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5 common mistakes that devalue Project Portfolios by 40% or more

(and what to do about them)

Written By:

Mark C. Hall, PMP®

President

William George Associates Ltd.

www.williamgeorge.net

JANUARY 2009

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About the Author:

Marc C. Hall is an executive with over 20 years experience applying Project Management and

Integrated Planning methodologies to business operations across various industries. Mr. Hall is

the President and co-founder of William George Associates, a New England-based full-service

provider of project management training, consulting, tools implementation and staffing services.

Mr. Hall’s implementation of Project Management methodology and Planning solutions has

yielded companies documented cost savings in excess of $50 million, as well as immediate and

sustained improvements in customer satisfaction. Mr. Hall is an accomplished trainer and has

given numerous technical presentations on PMO Best Practices. He is a member of the Board of

Directors for the Mass High Tech Council (mhtc.org), is a certified Project Management

Professional (PMP®) and holds a BA in Political Science and French Literature from Furman

University. Questions and inquiries are welcome via email to mhall@williamgeorge.net.

Project Portfolio Management (PPM) Mistake #1 – Not knowing the expected ROI of the Project

Portfolio

Most organizations do not view projects as strategic investments and therefore neglect a most

important element of Project Portfolio Management: the valuation of the business and/or IT

portfolio of projects from a cost/benefit or investment/return perspective. It is typical for

medium to large organizations ($5 million to $50 million in annual project expenditures) to

allocate budget at the departmental level with little or no top-level process governance around

how those funds are to be expended. In the absence of qualification and quantification of the

potential and expected benefits to an organization, the portfolio of projects selected can be

analyzed over time solely against the factors utilized in their selection. These often include

political factors that may or may not be related to the strategy of the business/IT organization.

Metrics for success for such a portfolio might include adherence to schedule, budget and

satisfaction of key stakeholders responsible for a particular project being selected, but

conspicuously absent is the ability to track the value of the project to the organization

throughout the its lifecycle.

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Finance executives are valuable resources for PPM and have expertise in defining ROI scenarios

and approaches for project investments. It has been the experience of William George

Associates Ltd. (WGA) that the inclusion of Finance in the PPM process yields higher integrity of

data inputs for the PPM system and helps to reduce/remove any surprises in the performance of

the portfolio for the Finance stakeholders.

PPM Mistake #2 – Not identifying and communicating the organization’s strategic business

drivers

It is essential that all resources working on projects know and understand the strategic business

drivers of the organization. In order to fully engage all project resources in the success of any

project the link between tactics and strategy should be clearly communicated. The absence of

communication and understanding of business drivers leaves project resources obscured from

the value of their contributions to the success of the organization. This dynamic often causes

resources to be disconnected and indifferent to their project work.

PPM Mistake #3– Not prioritizing the strategic business drivers

Not all strategic business drivers are (or should be) equal. There are no organizations in

existence that are not constrained by resources, both human and financial. Therefore, the key

to effective management of precious resources is to apply them to the most important efforts

on any given day, month, or year. To do so requires that separation in importance be created

among the top business drivers. It often takes senior executives weeks to agree on business

drivers and their relative priorities, but this effort is well worth the time investment. Once

consensus among the senior team is achieved, an organization can move quickly to discern

which projects are most important and thus deserving of resources.

Because most organizations do not stratify business drivers, understanding which projects

should move forward and which should be stopped or delayed is difficult and adds tremendous

stress on the organization. When all strategic drivers and all projects are considered to be equal

value, decisions are made based on decibel levels of customer calls, project sponsors’ influence

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in the organization as well as other factors not necessarily related to strategic objectives of the

organization.

PPM Mistake #4 – Not analyzing the relation of each potential project to each business driver

Once priorities are established among the strategic business drivers, each project considered for

inclusion should be analyzed for its relative support of each business driver. Most organizations

do not carry ranking to the project level so that crisp decisions may be made in the heat the

moment when decisions must be made as to where to apply limited resources. This ranking

process extends PPM better practices to the individual project level. Once all projects are

analyzed and documented in this manner, software plays an important role in capturing the

analysis of all projects within the portfolio.

PPM Mistake #5 – Not utilizing the portfolio process and tools on a monthly basis to rationalize

the in-flight portfolio against new requests

Once the annual planning has been completed using newly revised portfolio processes and

tools, many organizations find it challenging to reapply the methodology as new requests come

in on a monthly basis. Each project should follow a consistent workflow for project requests

with all cost and benefits documented and signed off by predetermined stakeholders. The

supporting software shall then optimize the new requests against the in-flight portfolio of

projects. At this point, decisions should be made to move resources from lower priority projects

to higher priority new projects. Many organizations are reluctant to remove resources from

lower priority projects due to human factors and the influence of the project sponsor, however

not applying resources to the “correct” projects can devalue a portfolio significantly.

The Solution: PPM Process with Microsoft Office Project Portfolio Server 2007

� Step 1: Perform a Portfolio Capability Assessment to baseline your organization’s

current practices.

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� Step 2: Develop portfolio processes and workflows at a depth that is appropriate for

your organization’s current level of Portfolio process maturity.

� Step 3: Capture requests in Project Portfolio Server 2007 per Figure 1 below

� Step 4: Identify and prioritize business driver (Figure 2)

� Step 5: Analyze each project against the each business drivers (Figure 2)

� Step 6: Prioritize projects (Figure 2)

� Step 7: Optimize the portfolio (Figure 2)

Predefined workflows help ensure the projects are subject to the appropriate governance controls throughout their life cycle (from proposal to postimplementation)

Capture all project requests within a central repository, and define business-case templates to standardize the data collection across the organization

Capture Project Requests/Ideas

3

3a

Create: Capture project requests in an enterprise repository

Governance Workflow

Figure 1

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Figure 2

In Summary:

Avoiding the 5 common mistakes in PPM will yield immediate and lasting positive results in

improving the ROI of your organization’s project portfolio. Taking the first step is the most

important one, given the current state of the economy. And with powerful, yet cost-effective

PPM software available from Microsoft together with proven, value-added guidance from a

trusted partner, it is empowering to know that solutions exist today that help ensure

organizations extract maximum value from their project investments – in a matter of weeks (not

months), for a lot less than you might expect.