Overview of project portfolio management

12,802 views
12,222 views

Published on

Project portfolio management is very much a multi-faceted management discipline. Portfolio management directly impacts strategic execution resulting in greater benefit to the organization and its customers. At the same time portfolio management focuses on increasing project value, often measured financially, by selecting the best projects with the right balance of risk. Portfolio management also provides much needed organizational infrastructure to enable the organization to launch more successful projects. At the same time, portfolio management is very much about people, the senior managers who make decisions, the project managers who provide key data, resource managers who play an integral role in resource allocation, and team members who participate on project teams and possess a variety of skills that can be utilized in multiple ways. Finally, the nuts and bolts of portfolio management centers around data—strategic data, financial data, resource data, schedule data, and performance data to name a few.

Based on the information above, project portfolio management can be broken down into four basic components: selecting the right projects, optimizing the portfolio, protecting the portfolio’s value, and improving portfolio processes. In order to implement portfolio management, we must understand PPM with these four components in view.

1) Select the Right Projects—selected projects must align with the business strategy and meet other important criteria. This results in the portfolio containing a higher percentage of winning projects.
2) Optimize Portfolio Value—all the steps necessary to construct an optimal portfolio given current limitations and constraints.
3) Protect Portfolio Value—during the execution of an optimized portfolio, the aggregate project benefits (portfolio value) must be protected. This occurs by monitoring projects, assessing portfolio health, and managing portfolio risk.
4) Deliver Portfolio Value—Ensure that portfolio value is delivered by comparing expected benefits with actual benefits. Drive PPM maturity which translates into a greater realization of the benefits of project portfolio management.

One of the primary goals 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.

Published in: Business, Economy & Finance
1 Comment
25 Likes
Statistics
Notes
  • Excellent SlideShare, Tim! For those interested in learning more about PPM, especially for CIOs, check this guide out: https://kanbanize.com/blog/project-portfolio-management-strategy-guide-for-cios/
       Reply 
    Are you sure you want to  Yes  No
    Your message goes here
No Downloads
Views
Total views
12,802
On SlideShare
0
From Embeds
0
Number of Embeds
293
Actions
Shares
0
Downloads
667
Comments
1
Likes
25
Embeds 0
No embeds

No notes for slide
  • Business infrastructure includes the decision making and governance processes (e.g. Stage-Gate); the sophistication of your governance processes should be driven by portfolio magnitude and project criticality. Smaller organizations with smaller portfolios often require fewer and more basic governance processes.

    As business infrastructure improves, organizations can accommodate more projects, utilize greater amounts of data, and make decisions faster. Governance should be ‘right-sized’ to fit the actual condition of the organization’s portfolio.

    Traffic signs and lights are governance mechanisms to control the flow of traffic
  • KEY QUESTIONS TO BE ANSWERED AT EACH STAGE

    1) Define the Portfolio (individual projects and portfolio parameters): When can we take on new work? What is our risk tolerance for the portfolio (compared to historical data)? How strong is our pipeline of projects? Have we captured our most important future projects (not initiated yet)? How should we invest categorically (% breakdown)? How well are our projects aligned to strategic objectives?
    Reports needed: Resource report highlighting available critical resources, portfolio risk assessment, pipeline report (backlog, current value, etc.), roadmap

    2) Optimize Portfolio Value: do we have an optimal portfolio that we can deliver?
    Reports needed: efficient frontier report with variance analysis

    3) Protect Portfolio Value: how well are we delivering the portfolio? What are we doing (at the governance team level) to keep it on track?
    Reports needed: summary of project performance, portfolio health

    4) Deliver Portfolio Value: Are we getting the benefits we intended? Have we learned why we may not receive full benefit and how to remedy this in the future?
    Reports needed: maturity map/progress, gap analysis between what we expected from what we got
  • At level 2, some standardization of processes exist, although most processes are still immature. Nevertheless, some processes are defined and documented, and the organization is getting some benefit from portfolio management. At this stage, the organization should have visibility of all major projects in a central tool. The primary focus is on getting basic governance standards and processes set up for reviewing project requests. Basic prioritization may begin at this point with rudimentary understanding of resource capacity management.
  • KEY QUESTIONS TO BE ANSWERED AT EACH STAGE

