INTRODUCTION TO PROJECT PORTFOLIO MANAGEMENT

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INTRODUCTION TO PROJECT PORTFOLIO MANAGEMENT

• SEVEN BEST PRACTICES FOR SUCCESSFUL
  IMPLEMENTATIONS
• 19 SEPTEMBER 2007, STEPHEN W. ARBUTHNOT, UMT
  CONSULTING

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UMT The Portfolio Management ExpertsLeading
the field since 1989

• Global Portfolio Management Consulting Group with
  nearly 20 years experience leading the Portfolio
  Management industry.
• Successfully implemented Portfolio Management
  Solutions at over 100 clients globally, at the
  Corporate, Business, and IT levels.
• Vertical depth with diverse industry coverage
  that includes successes in financial services,
  manufacturing, telecom, pharmaceuticals, and
  public sector (regional/state and local), among
  others.
• Leading experts in Project Portfolio Management
  (PPM), Application Portfolio Management (APM),
  Project Management Office setup (PMO)
  Enterprise Project Management (EPM).
• Microsoft Gold Certified Partner developer of
  the Microsoft Project Portfolio Server (formerly
  known as UMT Portfolio Manager, acquired by
  Microsoft in 2006).

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• Overview of Project Portfolio Management

• Seven Best Practices of Effective PPM

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Why is PPM Important?
50 Value Lost
50 Value Realised
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100
Delivering the Investments Right
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Portfolio Management Starts from the Top
DownAlignment to Deliver Strategy is Paramount

• World-class organisations demonstrate clear
  alignment between strategic, operational and
  human activities
• Research has shown that organisations (in any
  sector) that can demonstrate this alignment,
  return exponentially better results.
• Investment in activities and initiatives that do
  not clearly align with strategic goals is wasted.

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Key Elements of PPM
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How Does it Work in Practice?UMT Consulting
Microsofts PPM solution architecture

Exec/Sponsor
Portfolio Mgrs
Project Res Mgr.
PMO.

Create
Select
Plan
Manage
PPM Phases
Portfolio Prioritization
Detailed Project Planning
Portfolio Dashboard Tracking
Business Driver Definition
PPM Stages
Strategic Value
Develop Project Plan
Change Request Mgmt
Project Requests
Financial Value
Assign Named Resources
Portfolio Status Reporting
Business Case Development
Risk Value
Define Inter-dependencies
Portfolio Re-Optimization
Issue Risk Management
Business Objectives Def.
Project Tracking
Portfolio Optimization
Cost Resource Est.
Project Tracking
Charting Analysis
Benefit Forecasts
Resource Management
Governance
Constraint Analysis
Strategic Assessment
Time Tracking
Adv. Portfolio Analytics
Risk Assessment
Project Status Reporting
Phase Milestone Def.
Collaboration Doc. Mgmt
Integrated Portfolio Governance Workflow,
Approvals and Oversight
Microsoft EPM Solution Summary
Portfolio Builder
Portfolio Optimizer
Portfolio Dashboard
Project Portfolio Server
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Alignment of the Project Portfolio to Business
Objectives
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Visibility of the Overall Strategic Enterprise
Project Portfolio
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Governance Across the Entire Project Lifecycle
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Tangible Benefits of PPMFour key areas to expect
results

• Saving Money
• Cutting spend on non-essential initiatives
• Responding to changes in budget availability
• Adding Value
• Focus investment on critical strategic areas only
• Monitor delivery of benefits closely
• Adding Transparency
• Key stakeholders have increased process
  visibility and insight into how / why decisions
  are made
• Impact of changes in environmental factors can be
  modelled and understood in advance
• Improving Governance
• Structured approval process
• Fund in phases, not end-to-end
• Constant re-evaluation of existing initiatives
  against potential new projects

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Key Points

• Overview of Project Portfolio Management

• Seven Best Practices of Effective PPM

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Seven Best Practices of Effective Portfolio
Management

• Start at the top with senior management buy-in
• Dont overwhelm the organisation with a big bang
  approach
• Develop a governance process
• Use proven PPM tools
• Develop a common currency to evaluate projects
  based on contribution to business objectives
• Optimise the portfolio against constraints to get
  the biggest bang for the buck
• Dont assume things will be OK monitor
  portfolio execution and benefits realisation

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1. Start at the Top with Senior Management Buy-in

• Focus on business objectives from the beginning
• Engage senior management at the start of the PPM
  process, starting with portfolio selection, to
  ensure that business objectives are clarified
  early in the planning cycle.
• Consensus can be built between the management
  team over projects that support these objectives,
  and squeaky wheel (those that shout the
  loudest) priorities are minimised.
• Early application of the PPM framework to
  critical business needs
• The importance of buy-in at the senior level is
  especially critical in PPM governance
• Early in the process, senior management can be
  educated in ways to engage and apply PPM during
  critical decision points that affect investment
  level and direction
• Establishment of communication forums
• Senior executive buy-in at this early stage also
  creates a defined forum for escalation of issues
  pertaining to portfolio delivery
• Provides executives with a tangible stake in
  ensuring the successful implementation of the
  portfolio

