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Project Portfolio Selection Model - Voice narrated


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Narrated copy of "Project Portfolio Selection" presentation made to the PMI Symposium 2008 in Ottawa. Puts forward a scoring model for selecting projects which are best aligned against organizational strategies and goals.

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Project Portfolio Selection Model - Voice narrated

  1. 1. Russona Consulting presents:<br />Choosing the Right Projects<br />A Subset of Project Portfolio Management<br />
  2. 2. Why Is This So Important<br />“The greatest waste in business is <br />doing the wrong thing well”<br /><ul><li>Henry Ford </li></ul>Project management is about “doing the projects right”<br />Portfolio management is about “doing the right projects”<br />
  3. 3. Presentation Contents<br /><ul><li>Overview
  4. 4. The Life Cycle
  5. 5. Business Variables
  6. 6. Cyclical Variables
  7. 7. Scoring Individual Projects
  8. 8. Balancing The Portfolio
  9. 9. Summary</li></li></ul><li>Project Portfolio Management<br />To be effective, the portfolio assessment needs to incorporate both short and long term perspectives<br />The management of an effective PPM is about the selection and prioritization of projects to deliver the highest value, based on the pre-established portfolio business decision and priority criteria<br /> - “Best Practices for Project Portfolio Management” White Paper – Serena Mariner, August 2008<br />
  10. 10. Organizational Context<br />
  11. 11. Life Cycle Phases<br />here<br />
  12. 12. Portfolio Management<br />Project Portfolio Management covers 3 key areas:<br /><ul><li>Align the portfolio of projects based on highest value and business criteria
  13. 13. Ensure the investment is being managed
  14. 14. Ensure the business achieved the expected benefits</li></ul>Most organizations have more “good ideas” than they have resources to deliver on<br />Focus on “doing the right projects”<br />
  15. 15. Roles in Portfolio Management<br />PMI’s – Portfolio Management Std. – 1st Ed.<br />
  16. 16. Impact of Too Many Projects<br /><ul><li>Delayed benefits
  17. 17. The expected benefits from the changes take longer to be realized
  18. 18. Projects take longer
  19. 19. Changes in business / technology / environment mean more “challenged” projects
  20. 20. Trying to cover too many bases means that nothing gets done well
  21. 21. Unhappy stakeholders, poor quality results</li></li></ul><li>Presentation Contents<br /><ul><li>Overview
  22. 22. The Life Cycle
  23. 23. Business Variables
  24. 24. Cyclical Variables
  25. 25. Scoring Individual Projects
  26. 26. Balancing The Portfolio
  27. 27. Summary</li></li></ul><li>Life Cycle Phases<br />Following TBS – EMF, key phases in the project life cycle are:<br />Business case<br />Portfolio Selection<br />Project Initiation<br />Planning<br />Execution <br />Control & Monitoring<br />Close-out – Delivery<br />
  28. 28. Selection Process - Criteria<br /><ul><li>Ensure that the projects we select reflect the business criteria in terms of achieving business objectives
  29. 29. Transparency required to ensure support for the process
  30. 30. Needs to reflect the capacity of the organization to commit and deliver on selected projects</li></li></ul><li>Process Demonstration<br />This presentation demonstrates how to model this using MS Excel!<br /><ul><li>Series of slides demonstrating:
  31. 31. Ranking of key business objectives (KBOs) against each other
  32. 32. Selection of key criteria for evaluating proposed projects
  33. 33. Business factors
  34. 34. Technology factors
  35. 35. Risk factors
  36. 36. Financial factors
  37. 37. Using the criteria to weight the proposed projects
  38. 38. Provides a “weighted score” on which to prioritize
  39. 39. A two step assisted process to finalize the selected projects</li></li></ul><li>Inputs Required – 3 Levels<br /><ul><li>Business Management (> annual)</li></ul>Business criteria (and groupings)<br />Key Business Objectives (KBOs)<br /><ul><li>Executive (annual)</li></ul>Overall budget<br />Budget categories <br /> % Allocation of the budget to those categories<br /><ul><li>List of candidate projects (ongoing, regular basis)</li></ul>Category<br />Overall cost<br />For each candidate, a scoring against the business criteria<br />
  40. 40. Project Phases / Reviews<br />
  41. 41. Pre-Project Stage<br />
  42. 42. Roles / Responsibilities<br />
  43. 43. Portfolio Management Processes<br />PMI’s – Portfolio Management Std. – 1st Ed.<br />
  44. 44. Project Alignment Process<br />Portfolio selection follows a 7 step process<br />Identification<br />Categorization<br />Evaluation<br />Selection<br />Prioritization<br />Portfolio Balancing<br />Authorization<br />
  45. 45. As New Initiatives Are Raised<br />Identification – someone has gone through the business requirements and developed a business case. Decision made on which option to select<br />Categorization – in some organizations, budgets will have specific “categories” that need to be balanced (e.g. infrastructure, research and development, employee development)<br />Evaluation –collect the information required to do selection / prioritization<br />Selection – some projects may not meet required qualifications, be mandatory, or customer / contract driven<br />
  46. 46. Presentation Contents<br /><ul><li>Overview
  47. 47. The Life Cycle
  48. 48. Business Variables
  49. 49. Cyclical Variables
  50. 50. Scoring Individual Projects
  51. 51. Balancing The Portfolio
  52. 52. Summary</li></li></ul><li>Key Business Objectives (KBOs)<br />Not all KBOs have the same level of benefit for the organization<br /><ul><li>While there may be multiple key business objectives, they should have different relative weights to the organization
