How has the economic downturn affected your company’s bottom line? A common theme you’re probably hearing is that organizations want to improve efficiency, cut costs, and maintain core functions, allowing them to survive and be ready to bounce back as soon as times get better. Unfortunately, cost cutting efforts usually translate into project work being canned, which means many companies reduce their project management practice and staff accordingly. That in turn can lead to poor return on investment in times when it’s needed most or investing in the wrong projects or executing project work poorly.
Although it’s no silver bullet, the practice of project portfolio management (PPM) can help organizations cut costs in an efficient manner. The goal is to make sure that resources are invested in initiatives that support the strategic objectives of the organization as they evolve. Companies that employ PPM as a practice stand out because they apply method to the sometimes-haphazard decision-making that goes on in determining what projects warrant investment.
There are quite a few technologies that can be used in support of PPM, ranging from complex enterprise applications to simple spreadsheet models. As part of its enterprise project management (EPM) solution, Microsoft’s offering is Project Portfolio Server, an enterprise software platform that allows organizations to manage their portfolio of projects in a client/server-based environment. The system supports portfolio lifecycle management, from idea generation, to portfolio prioritization and optimization, to execution tracking of selected projects and programs. Each of the three modules of the Project Portfolio Server software supports one major area of the portfolio management process.
Managing the Data about Projects
The Portfolio Builder module supports managing the pipeline of project proposals on an ongoing basis, with features such as online business case creation and a configurable workflow engine. Business case data such as project charter information, cost, resource and benefit estimates, risk assessment questionnaires, and strategic impact assessments, is captured in standardized online templates and saved in a centralized inventory (the Project Portfolio Server database).
By standardizing the data format and maintaining it in a centralized location, Portfolio Builder facilitates the generation of aggregated views of the projects making up the portfolio by grouping and slicing the data the way the organization needs it. The workflow supports the process of capturing the data and building the portfolio by imposing gate reviews during the creation of new proposals; if the new idea is deemed as not interesting compared to other opportunities in the portfolio, the appropriate governance body can stop the work before too much effort is invested.
Figure 1: The Microsoft Project Portfolio Builder scorecard.
The second module, the Portfolio Optimizer, supports the portfolio prioritization and selection processes. Once project proposals are in Portfolio Builder, they can be prioritized based on several criteria, such as financial return — usually measured by return on investment (ROI) or net present value (NPV), strategic value (measured by the impact of the project portfolio on the organization’s strategic goals or targets), various industry-specific measures, or a combination of all these.
The result of the prioritization exercise is a ranked list of all projects in the portfolio, with a priority score calculated by the Optimizer, based on the impact projects have on the criteria chosen (strategy, financials, etc). Being an analytical module, the Optimizer employs complex mathematical algorithms to provide portfolio modeling capabilities and allows the creation of various “what if” scenarios for portfolio selection, based on different levels of the organization’s budget constraints or resource availability, compliance or regulatory projects, interdependencies, and risk profile (attractiveness). Using these kinds of practices, the prioritization and selection activities become more objective, and corporate planning and budgeting activities become more transparent.
Figure 2: The Optimizer module.
The third module, Portfolio Dashboard, supports the execution tracking and status reporting of projects and programs that were given the go-ahead. A scorecard or dashboard view provides drill-down functionality and red, amber, and green status indicators. It starts with business units and moves down into programs, and then projects, flagging areas of concern (red indicators). This approach allows senior stakeholders to manage by exception rather than analyzing the entire stack of status reports every week/month/quarter.
In terms of data, the system is quite flexible. With simple configuration, you can set manual and automated indicators based on underlying data such as schedule, cost, or resource variances between planned and actual figures. During portfolio execution, the detailed data can be fed from other systems, such as Project or Project Server (using the out of the “Portfolio Server Gateway”) or other enterprise systems such as financial applications via application programming interfaces (APIs).
As with any technology of this kind, the dashboard reports are only as good as the underlying data itself. If the users of the system (typically, project or program managers) don’t do a good job on updating the status of their work or if the information isn’t fed from other systems in a consistent and timely manner, the reporting coming out of it won’t be reliable. Based on my experience, failed implementations of systems such as Project Portfolio Server occur not because the technology can’t support the reporting needs, but because the adoption and adherence to the rules are seen as secondary and not enforced.
Figure 3: A Portfolio Dashboard view.
The three modules I describe support an integrated portfolio management lifecycle process. All projects in the portfolio follow the same workflow rules regarding roles and responsibilities for submitting new ideas, reviewing them, creating business cases, and approving or rejecting them. Adopting a standard workflow with the same roles and responsibilities for all projects of a certain type ensures that effective governance controls are in place for the portfolio of projects and that the organization has a good hold on what it’s investing resources into.
Figure 4: Sample workflows from Project Portfolio Server.
Organizations can implement PPM in different ways, based on their specific industry and level of process maturity. Some companies look to PPM to support an annual or multi-annual planning cycle, others to manage a strategic change initiative composed of many projects. Those businesses high on the maturity curve are employing the practice for analyzing and optimizing their portfolio quarterly or even more frequently. Especially during a downturn, doing frequent evaluations about on-going work and new initiatives allows the company to realign due to frequent changes in its strategies, so that the scarce resources companies still have for project work return maximum value. It also allows the organization to stop projects that are no longer aligned with strategy, freeing up resources to be invested in new projects that provide better value.