    1) Define the Portfolio (individual projects and portfolio parameters): When can we take on new work? What is our risk tolerance for the portfolio (compared to historical data)? How strong is our pipeline of projects? Have we captured our most important future projects (not initiated yet)? How should we invest categorically (% breakdown)? How well are our projects aligned to strategic objectives?
    Reports needed: Resource report highlighting available critical resources, portfolio risk assessment, pipeline report (backlog, current value, etc.), roadmap

    2) Optimize Portfolio Value: do we have an optimal portfolio that we can deliver?
    Reports needed: efficient frontier report with variance analysis

    3) Protect Portfolio Value: how well are we delivering the portfolio? What are we doing (at the governance team level) to keep it on track?
    Reports needed: summary of project performance, portfolio health

    4) Deliver Portfolio Value: Are we getting the benefits we intended? Have we learned why we may not receive full benefit and how to remedy this in the future?
    Reports needed: maturity map/progress, gap analysis between what we expected from what we got
  • Overview of project portfolio management

    1. 1. Overview of Project Portfolio Management Tim Washington December 2015 An Overview of Project Portfolio Management
    2. 2. Overview of Project Portfolio Management Project portfolio management is a combination of various management disciplines: General management Business management Project and program management
    3. 3. Overview of Project Portfolio Management Project portfolio management (PPM) is a senior leadership discipline that drives strategic execution and maximizes business value delivery through the selection, optimization, and oversight of project investments which align to business goals and strategies. Paradigm Shift #1: Projects are an important vehicle for executing strategy
    4. 4. Overview of Project Portfolio Management “Portfolio management is the strategy- based, prioritized set of all projects and programs in an organization reconciled to the resources available to accomplish them.” Paradigm Shift #2: The single project view to a total portfolio view. FTE’s
    5. 5. Overview of Project Portfolio Management “[PPM is about] managing [the] composite groups of projects with the same rigor, balance, executive leadership, and decision-making involvement as the company’s financial portfolio. Portfolio management is an ongoing process that includes decision-making, prioritization, review, realignment, and reprioritization.” Paradigm Shift #3: Projects are investments!
    6. 6. Overview of Project Portfolio Management Execute Strategy Deliver Business Value Enhance Decision Making Manage Organizational Change The Purpose of Portfolio Management
    7. 7. Overview of Project Portfolio Management Portfolio Management Benefits • Higher return on project investments • Lower organizational risk • Balanced project portfolio workload • Increased project throughput • Shorter project cycle times • Greater confidence of meeting customer commitments
    8. 8. Overview of Project Portfolio Management ART Governance Leadership SCIENCE Processes Data Successful portfolio management is a combination of art and science Strategic Decision Making
    9. 9. Overview of Project Portfolio Management As the magnitude of the portfolio grows you need the right level of governance processes to effectively and efficiently deliver critical strategic initiatives LARGE PORTFOLIOSMALL PORTFOLIO LARGE SCALE TRANSFORMATIONMEDIUM-SIZED PORTFOLIO Right Size Governance to the Size of Your Portfolio PPM is only bureaucratic if you have the wrong infrastructure Too much process becomes BUREAUCRATIC Too little process becomes chaotic BASIC PROCESSES ROBUST PROCESSES 9
    10. 10. Overview of Project Portfolio Management You need portfolio management when… Your Project Managers feel like this Your organization acts like this Employees react to strategic goals like this
    11. 11. Overview of Project Portfolio Management At the highest level, Project Portfolio Management has four basic components: Processes to define portfolio parameters and select projects that align with strategic objectives Define the Portfolio All the steps necessary to construct an optimal portfolio given current limitations and constraints Optimize Portfolio Value Ensure value is delivered by comparing expected benefits with actual benefits; drive PPM maturity Deliver Portfolio Value The Goal: Maximize value delivered to customers and stakeholders Project benefits must be protected in order to deliver maximum portfolio value Protect Portfolio Value
