Portfolio management in strategy alignment (Part 3/3)

Today I will cover the last post for this series of posts on the blog. As stated before, portfolio management is a wide subject and there can be endless discussions on the subject. In my previous post, I discussed how mature organizations operate within the frameworks of portfolio management and how this seperates them from their peers in strategy alignment and object realization. I wrote about the advantage they have in connecting project execution to strategy fulfillment and how it makes the program and project initiatives frutiful. I must also admit that maturity does not come easily as it demands lots of resources to be able to provide good governance and clear oversight in project implementation, reaping along fruitful results on each and every level. This should be done with an aim of not only delivering value but also ensuring that the underlying portfolios, programs and projects incorporate this practice in the organization culture.

In a parallel project where I am working on a business report on how companies align IT projects to business strategies, I have had the opportunity to meet and interact with executives of a company who shared information on how the company is managed. For privacy reasons and with all due to respect to GDPR laws, I will keep the name of the company confidential. However, one thing that struck me is the relative simplicity of the organization’s management hierarchy and the model of implementing projects.

The program managers report direcctly to the executive, and there does not exist any portfolio manager. The management believes that having portfolio managers alienates them from the rest of the company, something that they do not want. Well, I understand that the company does not see the huge need for portfolio management and it is usually at the right time that it will be implemented. What I found amazing, is that the company claimed to have a high project completion rate, and seldomly fail to meet the strategic goals of the company through the initiatives put in place. The organization purely operates in an environment of growth through increased sales volume. However, they do acknowledge that they realize the need to implement portfolio management in the coming future, to relieve the program managers of the pressure they face in implementing projects. As the CEO states, “Implementation of project management will be done when we reach a certain target in the company, which we forecast to be in the coming 2 to 3 years. This will be critical in helping the company be agile and improve the program managers effeciency.”

While many organizations have the same mentality like the one I am working with, one thing stands out; acknowledging that portfolio management implementation and maturity is a continuous journey with lots of learning process. Truly, according to PMI, strategy implementation of a business will vary from company to company and the management have to realize their own potential, needs and capability. Though PMI taunts portfolio management as a vital success component in decision making, it may also be a source of distraction and confusion. At times, the governance may cloud the realization of strategies too much making the organization structure to be too complex, unnecessary and fail to address the considerations of the business. I would conclude that though it may bring along great positive effects, there should be caution in it’s introduction. It takes time to streamline portfolio management to the needs of the business and it is important that this be done with continous review and agility to help an organization realize the planned benefits.

Portfolio management in strategy alignment (Part 2/3)

In this second post of the 3 part series, I will continue to highlight the importance of portfolio management in strategy alignment in the context of an organization. If you did not read my first post, please go back and read it for a better understanding of how this works.

Previously, I discussed the main points that make mature organizations with a culture of strong portfolio management better performers. I was able to show how an enabling culture with strong processes makes these companies stand out. I also explained the presence of leadership in championing portfolio management within the company BRM framework.

A rider to these is that there is need for a stronger commitment from the executive to recognize this opportunity and optimize it’s outcome. According to PMI, less than 25% of companies rate their organizations as portfolio mature. This sample is representative of a research that was made by PMI in conjunction with 466 portfolio management practiotioners in 2015. So, how does this affect these companies? After all, they are still in business and there is no cause for alarm. Or so, it may be reasoned. But this is not true as we will see shortly.

First and foremost, every organization in business understands the importance of realizing their goals. These organizations are most likely not experiencing a positive tangible impact in the company’s successes, compared to their high maturity compatriots. They may barely make it to the target or fall short of it but will rarely reach their target with satisfying and convincing results. Such organizations are highly prone to economic changes or changes in market trends. The leadership in these companies may acknowledge that they realize the importance of portfolio management and it’s competitive advangatages but still fail to implement it.

Secondly, these organizations may have problems achieving project completion with a high success rate and within the given budget. When unforseen market conditions arise or competitive situations arise, they do not demonstrate agility and thereby struggle to adapt to new changes. Quite often, the rising costs may spiral out of control, spelling doom for the company. In mature companies, the project portfolio managers are better placed to forsee such risks and uncertainties, and stopping them as soon as it is realized that they no longer serve the benefits they are planned for. A good example was the prouction of Windows Vista, which performed dismally in comparison to it’s predecessor, Windows XP. The primary objective was to realize better and improved state of securityin the QWindows operating system. The downside to this is that the product face d new criticism in it’s operability. Microsoft quickly realized the blunder and saw the customers dissatisfaction. This was quickly resolved when they realeased a more stable version in 2009, Windows 7, to rectify the blunder. Again, it is through a srong portfolio management which made it possible for Microsoft to identify business needs in the defined planned benefits.

