Managing the Portfolio, Realising the Benefits

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• Managing the Portfolio, Realising the Benefits
• Public Sector Portfolio Management, 22nd January
  2009
• Stephen Jenner
• stephen.jenner_at_cjit.gsi.gov.uk

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Stake in the Ground - Project Portfolio
Management depends on reliable data
The best project selection system in the world
is worthless unless the data is sound. Cooper
and Edgett
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But
There is a demonstrated, systemic tendency for
project appraisers to be overly optimistic. This
is a worldwide phenomenon that affects both the
private and public sectorsappraisers tend to
overstate benefits, and underestimate timings and
costs. HM Treasury it is found with
overwhelming statistical significance that the
cost estimates used to decide whether such
projects should be built are highly and
systematically misleading.
Flyvbjerg Delusional optimism we overemphasise
projects potential benefits and underestimate
likely costs, spinning success scenarios while
ignoring the possibility of mistakes.
Lovallo and Kahneman
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Four explanations

• The technical explanation - our tools are
  inadequate.
• The psychological explanation optimism
• bias, derived from cognitive biases.
• 3. The economic explanation continuing with a
  project creates work for project managers,
  suppliers etc.
• 4. The political explanation Strategic
  misrepresentation?

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The Result - Business Cases contain assumptions
masquerading as facts
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The Solutions

• Be clear about the benefits you are buying.
• Spend more time doing your homework.
• Triangulate and Validate project proposals.
• Appraise Attractiveness in the context of
  Achievability.
• Stage or phase Gates with teeth.
• Independent review.
• A Clear line of Sight from Strategic Intent
  through to Benefits Realisation.

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The solutions 1 Be clear about the benefits you
are buying
Beware staff time savings they are
vouchers they only have a value when they are
cashed or the time is re-deployed to other value
adding activity.
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The solutions 1 Be clear about the benefits you
are buying
Beware Strategic alignment as an investment
justification, Our CEO defines strategic
projects as expensive projects without a
Business case. Corporate Executive Board
paper
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The Solutions 1 Be clear about the benefits you
are buying

Strategic Contribution Analysis
Benefits Mapping
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The Solutions 2 Spend more time doing your
homework

• Its the Business Case, stupid
• Failing projects dont have brilliant business
  cases

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The Solutions 3 Triangulate and Validate

• Use more than one appraisal method, or value
  lens
• Combine financial metrics with multi-criteria
  analysis and decision conferencing.
• Validate/book the benefits with the recipients
  before investment.
• Establish effective accountability for delivery
  and benefits realisation.

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The Solutions 4 Appraise Attractiveness in
the context of Achievability

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The Solutions 5 Stage or phase Gates with
teeth

• Regularly requiring project teams and business
  sponsors to sing for their supper.
• Presumption if you exceed tolerance, funding
  ceases.
• Conclude with a formal re-commitment to benefits
  realisation.
• Challenge and Support.

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The Solutions 6 Independent review
humans not only are prone to make biased
predictions, were also damnably overconfident
about our predictions and slow to change them in
the face of new evidence. In fact, these
problems of bias and overconfidence become more
severe the more complicated the prediction.
Ayers
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The Solutions 6 Independent review
Ayers suggests an, Advocatus Diaboli whose
job it is to poke holes in pet projects. These
professional No men could be an antidote to
overconfidence bias. Davidson Frame proposes
the use of murder boards to pull a proposal
apart to, make sure that arguments in support of
project ideas do not have built into them the
seeds of their own destruction. Steve Jenner -
I suggest a fool to ask the questions others
dont dare to ask and identify those,
assumptions that masquerade as facts.
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The Solutions 7 A Clear line of sight from
strategic intent to benefits realisation
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