project portfolio management - duluth

Project Portfolio

Management Brandon Olson

Workshop Objective

Develop a plan to increase the

impact of your projects Formalize project section process

Apply a strategic project evaluation metric

Agenda

Project Management

Project Selection

Portfolio Approach

Portfolio Management

Migrating to Portfolio

What is a Project?

“…a temporary endeavor

undertaken to create a unique

product, service, or result.”

PMI, 2008

Project Sources

Projects

Revenue Generation

Expense Reduction Directive

Project Teams

Executive

Functional Manager

Staff Staff

Functional Manager

Staff Staff

Functional Manager

Staff Project

Manager

Project Management

Initiating Planning Executing Monitoring Controlling

Closing

Project Management Process Groups

PMI, 2008

Knowledge Areas

Project Integration

Management

Project Scope

Management

Project Time

Management

Project Cost

Management

Project Quality

Management

Project Human Resource

Management

Project Communications

Management

Project Risk Management

Project Procurement Management

Project Variables

Functionality

Q

Project Success Rates

0%

10%

20%

30%

40%

50%

60%

Successful Challenged Failed

1994

1996

1998

2004

2009

2011

Gale, S. (2011). Failure rates finally drop. PM Network, 25(8), 10-11.

Project Success?

How do you define project success?

Agenda

Project Management

Project Selection

Portfolio Approach



Project

V

Project Selection and

Resource Limitations

Processing

Power

Time Personnel

Funds

Project

W Project

N

Project

R Project

S

Project

Y

Project Selection:

Common Practices

Political Influence

Squeaky Wheel

FIFO

Age of Request

Financial Attributes

(ROI/NPV/Payback)

Project Monitoring

Functionality

Performance

to Budget? Performance

to Timeline?

Performance

to Deliverables?

Agenda

Project Management

Project Selection

Portfolio Approach



Portfolio Appraoch

Project Portfolio Operational Scope Strategic Scope

Governance Governance

Schedule Business Value

Budget Portfolio / Project Risk

Functionality Schedule & Budget

Project Risk Functionality

Distributed Management Centralized Management

Project B

Project Governance

Project I

Project M

Project R

Project X

Project T

Project L

Project Q

Project P

Project Y

Project D

Project A

Project N

Project J

PMO

Project Portfolio Governance

Portfolio

Project Y Program

Project R

Project X

Project C

Project G

Portfolio

Program

Project A

Project Q

Project H

Project J Program

Project K

Project B

Project S

Executive Management

Project Portfolio Management

Goal:

Determine and deliver the mix of potential

projects that will result in the best utilization

of human and cash resources and

maximize long-range growth and return on

investment for the firm.

Levine, 2005

2 Phases of PPM

Portfolio Selection

• Propose Projects

• Align Projects

• Evaluate Projects

• Identify Risks/Value

• Rank Projects

• Select Projects

Project

Pipeline Portfolio Maintenance

• Project Objectives

• Portfolio Objectives

• Forecast Impacts

• Reevaluate Projects

• Value

• Performance

• Determine Funding

• Cancel

• Continue

Agenda

Project Management

Project Selection

Portfolio Approach



PPM Process

Align Value Distribute Risk Select Monitor

Strategic Alignment

Organization Strategy and Objectives

Operations Planning Strategic Planning

Initiatives

Project Portfolio

Operational Resources

PMI, 2008b


What is Value?

