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The five reasons why organisations choose the wrong projects

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Why orgnaisations choose the wrong projects

Why orgnaisations choose the wrong projects


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  • 1. The 5 Reasons why Organisations choose the Wrong ProjectsDarren CookPrimavera Australia17 Aug 2010
    The most comprehensive Oracle applications & technology content under one roof
  • 2. The Five Reasons why Organisations choose the Wrong Projects
    Capturing the wrong information
    Decision making Bias
    Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 3. Why is this important?
    Leads to..
    Situation
    Results in..
    No Capacity View
    Reluctance to say no to projects
    Too many projects
    Over budget
    Capturing the Wrong Information
    Projects Late
    Can’t kill projects
    Poor execution
    Business needs not met
    Projects sold on an emotional basis – not selected
    Under-estimation of effort and cost
    Benefits not received
    No effective review process
    Overemphasis on ROI
    Projects not aligned to strategy
    Lack of confidence in Delivery Process
    No clear criteria for selection
  • 4. The Five Reasons why Organisations choose the Wrong Projects
    Capturing the wrong information
    Decision Making Bias
    Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 5. Reason 1: Capturing the right information
    What is the right information to capture?
    • It depends on the information you require to make the funding decision.
    • 6. Value to the Organisation should be paramount
    • 7. Data for Data capture sake
    • 8. Benefits, Cost, Value, Alignment, Risk.
    • 9. What other information will you need to review this investment?
  • Reason 1: Capturing the right information
    • Information split between
    Concept Information
    Business Case Information
    Descriptive
    Alignment
    Financial Contribution
    Risk
    Should we Invest in this Investment?
    • Supply vs Demand
    • 10. Cost Restraints
    • 11. Capabilities of the Business to absorb change
    Can we do this Investment?
    How is this investment going?
    • Tracking Information
    • 12. Health
    • 13. Project Mgmt Information
  • The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    Decision making Bias
    Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
    Capture the information your organisation requires to make Funding decisions
  • 14. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    Decision making Bias
    Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 15. Reason 2 – Decision Making Bias
    * SDG eBriefing: Garbage In, Garbage Out: Reducing Biases in Decision Making. January 15, 2003
  • 16. Countering Bias
    Documenting Judgements and Assumptions
    Use Experts when Required
    Assess New Initiates
    Require Probability or Confidence indications
    As well as existing Investments
    Look at Future Costs not Sunk Funds
  • 17. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 18. Decision making Bias
    Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 19. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 20. Decision making Bias
    Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 21. Reason 3: Not knowing what metrics to use
    • Are all initiatives created equally?
    • 22. Mandatory Initiatives
    • 23. You may need to fund them but do they need to be done now?
    • 24. Limit Scope, Cost, Risk
    • 25. Discretionary Initiatives
    • 26. Alignment, Financial Contributions, Risk, Value, Priority
  • Reason 3: Not knowing what metrics to use
    • What are we trying to achieve?
    • 27. Which Investments should the Organisation invest in?
    • 28. What initiatives are going to provide the most value to the Organisation?
    • 29. Why you wouldn’t just use Financial Metrics?
    Companies that rely mostly on financial metrics obtain "unbalanced portfolios" that are not well matched to the strategy of the firm
    R. Foti, "Priority Decisions," PM Network, 16 April, pp. 24-29
  • 30. Alignment to Objectives
    • In 2004, Pricewaterhouse Coopers found that only a handful of projects ever achieve project success.
    • 31. Its survey focused on a broad range of industries, large and small, in 30 different countries, which represented 10,640 projects, for a total value of $7.2 billion.
    • 32. The firm found that only 2.5 percent of global businesses achieve 100 percent project success.
  • Alignment to Objectives
    • Business Improvement Architects’ research with more than 750 organizations worldwide found…
    • 33. A major reason for project failure is that most organizations do not ensure that all projects they implement align with their organization's core strategies.
    • 34. 80 percent of organizations in the research study had no formal business case for the development of their Project Management Offices
  • Alignment to Objectives
    • What contributes to the Corporate Objective outcome?
    • 35. How does this initiative effect the future state?
    • 36. It is not enough to say that this Investment contributes to Operational Excellence
    • 37. Organisations must verbalise their Corporate objectives into current and future state.
    Example:
    Call centre performance level >80% (calls answered within 30 seconds)
    Current State: Current performance is 65%
    Future State: >80%
  • 38. Alignment to Objectives
    If you have projects that have already started and are contributing to an objective then any new project must use these future states in the evaluation
    Proposed
    Improvement
    Current
    Improvement
    Current State
    Approved Projects
    Now
