Project Portfolio Management

1
Project Portfolio Management

• Concepts
• Theory
• Practice
• common/typical practices
• 'best' practices
• ideal practices that is, what the concepts and
  theory suggest could or should be done.

2
Analysis and Synthesis

• We will review many of the analysis topics you
  studied in your other courses (cost analysis,
  risk analysis, earned value analysis, work
  breakdown structure, resource scheduling, etc),
  but in the context of synthesizing them into a
  PPM process
• We will study decision making and prioritization
  (topics from DNSC 224) which will be helpful in
  performing synthesis required for many facets of
  PPM

3
Overview of Course (Blackboard)

• Announcements
• Syllabus
• Grading percentages are approximate and may be
  modified to some extent.
  
• Discussion Forums
• Expect some changes

4
Overview of Course (Blackboard)

• Outline
• Dates
• Topics
• Grading/Deliverables (Tentative s)
• Mid Term 20
• Final 20
• Project Choice Decision 20
• Project Portfolio Project 25
• Class Presentation of Specific Topic 10
• Class Participation 5

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Overview of Course (Blackboard)

• Discussion Board
• Personal Information
• One Minute Summaries
• General Discussion and Team Forming

6
PPM Doing the Right Things

• Project Management
• Doing things right
• Enterprise Management
• Doing things right throughout the enterprise
• Project Portfolio Management
• Doing the right things!

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Stakeholders

• Stakeholders for individual projects (project
  management) include
  
• business owners, business sponsors, and often the
  end user of a projects output.
  
• they are specifically concerned with satisfying
  their own business requirements and needs and
  controlling cost and schedule.
  
• Stakeholders for the PPM processes include
• financial management, senior business executives,
  and ultimately the stockholders of the
  organization.
  
• they are concerned with optimal investment of
  scarce company resources and typically are
  interested in return on investment, strategic
  alignment, and the risk profile of the portfolio.

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Integration / Synthesis

• To satisfy both sets of stakeholders,
  organizations must define an integrated process
  that links project management and portfolio
  management practices.
• by tying the executive decision process to
  resource allocation and day-to-day project
  execution.

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Art and Science

• Project portfolio management is the art and
  science of applying a set of (concepts,
  theories), knowledge, skills, tools, and
  techniques but to a collection (or portfolio) of
  projects in order to
• meet or exceed the needs and expectations of an
  organizations investment strategy.

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PPM enables businesses to..

• Provide a structure for selecting the right
  projects and eliminating the wrong ones(But
  which ones are right and which ones are wrong?)
  
• Allocate resources to the right projects, thus
  reducing wasteful spending(this is part of
  determining which are right and which are wrong,
  but not individually, as a combination or
  portfolio)
• Align portfolio decisions to strategic business
  goals
  
• Base portfolio decisions on logic, reasoning, and
  objectivity(As well as well informed subjective
  judgment)
  
• Create ownership among staff by involvement at
  the right levels
  
• Help project teams understand the value of their
  contributions

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PPM is NOT just Enterprise Project Management

• Levine pg 23 A critical mistake is to think
  that PPM is fundamentally the management of
  multiple projects. This is not so. PPM is the
  management of the project portfolio so as to
  maximize the contribution of projects to the
  overall welfare and success of the enterprise.
  This means that

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PPM is NOT just Enterprise Project Management

• Projects must be aligned with the firms strategy
  and goals.(AHP will be useful in accomplishing
  this)
  
• Projects must be consistent with the firms
  values and culture(Subjectivity will be an
  important part and should not be overlooked)
  
• Projects must contribute (directly or indirectly)
  to a positive cash flow for the enterprise(The
  portfolio of projects must contribute directly or
  indirectly to all of the enterprises objectives,
  not just cash flow. But a particular project
  need only contribute to one or a few of the
  objectives)
• Projects must effectively use the firms
  resources both people and other
  resources(Resources will be considered at a
  macro level when making portfolio decisions and
  then at a micro level when performing projects.)
  
• Projects must not only provide for current
  contributions to the firms health but must help
  position the firm for future success(Objectives
  such as corporate image, impact on the
  environment, ethics should be included in the
  Enterprises strategy.)

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Making the Case for Project Portfolio
ManagementChapter 5.1

• To make the case for PPM, it is necessary to
  demonstrate how PPM can address real and
  immediate problems.
  