The correlation between project portfolio management and strategy implementation are worth highlighting; The ability to complete the organizations’ projects within the defined time, on budget, and, most importantly, delivering the expected outcome in full—continously over time within a broader change portfolio—helps organizations execute their strategy more effectively. This in turn, builds a competitive edge to take on even more ambitious change. It is these small changes over time that makes a product adapt to market changes and customer needs, making it withstand time. The other advantage of such a stronger portfolio management, is that newer competencies are developed and decision-making within the organization becomes better. This is blended into the company culture where it is viewed as an asset and is nurtured and invested in, to make improvements. These improvements are felt at the management level, employee level and even the other stakeholders soon acknowledge this.

To sum today’s post, I have always wondered how many portfolio managers/executives really know whether and how the business objectives are effected in their organizations. I like watching “Undercover Boss”, where managers from different industries get shocked to know that organizational policies are not effected and go against the companie’s planned benefits. ould this have been avoided if there was better portfolio management? Catch the third post of this series tommorrow.

Portfolio management in strategy alignment (Part 1/3)

This is a subject am passionate about. I am currently working on a parallel project trying to link the same two topics in an organization context. I will post the results of this project later in early November.

Mature organizations with well managed portfolios have one thing in common; greater focus on strategic initiatives through risk and investment decisions which lead to strategies implementation and consequently benefits realization. This is not to mean that organizations that do not have portfolio management do not succeed, but they are greatly exposed to risks and the chances of success diminish significantly in the face of adversity. Fierce competition, dynamic market trends, economic tremors and many other external factors may force a company to undergo dramatic challenges. However, to withstand the storm, there is need to have effective project portfolio management through which programs and projects are managed. It is through this framework that strategy development and strategy implementation are effected.

So what is project portfolio management? PMI defines it as the “centralized management of one or more portfolios that enable executive management to meet organizational goals and objectives through efficient decision making on portfolios, projects, programs and operations.”

That was a mouthful. Let’s break it down to and make it easier to understand. Centralized management…….Portfolios…….executive management……..goals and objectives …….decision making …..initiatives and operations. When the statement is not made to be too wordy, then it starts to make sense.

1. It involves effective decision making by the portfolio manager.
2. The decision is intended to meet the strategic goals for the organization.
3. The decision is made with consideration on the programs, projects and portfolios, which it manages.

It is in this environment where the executive take an organization-wide view to ensure correct allocation of resources and time and ensure corrective decision making steps are undertaken across their initiatives.

This eventually maximizes value delivery and benefits realization in a company making it a vital component of success. Through this, projects are prioritized, overall objectives are confirmed and projects are initiated at the correct timing. As most organizations realized after the financial crisis in 2010, they are putting more efforts now in streamlining their operations under project portfolio management through which decisions are made. It is still not unusual to find businesses where the management does not understand why particular branches are performing exceedingly well while others are struggling. though there may be other reasons, most of the time it is because they are not under the same portfolio management. This means critical components of decision making are not effected in the same manner, though they share the same strategy and values. There is no way to identify the needed resources and make the trade-offs when capacity constraints arise, so that team resources are optimized and talent is properly aligned with the strategies. This is quite often the leading cause in the management “missing the point”.

Having a portfolio management in itself is a defeatist idea if it is not agile. The executive need to understand the dynamic environment and which they operate in and follow along the pace of change to avoid obsoletion. there is need to frequently update and adapt the organization’s strategy so that the projects within the portfolio are in tandem with the strategic goals. It would be dumb, to invest heavily in a costly project whose benefits are no longer tenable, simply because the portfolio was static. To ensure dynamism, sound and mature decisions have to be made to support, prioritize, adapt and potentially put a stop to non-tenable projects. Interestingly, it is not a brainer that organizations with stronger portfolio management also enjoy organizational and market success. They stand out from their peers in three key areas;

Strng processes: They have better processes that have been put in place to structure discussions and decision making within the right framework, which strengthens portfolio, program and project processes based on objective, quantifiable facts instead of gut feelings.

Leadership, sponsorship and support: The executive and general leadership do not preach water and drink wine. They understand the power of portfolio management and its effectiveness. They champion it’s presence and processes which sustains improvement in an organization.

Enabling culture – cultural support for portfolio management is both intellectual and emotional. The executive in these mature organizations understand this and addresses both dimensions, to ensure there is no stigma of failure when a project is terminated due to inviability.

In an increasingly complex business environment, it is important that organizations capture the benefits of superior portfolio management and optimize the ability to view, allocate and adjust resources and time across a portfolio of critical, strategic projects.

Don’t miss out on part two of this post as I delve deeper on how portfolio management wins strategies in organizations.