    12. 12. Overview of Project Portfolio Management Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value Portfolio Reporting and Analytics Portfolio Value Management Portfolio Communication Capacity Planning Capacity Planning Portfolio Risk Mgt Portfolio Risk Mgt Portfolio Planning Portfolio Planning Portfolio Risk Mgt Ideation Prioritization Lessons LearnedProject Monitoring Work Intake Portfolio Balance Portfolio MaturityPortfolio Planning Stage-Gate Efficient Frontier Resource Mgt
    13. 13. Overview of Project Portfolio Management Define the Portfolio Capacity Planning Stage-Gate Portfolio Risk Mgt Portfolio Planning Ideation Work Intake Ideation is the process by which new project ideas are generated. The goal is to collect the best ideas from the organization to generate higher quality projects. Work In-take refers to the steps of developing a project proposal and bringing it to the governance board for a go/no- go decision. This process works in conjunction with both ideation and Stage-Gate, but can be a standalone process. Stage-Gates are a governance structure to evaluate, authorize, and monitor projects as they pass through the project lifecycle. Each gate represents a proceed/modify/hold/stop work decision on the part of the project governance board. Portfolio Planning at this life cycle stage is focused on providing visibility of the project pipeline and the long-term strategic roadmap. Capacity Planning at this life cycle stage is focused on assessing resource needs of incoming project requests to determine whether the organization has capacity to take on new work. Portfolio Risk Management at this life cycle stage is focused on measuring the risk tolerance of the governance team as well as assessing the risk nature of incoming project requests. Processes to define portfolio parameters and select projects that align with strategic objectives How should we invest? • When can we take on new work? • How strong is our pipeline? • Do we have the right projects?
    14. 14. Overview of Project Portfolio Management Project Parking Lot IDEATION/ OPPORTUNITY MGT WORK IN-TAKE 1 2 3 STAGE-GATE Employees Management Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value 1. Managers and employees alike contribute ideas, which get rejected, approved, or put on hold. 2. Approved ideas become formal project proposals and get submitted through a work intake process. 3. From there, many organizations utilize a Stage-Gate process to govern projects
    15. 15. Overview of Project Portfolio Management Optimize Portfolio Value Capacity Planning Efficient Frontier Portfolio Risk Mgt Portfolio Planning Prioritization Portfolio Balance Prioritization is the process of evaluating project value in order to assign resources to the most important projects and start work at the appropriate time Portfolio Balance is having the right distribution of projects by taking into consideration risks, categorization, schedules, and other issues with the whole portfolio in view Efficient Frontier Analysis refers to the optimization techniques used to identify the optimal grouping of projects that maximize the risk-adjusted portfolio value at a given budgetary level Portfolio Planning at this life cycle stage is focused on optimizing the sequencing and timing of approved projects based on resource constraints and dependencies Capacity Planning at this life cycle stage is focused on optimizing portfolio value based on resource constraints and to construct an optimal portfolio plan Portfolio Risk Management at this life cycle stage is focused on balancing and optimizing portfolio risk The steps to construct an optimal portfolio given current limitations and constraints Do we have an optimal portfolio that we can realistically deliver?
    16. 16. Overview of Project Portfolio Management Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value 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 Managing resource capacity based on bottleneck resources is an emerging best practice
    17. 17. Overview of Project Portfolio Management Portfolio Bubble Chart Bubble charts support portfolio balance. The dictionary defines ‘balance’ as the “equal distribution of weight, amount”. Balancing the portfolio means having the right distribution of projects by taking into consideration risks, categorization, schedules, and other issues with the whole portfolio in view. Portfolio balancing is a fine-tuning step of optimizing the portfolio to include the right mix of projects in order to maximize its value. Bubble charts help visualize the portfolio to spot low value projects.
    18. 18. Overview of Project Portfolio Management The GOAL is to deliver maximum business VALUE EFFICIENT FRONTIER ANALYSIS (Cost-Value Optimization) Constraint: Budget CAPACITY PLANNING (Resource Optimization) Constraint: Human resource availability PORTFOLIO BALANCING (Work Type Optimization) Constraint: Categorical Designations PROJECT SEQUENCING (Schedule Optimization) Constraint: Timing and Dependencies Optimization Techniques