• This is best accomplished by soliciting the input
  of co-workers to isolate known problems, making
  interpretations, developing potential solutions
  and outlining benefits accruing from these
  solutions, and communicating these findings.
  Examples

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Statement 1. Im overloaded with too much work
going on.

• Who Says Any staff member.
• Interpretation The staff member has too many
  projects.
  
• Solution (AHP and Optimization) Improve
  prioritization and selection process.
  
• Reduce the number of projects happening at one
  time by one part of the organization.
  
• Benefit When the number of projects is reduced,
  project quality and performance increase as
  attention focuses on doing the right things. In
  addition, extra capacity is created for attending
  to emergencies or engaging in creative thought.

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Statement 2. Im not sure how projects are
approved or prioritized, or if the decisions are
sound and the projects doable.

• Who Says Any staff member.
• Interpretation The staff member has too many
  projects.
  
• Solution Improve prioritization and selection
  process.
  
• Reduce the number of projects happening at one
  time by one part of the organization.
  
• Benefit When the number of projects is reduced,
  project quality and performance increase as
  attention focuses on doing the right things. In
  addition, extra capacity is created for attending
  to emergencies or engaging in creative thought.

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Statement 4. We made this commitment to the
client and must fulfill it.

• Who Says The project manager
• Interpretations
• Someone has challenged the projects validity
  (rightly or wrongly) or attempted to add scope to
  the project based on new information.
  
• In the absence of formal oversight of such
  requests, the project manager has decided to
  defend the project.
  
• He/she probably feels judged based on whether
  he/she delivers on time, on spec, and within
  quality constraints.
  
• This dynamic occurs in organizations that havent
  learned that project execution is subordinate to
  project relevance.
  
• Meeting ones commitments is laudable only when
  the commitments make sense.
  
• Demands and resulting commitments were made in a
  vacuum.
  
• The clients needs have not been previously
  challenged.

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Statement 4. We made this commitment to the
client and must fulfill it. (continued)

• Solution
• Remove the stigma associated with project
  redefinition by emphasizing and communicating the
  importance of considering the business benefit of
  proposed changes over traditional and rigid
  measures of project success.
• Raise the visibility of the decision making
  process by holding regular portfolio management
  meetings.
  
• Enable broad-based input and buy-in by ensuring
  that all projects are vetted by a centralized and
  empowered governance body with the capability to
  see the larger picture
• Emphasize and communicate the importance of
  considering the business benefit of proposed
  changes over traditional and rigid measures of
  project success.

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Statement 5. The project is a must-do

• Who Says The client.
• Interpretation There is the sincere belief of a
  client who has decided (often unilaterally) that
  his project must take precedence over other
  projects. The client has gotten away with this
  before and often is willing to threaten taking
  his project elsewhere
• .

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Statement 5. The project is a must-do
(continued)

• Solution. All projects are assessed for their
  ability to meet strategic goals, which can then
  be articulated versus arguing, Because I say
  so
• The governance body must apply scientific methods
  when evaluating projects while also allowing
  intuitive expressions , so the results are
  defensible and intuitive to system owners.

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Statement 11. How can we make decisions with
incomplete information?

• Who Says. A PPM governing body member.
• Interpretation. PPM governing body members
  typically need three things in order to commit to
  a result
  
• They need to agree on the criteria (objectives)
  that will be used to prioritize and select
  projects.
  
• They need to have clear descriptive information
  about the projects (for example, the business
  case.
  
• They need to have a mechanism for applying
  criteria to create project rankings. (measure the
  contribution of projects to the organizations
  objectives to derive ratio scale
  priorities).Continued

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Statement 11. How can we make decisions with
incomplete information? Continued

• The criteria (objectives) should be top down in
  nature, deriving from high-level performance
  goals in the organization. The ranking mechanism
  (prioritization mechanism) should be
  statistically (theoretically) sound and
  defensible and include an opportunity for open
  conversation that provides a forum for expression
  of the collective experience of the group.
• Solution. The governing body (Governance) and its
  sponsors are charted to make top-down decisions
  about what the organization should do to meet
  strategic objectives. If the information is
  incomplete, make and document assumptions In
  order to move ahead. Then reconcile this plan
  with bottom-up data.

