Focus on the Right “P” in “PPM”

By Matthew Barnett, PowerSteering Software

Driving Results with Top-Down Portfolio Management

“To deliver the most benefit to the organization, the primary focus of PPM must be on the portfolio – a “top down” approach.”
-Matthew Barnett, PowerSteering Software

As the first "P" in "PPM" suggests, the practice of Project & Portfolio Management often represents nothing more than a natural outgrowth of project management. Once the volume of projects and project managers achieves critical mass, the concept of portfolio management emerges from the rather basic organizational challenge of managing a lot of moving parts at once. In this evolution, PPM is simply project management in the aggregate: a means to track a large number of projects and people at one time. This "bottom-up" perspective informs the way many organizations both conceptualize and deploy PPM.

The problem with this model is that it puts too much emphasis on the wrong "P." Optimizing the quality of project execution means little if the organization is not working on the right projects in the first place. To deliver the most benefit to the organization, the primary focus of PPM must be on the portfolio - a "top down" approach. Projects that are both on time and on budget but are misaligned with strategic goals or redundant with other work in the organization represent nothing more than corporate waste. To realize the most value from Project & Portfolio Management, emphasis should be placed on the business processes of project prioritization and selection, which together are often referred to as "demand management" or "demand optimization." Only once the business is sure it is doing the right things need it concern itself with whether or not those things are being done the right way.

To further codify what is meant by such a "top-down" approach to PPM, PowerSteering has developed the PPM Capability Model (Figure 1). It categorizes Project & Portfolio Management into 4 key business processes: Demand Optimization, Governance, Execution, and Analysis, and defines three levels of capability (Crawl, Walk, and Run) within each. This approach offers a more practical alternative to existing PPM maturity models and differs in three key ways.

• Rather than treat all PPM processes equally, PowerSteering has developed estimates of the relative value of each activity and capability phase based on data and experience with program portfolios at over 150 major organizations. Consistent with the argument above, this places significantly more value on the top level of demand optimization and governance than the more tactical areas of project execution and reporting.

• Similarly, per the classic 80/20 rule PowerSteering attributes greater value to creating a basic level of rigor and discipline within each capability area than the incremental benefit of advancing from that basic level to more advanced approaches. 

• PowerSteering does not advocate advancement to the next level of capability as a goal unto itself, but rather encourages organizations to assess their current capabilities and pursue those incremental improvements of greatest value. For much of your organization, a brisk "walk" may be the ideal level of capability and control to balance effectiveness and overhead.

For each cell in the table, multiplying the weightings of its respective column and row derives that capability's relative value. Though approximate, the results below not only strongly indicate that the most value lies in creating basic capability in the processes of Demand Optimization and Governance but also suggest that it may be worth further advancing these processes to the "Crawl" phase before even starting to worry about the Execution dimension.

The good news is that these top-down processes are actually far easier to improve than those of project management. To employ portfolio management starting from the "bottom-up" model involves the constant, granular tracking of the tasks and schedules of countless project members. This is not only an incredible amount of work, but presents a tremendous change management challenge because it relies on complete organizational adoption. Any team that does not comply with the requirement of keeping projects up to date directly undermines the integrity of the aggregate data.

Getting started with the "top-down" model, on the other hand, requires only that a handful of individuals, most likely executives, periodically evaluate project candidates to determine which should make the cut and enter the active portfolio (i.e., the "Investment Review Board" and "Simple value assessment" processes in the Crawl phase of the Capability Model). Certainly, such evaluation techniques can be made very complicated and sophisticated. But they do not have to be. Consistency is far more important than complexity. For organizations currently without any formal portfolio management processes, the fairly simple discipline of scoring projects on basic dimensions such as expected benefit, expected duration, and strategic fit should greatly improve portfolio results.

With such a project selection framework in place, a valuable follow-on is to create a basic inventory of all active and proposed projects (in the Capability Model the "Capture all investment demand" step in the Optimize Demand/Crawl phase). This provides a snapshot of the health of the current portfolio, and requires only gathering a few key data points on each project - for example, its purpose, current status, and expected and realized benefit. This high-level catalog will generally uncover candidates for cancellation, in the form of duplicate efforts, work that is not tied to key corporate objectives, or projects that are so off track they cannot be saved.

The payback of such an exercise can be virtually instantaneous. For example, one PowerSteering customer, a CIO at a Fortune 100 company, was able to immediately identify and discontinue 70 failed or low-value projects from a portfolio of over 500. This enabled him to shift over 15% of his resources to more strategically aligned work. Considering the time, effort, and the cost of the tools involved, this rationalization effort resulted in an immediate ROI of over 10:1.

As such dramatic results testify, organizations looking to build a successful PPM practice should avoid approaches that focus on perfecting project management processes first and only worry about the portfolio later. Strategy execution, as former CEO of GE Jack Welch often proclaimed, is about doing the right things in the right way. The unspoken corollary is that if you're not doing the right things, how well you do them doesn't matter at all. Adopting "top down" PPM, which emphasizes optimizing the investments in the portfolio, ensures the organization only works on those projects that align with corporate objectives and deliver the most value. In this way it delivers better program results, and with less effort, than attempting to build portfolio management capabilities from the bottom up.