    19. 19. Overview of Project Portfolio Management Protect Portfolio Value Portfolio Risk Management Project Monitoring Portfolio Planning Resource Management Portfolio Planning at this life cycle stage is focused on maintaining the strategic roadmap in light of changing conditions and dates during project execution Resource Management at this life cycle stage is focused on ensuring adequate resource utilization in support of successful project execution Portfolio Risk Management at this life cycle stage is focused on managing actual portfolio risks during project execution Project Monitoring provides project performance data that enables portfolio investment tracking to use actual project results to drive future portfolio actions The steps to protect project benefits in order to deliver maximum portfolio value How well are we delivering the portfolio? • What do we need to do to keep it on track?
    20. 20. Overview of Project Portfolio Management Drive the ship The goal is to deliver maximum business value “All efforts should now be put into safeguarding the value of the portfolio.” Therefore…. In a turbulent project environment, it is critical for the management team to drive future portfolio actions based on current project results Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value
    21. 21. Overview of Project Portfolio Management Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value PORTFOLIO RISK: a set of events or conditions that have a positive or negative effect on the portfolio strategies PORTFOLIO RISK MANAGEMENT: necessary steps taken to increase the likelihood of positive events and decrease the likelihood of negative effects impacting the project portfolio PROCESSES: 1. Identify portfolio risks 2. Analyze portfolio risks 3. Develop portfolio risk responses 4. Monitor and control portfolio risks PMT Decision External Events Business Changes Governance Risk Major Project Risks COMMON PORTFOLIO RISKS The Portfolio Management Team (PMT) decides what gets elevated and monitored as a portfolio-level risk. Portfolio Risk Management 5 4 3 2 1 1 2 3 4 5 CONSEQUENCE LIKELIHOOD
    22. 22. Overview of Project Portfolio Management Deliver Portfolio Value Lessons Learned Portfolio Maturity Portfolio Maturity refers to assessing the current state of the portfolio processes and determining how best to arrive at a higher level of maturity; since higher portfolio maturity generally translates into a greater realization of the benefits of PPM Lessons Learned refers to the steps of capturing project lessons learned that will improve future project execution in order to deliver greater portfolio value Ensure current and future portfolio value is delivered by comparing expected benefits with actual results Are we getting the benefits we intended? • Have we learned why we may not receive full benefit and how to remedy this in the future?
    23. 23. Overview of Project Portfolio Management Current State Future State (expected benefit) Actual Benefit Benefit Gap 1. What future state benefits are we expecting? (business case) 2. What benefits have we realized? (benefits tracking) 3. How do we ensure we realize full benefits on future projects? (lessons learned) Benefits realization becomes important if we want to close the gap! Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value
    24. 24. Overview of Project Portfolio Management Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value • Managing portfolio maturity is a critical process for ensuring that organizations “right-size” their processes based on the needs of the organization. • Over-engineering the portfolio management process too early can create an unnecessary weight on the organization and can cripple the implementation. • A PPM maturity model is useful for assessing the current state of the portfolio processes and how to arrive at a higher level of maturity (future state). • Higher maturity often translates into a greater realization of the benefits of PPM. • Organizations can identify their targeted level of maturity based on portfolio magnitude (factors such as budget, total human resources, geographic breadth of organization/portfolio) and project criticality (factors such as: financial ramifications, importance of strategic execution, ability to manage organizational change, risk of failure, etc.) • The following slides will identify key capabilities for each maturity level PortfolioMagnitude Large Portfolio Very Critical Projects Level 1 Level 2 Level 3 Level 4 Level 5 Project Criticality Managing Portfolio Maturity
