The Right Way to Implement Portfolio Management: Baby Steps

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By Wanda Curlee

Why do organizations implement portfolio management? There is no right or wrong answer. However, there is a right and wrong way to implement it. Sometimes organizations become so excited by the possibilities of portfolio management, they take the big bang approach. In other words, they implement everything at one time. This is definitely the wrong approach for almost all organizations.

A more desirable approach is what I like to call baby steps. With baby steps, there’s less to lose if something needs to be abandoned or tweaked to better meet the demands of the company. The first step of this approach is to develop the portfolio management methodology the company wants to eventually adopt. This helps leadership see the full value and builds buy-in.

For some, determining what to adopt first is very painful. My suggestion for deciding what aspects of portfolio management to implement first has to do with resources. Today, organizations usually lack all the resources needed to deliver everything desired. So start with your most in-demand resource—the type that gives you the most trouble—whether it’s human, capital, hardware or something else. Then take all your projects and programs and decide the order in which you’d like to deliver them. This is your portfolio roadmap. Are the in-demand resources in collision? In other words, would a scarcity of resources cause bottlenecks in project or program execution? Most likely the answer is yes.

Next, you might want to roughly determine the cost of each component (e.g., a project or program), the highest two risks on each one, and the perceived value of delivery. Cost is normally quantitative, but perceived value and risks may be qualitative. That’s okay. Just try to have four or five factors for each and assign a numeric value for low, medium and high. This makes it easier to come to consensus.

For each component, have concentric circles with value at the center, cost surrounding the value and finally a red circle to describe risk. For example:

The first set of circles has a relatively small value, but large cost and risk. For the amount of benefit received from this component, it might make sense to cancel.

The second set of circles shows a large value, a smaller cost and a large risk. Since the value is so large compared to the cost, it might be worthwhile to see if the risks can be reduced.

Finally, the last set of circles has a moderate value, a large cost and a fairly low risk. This may be a good one to keep, especially if the costs can be negotiated down.

Once each component has three circles, then the portfolio roadmap can be looked at again with each of these concentric circles. Does it match what you had before? Probably not. Based on the circles, you will probably make changes to the portfolio roadmap. Some portfolio components may be canceled and others will change priorities.

Yes, the resource that causes bottlenecks or collisions still needs to be evaluated, because most likely there are still some issues. However, you may have more resources because some components were canceled or delayed. With a better handle on what components can and should be executed when, you’re on your way to a successful rollout of portfolio management at your organization.

Have you ever done this kind of resource audit and prioritizing at your organization? If so, has it helped?

 

Posted by Wanda Curlee on: December 22, 2015 07:21 AM | Permalink

Comments (8)

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Good post Wanda. For organizations new to Portfolio Management, such baby steps help. The simple visualization you suggest is good as well. At the same time, making both risks and perceived value completely subjective may reduce the usefulness of this model. Maybe we should strive to get quantitative numbers at least for value, if not for risk. Even risk can be modeled to arrive at reasonable accurate quantitative estimates. What are your views on this?

Wonderful relationship amongst Value, Cost and Risk. Never have seen it this way before.

Hello Prabhaker - Thank you for the comment. I agree with you that quantitative must be done as well. I did not emphasize this enough within the posting and should have. Quantitative should be used as well as qualitative. Good catch.

Hello Wanda, a good article especially where you talk about the value-cost-risk relationship. This helps to visualize the relationship. However as Prabhaker has pointed out the qualitative part does not help alone. One other thing probably missing is the right stakeholder management to establish the portfolio management and this includes buy-in from senior management

The thing we use is a Business Value Calculator to first justify the project from the customer perspective and then validate and rank the sub-portfolio before ranking and prioritizing the portfolio. In short the method that we use need not work for anyone else. The right way to implement portfolio management is related with the organization, it's structure, it's customers and so on

Hello Kiran - Thank you for your post. I agree with you on all counts. I focused my blog on cost-value-risk aspect of Portfolio management but yes, all the other items such as stakeholder management must be addressed. However, for an organization to embrace Portfolio management not all items must be done with the same focus until the maturity reaches a certain point. Hence my suggestion to focus on the three items while doing the others but not with the same intensity. Hope this makes sense.

Wanda, a great article on portfolio management. I really love the concentric circle idea, especially at the portfolio level where visual stories go further with busy stakeholders. One comment here is, while you very admirably went for the highest value item, this raises the question; is it wise to go for the big win or the small win to start.

In your experience, what works better and why?

Excellent article, reminded me of the value vs difficult of implementation cuadrant to identify low hanging fruits (projects), the risk comparison among projects represented by circles is a great representation, thanks for sharing.

Hello Hector - Thank you for your comments. I have found the circle approach the easiest way to show clients the "low hanging fruit".

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