If you want to become an expert consultant, you should realize that “hitting the wall” a few times is part of the journey… In our business of Project & Portfolio Management, guiding a company through the Project Selection process or Strategic Portfolio Management, is the perfect topic to “evolve” the hard way. And a recession context only makes it more interesting…
The fun part is that the bigger my warnings towards our own consultants or to Portfolio Managers at the customer side, the more they get motivated to make the ultimate model to help a Board of Directors select their portfolio of projects with only one push on the button. And then we all need to experience it once: we push the button… and it triggers our very personal airplane ejection seat out of the Boardroom and back to the drawing table. Been there, done that. Learned a lot about simplicity when guiding Portfolio Selection.
Why is it so difficult to select the right set of projects for our company, if we know our budget and we know our strategic direction?
The answer is not in the model or the methodology used. It is simply related to some facts of human behavior we all better accept and learn to deal with, rather than trying to change them:
- (One/My) department: “I hate to choose"
Starting from any individual director defining his list of projects to be done, we already get confronted with FOMO (Fear of Missing out). Meaning, I had 10 great ideas these last months so what if I just de-select this one idea that might have made the difference?
- Multiple departments: “# winners = # losers”
Of course, the company or society (public sector) is the big winner of a more objective Portfolio selection! But purely seen from a stakeholder perspective this objectivity creates exactly as much people winning as people losing… If I am the head of the big bully department that always gets the biggest chunk of the Portfolio budget without much justification, I might have my reasons to swipe away this Enterprise PMO Manager with his/her fancy and objective Portfolio Selection model…
5 Tips to efficiently support your Management when selecting their project portfolio in troubled times
As stated in one of my first blogs related to the current recession, I am convinced that many CEO’s will increase their interest in Benefits Management. Why? If resources and budget get limited, they want to make sure they select the right projects and go after the promised benefits. However, if you had not started building Benefit Realization Management at Portfolio level yet, you will need to start with the basics. These 5 tips will maximize your chances of success:
- Use Pareto (80/20) & knock-out criteria to keep focus.
The best way NOT to come to a decision is to confront your Senior Management with all the submitted project ideas. I have been working for many companies so far and Pareto is almost always right: the 20% largest initiatives represent 80% of the available capacity or resources. Focus your discussions on this short but strategic list; this is where the choices need to be made. Clearly communicated knock-out criteria can already reduce project lists from the beginning e.g. if IRR is below x, do not even bother.
- KISS: Compare what can be compared - in other words: categorize!
If you want people to understand (and finally) accept why certain decisions were made, keep it as simple as possible from the beginning. Let any project initiator link his/her project idea to the one category/benefit it contributes the most to (Growth, Cost reduction, Risk, …). You sharpen the business case and avoid getting into complex multi-criteria models that e.g. try to compare a marketing project with a safety project…
- Benefit ownership must be clear!
By linking every project idea to one company benefit in the previous step, we are grouping projects that can be compared with each other. A next simple step is to make sure that the ownership for a benefit is clear. Whether the benefit is cost reduction or customer satisfaction, we let one benefit owner evaluate and rank all projects that claim to contribute to his benefit (If manager X will be evaluated on NPS evolution within 1 or 2 years, he/she is the one prioritizing all project ideas who claim to contribute to that, whoever in the organization entered them).
- Simple questions are hard (to avoid).
The more complex your model gets, the easier for a Board NOT to decide. A simple question to a board might still be hard to take but is hard to avoid: if all your project ideas are in relevant categories (by strategic goal/benefit) and every category is ranked by the benefit owner, than you can limit yourself to a question that everybody understands: “How much money do we want to put in each category? What is the current priority of growth versus efficiency versus risk reduction?”. Coming back to my intro on human behavior, still not easy to answer, but at least you cannot be blamed for making it too complex.
- A light process needs clear governance afterwards.
A very light Portfolio Selection process (Prioritize with a minimum of information in a first phase) can only survive if the governance afterwards is sufficiently clear and executed. Passing the first gate of a Portfolio Selection is not a free ticket to Disneyland: you should know from the beginning that there will be a second gate where less benefits and more costs than announced at gate 1 will mean “NO PASAR”…
As stated in my intro, Portfolio Selection is probably the most complex portfolio process to get started in an organization, specifically because it requires much more than a technique you can be explained.
So again, a very last tip: keep it simple and do not underestimate the subject. If you are doubting your approach, give us a call or follow one of our free webinars on the subject!
Webinar: Mid-term resource management: anticipate & prioritize
The COVID-19 recession leads to new defined priorities to tackle the new, changed world. The shift in priorities might have been communicated from C-level to the organization, however, it remains very difficult and challenging to adapt the project portfolio to these new priorities. What about ongoing project? Should they be stopped? Which resources are still available? What about other priorities set by other directors? Very quickly, the E-PMO risks ending up in discussions where everybody is putting his projects and priorities first.
Time for a mid-term resource management battle plan that gives you quickly a full overview of which crucial resources are asked in the upcoming 3 to 6 months, so senior management can really decide on priorities.