    25. 25. Overview of Project Portfolio Management • The key word for level 1 is “inconsistency”. No standards exist at this level, many project and portfolio processes do not exist at this level, and what does exist is applied in an ad hoc way. • Individual project managers are not held to specific accountability by any process standards. • Documentation is loose and ad hoc. • Projects are often funded despite absence of critical information Level 1-Initiation Stage Level 2-Developing Stage (“Emerging Discipline”) • PPM processes not yet considered an organizational standard. • Documentation exists on these basic processes. • Management supports the implementation of PPM • No consistent understanding, involvement, or organizational mandate to comply for all projects or project portfolios.
    26. 26. Overview of Project Portfolio Management Level 3 Defined Stage (“Responsive”) Level 3 is a significant step for the organization as it regularly and effectively uses portfolio mechanics. Processes are well defined and established in the organization, with process documentation made freely available to the organization. Level 3 signifies the real shift from a single project view to an aggregate portfolio view. In the previous two levels, even though there is visibility of the portfolio as a whole, emphasis was placed on individual projects. By level 3, organizations better understand how projects interact with each other. Governance bodies seek to understand the implications to the portfolio based on specific project decisions, the key question being “what will this do to the portfolio?” By this point, the organization should be investing in true portfolio management software that brings even more process improvements and efficiencies to the organization. For these reasons, level 3 is often referred to as “the sweet spot”.
    27. 27. Overview of Project Portfolio Management Level 4-Managed Stage (“Proactive”) Level 4 marks the advance of the organization in its use of portfolio management. • Here governance bodies utilize optimization techniques to drive even greater value to the portfolio with little or no extra cost. • PMO’s collect higher quality data that can be used for various optimization techniques, such as resource capacity optimization. • The organization feeds the portfolio system regularly with accurate and up-to-date project information. • Prioritization as a project selection tool has been replaced by efficient frontier analysis. • Schedule optimization is used to unlock even greater value from the portfolio. Level 5-Optimized Stage • The key difference between level 4 and 5 is that at level 5, there is so much organizational rigor and process discipline that the organization proactively uses optimization techniques, and does so with little or no resistance. • Quality data is constantly fed into the portfolio system. • Several enterprise systems are integrated with the portfolio system making it a critical system for the performance of the organization.
    28. 28. Overview of Project Portfolio Management • New product and project ideas • Work in-take process • How people submit ideas/proposals • Gate decisions • Gate status • Gate meetings • Reports/analytics around Stage-Gate • Optimization processes • Priorities • Project value • Project sequencing/ dependencies • Resource capacity • Resource needs • Resource data inputs • Resource reports • Portfolio roadmaps • Portfolio reporting (balance, efficient frontier, etc) • Status meetings/ agenda • Project status • Performance/ health reports • Significant project risks • Portfolio risks • Scope changes • Project closure • Lessons learned • Value delivery Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value Portfolio Communication Portfolio communication is an integral part of PPM by communicating with leadership, business stakeholders, project teams, and the entire organization about project portfolio decisions and information. Communication content is noted below based on the lifecycle stage
    29. 29. Overview of Project Portfolio Management Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value Portfolio Reporting and Analytics Portfolio reporting and analytics are key outputs of the portfolio process to enable decision makers to make the right decisions. At each phase of the PPM lifecycle different types of analysis are conducted with corresponding reports. Analysis: • Quantity of ideas by functional area, IT system, product line, strategic goal, etc. • Kill rate of projects • Duration of projects between gates • NPV of project proposals • Riskiness of project proposals • Gate status • Projects in the pipeline Reports: • Ideation • Stage-Gate • Pipeline Analysis: • Project value (by project type, phase, department) • Project scores • Dependencies • Sequencing • Portfolio balance • Optimization scenarios Reports: • Portfolio roadmap • Risk-value bubble chart • Efficient frontier • Optimization scenarios Analysis: • Project status • Portfolio status (overall, by project type, strategic goal) • Portfolio health • Portfolio risks • Scope changes • Change in portfolio value • Change in project value • Projects in the pipeline Reports: • Portfolio status • Portfolio health • Portfolio risks • Portfolio pipeline • Portfolio roadmap Analysis: • Anticipated benefits at closure • Duration of projects (by type, strategic goal) • Portfolio maturity Reports: • Portfolio maturity map • Portfolio pipeline • Portfolio roadmap
