Managing portfolios of change
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Many organisations struggle with managing more than one change initiative. This presentation provides insights from research and practice in leading organisations in Australia. This presentation was delivered at the October 2014 Change Management conference in Canberra, Australia.
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Managing portfolios of change
- 1. Managing portfolios of change Michael Young
- 3. The Changing World External • Globalisation & competition • Customer sophistication • Technological advances • Rapid change • Legal environment Internal • Increasing complexity • Do more with less • Change weariness • Short-term focus • Generational differences
- 4. Source: Antonio Nieto-Rodriguez (2012): The Focused Organization, Gower, London
- 5. The Research Shows… $100 billion were invested in projects in the State of Victoria over the past decade without any evidence of improvement in their strategic goals Leading organisations admit that as few as 10% of their strategies are implemented ¾ of mergers and acquisitions never pay off Projects Success: On-time On-budget Standish 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1994 1996 1998 2000 2002 2004 2006 2009 Successful Challenged Failed Project governance in Australia is highly dysfunctional Low performing organisations complete only 36% of change initiatives successfully 40% of an organisations resources are spent on strategic initiatives yet top executives pay little attention
- 7. P3M3 Maturity Levels 0 1 2 3 4 5 Control Governance Benefits Stakeholder Risk Financial Resource P3M3MaturityLevel AVERAGE Project mgt Program mgt Portfolio mgt 2013 Maturity Levels – 2nd best agency 0 1 2 3 4 5 Control Governance Benefits Stakeholder Risk Financial Resource P3M3MaturityLevel AVERAGE Project mgt Program mgt Portfolio mgt 2013 Maturity Levels – large agencies 0 1 2 3 4 5 Control Governance Benefits Stakeholder Risk Financial Resource P3M3MaturityLevel AVERAGE Project mgt Program mgt Portfolio mgt
- 10. Ideation Customers Partners Markets Scans Open Source Business Intelligence Competitive Intelligence Internal Database Staff Idea Generation Ideation Events Data Mining Individual Input Initial Screen and Review Ideas Portfolio Management Idea Transition Strategic Fit Meets Current /Future Customer Needs Competitive Position Concept of Operations Revenue Potential Feasibility and Risk Analysis of Alternatives Investment Cost And Funding Streams Enterprise Capabilities Business Plan Virtual Prototype Worthiness Partner Alignment Opportunity Pipeline Business Unit Pursuit Source: Boeing Corporation Your resource capacity
- 12. The best organisations PfM3 - Management Control – Level 4 PfM3 - Organizational Governance – Level 5 1. Robust organizational framework for categorizing initiatives, measuring and monitoring organizational performance, and measuring contribution from portfolio 1. Governance of investment management has moved from a programme/project-centric process to organization-centric 3. High-level reports on key aspects of portfolio made available to Executive Board to support informed decision-making 4. Prioritization within portfolio based on priority of strategic objectives 6. High levels of operational engagement with decision-making and direction of portfolio 5. Executive Board has clear accountability for stability of the organization and actively manages portfolio to ensure sustainability and realization of strategic objectives 7. Decision-making based on maintaining alignment and balance within portfolio, and its optimal configuration, to achieve strategic objectives 6. Organization proactively enables, supports and achieves business process improvement 9. Trend reporting on progress, actual and projected cost, level of risk, and initiative and stakeholder confidence, are routinely collected, reviewed by Executive Board and used for decision-making 10. Quantitative and qualitative measures and lessons identified are routinely used to improve effectiveness of portfolio management
- 15. IT Investment process (2011->2012 from $50Mpa -> $27M pa) The theory … The practice … ‘decibel-driven’ processes More productive and inclusive Australia Employment projects Schools projects Early childhood projects Help …
