Portfolio management


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Portfolio management

  1. 1. CaseStudy MANAGING FOR RESULTS DOD A GENCY T URNS TO P ORTFOLIO M ANAGEMENT FOR I MPROVED P ERFORMANCE AND E FFICIENCYB ACKGROUND TAKING THE F IRST S TEPIn 1993, Congress passed the Government Performance and Results Act, Meeting all of the legislative requirements along with the OMB/GAO IT invest-which required federal agencies to measure program results by linking per- ment management guide would require the agency to ensure its IT investmentsformance to investments. Because Congress provides capital to federal resulted in measurable improvements to its mission-related and administrativeagencies, it wanted to ensure agencies’ investments yielded value and that processes. In April 2000, determined to satisfy the intent of the legislation andthe means to achieve value were measurable. Three years later, the Clinger- comply with the OMB/GAO guide, the agency engaged Robbins-Gioia, a manage-Cohen Act mandated that the Department of Defense implement a process ment consulting company with more than 20 years of experience managing com-whereby information technology investments are managed and evaluated plex initiatives. Robbins-Gioia was tasked to establish a program executivebased on measurable contributions to DOD mission goals and priorities. As office (PEO) structure as an initial step in managing the agency’s emerging ITa result of this legislation the Office of Management and Budget and investment programs. The company had been helping the agency to success-Government Accounting Office established an IT investment evaluation guide fully execute its business systems modernization effort and was on site whendirected at the IT investment management process. the DOD began to embrace the legislative intent of the Clinger-Cohen Act and resulting guidelines. The agency turned to Robbins-Gioia for help in defining theTo comply with legislation and federal guidance and establish metric perform- legislation, evaluating the agency’s programs and investments, and implement-ance measures, a critical DOD agency set out to identify and establish ing an overall methodology to support the agency’s acquisition and portfolioprocesses to effectively manage its IT investments and ensure those invest- management process.ments were aligned with its strategic missions, business goals, and objec-tives. With more than $3 billion in IT investments over a 5-year planningcycle, investment management and oversight is critical to the agency’s mis-sion. “The agency understands the significance of performance measure- With more than $3 billion in IT investmentsment in the federal government and is committed to achieving effective man- over a 5-year planning cycle, investmentagement and oversight of its investments,” said Rex Lovelady, senior pro-gram management consultant from Robbins-Gioia, a company engaged to management and oversight is critical to thehelp the agency achieve its aims. “This initiative enables the agency to agency’s mission.acknowledge the dollars being spent on IT, while determining outcome meas-ures and the expected benefit and return on investment.”Solutions used:
  2. 2. (1) identifying IT investments; (2) baselining cost, schedule, and perform- ance; (3) establishing the business value for each portfolio investment; and Portfolio management is a unique process that aligns (4) identifying expected mission outcomes. The portfolio managers, in a col- investments with strategic missions, business goals, laborative effort with the functional proponents, were also responsible for and outcomes while grouping like investments into managing the portfolio investments during the critical budget planning portfolios. process by monitoring IT investment baseline changes, analyzing portfolio impact in the selection of new IT investments, assessing portfolio risks, and making investment decisions that impacted other portfolios.M EASURING U P THROUGH P ORTFOLIO M ANAGEMENTIt didn’t take long to determine the agency would benefit from a disciplined yet FACING R EALITY H EAD O Nflexible portfolio management approach to manage and oversee its IT invest- Right from the start, the agency faced several barriers in implementing thements in support of its functional and mission areas. Portfolio management is portfolio management process. As an integral part of the portfolio manage-a unique process that aligns investments with strategic missions, business ment solution, the agency was required to implement a PEO acquisitiongoals, and outcomes while grouping like investments into portfolios. This solu- structure, which would provide greater management and oversight of thetion would manage investment risks to maximize ROI and contribution to mis- agency’s automated information systems (AIS). At the time, the agencysion outcome, empower agency senior executives to make decisions with lacked an adequate program management structure to support either thegreater confidence, and provide visibility into the implementation of the total portfolio management or PEO initiative, and discovered that it would needintegrated investment strategy. to merge more than just its AIS systems. The agency would also need to oversee contemporary systems, legacy systems, infrastructure, and otherOnce on board, Robbins-Gioia helped the agency interpret IT investment man- emerging programs and project relationships to maximize IT investment con-agement requirements and used best practices to define portfolio management. tribution to mission outcome.A portfolio was defined as the resources, management, and related investmentsrequired to accomplish a mission-related or administrative outcome. Portfolio Additionally, the agency was finalizing a major reorganization that requiredmanagement, then, was the process of managing and overseeing those IT the refinement of organizational roles and responsibilities. To facilitate theinvestments to maximize the contribution each IT investment and portfolio process and provide direction for the implementation, Robbins-Gioia devel-makes toward mission accomplishment. oped several of the agency’s directives. PEO operations, portfolio manage- ment and oversight, and AIS life cycle management for emerging systemsRobbins-Gioia assisted the agency in identifying the best portfolio approach to directives documented the process and clearly defined roles and responsi-manage the agency’s investments and laid out an overall methodology and plan bilities.that mapped out the activities necessary to successfully implement the missionanalysis through the selecting, controlling, and evaluating phases of the portfo-lio management process. Robbins-Gioia was instrumental in establishing an ITinvestment management self-assessment questionnaire and conducting the Right from the start, the agency facedagency’s self-assessment in accordance with the GAO investment managementmaturity model. This self-assessment helped to validate the overall portfolio several barriers in implementing themanagement process and implementation plan and provided the initial frame-work to address GAO’s subsequent IT investment management audit. portfolio management process.Portfolio managers were chosen to manage each portfolio’s investment areas.The portfolio managers established the management structure responsible for