    30. 30. Overview of Project Portfolio Management • Assessing and measuring optimal portfolio value • Assessing project priorities to ensure project value delivery • Assessing project sequencing to maximize value delivery • Analyzing resource capacity to maximize value delivery • Monitoring individual project status and health to protect portfolio value • Analyzing aggregate portfolio performance and health to protect portfolio value • Analyzing significant project risks to protect portfolio value • Assessing portfolio risks to protect portfolio value • Measuring post implementation project value • Evaluate lessons learned to determine inhibitors of portfolio value Deliver Portfolio Value Optimize Portfolio Value Define the Portfolio Protect Portfolio Value Portfolio Value Management Portfolio management is about maximizing and delivering business value internally and externally (if applicable). Portfolio value management includes the steps to measure, maximize, and deliver portfolio value. The high level steps at stage of the PPM lifecycle are noted below. • Business case development • Opportunity assessments • Project risk assessments • Pipeline value assessments
    31. 31. Overview of Project Portfolio Management THE RIGHT PROCESSES to collect THE RIGHT DATA to populate THE RIGHT SYSTEM THE RIGHT REPORTSto generate for THE RIGHT PEOPLE ON ANY DEVICE PPM SYSTEM (“single source of truth”) DATA REPORTS INFORMATION ANALYTICS PROCESSES You need to get processes AND tools done right BENEFITS: Lower Cost ● Higher Quality ● Higher Adoption ● Business Results Delivered Faster ● Higher Realization of PPM
    32. 32. Overview of Project Portfolio Management Business Drivers Reporting Processes People DATA COLLECTIONDECISION MAKING Data INITIAL IMPLEMENTATION ONGOING MANAGEMENT Before implementing a PPM system, it’s essential to understand your primary business drivers Develop reports, analytics, and dashboards that tie to business drivers Data collection is not free; only collect data that supports the reporting and analytics needed. Otherwise it is a waste of organizational resources. Establish clear data collection processes to ensure that accurate data is entered into the system at the right time. PPM system users need the right skills in order to collect the highest quality data Once your PPM system is up and running, the five factors noted above need to be considered in reverse order: Employees follow the established processes in order to collect the data, which informs reports and analytics that drive better decisions to fulfill the original business drivers PPM System Implementations
    33. 33. Overview of Project Portfolio Management 1. Sr. Mgt. Uses the Data 2. Sr. Mgt. Communicates That the Data is Being Used 3. Sr. Mgt. Demonstrates How the Data Is Being Used 4. Data Quality Improves 5. Better Decision Making Ensues Portfolio Reporting and Analytics • Data collection is not free; any data that is collected but not actively used is a waste of organizational resources • Knowing what information is needed to drive better decision making will help ensure that only important data is collected. • Data quality is never perfect at the beginning of a portfolio management process, so senior leadership should not wait until data is “perfect” before they begin using it • Once leadership begins to use the data they will better understand what data is really needed for decision making • Moreover, once the data gets used, gaps in the data will be readily apparent and will give senior leaders an opportunity to reinforce the importance of following portfolio processes in order to generate quality data • Data is the fuel that runs the portfolio engine
    34. 34. Overview of Project Portfolio Management LEADERSHIP Leadership determines what data is important for managing the portfolio and drives accountability for getting the right data PROCESS The right processes get the right data into the system at the right time TOOL A portfolio system stores and transforms the data for general consumption (reporting and analytics) LEADERSHIP Leadership then uses the data to make better investment decisions at the right time Good data is the fuel that makes the portfolio engine run! Portfolio Reporting and Analytics
    35. 35. Overview of Project Portfolio Management If you liked the presentation, please ‘like it’ and share your comments, thank you Name: Tim Washington Email: twashington@pointb.com For a copy of these slides, please contact me at: @ppmexecution http://www.linkedin.com/in/timawashington www.ppmexecution.com blog dedicated to PPM articles For more information, visit:

    ×