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Portfolio Management – Don’t lose your balance!

Below is a link to a Slide Share on my recent presentation at the 2016 Kansas City PMI Chapter PDD Days.




Flawed Governance Decisions = Weak Project Portfolios

Some years ago, Gerald Kendall and Steven Rollins wrote a book called, “Advanced Project Portfolio Management and the PMO – Multiplying ROI at Warp Speed” in which they noted four universal problems in project portfolio:

  1. “Too many active projects (often double what an organization should have)
  2. Wrong projects (projects that will not provide value to the organization)
  3. Projects not linked to strategic goals
  4. Unbalanced portfolio
    • Too much on the supply side, not enough on the market side
    • Too much development, not enough research
    • Too much short term, not enough long term
    • Not reflective of the organization’s most important assets, strategic resource value, or major product revenue opportunities…”
These problems are not new – they existed when the book was written over a dozen years ago and in my experience they are still common.  They are the result of flawed decision-making by the governance team.  But why are these governance decisions so poor?  Could it be that the materials that PMOs provide to support project decisions are inadequate?  Are the decisions being framed in project management jargon instead of business language?  Are so many data points provided that the executives can’t see the forest for the trees?  Do portfolio reports fail to provide a view of the interactions among projects?  If your project portfolio includes any (or all) of these four problems, it’s time to have a serious conversation with your governance team to understand what information they need to make better decisions.

Project Governance – It’s Okay to “Just say No”

According to a 2014 report “Project Smart” by The Standish Group (https://www.projectsmart.co.uk/white-papers/chaos-report.pdf), only 16.2% of projects were on-time & on-budget, while 52.7% were challenged, and 31.1% were impaired or cancelled.” Why were so many projects considered unsuccessful? Here are some of the top-ranked reasons:

  • Lack of executive support and user input or involvement
  • Unrealistic expectations
  • Technology incompetence and lack of resources

If a projects lack executive support, are unrealistic and the teams are inadequate, why were they approved?  Perhaps they were launched under the radar.   Maybe it was approved because a politically powerful executive thought it was a great idea, but lacked the time to provide executive sponsorship.  It’s possible that organizational cultures value boldness and eschew prudence.

The impact of these project failures extend throughout the organization.  Project team members feel responsible for the failure and morale takes a hit.  Talented leaders are blamed for the failures and some feel compelled to resign and others become overly risk-averse.

The solution is effective portfolio management and governance processes that result in more than just rubber-stamped “yes” decisions.  Portfolio management and governance must also result in “not yet” and even “no” decisions.

You are now entering the PPM Zone

Borrowing heavily from the Twilight Zone introduction, “There is a strange dimension beyond that which is known to project managers. It is a dimension as immense as sales and marketing and as endless as a program timeline. It is the middle ground between strategy and projects, between PowerPoints and Microsoft Project, and it lies between the pit of risk management and the pinnacle of executive briefings. This is the dimension of bewilderment. It is an area we call the PPM Zone.”

The Project Portfolio Management (PPM) zone is the place where project managers enter with Iron Triangles (scope, time, and cost), methodologies, and tools.  The project manager’s senior leadership team enters the PPM Zone with often-incomplete thoughts of vision, mission, and goals.  Project managers and senior leadership enter the PPM Zone each month, uncertain about why they are there.  An hour later, everyone leaves the PPM Zone frustrated that there was no clear “meeting of the minds.”

The PPM Zone should not be so mysterious.  After all, the goal of the PPM Zone should be to ensure that projects are chosen, planned, and executed in order to optimal business value as quickly as possible.  The PPM Zone should include “just enough” process and metrics to support decisions to fund, start, monitor and, if necessary, cancel projects based on their contribution to the success of the enterprise.

Those of us with extensive project management experience tend to view the PPM Zone from our own perspective rather than that of the executives making these decisions.  We over-emphasize project status reporting and under-emphasize strategic alignment.  We define complex formulas, collect extensive amounts of project data, and adhere to arcane PPM models, yet we overlook the human and political aspects of these decisions.  We need to move over to the senior leadership side of the table and understand what information they require to make project decisions and then continually refine our processes, tools and metrics accordingly.

The Annual Budgeting Process – It Can Use Some Improvement

Over the years, I’ve had the opportunity to work with a wide range of managers and executives. Some had a very IT-centric education and background while others were decidedly non-technical. Most were command-and-control types while others viewed themselves as servant-leaders long before that description was popularized. The majority were calm and reasonable while blessedly few were screamers. If I were to assemble all of these people in a single location and ask their opinions they would not agree on much. Except for one thing – their dislike of the annual budgeting process. Since most 12-month budget cycles are started 3-4 months before the cycle begins, managers are asked to accurately predict what will happen in their organizations 14-16 months thereafter. They are asked to describe funding requirements for projects that have not yet been conceived and their performance will be judged by their adherence to a budget which is merely a wild guess. As organizations have attempted to apply agile principles at scale, managers have discovered that the annual budgeting process is not only disliked, it impedes organizational performance because:

      1. The extensive up-front effort to define and analyze project business cases yields little useful decision-making data and results in green-lighting projects with limited business value

        2. Project cost-overruns result in shifting funds from valuable early-stage projects in order to complete an over-budget project for which the business case is no longer valid

          3. It is difficult to reduce resources on approved projects to work on newly-identified opportunities with greater business value

So, how do we fix this dreadful process? Following are some sources of ideas for applying lean | agile principles to budgeting:

The Scaled Agile Framework (SAFe) proposes that, in lieu of project-based allocations, budgets should be based on funding long-standing teams organized around business value.