    End of Cycle
    New Candidate
  • 39. Financial Contribution
    Looking at contribution to a target future state
  • 40. Financial Contribution
    Future State of the Business
    Current State of the Business
    Go Decision
    Value Added
    by Project
    No Decision
  • 41. Risk
    • What is Risk?
    “Risk is the cumulative effect of the chances of uncertain occurrences, which will adversely affect project objectives. It is the degree of exposure to negative events and their probable consequences” Ohio State University
    "Risk in itself is not bad. What is bad is risk that is mismanaged, misunderstood, mis-priced, or unintended“ S. Labarge, "Valuing the Risk Management Function," Presentation at the Risk Management Association's Capital Management Conference, Washington DC. April 10, 2003.
  • 42. Risk
    • How Risk tolerant is the Organisation?
    • 43. Hurdle Rates
    • 44. Probabilities
    • 45. Portfolio Risk
    A diversified portfolio of high and low risk investments yield a higher return than a portfolio comprised of solely high risk or low risk investmentsDr Harry Markowitz – Pioneer of Portfolio Management
  • 46. Scoring
    Value = Alignment * Financial Contribution / Risk
    Prioritisation = Value + Timing Considerations + Dependencies
  • 47. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 48. Decision making Bias
    • 49. Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
    Mandatory Initiatives
    Discretionary Initiatives
    • Alignment, Financial Contributions, Risk, Value, Priority
    Metrics should be observable
  • 52. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 53. Decision making Bias
    • 54. Not knowing what metrics to use
    Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 55. Reason 4: Focus only on “Should we do this?” and not “Can we?” as well
    • Wouldn’t it be nice…..
    • 56. If the only projects you are asked to manage were the ones your organisation really required?
    • 57. If you were not asked to manage more than you have the capacity to handle.
    • 58. If the company had an understanding of it’s capacity before saying “Yes, we will do this!”
  • Resources - Can we do this?
    Supply vs Demand in Hours, FTE’s etc
    Critical Resources
  • 59. Budgets – Can we afford to do this?
    What is the variance between Budget and requested funds?
  • 60. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 61. Decision making Bias
    • 62. Not knowing what metrics to use
    • 63. Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
    Resources
    • Critical Resources, Supply vs Demand
    Budget
    • Budget vs Requested Funds
    • 64. Capabilities of the Business to absorb change
  • The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 65. Decision making Bias
    • 66. Not knowing what metrics to use
    • 67. Focus only on “Should we do this?” not “Can we?” as well
    Not looking at project selection with a Portfolio focus
  • 68. Reason 5: Not looking at project selection with a Portfolio focus
    • Just because an organisation may have a portfolio of mostly on-time, on budget projects does not mean it has the best possible project portfolio
    • 69. What happens when you select projects individually?
    • 70. Early project approvals get the resources
    • 71. Portfolio is biased towards small, low value, low risk, short duration projects
    • 72. Benefits can be double counted
    • 73. Little regard to the possible impact of one project to the next
    Portfolio Management Approach key to answering the questions above
  • 74. Portfolio Management = PROCESS for evaluation, selection, execution and benefits realization
    Portfolio - A collection of investments that aims to maximize value while constraining risk.
    Portfolio Management - The processes, practices and specific activities to perform continuous and consistent evaluation, prioritization, budgeting, and finally selection of investments that provide the greatest value and contribution to the strategic interest of the organization. Through portfolio management, the organization can explicitly assess the tradeoffs among competing investment opportunities in terms of their benefit, costs, and risks.
    Source: US Army Business Transformation Knowledge Center http://www.army.mil/ArmyBTKC/rc/glossary.htm#p
    What is Portfolio Management?
  • 75. Portfolio Management Process
    Objective: manage investments like a portfolio, enabling the leadership team to choose and execute activities that increase the value to the organization.
    Key Portfolio Management Processes
    3.Prioritize & Select
    investments
    6.Adjust course
    2.Propose initiatives
    5.Review
    portfolio
    Planning
    Control
    1.Clarifyobjectives
    4.Track
    performance
    Frequency of Review
    • Choosing – Annually, Quarterly, Ad Hoc opportunities
    • 95. Executing – Weekly or Monthly operations reviews
  • Managing Investments in Portfolios Answers Key Business Questions
    Where’s the money going?
    What value is being returned to the business?
    Can we rationalize our current investments to ourselves?
    Is this the best mix of investments?
    If we had 2% more, or 2% less to spend, what would we fund?
    At the Department Level
    At the Business Unit Level
    At the Enterprise level
  • 96. The Five Reasons why Organisations choose the Wrong Projects
    • Capturing the wrong information
    • 97. Decision making Bias
    • 98. Not knowing what metrics to use
    • 99. Focus only on “Should we do this?” not “Can we?” as well
    • 100. Not looking at project selection with a Portfolio focus
    THANK - YOU
  • 101. Questions
  • 102. Tell us what you think…
    http://feedback.insync10.com.au

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