- 16. Key Changes From ‘tunnel to funnel’ – Concept Definitions (3p) – Detailed Proposals ($20k-50k) – logic needed to cull earlier in the process • Analysis – 4R, 6Q Governance 2 template changes • ValIT Categorisation vs ‘Essential’ 1. Doing better things 2. Doing more things 3. Doing things better 4. Keeping our promise 5. Keeping lights on 6. Keeping our job • Value Risk Assessment (Existing) – Policy – Strategy – Savings – Risk Timing 2012-13 Cluster Employment investment category (Multiple Items) Value Assessment Count of cost pa Column Labels Row Labels Policy Strategy Savings Risk Grand Total implement govt policy 3 3 support govt policy - clear & measurable benefits 2 2 support govt policy - intangible benefits only 4 4 No clear linkage to govt policy 1 1 implement dept strategy support dept strategy - clear & measurable benefits 6 6 support dept strategy - intangible benefits only 1 1 No clear linkage to dept strategy ROI > 200% ROI > 150%, <200% ROI > 100%, <150% ROI > 0%, <100% 2 2 no ROI will reduce dept risk rated High or Extreme will reduce op risk rated High or Extreme help reduce dept risk rated High or Extreme 1 1 will reduce dept risk rated Moderate or Low 1 1 help reduce dept risk rated Moderate or Low help reduce op risk rated Moderate or Low No linkage to risks Grand Total 10 7 2 2 21 Timing 2012-13 Cluster Employment unaligned: Alignment with investment priorities45% 26% 6% 19% 3% Count of cost pa Column Labels Row Labels Policy Strategy Savings Risk #VALUE! GrandTotal 0 1 1 1. Doing New Things (Transform) 0% 2. Doing more things (Grow) 2 1 3 10% 3. Doing things better (Enhance) 8 6 2 2 18 58% 4. Keeping our promise (Compliance) 4 1 5 16% 5. Keep lights on (Core) 1 3 4 13% (blank) Grand Total 14 8 2 6 1 31
- 18. Head of Projects
- 22. Key Take-Aways • Change’s are a significant investment – treat them as such • Understand and develop your organisation’s change delivery capability • Prioritise! You cant do everything. • Create and reinforce a delivery culture • Don’t kill your change initiatives by under-resourcing them • Project sponsorship and governance are core skills for executives • Stop initiatives that no-longer deliver any benefit
- 23. Got a question? 0411 243 568 Michael.young@transformed.com.au www.transformed.com.au
Notas do Editor
- Defining change capability Why should you care? Identifying the right initiatives Case study – what the best organisations do Effective and sustainable delivery
- Change means different things to different people Commonly people talk about the 2 certainties in life – death and taxes…. I reckon there are three – death, taxes, and things changing!
- Nothing stands still – things are always changing… Market disruptions
- From an organizational perspective, changes are managed activities to move the organisation from one state to the next. Ideally these changes result in achievement of the organization's strategy or an ROI We tend to see two key aspects in a business, each with a different approach and focus: Run the business (operations) Change the business (projects) With the changing environment and in the world of hyper-competition, there is an increasing focus on changing the business. Time to market is more rapid, cycle times are quicker – just look at common everyday things – media operates in seconds, songs on the radio disappear after a few weeks and are never played again. We need a systematic way of dealing with all the projects and change initiatives that an organization manages at any given time. And no the answer is not PRINCE 2 or PMBOK just in case you were wondering. I’m not against PRINCE2 or PMBoK, however these standards only describe a singular, individual project – not a portfolio of change initiatives that exists in an organisation.
- So if change initiatives are so important, how are we tracking… the research shows a pretty damning picture! 9 % of organizations rated themselves as excellent on strategic change delivery 56 % of strategic initiatives met original goals and business intent. Organizations are losing $109 million for every $1 billion invested in change delivery. High-performing organizations successfully complete 89 % of their change initiatives High-performing organizations waste nearly 12 times less than low performers. Top executives are not clear about their own company’s strategic initiatives yet up to 40% of the organisation’s resources are spent on these.
- Does this look familiar?? But why is this the case? Organisations are not mature in managing portfolios of change Selecting the wrong initiatives, or pandering to the executive’s wims Too many initiatives and not enough resources – prioritising in a changing world when everything is important being focused is difficult and requires lots of discipline
- I have been conducting research with the University of Canberra over the last 3 years to understand the maturity of organisation’s in delivering change. In 2011 the Government mandated that all agencies undertake a maturity assessment using the P3M3 maturity model. The average maturity across FMA Agencies is around 2 which is considered ‘Ad Hoc’. “best-practice” is 3. The best organisations are 4 or 5. Remember the stats a little earlier… Low performing organisations complete only 36% of change initiatives successfully… The case studies I will refer to a little later are from two organisations both of which are operating at level 4. We are conducting detailed case studies to identify what the recipe for the ‘secret sauce’ is…
- Now back to the run the business / change the business concept. I will focus on the portfolio management element - ‘Select the right Initiatives’.