The Lean Startup book recommends Innovation Accounting for new products

The Lean Enterprise book advises the reader to eliminate project-based funding processes and separating funding decisions from the annual fiscal cycle

The Business Value of Speed

When we think of business value, we often think in terms of Return on Investment (ROI).  We may undertake a project with an eye toward reducing head count or otherwise leveraging the productivity of employees.  This view of business value has some inherent limitations.  The project costs often exceed the original budget, thus diminishing the ROI calculation. When the system is implemented, the anticipated headcount reductions are rarely taken.  Instead, the efforts of the employees are shifted to other activities which may or may not be more valuable.  More importantly, we are not increasing business value by more efficient work on products or services that our customers no longer want.

In today’s rapidly changing competitive landscape, speed can be far more valuable than squeezing the last ounce of productivity from administrative processes.  Consider the business value of launching a new software-based product six months earlier, responding to a customer question immediately rather than requiring a call back, or completing a customer project in a month instead of a year.

Should you adapt your metrics to focus on speed over mere efficiency?


Beware of Assumptions – They May Bite

Those of us who work with projects are always making assumptions.  We think about them briefly when writing the project charter, and they seem so reasonable at the time.  Certainly the customers will use the new product and will tell all their friends about it.  And there is no question that we will get our product to market faster than our competitors – even those competitors that are not currently on our radar.  So, we spend the next 3 months, 6 months or more working on the release only to find that our assumptions have bitten us in the … leg and make us look foolish. 

The agile frame work, with the reliance on the judgment of product owners, may help prove or disprove the assumptions before we launch the new product.  But product owners are proxies for the real customers in the market and may make incorrect assumptions about priorities and product features.   The customers are the ones who are most able to either prove or disprove our assumptions, but how do we engage them?

Eric Ries, who wrote the book, The Lean Start Up, proposes a systematic management process that calls for validating product strategy assumptions via the development of a “minimum viable product (MVP)” that can be used by potential customers very early in the product development process.  The metrics resulting from the use of the MVP provides input into decisions to either “pivot or persevere” with the original product strategy.  Here is a link to a website that discusses the book, the process, and the movement in support of lean product development http://theleanstartup.com.

If you are contemplating a new product or service and would prefer not to be bitten in your assumptions, it would be worthwhile to investigate the lean start up process.

Lean – Agile Program / Portfolio Management – What’s New?

As organizations begin to scale the use of lean-agile methods, they soon identify impediments in the area of program & portfolio management.  Following are three major categories of impediments, as summarized below:

  1. Funding - Project-level budgets established 12-15 months in advance cannot accurately predict agile funding requirements
  2. Capacity / Change Management – the flexibility of agile scoping and delivery will quickly overwhelm granular resource capacity plans
  3. Governance – Traditional metrics regarding (time, cost, quality) and phase-gate reviews do not accurately depict the health of agile projects, so more meaningful metrics are needed

Clearly, the movement toward  agile development will require some significant rethinking of program and portfolio management.  The Scaled Agile Framework (SAFe) provides a unique perspective on lean-agile program portfolio management.  Among other things, SAFe proposes a continuous flow of epics rather than discrete projects with specific start-end points.  It also proposes lightweight business cases and rolling wave planning among other changes.  Following is a link to a SAFe abstract on lean program portfolio management:


The SAFe abstract also references a case study on agile portfolio management from DTE Energy.  It can be viewed by clicking on the link below:





Risk Management and the Lean / Agile Frameworks

Here’s a link to a AgileHood KC post on the application of risk management practices within the lean / agile frameworks.



PMO positioning – Is the current state good enough?

So, what do PMOs do anyway? Since PMOs have been around for years, it seems like this would be a simple question.  However, as recently as 2012 the Project Management Institute (PMI) found that there was considerable confusion among executives, managers, and even project/program managers around reporting relationships, functions and types of PMOs.  To help address the confusion, PMI initiated a study and published the results in late 2013.    Following is a link to the study:


The study identified five PMO frameworks:

  1. Organizational Unit, Business Unit, or Department PMO
  2. Project-Specific PMO
  3. Project Support/Services/Control PMO
  4. Enterprise/Organization-wide/Strategic/Corporate/Portfolio/Global PMO
  5. Center of Excellence/Center of Competency

The study identified “PMO domains of work” that included:

  • Standards, Methodologies and Processes
  • Project/Program Delivery Management
  • Portfolio Management
  • Talent Management
  • Governance and Performance Management
  • Organizational Change Management
  • Administration and Support
  • Knowledge Management
  • Strategic planning

The report goes on to analyze PMO survey results against multiple criteria, of which a couple of points are worth noting.  While the PMOs self-reported good results for the typical PM measures of goals, time and budget, they were less sanguine about their leadership in strategy formulation and project alignment with strategic objectives.

So, back to the original question, “what do PMOs do?”  This report seems to reinforce the perception that PMOs are focused on administrative and tactical outcomes but are not positioned to drive strategic business results.  Is the current state good enough?  Or does this report identify a growth opportunity for PMOs?

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