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Ppm wp-10 critical
1. 10 CritiCal StepS
for SucceSSful Project
WhitePaper
Portfolio ManageMent
Right now, across all sectors of the economy, projects fail to meet basic design or business
organizations are grappling with diminished growth objectives. This is usually due to cost overruns
rates, tighter budgets, and intense pressure to and overestimation of project benefits—basic
manage their investment dollars more effectively. program management issues. In order to effec-
In this atmosphere of increasing regulatory require- tively implement Project Portfolio Management,
ments and corporate accountability, organizations an organization needs to come to grips with
struggle to make the best decisions at the right its basic program management infrastructure,
time every day. However, this can be daunting. instilling discipline into the organization and
Best practice organizations are implementing forcing the control of program costs, resources
Project Portfolio Management to make better and and scope.
more informed decisions on a recurring basis.
B uilDs c onsensus
Project Portfolio Management provides a dynamic
decision-making process for assessing value, Besides introducing program management dis-
prioritizing projects, and allocating resources to cipline across the enterprise, Project Portfolio
meet key organizational objectives across the Management helps build consensus in an orga-
enterprise. The end result is the ability to select nization. In many organizations, decision-mak-
the best mix of projects that maximizes returns ing is not an easy task for senior management.
and minimizes risks for your organization. The management team usually lacks the data,
tools and processes needed to facilitate the
W hy P roject Por tfolio M anageMent ?
discussion and resolution of difficult decisions.
The benefits of Project Portfolio Management A standardized and strategic process will help
are becoming more apparent in this age of individuals throughout the organization under-
smart investment and strategic decision-mak- stand how and why certain decisions are being
ing. “Portfolio Management elevates information made—and will also ferret out “pet projects”
technology discussion to business terms. In the that do not contribute to the organization’s
end, there are business projects and very few, strategic objectives.
if any, IT projects.” according to Doug Lynn of
META Group. Project Portfolio Management instills
a DDs to the B ottoM l ine
program management discipline into your organi- The days of un-scrutinized, liberal corporate
zation while helping build consensus for difficult and government spending are over. Today’s
decisions. However, the greatest value of this
process is improving your bottom line through the
elimination of draining projects that do not contrib-
ute to the health of your enterprise.
“Portfolio Management
elevates information technology
i nstills P rograM M anageMent
D isciPline discussion to business terms.
In the end, there are business
Organizations have been losing money on failed
projects for years. According to Firoz Dosani, VP
projects and very few, if any, IT
of Mercer Management, “When the true costs are projects.”
added up, as many as 80% of technology projects
Doug Lynn, META Group
actually cost more money than they return.” In
addition, Gartner Group reports that over 60% of IT Solution used:
2. environment of accountability and governance
will not allow continued IT spending with few pros-
pects of measurable benefit or return. Project
The application of Project Portfolio Management can be
Portfolio Management techniques save money by
ensuring those projects that get funded also get
daunting –but not impossible. There are ten critical success
results. Gartner Group reports that organizations
utilizing a strategic project prioritization process factors that will help your organization derive the most value
will more effectively address business needs and
reduce failed projects by 25% in 2003, thereby from this strategic management process.
improving the bottom line. A survey by CIO
Magazine discovered that companies achieving
Project Portfolio Management excellence were
experiencing a 19% higher revenue growth rate needs to understand how decisions impact for ongoing operational decisions. Doug
than those having an informal approach to man- the enterprise. The data collected during Lynn attests that Portfolio Management is
aging multiple projects across the organization. the Project Portfolio Management process proving to be “the most compelling IT value
In short, effective Project Portfolio Management enables senior management to be more communication tool.” Clear communication
yields results. effective because they are able to make of strategic objectives helps define the
fact-based decisions. Data-driven decisions expected outcomes and answers. What will
c ritical s uccess factors
empower senior management with their strategy drive you to do? What changes do
The application of Project Portfolio Management stakeholders – governance boards or share- you want within your organization? Answers
can be daunting—but not impossible. Ten critical holders. If decisions are not made accord- to these questions will drive new initiatives
success factors will help your organization derive ing to data, they are vulnerable to questions that align with the strategy.
the most value from this strategic management and review by outsiders. However, senior
process. These factors all contribute to the effec- management need not be a slave to the 3. s trategically aligneD investMent
selection
tive selection, control and evaluation of projects data. The data may indicate that goals are
under a Portfolio Management doctrine. not properly aligned or balanced. Wherever Whereas the communication of strategic
the data point, it is still up to senior man- objectives builds an operating framework,
1. s enior M anageMent c oMMitMent & agement to analyze and interpret according the alignment of investment selection puts
c onsensus
to their knowledge of the company and the framework to use. Every decision in the
Senior management’s commitment to the industry. This is the true value of senior organization needs to be measured against
Project Portfolio Management process is management’s participation in the Project the stated strategy. Alignment will occur
paramount to success. Because the Project Portfolio Management process. naturally as new initiatives are evaluated
Portfolio Management process introduces a within the strategic context. For example,
strategic decision-making approach, it must 2. c oMMunication of s trategic if an organization standardizes on Sybase,
o Bjectives
start at the top in order to extend through- an informed manager will not approve the
out the organization. Leaders must under- Communication is at the heart of success- purchase of non-Sybase applications. Or,
stand the entire process and commit to ful Project Portfolio Management. Strategic overtime will be closely scrutinized in an
decision-making based upon that process. objectives must be defined and communi- organization trying to streamline costs. In
As this decision-making process is pushed cated so that everyone across the organiza- effect, strategy determines investments and
down to the lower levels of an organization, tion understands the corporate goals and actions across the organization. Strategy-
it begins to change the culture and impact decision-making process. Understanding friendly projects will gain easy approval
the way of doing business. Without senior the strategy at all levels of the organization and those that are not aligned will receive
management commitment and consensus, is essential because even simple and seem- increased scrutiny—either of the project
the process will not work. Actions, such ingly non-strategic decisions are affected. or (in rare cases where the project is espe-
as data collection, that contribute to the For example, the decision to purchase an cially compelling) of the strategy.