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Statement 14. Portfolio management should be
simpler.

• Who Says. Any staff member.
• Interpretation
• People often avoid change, and implementing
  responsible portfolio management is a big change
  for many staff.
  
• A staff member may complain that PPM is too
  difficult in order to avoid accountability or out
  of fear that critical work will not get done in a
  timely fashion. (continued)

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Statement 14. Portfolio management should be
simpler (continued)

• Solution. Simplify as much as possible,
  recognizing that a number of assumptions can be
  made about the complex interrelationships that
  exist in order to make progress.
• With PPM however, multi-variate criteria
  (multi-objective) analysis (and synthesis) yield
  superior results to single-variable decision
  making. It is possible (and we will learn how)
  to combine simplicity with multivariate
  techniques to achieve a more balanced portfolio.
  Organizations that implement this approach rank
  among the highest performing. Integrating
  qualitative and quantitative data improves the
  probability of success, since it entails the
  consolidation of both subtle and supporting
  factors that are important to project work.

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Designing/Choosing Strategies

• Enterprise and Business Unit Strategic Plans
• Annual offsite to revise
• Brown/Green/Red Book gathers dust on shelves
• Bring to life by using it to make decisions!
• Contrasting alternative strategies
• Strategy Case analogous to business case
• Specific objectives (high level)
• Evaluating Strategies
• Boston Consulting Group Model
• Market Attractiveness (Market Growth)
• Industry Competitiveness (Market Share)
• NetMBA
• ..ValueBasedManagement
• BCG type AHP model for Enterprise
• BCG type model for Business Unit

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Chapter 4.1 Linking Strategy and Project
Portfolio Management (Y.C. Yelin)

• Organizations are accustomed to investing in
  developing strategies to drive them forward
  
• Multiple days of leaders and cross-functional
  teams time are spent each year in offsite
  meetings
  
• Participants leave the meeting feeling they have
  raised options, hammered through them and
  achieved alignment among participants and the key
  methods that the organization will pursue to
  achieve its goals
• The goals these strategies are intended to make
  happen are frequently NOT achieved
  
• Cross-functional resource allocation and
  competing priorities cause drag on the
  organization
  
• Over time, belief in the organizations ability
  to develop effective strategies and achieve goals
  lessens
  
• Funding sources retreat and talented associates
  who want to contribute to a successful
  organization leave

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What is Strategy?

• (Tregoe Zimmerman in Top Management
  strategy)Framework that guides those choices
  that determine the nature and direction of an
  organization
• (George Steiner in Strategic Planning) Strategy
  answers the questions
  
• What should the organization be doing?
• What are the ends we seek and how should we
  achieve them?
  
• (Michael Porter, Competitive Strategy)Competitive
  strategy is a combination of the ends (goals)
  for which the firm is striving and the means
  (policies) by which it is seeking to get there.

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Figure 4.1-1 link between strategy and project
portfolio

• Assuming that leadership has identified the
  mission, goals, and strategies, the next level of
  detail is identification of specific projects
  that will carry out the strategies.
• These projects become candidates for inclusion in
  the organizations project portfolio.

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Figure 4.1.2 sample goals with links to
strategies and potential projects
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Exhibit 4.1-1 Evaluating the degree of Linkage
and Criticality to the Strategies

• The sum of the individual strategy impact ratings
  provides an overall project strategy value score.
  
  
• This score is integrated with a projects ratings
  on other evaluation criteria, such as net present
  value or risk.
  
• Such a total project score is often used to do
  the initial prioritization of project candidates.

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No Explicit Strategy?

• What if strategies do not exist for the
  organization?
  
• German proverb Whats the use of running if you
  are on the wrong road?
  
• Stop and find the right road.
• Might be able to reverse engineer the
  organizations strategy by looking at
  
• Where is the organization spending its
  money?What programs are funded?
  
• What skills are being bought?
• Gain concurrence from leadership to use the
  implied strategic criteria in the project
  evaluation process.

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PPM as a Surrogate for Strategic Planning

• If your organization does not do strategic
  planning today, instituting PPM will enable the
  discipline and process that defines the strategic
  process.
• If your organization does do strategy work today,
  integrating PPM with it is a natural extension to
  strengthen it and increase rate of strategy
  realization (take the dust off the strategic
  plans sitting on shelves).