  3. 3. After identifying the portfolio managers and outlining their roles and respon-sibilities, a plan was created that established critical action items. “Then we took that plan and encompassed“We created a schedule with the activities and key milestones to help keepthe agency on track to accomplish this task,” said Lovelady. “Then we took it into the agency’s overall organization, andthat plan and encompassed it into the agency’s overall organization, and it it took off from there.”took off from there.” –Rex Lovelady, Robbins-Gioia senior program management consultantFrom then on, the agency transitioned into the four phases that make up asuccessful portfolio management process of mission analysis, selection,control, and evaluation. and corporate portfolio impact. The investment proposal is briefed as a mile-Mission Analysis stone decision to the PEO review board for selection. The selection process isTo budget for an IT investment program with portfolio management, the embedded in the budget planning process and development of the annual budg-agency would need to determine specific requirements for IT investments. et submission.The agency’s mission areas conducted analysis that linked their missiongoals to performance outcomes. This enabled mission areas to identify Controlgaps in missions, prioritize deficiencies, and determine the strategic direc- Management and oversight is provided for those IT investment programs thattion for the agency’s mission-related and administrative processes. are selected through the established PEO operations and life cycle management process. The acquisition executive delegates management and oversightIf a mission deficiency was found, the mission areas would then conduct a responsibilities of the selected IT investment to the PEO, who establishes mile-trade-off analysis to identify possible solutions for the deficiency. stone decision reviews, testing and evaluation processes, and program docu-Nonmaterial solutions—such as reengineering business processes, organi- mentation requirements. The PEO also tailors life cycle requirements and initi-zational and policy changes, and training and education—were considered ates program baseline reporting. IT investment program status is reported on afirst to resolve the deficiency. If the mission area determined that an IT solu- monthly basis and in-progress reviews are conducted on a quarterly ortion was needed, it had to document the trade-off analysis, develop a mis- as-needed basis.sion needs statement, and document the functional requirements that anIT capability must meet to eliminate the deficiency. Evaluation In the evaluation stage, the achievement of program goals and objectives are“The functional proponents are responsible for defining the mission need evaluated and lessons learned documented. The PEO maintains oversight overand functional requirements for an IT capability,” said Lovelady. “The IT com- the assessment and reporting of performance information and planned versusmunity then provides the IT solution that supports that requirement.” actual benefits as well as planned versus actual costs.Selection The agency has implemented 75 percent of the stage 2 critical processes andOnce it is established that an IT capability would best resolve a deficiency, should reach stages 2 and 3 of the GAO portfolio management maturity frame-an IT investment proposal is developed, transitioning the portfolio manage- work as the agency runs through the next budget planning cycle in 2003. Thisment solution into life cycle management. Prepared by the functional mis- will provide the documented, physical, and testimonial evidence of an opera-sion area and information operations team, the IT investment proposal sum- tional and improving IT investment management process within the agency.marizes the mission need, possible IT alternatives and recommended alter-native, estimated cost, anticipated benefits, initial resource requirements,
  4. 4. Headquarters11 Canal Center Plaza Robbins-Gioia has been dedicated to delivering managementAlexandria, VA 22314t: 800.663.7138f: 703.684.5189 solutions to government agencies and Fortune 500 companies forNew York65 BroadwaySuite 906New York, NY 10006 more than 21 years. We help our global customers optimize their212.509.6260Ottawa business processes, accelerate change, and establish time, cost,180 Elgin Street, Suite 900Ottawa, OntarioCanada K2P-2K3613.236.3773 and quality improvements to transform their businesses.Detroit26555 Evergreen RoadSuite 1290Southfield, MI 48076 Selected Client List248.359.7807 COMMERCIAL GOVERNMENTToronto AT&T Agriculture8th Floor Avaya Air Force2425 Matheson Blvd E. AXA Financial ArmyMississauga, OntarioCanada L4W 5K4 DaimlerChrysler BLM905.361.2803 EDS Customs Service Ford Motor Company DefenseLos Angeles FuGen EnergySales Office General Motors FAA112 Third StreetSeal Beach, CA 90740 Hewlett-Packard FBI562.594.8739 Johnson & Johnson INS Lockheed Martin InteriorDayton Lucent Technologies Justice1360 Technology Court Merrill Lynch NROSuite 200 PricewaterhouseCoopers NavyBeavercreek, OH 45430-2200937.426.8081 Public Service Electric & Gas PTO United Airlines Transportation Qwest TreasuryWarner Robins, GA402 Corporate Pointe Verizon TSAWarner Robbins, GA 31088 VBA478.329.0009Montgomery, ALTwo East Building400 Eastern BypassSuite 200BMontgomery, AL 36117334.271.4654www.robbinsgioia.cominfo@robbinsgioia.com800.663.7138 ©2003 Robbins-Gioia, LLC® All rights reserved 02-09u042803