Portfolio Management and the PMO - Cost Center or Revenue Driver?

Portfolio Management

and the PMO:

Cost Center or

Revenue Driver?

© 2015 Global Knowledge Training LLC. All rights reserved. 4/9/2015

Dan Stober

Business analyst and PMP-certified project manager

More than 15 years of project management experience

Has performed business analysis and project

management for the U.S. government, where he

managed projects in the United States, the Middle

East, and Europe

As practice lead for project management and business

analysis at Global Knowledge, Dan manages the

project management and business analysis training

portfolios


Agenda

Intro

Aligning Projects into Programs

Projects: Deliverables

Programs: Coordination and Alignment

Portfolio/PMO: Managing Capacity

Roles and Responsibilities of a Portfolio Manager

Identifying the Limiting Resource

Managing the Limiting Resource

Effective Portfolio Management

Executive Involvement in Project Success

Q&A


After completing this webinar, you will be able to:

See the value of aligning portfolios with organizational

strategy

Understand drivers of project failure

Make the link between educating your organization and

project success

Get senior management on board to support portfolio

management

Select the correct training for your workforce


Definition: Organizational Project Management

Organizational Project Management

The management of projects, programs, and

portfolios in alignment with organizational strategies


Project Management

Project Management: Deliverables

*From The Standard for Portfolio Management — Third Edition,

Project Management Institute, Inc., 2013, 180.

The development and implementation of plans to achieve a

specific scope, driven by the objectives of the program or

portfolio of which it is a part

“The application of knowledge, skills, tools, and techniques

to project activities to meet the project requirements”*


Program Management

Program Management: Alignment and Benefits Realization



The coordination of a related set of projects and operations

in order to realize specified benefits

“The application of knowledge, skills, tools, and techniques

to project activities . . . to obtain benefits and control not

available by managing projects individually”*


Portfolio Management

Portfolio Management: Organizational Capacity



The alignment of projects with organizational strategy by

selecting the right programs or projects, prioritizing the

work, and providing needed resources

“The centralized management of one or more portfolios to

achieve strategic objectives”*


Goals of Organizational Project Management


Capacity

The allocation of resources according to organizational priority and ability

Coordination/Benefit Sustainment

The achievement of organizational benefits

Deliverables

The creation of specified deliverables that support organizational objectives

Portfolio management

Program management

Project management


Overview of Portfolio Management


Provides an opportunity for a governing body to make

decisions that control or influence the direction of a

group of portfolio components as they work to achieve

specific outcomes

“Includes interrelated organizational processes by

which an organization evaluates, selects, prioritizes,

and allocates its limited internal resources to best

accomplish organizational strategies consistent with its

vision, mission, and values”*




Portfolio Management in Practice

Coordinating the many projects within an organization

to be a streamlined set of prioritized initiatives

Treating projects as investments that consume

resources

Maximizing overall return from investments in all

projects



Definition: Portfolio


A collection of projects,

programs, and

operations grouped

together to facilitate

effective management

and meet strategic

objectives


Definition: Organizational Strategy




“A plan of goals, policies, and actions that provide the

overall direction and focus of the organization”*

Organizational strategy defines the means of attaining

organizational goals through operations, programs, and

projects

Portfolio management is a tool used to implement an

organization’s overall strategic plan


Portfolios and Organizational Strategy


Organization’s

strategy and

objectives

A portfolio reflects an organization’s strategy and how that

organization views the portfolio’s components in relation to

the organization’s objectives.


Characteristics of Portfolios

Portfolio Management and Organizational Strategy

Aligned with one or more organizational strategies and objectives

May be long-lived, unlike a project

May be one of multiple portfolios within an organization — each one dedicated to unique strategies and objectives


Strategy Drives Portfolios


Organizational strategy contains mission and vision

statements, as well as strategies needed to achieve the

mission.

Strategies are translated into initiatives that are

influenced by many factors:

Market dynamics

Partner requests

Shareholders

Regulations

Competition

Initiatives drive the establishment of portfolios.


