made about project managers managing ‘within the chaos’. This got me thinking about how portfolio management fits in with the chaos. Another distinction between project and portfolio management began to emerge; Project managers manage within the chaos, but good portfolio management helps manage the chaos. Let me explain.

Project managers are often given a task to make things happen and use as many project management tools as needed to execute a project. Project managers usually do not own their resources and have no direct influence over the types of projects being conducted, the project governance process, or the project priorities for the organization. Therefore, Project Managers need to learn how to best manage their projects in the midst of an ever-changing work environment (a.k.a. chaos).

Portfolio Management as a discipline can be used to help minimize the chaos within the organization. If leadership is proactive in developing good governance processes, then the organizational infrastructure will be established to accommodate the number and complexity of projects within the organization (I will touch on the need for good organizational infrastructure next month at Project World). Good project selection will help identify good projects as well as to balance the high-risk and low-risk projects being conducted at any one time. This is a big point to help manage the chaos. Too many risky projects translates into a lot of variability for project managers; and when Murphy strikes, it can have a huge negative ripple effect across the portfolio of projects.

Good prioritization will also identify the most important projects and help communicate to resources managers how to allocate their resources. Furthermore, solid resource capacity management will make a world of difference for project execution. Imagine having the right resources at the right time! Portfolio management will reduce organizational chaos to make project execution more successful when solid organizational infrastructure is put in place.