  53. 53. Our project selection process should reflect this in how we rank support of KBOs to candidate initiatives</li></li></ul><li>Ranking KBOs<br />
  54. 54. Convert KBOs To Numeric Weighting Factors<br />
  55. 55. Scoring the Strategic Alignments<br /><ul><li>Using the relative weights of the KBOs from before
  56. 56. We now select which KBOs the project supports
  57. 57. Notice that normally the weighted score would be hidden</li></li></ul><li>Business Drivers<br />There are a number of additional business drivers that most organizations factor in when determining the viability of new initiatives.<br />These typically do not vary from year to year, and there may be a lot of similarity between organizations within the same industries<br />Not all of these factors will have the same weight in scoring initiatives<br />Some examples of factors include:<br /><ul><li>Size of the initiative (people, investment capital)
  58. 58. Number of business units involved
  59. 59. Financial returns (pay-back period, NPV)</li></li></ul><li>Which Factors to Include<br />Determine the factors that you want to use in your organization<br />Determine the high level groups and their relative weighting<br />Create sub-sets if that is not granular enough for your organization<br /><ul><li>Calculates weighting based on combination of two levels</li></ul>All factors will be used to compute the total weighted score for each proposed project<br />Remember, all projects will have to provide a score for each of these criteria<br />
  60. 60. High-Level Categorization<br />
  61. 61. Provide More Granularity as Needed<br />
  62. 62. Calculated Weights for Sub-categories<br />
  63. 63. Presentation Contents<br /><ul><li>Overview
  64. 64. The Life Cycle
  65. 65. Business Variables
  66. 66. Cyclical Variables
  67. 67. Scoring Individual Projects
  68. 68. Balancing The Portfolio
  69. 69. Summary</li></li></ul><li>Annual Changes<br /><ul><li>Total amount of budget for the organization
  70. 70. Amount required for “keeping the lights on”
  71. 71. What’s left is the budget for “new initiatives – projects”
  72. 72. Possibly new strategies and goals – KBOs
  73. 73. Concept of “budget categories”
  74. 74. Allocation between them may change more frequently</li></li></ul><li>Presentation Contents<br /><ul><li>Overview
  75. 75. The Life Cycle
  76. 76. Business Variables
  77. 77. Cyclical Variables
  78. 78. Scoring Individual Projects
  79. 79. Balancing The Portfolio
  80. 80. Summary</li></li></ul><li>New Initiatives and Proposals<br />The categories are used to score a project as the independent initiatives come in:<br /><ul><li>Use of drop down menus to limit variance of input
  81. 81. Use a visible legend to assist with interpretation
  82. 82. Initiatives can be scored as they come in
  83. 83. Keep the “weighted score” invisible, concentrate on the objective score for the initiative
  84. 84. This data input could be done by a number of different areas:
  85. 85. Business analysts
  86. 86. PMO function
  87. 87. Portfolio secretariat</li></li></ul><li>Scoring the Independent Initiatives<br />
  88. 88. Presentation Contents<br /><ul><li>Overview
  89. 89. The Life Cycle
  90. 90. Business Variables
  91. 91. Cyclical Variables
  92. 92. Scoring Individual Projects
  93. 93. Balancing The Portfolio
  94. 94. Summary</li></li></ul><li>The Big Picture<br />- Combine all the new initiatives that have come in and determine where you need to “draw the line”<br /><ul><li>Shows a series of sheets that:
  95. 95. Add all the initiatives in one sheet, with weighted scores
  96. 96. Show them being copied / sorted in order
  97. 97. Show how the cumulative costs contribute to “pass 1” decision
  98. 98. For some organizations that’s enough
  99. 99. For others, they may want to apply “budget buckets”
  100. 100. Shows how you can take it one step further to balance the buckets</li></li></ul><li>Applying the Business Criteria Weighting<br />
  101. 101. First Pass at Balancing<br />
  102. 102. Second Pass at Balancing – “Categories”<br />
  103. 103. Selected Projects! – Balanced Approach<br />That is your list of projects to charter<br /> - that is when you know definitively that “it is a project”<br /> - “soft commit” pending the planning phase<br />The selection process followed will help in project success because<br /><ul><li>Only approve projects that you can deliver on
  104. 104. Methodology lends itself to ensure senior management support for projects selected
  105. 105. When resources become available, everyone is aware of the next project that should be selected</li></li></ul><li>Presentation Contents<br /><ul><li>Overview
  106. 106. The Life Cycle
  107. 107. Business Variables
  108. 108. Cyclical Variables
  109. 109. Scoring Individual Projects
  110. 110. Balancing The Portfolio
  111. 111. Summary</li></li></ul><li>Conclusions<br /><ul><li>Readily available tools
  112. 112. Techniques are simple to implement
  113. 113. Separate the “scoring” from the business weights
  114. 114. Project portfolio is selected from the highest scoring projects within the resources available
  115. 115. Easily extendible to provide for “budget categories” to ensure adequate funding to traditionally low scoring areas
  116. 116. Logical, methodical approach facilitates stakeholder focus on approval of projects that support the business objectives</li></li></ul><li>Benefits<br /><ul><li>Provides a quantitative, logical process to ensure projects selected best match the strategic direction of your organization
  117. 117. Ensures senior management support because the project is focused on tangible business criteria
  118. 118. Focuses everyone on making the right decisions based on the organization’s business drivers
  119. 119. Garners support the result because the process is both visible and fair</li></li></ul><li>
  120. 120. Thank you for your time!<br />Russ McDowell, M. Eng., PMP<br />Russona Consulting Corp.<br />E-mail:<br />Phone: (613) 836-6182<br />