Return on Investment (ROI)

Estimated Lifetime Benefits – Estimated Lifetime Costs

Estimated Lifetime Costs

Example: $310,000 - $160,000

$160,000

= 0.94 = 94%


Project Selection

Informational

Infrastructure

Transactional

Strategic

Common IT Portfolio

Cost Agility

MIT Sloan Center, 2007

Innovation Integration


Risk Evaluation Scale Value Probability Value Schedule Cost

Very High 1.0 90% - 100% > 10% > 10% > 10%

High 0.7 70% - 90% 5% - 10% 5% - 10% 5% - 10%

Medium 0.5 50% - 70% 2% - 5% 2% - 5% 2% - 5%

Low 0.3 30% - 50% 1% - 2% 1% - 2% 1% - 2%

Very Low 0.1 10% - 30% 0% - 1% 0% - 1% 0% - 1%

Very Low Low Medium High Very High

Very Low .01 .03 .05 .07 .10

Low .03 .09 .15 .21 .30

Medium .05 .15 .25 .35 .50

High .07 .21 .35 .49 .70

Very High .10 .30 .50 .70 1.00

Probability

Risk

Risk = Average (Value, Schedule, Cost)

Adapted from Brewer & Dittman, 2010 and Lovelady &Anderson, 2006


Project Selection

Primary Funding

Selective

Funding

Selective

Funding

Not Funded

RISK

VA

LUE

Risk Score

ROI


Project Evaluation

Alignment

Value

Distribution

Risk Assessment

Balance Resources ($ and people)

Intangible Benefits


Monitor Portfolio

Project

Project

Project

Project

Program

Program

EVA Risk

Alignment Value


Agenda

Project Management

Project Selection

Portfolio Approach



Steps to PPM

Define Portfolio

Gather Projects

Begin Weeding

Begin Evaluating

The PPM Starter Kit, ganntthead.com

Tips for PPM 1. Start at the Top

2. Avoid the Big Bang

3. Develop a Governance Process

4. Use a Proven PPM Tool

5. Forgive Human Errors but not Process Errors

6. Use the Tool in your Operations Reviews

7. Use Executive Dashboards

8. Be Open to Project Failures

9. Anticipate Business Opportunities & Constraints

10. Remember Who the Boss is

ganntthead.com

Key Drivers of PPM

78% - Senior Management Receptivity

66% - Competent Portfolio Governance

62% - Standardized Metrics and Criteria

59% - Consistency & Logic of Objectives

58% - Mature Project Management Office

PM Network Survey, 2012

• Formalization at both the project and portfolio levels

results in higher performance than formalization at

just one level

• Formalization provides transparency that leads to

improved allocation of resources and an overall

cooperation between projects Teller, Unger, Kock & Gemunden, 2012

Formalized PM & PPM

Practices

Organizations with stable PPM practices see

64% of projects meet targeted ROI (17% more

than highly variable PPM practices)

Formalization at both the project and

portfolio levels results in higher performance

than formalization at just one level

Formalization provides transparency that

leads to improved allocation of resources and

an overall cooperation between projects

PM Network Survey, 2012 & Teller, Unger, Kock & Gemunden, 2012

64%

Why PPM?

0% 20% 40% 60% 80%

Improved Prod. Dev. Costs

Improved ROI

Revenue Growth

Cost Reduction

Customer Satisfaction

40%

45%

58%

59%

73%

PM Network Survey, 2012

Suggested Readings

July, 2012 Volume 30

Issue 5

References Brewer, J. L., & Dittman, K. C. (2010). Methods of IT

project management. Boston, MA: Prentice Hall.

Lovelady, R., & Anderson, A. (2006). Psst: Want to take a risk? In G. Richardson & C. Butler (Eds.), Readings in information technology project management (pp. 166-171). Boston, MA: Thomson/Course Technology.

Pearlson, K.E. & Saunders, C.S. (2010). Managing and using information systems: A strategic approach (4th ed.). Hoboken, NJ: Wiley.

Project Management Institute (2008). A guide to the project management body of knowledge (4th ed.). Newtown Square, PA: Author.

Project Management Institute (2012). The power of portfolio management. PM Network, 26(6), 14-15.

Teller, J., Unger, B.N., Kock, A., & Gemunden, H.G. (2012). Formalization of project portfolio management: The moderating role of project portfolio complexity. The International Journal of Project Management, 30(5), 596-607. doi:10.1016/j.ijproman.2012.01.020

project portfolio management - duluth

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