Based on a discussion facilitated by Kevin Moylan, Head of Project Management & the Project Management Office (PMO) at Nationwide during the Intelligent Projects Forum 12th March 2014.
In today’s world we see greater complexity within the business environment, which places further pressure on the IT department and the transformation teams. Business executives want more for their money and, whilst the budget may remain the same, senior management expect greater achievements, creating an increased pressure to deliver.
Other companies are experiencing an increase in their IT and change budgets due to an upturn in the market. Although this is a good environment to be working in, it can also be highly pressured, as expectations around what can be achieved grow disproportionately.
There is a greater desire to realise the benefits of a project: historically it was expected that a project would realise only 50-60 per cent of the value promised in their business cases, although this figure often decreases. It is therefore critical to instil project portfolio management discipline to ensure money is spent on the right projects and continuously reviewed.
There needs to be a framework within the organisation to weight different projects and allow comparison across the portfolio. Our discussion was around how to develop this framework, the criteria that are applied and the challenges that transformation directors, project directors and audit teams are facing.
The core considerations for project prioritisation
Deciding which projects an organisation prioritises for the foreseeable future is steeped with legacy, personal preference, emotion and subjectivity. For the PMO to be comfortable that they are working on the right projects, they must ensure that the right level of analytical rigor takes place to create options, choices and discussion. To achieve effective prioritisation, organisations and the Board must demonstrate their conviction to change and support the corporate objectives and understand that not everything can be delivered at once.
It is imperative that the business provides the relative weight of schedule, budget, and scope compliance to ensure informed decisions by the project team. However, there also needs to be the flexibility and discretion to adjust overall project score.
End-user considerations, business strategy and commercial acumen must help balance the project portfolio, and all areas of the business must play their part in the decision-making.
Tools and techniques
Simple tools can be the most effective at the beginning of the prioritisation process with detail around resourcing coming later on.
Comparing projects purely by size and scale is simple but can be effective, for example as it allows decision-makers to consider the impact of having two smaller projects versus one large ‘super tanker’.
Positioning at the right level is essential, otherwise Executives will get lost in the detail and sponsor engagement will diminish.
For new product development, it is worth considering the portfolio in line with a familiar marketing tool, the Boston Matrix:
Investment should be made in rising stars and cash cows rather than failing products (problem children or dogs). Note, this method needs to be extended to cover internal and regulatory issues.
Holistic Delivery Accountability
Some companies are stricter on accountability for benefit delivery – they do not allow the sponsor to move to a new area of the business and wash their hands of the project. [Other organisations believe it is better to have a definitive cut-off point at the end of a launch project, to avoid ‘long tail’ and hand-over any issues to a new project team that can work on moving things forward with a fresh, delivery focused approach.]
Ensure the right level of Governance – where trade-offs and decisions can be made
Obtaining a holistic view of the true merit of each project across the portfolio is a challenge when each strategic business unit has a number of drivers and agendas. Defining and applying assessment criteria and measurement guidelines is therefore invaluable.
PMOs are increasing their influence in portfolio prioritisation by ensuring accuracy and consistency of business case evaluation through partnerships with other corporate functions. Standard criteria can often avoid subjectivity and political bias.
Developing and applying these assessment criteria is increasingly important in the Enterprise PMO role. This centralised, independent role is about governance rather than control, and involves an understanding of weighting and categorisation, rather than actually making the decision.
Modelling to the right level of complexity enables decision makers to consider projects like for like, and to do this they need to include views of cost, risk, resource, capability and “do-ability”.
With the criteria applied, a governing body chaired at the right level, such as an Investment Review Board, can (continuously) ensure the overall project portfolio composition reflects the desired risk and benefit profile that supports the strategic objectives.
1. Understand that not everything can be delivered at once
2. Ensure accuracy and consistency of business case
3. Ensure the right level of analytical rigor takes place to create the options and choices
4. Avoid overly bureaucratic governance. Apply the standards but make it real
5. Remove the ivory tower syndrome and view the portfolio as one
6. Create a continuous, holistic top down view of risk
7. Confirm that the Investment Review Board is chaired at the right level
8. Ensure financial views are not restricted to the current financial year
9. Get an early view and review of projects. Fail fast. Measure often
10. Build the right level of governance – where trade-offs and decisions can be made