success of Project Portfolio Management Oracle-based database competes with the
will not be enacted if not required by senior organizational strategy to standardize on 4. i nstitutionalizeD investMent Manage -
Ment Process
management. Sybase. Or, the implementation of an over-
time-heavy work week competes with the Organizational cultures determine who
Another critical argument for senior man- organizational strategy to streamline costs. makes decisions and how they make them.
agement‘s commitment is their over-arching However, this informal authority channel is
knowledge of the organization—where it is Managers at all levels of the organization not always easily understood or navigated
going and how it works. This group of people need to use strategic objectives as a guide within an enterprise. An institutionalized
3. investment process calls for the formation ciple provides visibility into the health of changes, investments need to be re-priori-
of a management review board whose pri- ongoing projects and the potential impact tized. A review board allows the organization
mary purpose is to streamline the strategic of planned projects—and ensures that all to institute change as external and internal
decision-making process. Better IT invest- projects are evaluated in the same man- factors change.
ment decisions begin with a good model. ner. Without this enterprise-wide visibility,
managers are hindered in their ability to 9. e ffective Bal ance of investMents
Strong leaders who delegate decisions to make necessary decisions. For example, a Once the Project Portfolio Management
their staff or other parties force the organi- healthy project may need to be shut down process has been established, senior man-
zation to operate on its own. An institution- or delayed because it is utilizing resources agement must ensure that the organization
alized management process is a sophisti- that are required for a more strategic project has an effective balance of investments.
cated way in which an organization learns that affects organizational viability. The key Projects should no longer be assessed
and refines itself through constant evalua- concept is the requirement that all projects according to their bottom-line financial
tion of strategic investments. be monitored. Milestones and costs need to impact. Each project needs to be evaluated
be consistently reviewed and controlled to according to its health, cost and strategic
5. g overnance fraMe Work aligneD
ensure the organization is getting value out contribution to the organization over the
With enterPrise Decision - Making
of its investments. short and long term. The ability to determine
The investment process evolves into a the appropriate balance is specific to each
governance framework whereby all strate- 7. c onsistent risk & PerforMance
organization and is made by the review
Me asureMent
gic decisions throughout the organization board. A technology start-up has different
are made in the same manner. Each level Building upon the implementation of an inte- requirements than an established retail
within the organization will have its own grated program/project management dis- clothing manufacturer. A start-up will need
threshold that limits its authority (such as cipline, an organization needs to measure more projects that demonstrate short term
budget approval, resource commitments, the risk and performance of projects across return whereas an established company is
and the ability to impact other business the enterprise. As a project progresses and more likely able to tolerate more high risk,
units within the organization). A common more money is invested, an organization long term investments.
governance framework ensures that deci- learns more about its overall risk. As risk
sions are made the same way up and down changes, the project’s potential return may The data from Project Portfolio Management
the organization and that there is an appro- change. Throughout the project life cycle, can determine how investments should be
priate mix of people making decisions. For risks should be mitigated and avoided. If, made throughout the enterprise. Are there
example, the marketing department makes for example, a high risk project remains enough short term, low risk projects that
decisions regarding marketing activities; high risk, and its probability of return is not promote organizational viability? Are there
the Comptroller makes decisions regarding compelling, the project may need to be can- long-term, high risk projects that foster orga-
daily financial management; and, Human celled. This data needs to be constantly fed nizational innovation? Are projects spread
Resources makes decisions for how to back into the evaluation process to ensure across the organization? It is important
administer employee benefits. the project continues to fall within strate- for senior management to balance today’s
gic guidelines. The goal is to monitor and needs against the future requirements.
A governance framework naturally follows mitigate risks in order to validate continued
from the implementation of an institution- financial and resource investment.
alized investment management process.
Whereas the investment management pro- 8. P ortfolio re vie Ws to suPPort
cess is formally created and organized, the
investMent Priorit y re alignMent
All organizations can benefit
governance framework will evolve within the A formal review board needs to be estab-
existing operating culture. lished to review all enterprise projects—IT from the adoption of basic
and non-IT, strategic and non-strategic. This
6. i ntegrateD PrograM /Project Manage -
review board should be composed of senior program/project management
Ment DisciPline
leaders and strategic line managers who
All organizations can benefit from the adop- meet on a regular basis to evaluate major
discipline to constantly
tion of basic program/project management investments and their strategic role in the
discipline to constantly evaluate project ongoing success of the organization. The
evaluate project health, such
health, such as cost and schedule. However, role of this group is to re-align projects as
as cost and schedule.
the implementation of an integrated disci- priorities change. These boards are the real-
pline takes the basic project management ization of a governance framework. As the
skills one step further. This operating prin- environment (technology, market, culture)