- Part of the problem the research shows us is that there is: A lack of resources No portfolio management processes No new product development process Low impacts (poor outcomes) Poor cycle times – things just take way too long High failure rates of change initaitives When we start to explore the root causes we see a few common themes: Too many projects Many projects are small and don’t really deliver any benefit There is no prioritisation Projects are not killed when no longer delivery any benefit Projects just don’t deliver – a poor job is done…
- One other thing that tends to occur is that there are always lots of ideas. Many ideas are not good ideas though… The irony is that most innovative organisations (which are often considered the best) are the ones wit the idea problem! Boeing has developed an ‘ideation’ process to filter and validate these ideas through a series of gates. In the words of Charles Darwin – only the fit survive! The rationale is to also ensure that the limited resources the organisation has are only focused on the most important or well considered ideas.
- And the result is not surprising…
- So what is the answer? Lets look at what the best, high-performing organizations do I’ll be looking at aspects of case studies from two different government agencies, both of which are operating at Level 4 either for specific elements or across the board.
- Firstly we need a direction (oops wrong direction) so we can identify and set priorities.
- Without this direction we cant set priorities… In the infinite wisdom of the Cheshire Cat in Alice in Wonderland - If you wont know where you are going, any road will take you there Whether we are talking about the entire organisation or just a department or division the best organisations have a strategic plan with a clearly articulated set of goals and objectives. Think its not possible… think again… From research in NSW and VIC governments – the strategic goals were found to largely not change over a 10 year period.
- Secondly we need an investment process Yes, Change initiatives are INVESTMENTS that the organisation makes. As much as 40% of the organisations resources or funding is spent delivering them… Wonder what the impact is – Imagine if the Government announced that the APS would be reduced by an additional 76,000. Or closer to home, your boss said you have just been given a $40,000 pay cut! Therefore we need a process to manage the organisation’s investments. The Former DEEWR had a problem – their IT capital budget was cut in half. In the past they had pretty mcuh enough money to do most of the things they wanted to do. The theory was that all the projects would be thrown into the mix the right projects would just pop out the bottom. Reality was slightly different. There was horse trading and executive arm-wresting…
- To improve the process we made a few minor changes to improve their investment process.
- Third activity is to understand the supply and demand of resources and critical skill sets. Organizations commonly approve projects and other change initiatives based on a budget allocation. Whilst budgets usually translate into staffing, the raw high level numbers don’t add up. Why try and do a particular series of projects when you don’t have the specific resources to do it… sure you can go and hire contracts but guess what – if you need them, so does everyone else. You will quickly find out that there are either no contractors available, or you will pay 2-3 times you have budgeted. Engwall & Jerbrandt - Resource allocation syndrome - satisficing rather than prioritizing The situation is actually counter intuitive: - it’s the heap of small projects that kill the big projects – yet small projects are often not scrutinized and are approved with little formality - You get more finished by starting less Top performing organizations have developed workforce plans and conduct supply/demand analysis of all resources. the most important projects get the resources – the rest get what’s left or nothing.
- We are just wrapping up a case study with another smaller Government CAC Act agency. What is unique there is that head of the Enterprise Program Office is part of the Executive Committee. Even after a change of CEO this position was maintained. When we spoke to the CEO about why she kept this arrangement in place after she started – she indicated that it was due to the large investment that the organisation was making in key changes. Other key comments included: The EPMO Manager works closely and collaboratively with the CIO, CFO, COO and other executives Provides visibility to all executives Executive support of key initiatives is critical The research also supports this – Top Management Support is the most critical factor for project success
- Top performing organisations have some sort of change delivery or project management framework – and it’s a lot more than a bunch of lame templates. From our case studies- the CEO of the small government organisation had some really interesting insights. The PM Framework provides: role clarity for everyone, including the Executives a consistent approach for delivery and reporting visibility to executives and promotes transparency across the organisation a basis for consistent language Helps to identify workload issues – resource supply and demand She also mentioned that: It must be fit for purpose and tailored to the context – an out of the box doesn’t work Needs to be ‘just enough’ - Goldilocks Must be matched with a financial system that is sophisticated ‘enough’
- I find it rather interesting that many organizations continue to pour money into projects that are either not delivering or no longer deliver something the organisation wants or needs. One project I worked on I recommended on 3 separate occasions to shut it down. I asked to be moved on to a separate project – the original project ended up ‘fading away’ after having spent 10 times the budget and being more than 3 years late. Top performing organisations cancel projects if they no longer deliver any benefit.
- Change initiative sponsors – critical projects are built into individual performance agreements Resource suppliers (eg CIO) has supply requirement built into their performance agreement Getting good people and letting them get on with it Holding sponsors to account Public recognition of good project work – Good PM is valued, nurtured and encouraged – examples sent in CEO weekly email