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2. Dont Overwhelm the Organisation with a Big
Bang Approach

• Identify PPM focus areas through a gap analysis
• The gap analysis compares your current capability
  maturity vs. industry best practices.
• There are typically many valuable existing PPM
  processes that should be built upon, not
  discarded!
• Communicate within the organisation using a proof
  of concept
• Conduct a POC, either in parallel to existing
  planning activities or well before yearly
  planning.
• Participants in the planning process often
  require tangible views of the value that PPM
  provides.
• A POC is an excellent way to communicate the
  value of PPM using familiar data.
• Rollout PPM with less than perfect information
• There is never a good time to initiate a change
  process information is never perfect.
• Those not interested in increased transparency
  will say PPM may not be the right approach
  because of less than perfect data or an
  insufficient methodology.
• PPM leads to systemic and organisational thinking
  and has self correcting mechanisms that enhance
  results over time.
• Whatever approach and tools are selected, NEVER
• Go too long without showing results! A perception
  that this approach is time consuming is fatal.
• Run PPM in a lab environment without active
  business management support and participation A
  perception that PPM is only theoretical will
  cause a disconnect with your business client.

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3. Develop a Governance Process

• Six Pillars of Governance
• Timing
• When are decisions made? Annually, quarterly,
  just-in-time or over multiple years?
• Decision Style
• How is consensus achieved? In groups, by voting?
  Or through a dictatorship?
• Organisational level
• Who is involved in the decisions? The Board?
  Multifunctional steering committee? PMO?
• Thresholds
• What are thresholds defined by? Budgets, full
  time equivalents, cross-business unit projects?
• Decision Criteria
• What other criteria affect decision-making?
  Financial impact, strategic impact, risk levels,
  architectural fit?
• Decisions
• How do projects originate and get prioritized?
  How do they get funded? What criteria are used
  for project cancellation? Who tracks their
  implementation?

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4. Use Proven Portfolio Management Tools

• Look for Tools that Help to
• Prioritise projects by their mathematically
  derived business value.
• Optimise against budget and resource constraints
  to select the best portfolio.
• Conduct What-If analysis using advanced
  portfolio intelligence.
• Drill down into reasons why your portfolio is not
  on the Efficient Frontier.
• Enable communication and sharing.
• Provide graphics and representations that are
  easy to understand and modify to reflect the
  ongoing changes in the portfolio.
• Enforce and expedite a scalable governance
  (gate-keeping) process through workflow management

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5. Develop a Common Currency to Evaluate Projects
Based on Contribution to Business Objectives

• Without a rational system of quantitative
  comparison, decisions get made emotionally.
• Quantitative financial gauges are lagging
  indicators that often fail to properly capture
  short-term benefits of certain business
  initiatives.
• Mathematically derive a strategic currency from
  which one project can be compared to another.
• Aligning projects to business strategy creates a
  visible link between the scope of the project and
  its intended benefits.
• Prioritisation of the portfolio should be based
  on the degree to which each project supports
  organisational goals (strategic value).

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6. Optimise the Portfolio Against Constraints to
get the Biggest Bang for the Buck

• Organisations should look to maximise the total
  strategic value their project portfolio can yield
  in relation to all constraints - and this
  requires mathematical optimisation.
• Efficient Frontier analysis seamlessly looks
  across all of the possible portfolios and gives
  you the confidence to know where you are in
  comparison to the optimal solution, and what is
  holding you back from reaching it.
• Move to a fact-based decision model that enables
• Identification of tradeoffs between more and less
  valuable portfolio components
• Leads to responsible decision making
• Provides maximum support of the companys
  business direction.

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7. Dont Assume Things will be OK Monitor
Portfolio Execution and Benefits Realisation

• Portfolio agility, or the ability to stay current
  with your investment status and respond to
  changes, is a key driving force
• Depending on the size of the portfolio, the
  monitoring and tracking of progress may be most
  effectively done through a Program Management
  Office (PMO) and PPM dashboard software.
• The responsibility of this function is to foster
  the effective delivery of projects by assessing
  key indicators such as
• Delivery to agreed milestones
• Mitigation of risks
• Resolution of issues
• Dependencies
• Adherence to change control procedures
• Escalation of issues to senior management
• Dashboard or scorecard reporting is a practical
  way for PMO functions to provide senior
  management with key information.

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• Stephen W. Arbuthnot
• Senior Vice President
• UMT Consulting
• 39 Houndsditch
• London EC3A 7DB
• UNITED KINGDOM
• Tel [phone]
• Mob 44 7947 648 097
• Email sarbuthnot_at_umt.com
• www.umt.com