Context of Portfolio Management


Based on The Standard for Portfolio Management— Third Edition, Project Management Institute, Inc., 2013, Figure 1-3, 8.


Management Emphasis


Doing the

right work

Portfolio managers

Program managers

Project managers

Doing the

work right


Function of a Portfolio Manager


Monitors, evaluates, and validates portfolio components relative to:

Alignment with organizational strategy and objectives

Viability as part of the portfolio based on performance and risk

Value and relationship to other components

Available resources and portfolio priorities

Additions and deletions


Responsibilities of a Portfolio Manager


Guiding the selection, prioritization,

balancing, and termination of portfolio

components

Guiding

Reviewing, reallocating, reprioritizing,

and optimizing the portfolioReviewing

Measuring and monitoring components’

contributions to the organization

Measuringand

Monitoring

Supporting senior-level decision-making

with timely and appropriate informationSupporting


Portfolio Management Activities


Receive information

Ensure flow of information on component performance and progress to and from components.

Analyze and convey

Analyze information on component performance.

Convey information to the portfolio governance board about the alignment of components with strategic goals.

Make recommendations

Provide options for actions to be taken.


Portfolio Governance Board

Makes decisions about priorities

Evaluates performance and makes resourcing,

investment, and priority decisions as needed



Chain of Command


The role of the portfolio manager is to ensure that

projects and programs are kept in alignment with

evolving organizational strategy.

Executives determine strategy

Strategy drives

objectives

Objectives drive projects


Limiting Resources

Limiting resources are:

The one or few resources that most often determine how

many projects can be completed

The staff, assets, or equipment that serves as a

bottleneck to project completion

The resources that are limiting change over time and

vary between departments.

Capacity Management


Management around the Limiting Resources

Capacity Management

Every possible resource pool cannot be managed.

Resources that most directly affect the organization’s

capacity to complete projects must be controlled.


IT Project Success Rates

The Role of Portfolio Management in Project Success

Year Successful Challenged Failed

2012 39% 43% 18%

2011 37% 42% 21%

2009 32% 44% 24%

2006 35% 46% 19%

2004 29% 53% 18%

2002 34% 51% 15%

2000 28% 49% 23%

1998 26% 46% 28%

1996 27% 33% 40%

*The Standish Group. 2013. The CHAOS Manifesto. Boston, MA.

The Standish Group Findings:*

Successful: The project was

completed on time, on budget,

and according to specification.

Challenged: The project was

completed and operational but

was over budget, late, or did

not meet all original

specifications.

Failed: The project was

cancelled before

completion or was never

implemented.


Reasons for Project Failure


Inadequate planning

Lack of control

Lack of upper management support

Poor risk planning

Lack of end-user support

Poor communication

Missed deadlines

Unrealistic expectations

Complexity — technical and organizational


Reasons for Project Success


Effective management structure

Reasonable stakeholder expectations

Executive support and organizational commitment

Involvement of skilled resources

Adequate risk management

Change management

Effective communications

Consistent and practical project methodology

Clear objective and defined requirements


Project Success and Portfolio Management


Portfolio management enables:

Scheduling and prioritization

Overcoming bottlenecks

Sharing of scarce resources


Project Creation



Interdepartmental Project Management


Project success depends on access to diverse resources


Competition at the Project Level


In the absence of effective

portfolio management:

Project managers compete for

scarce resources.

Projects are prioritized on the

basis of the competitive skills of

project managers.


Competition Results in Multitasking

Conflict between stakeholders results in the sharing of

scarce skill sets.

Staff must multitask to ensure that each project has

access to scarce resources.



Definition: Multitasking


Scheduling individual staff with multiple assignments:

Forces staff to move between tasks before completing

any one task

Forces staff to divide their time among projects


Efficiency vs. Effectiveness


Efficiency

Getting a large amount of work done

vs.

Effectiveness

Getting the right work

done

Multitasking wastes time even though a person may keep

very busy.

The trade off is between effectiveness and efficiency.

