Portfolio Management (aka Organized Chaos)

Posted by PM Majik

June 23, 2008

Welcome to this abstract on effective Portfolio Management. In the past several years of concentrated efforts managing corporate strategy, I have taken a special interest in managing an effective portfolio. Today we are going to discuss effective portfolio management and the effect it has on your organizations success.

IT Portfolio Management is a generic term. Although, financial portfolios are the most popular, we will not focus on it for this conversation. Financial information will, however, directly impact the portfolio management we address. I would also like to add that although Planning and Governance may occur in all sizes of organizations, one size does not fit all for IT Portfolio Management. A larger company with a large IT department may find more benefit in a single IT Portfolio system than to separate activities like Planning and governance. Smaller companies may find it more beneficial to create one entity for both functions.

For this purpose, managing an IT Portfolio will include initiatives that are planned and also include support services. Adding support services and application services is relatively a new practice. I have found it critical to identifying where all the resources and money are engaged. And finding where money and resources are engaged is the basis to effective IT Portfolio management. Portfolio management allows you to measure the success and performance of your current list of work.

First, let’s identify 3 kinds of Portfolio Management.

Application Portfolios – Managing established systems. Are they still maintaining their value? Have we merged with other companies and now need to consolidate systems?
Project Portfolios – Maintaining Innovation in your company. This is my personal favorite. What is potential ROI and how can we reduce overlaps from re-organization and acquisition. Creating the tools, process and best practices from one of my earlier discussions on Cultural Adoption will be helpful. Reporting on clean data will be key.
Resource Portfolio Management – Analyzing and forecasting needed talent. Without this piece it is not possible to execute strategy and be proactive. This is a critical strategic activity and will enable your organization to identify the workforce needed to be successful in delivering on its strategy while maintaining a proper work-life balance. Managing a resource portfolio will also control your labor costs, assess your skill needs and help you make more informed business decisions. This is all part of ensuring your projects have the right people in the right place at the right time AND at the right price and, perhaps more importantly, re-direct the focus on project success to the most value relative to cost and relative to other potential project investments.
In contrast to a scorecard, the IT Portfolio provides oversight and control of the budget as one of its goals. It should be flexible enough to allow organizations to adjust initiatives in any area of the portfolio and at any time. Break away from an annual plan that is unrealistic and never changes to better align with the corporate direction.

At many of the organizations I have worked at, I have seen what it looks like to not have defined processes for reviewing project requests and proposals. This is usually a lack of a proper work intake system. Business area owners submit projects and IT attempts to do more than they have capacity to do. Many do not see a direct relationship between budgeted dollars and resources. Indicating that a business area has provided enough money to get the work done, does not correlate to the resources being available or trained up to take on the work load. As a result there is no visibility to the actual work being done and being approved and they are not actually aligned with the corporate strategy. Needless to say, this gets quickly out of control and it becomes difficult to visualize that return on the investment. What investment?! It is also difficult to build repeatable processes in an environment like this. Silos are bad and cause much chaos and spend millions of wasted dollars.

So let’s get into the plan and implementation of managing this effective IT Portfolio system.

Start with aligning and creating a relationship with the business leaders. Both sides should be committed to making meaningful decisions for the company’s overall IT strategy. Both should match project intake requests with the company strategic objectives. The Portfolio Management system should be armed with running IT like a business and constantly monitor which projects are on track, which need help and which should be cut. This is a hard thing to swallow, but cutting projects where there will be no return or no material return, is vital to the continued success of your IT portfolio! This means you do not want to sink funds into lost causes, rather re-direct funds to larger pay backs.

Business executives need to have a clear idea of what they are approving and why they are approving it. Building business cases is the next most important objective to creating your portfolio management system. Building that relationship with the business will help the business case. Everyone is on the same page and is lined up with the better good of the company and not out for number 1!

Next, take inventory! What is everyone working on? Make it easy and ensure or enforce that it be in a single source. Match up as many attributes as possible to better identify these projects and create metrics on them in groups. For large companies this can look like multiple portfolios, one for each business. As long as one Portfolio Management System/Office is managing all portfolios for IT there should be coordination and agreement. Another option is to create portfolios for budget, applications, projects and resources. There are several Portfolio Management Systems (Primavera, CA, Planview, Mercury), so there is no excuse not the submit an RFP and start making life easier!

Training everyone on the activities that have to take place in order for this to be a success is the next key item and the one near and dear to my heart. Cultural Adoption is critical! Without trained staff on the metrics/reporting you are looking for to manage this portfolio, your mission will be lost. You need to know the projects length, status, resources assigned, actual hours and cost spent on work. You also need to know what’s coming and how to staff it. Eventually, you can be so good, you will see 3 years into the future!

Next you need to make sure to score your projects. Many of these portfolio tools will assist you with this scoring. You have a good inventory and your project managers are entering all the data that you need to identify a full, living inventory, so scoring them should be relatively easy. It will also better prepare you to identify the projects to kill and the ones to replace them with. Categorize all projects with the corporate objectives to ensure that relationship with the business partners stays true to the company and does not end up leaning to selfish goals. This list of projects (execution and new work) is what will be presented to the governing bodies and represent the only list of projects for IT and are scored jointly.

Finally, be prepared to prioritize! The whole reason this will succeed is because of the evaluation, cooperation and PRIORITIZATION of all IT projects.

Now we have just provided business visibility into IT and how those IT initiatives impact our companies. Everybody will know where the dollars are going and why they are going there and they all agree. What more can they ask for? It is what they have been asking for all along.

The benefits out-weigh the cost and effort of implementing an IT Portfolio Management system. No one will argue that there is a huge advantage to delivering a central oversight of the budget, risk management, a strategic alignment of IT initiatives and in some cases, standards for procedures, rules and plans.

Good luck in your efforts to roll out effective portfolio management and remember that a little risk management will prevent a lot of fan cleaning!

Portfolio Management