Splitting up the time of resources so as to please multiple

masters increases costs and delays the completion of every

project.

The end result:

Projects take longer and cost more

Wasted time, mistakes, confusion, and frustration


Contributions of Portfolio Management


Portfolio

management

Prioritizes projects based

on organizational goals,

not departmental goals

Encourages consistent

repeatable processes

Shares resources efficientlyHelps to avoid ineffective

multitasking


Ingredients for Portfolio Management Success


Executive involvement

Transparent prioritization

system

Project management

office


Executive Involvement



system

Project management

office


● Executives

determine

organizational

strategy.

● The project

management

office (PMO)

tracks project

capacity and

reports the

results to a

review board.

● The review

board

chooses

between

projects and sets

priorities.


Transparent System of Prioritization


Project management

office



system

● An effective

valuation

system fairly

compares

projects’

contributions

to corporate

objectives.

● The valuation

system used to

prioritize

projects should

be easily

understood

and universally

accepted.


Project Management Office




system

Project management

office

● PMOs collect

project data,

analyze it,

and provide

recommendati

ons to review

board.

● PMOs seek

solutions and

improvement,

not excuses

and blame.


The Silo Mentality


Project managers do not even expect to be successful.

Functional units are driven

to meet independent

targets.

More projects are

pushed into the system

without regard to

capacity.

Conflicts between

departments result in

battles over limited

resources.


Holistic View of Strategy


Effective coordination requires a big

picture view of what is important

and the authority to impose compliance.


Why Is Portfolio Management Needed?


Defective planning

Why?

Governance board

Where?

Continually

When?

Senior executives

Who?

Limiting resource

How?

Defective planning means that human

capital is mismanaged.


Where Is Senior Management Involved?


Defective planning

Why?

Governance board

Where?

Continually

When?

Senior executives

Who?

Limiting resource

How?

Governance board:● Sets priorities

● Regularly meets to decide which projects to

initiate, kill, put on hold, or learn more about


When Is Senior Management Involved?


Defective planning

Why?

Governance board

Where?

Continually

When?

Senior executives

Who?

Limiting resource

How?

Strategic planning● The mission statement determines strategy.

● Strategy drives objectives, which drive

investments.

Portfolio governance board● Decides how best to consume resources in

order to accomplish strategic goals

● Meets regularly or as necessary to react to

competitive forces


Who Is Involved?


Defective planning

Why?

Governance board

Where?

Continually

When?

Senior executives

Who?

Limiting resource

How?

● Senior representation from all affected

business units

● Every department, division, or functional

unit


How Does Senior Management Participate?


Defective planning

Why?

Governance board

Where?

Continually

When?

Senior executives

Who?

Limiting resource

How?

● A limiting resource is the resource or

resource pool that is the most common

bottleneck to project completion.

● Senior management decides: ● How the limiting resource will be consumed

● The best mix of projects to accomplish

corporate objectives

● Projects are sequenced according to their

contribution to strategic objectives.


Process for Senior Management Participation


Agrees how to determine project value

Decides how to measure and compare projects

Reviews the options

Uses analysis and recommendations provided by the portfolio manager

Chooses between projects

Decides how the organization’s limited project resources will be consumed

Determines how limiting resources will be shared


Training Your Organization


Set the foundation:

• Project Management Fundamentals

• IT Project Management

Build competencies and sustain benefits:

• Project Management, Leadership, and Communication

• Program Management

Take project management to the next level:

• PMP Exam Prep Boot Camp

• Portfolio Management

• Establishing and Managing the PMO


Learn More

Recommended Global Knowledge

Courses

Project Management Fundamentals

IT Project Management

Project Management, Leadership, and

Communication

Program Management

PMP Exam Prep Boot Camp

Project Portfolio Management

Establishing and Managing the PMO

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Portfolio Management and the PMO - Cost Center or Revenue Driver?

Leadership & Management

Transcript of Portfolio Management and the PMO - Cost Center or Revenue Driver?