The Danger of Fictional Benefits
Steve Jenner gave a presentation at the PMI Power Talks recently – a set of TED-style short presentations hosted in the centre of London by the PMI UK Chapter. He spoke about portfolio management and benefits.
Benefits, he explained, are not just one dimension of project portfolio management. They are the rationale for the investment of shareholders’ funds.
Often, he said, benefits are used as the way to justify the project. He pointed out that isn’t correct: benefits are the rationale for the project. We “go looking for benefits to justify what we want to do anyway,” he said.
Then people are surprised that they didn’t realise the predicted benefits. How could the project have done that? The benefits were made up anyway.
“Strategic alignment means nothing,” he went on to say. You can align anything with anything. Anything can be aligned up front. It’s what happens later that matters. Strategic contribution, he said, is where it’s at.
When you can’t justify a project by any other means, people call them “strategic projects”.
So how do you get round the problem of fictional benefits?
Don’t treat all projects the same way
Steve explained that it’s foolish to treat all projects the same way. Tailor the investment criteria: don’t try to rank and assess projects that relate to keeping the business functioning in the same way that you would innovation projects.
If you are investing to save money or increase revenue then it makes sense to do a cost benefit analysis.
If you’re doing it to make a strategic contribution, then benefits aren’t always clear in cost terms.
For projects that are mandatory, there is only one question that matters: Do we really have to do it? If it’s a $200m mandatory project with justifiable benefits of $300m and the project cost goes up, then we won’t worry if it now costs $250m. But if we are doing the project to be cost effective, and it isn’t really mandatory, then the cost increase matters. A lot.
Avoiding Fictional Benefits
Here are some tips that Steve gave for making sure your projects are adequately justified.
1. Be clear about the benefits you are buying
Financial benefits can be cash releasing: you can use the money elsewhere for other things, or non-cash releasing: they save money but you can’t actually access the money.
An example of that latter category would be things like process improvements that might shave a minute off a process. You aren’t going to make a staff saving on that. Saving staff time is only a benefit if you do something with it, so Steve argued that these aren’t real benefits at all.
2. Link gate reviews to funding
If your project gate reviews – the steps you go through at the end of each project stage to validate that it’s OK to move to the next point in the project – are not linked to funding or project performance then they don’t serve a purpose.
All they’ll do is just slow projects down and add bureaucracy. Unless they are meetings and project reviews with teeth i.e. that they can stop your project, what’s the point? Your portfolio, Steve said, should be a funnel not a tunnel. In other words, you need to be stopping projects, or delaying funding, and taking those hard decisions because that’s your job and how you protect the funding.
3. Expect improvement
This was an interesting point: expect things to get better and they will. Create a culture where project improvement is expected. Where project control is expected. Where generally you just expect things to be better week on week, year on year. And don’t let lack of improvement go unnoticed.
I’m looking forward to the next PMI Power Talks: I think the quality of speakers was exceptional and it was a really well-organised event. This session by Steve was very thought-provoking.
An enterprise resource pool is a great way to track and manage the people available to work on projects. It’s often set up by the Project Management Office and used to work out who is going to be a good fit for the skill needs of a new project.
Setting one up doesn’t have to be a big job or particularly complex, and many project management software tools will do this for you. Dan Lefsky, speaking at the PMI Global Congress EMEA in Barcelona, talked about the things you need to include in your resource pool data set in order to get the most use out of it.
Categories of Resource
He explained that a resource pool includes two types of resources:
The Data Needed For Your Resource Pool
He gave examples of the 8 things you need to consider and record for each named resource in order for you to be able to usefully draw on the data to select team members for upcoming projects. These are:
1. The Type of Resource
Is the person a Business Analyst, a Project Manager, a Quality Analyst, a User Experience expert, a Tech Writer, a Developer? Or something else? This is typically their job title and doesn’t necessarily reflect their particular skills.
This is where you record their skills. You’ll probably want to set up a drop down list or categories that you can tick from as searching free text fields is going to be too difficult once you’ve got all your resources on there. Skills can include programming languages, Agile/waterfall/hybrid PM methodologies and so on.
It’s worth noting the experience of each individual. This could include the departments they have worked on, the category of project they do, the number of years they have been at the company, or years’ experience overall in their role, the key relationships they have within informal networks etc.
Cost of resource is a factor. Are they charged at time and materials? Or fixed price? What’s their internal day rate when working on projects? You might not have costs for some resources because it’s moving ‘wooden dollars’ around the organisation and that’s fine, but if you intend to charge clients for resource time then you’ll need to know what each person costs.
Where is the resource based? For some projects it might not matter because they can work virtually, but for others it might have a significant impact. You could categorise these, Lefsky said, by onsite, offshore, onshore, nearshore or remote. Or you could list the city where they work (or do both).
6. Maximum Availability
This could change depending on their other commitments but it’s definitely a useful piece of information to have for some resources. For example, where an individual also works as a team manager, they will have certain management responsibilities that take up some time. These are things, speaking from experience, like approving timesheets, managing team’s expenses, team-level reporting, 1-to-1 meetings and performance reviews, dealing with sickness absence and so on.
You can’t allocate these people to your project 100% of the time. In fact, it’s not sensible to allocate anyone to your project 100% of the time. Note down what time they have outside their normal responsibilities that can be allocated to project work.
Knowing their line manager is helpful for resource requests.
8. Resource Breakdown Structure
Lefsky talked about positioning resources in the Resource Breakdown Structure (RBS) as this lets you see their security permissions, areas of control and similar. If you have a formal RBS then this could be worth doing but if you don’t, you could just as easily create another categorisation for security clearance if that was important to you.
Gather all this information and start to populate your enterprise resource pool. When you get started you’ll probably just focus on the people who spend a lot of time working on projects, but it’s worth expanding this if you can, and if you are going to take an enterprise-wide view of portfolio management. It’s a big job, and you have to reconcile the fact of treating individuals as ‘resources’ who can be put into little boxes and categorised, instead of the unique individuals that they are, but in large organisations particularly it can be incredibly successful.
Note that you’re going to have to continually review this. While someone’s job title might not change that often they could gain new experience through projects or develop new skills after training. Don’t let your resource pool data get out of date or you won’t benefit from being able to develop individuals or from letting them use new skills.
Do you use a resource pool? Let us know in the comments if it has been successful for you or whether – as I suspect it might be in many companies – it was set up as a one-off exercise and then not developed further, thus falling out of use very quickly. I look forward to hearing your experiences!
PMI have launched a new credential recently: the Portfolio Management Professional (PfMP)SM. The pilot finished in February and at the moment you can’t sit the exam while they review the feedback from that, but you can still apply and it won’t be long before exam dates can be booked.
Credentials in general are a good way to advance your career. This one demonstrates your experience in managing organizational portfolios and could enhance your chances of getting a pay rise. Anything that means your bosses recognise that you are doing a good job and are professional in the way you go about it improves your standing at work (or if your company doesn’t value that sort of thing, help you find a company that will). PMI’s literature claims it helps make you more marketable so you may find employers starting to ask about this credential if you are going for PMO and strategic level jobs.
So, as this month is all about Portfolio Management on projectmanagement.com, I thought I’d explore the PfMP a bit more.
Is it for you?
It won’t be for the majority of people. It’s aimed at people who are responsible for portfolio management in their companies. PMI define a portfolio as:
“a collection of programs, projects and/or operations managed as a group. The components of a portfolio may not necessarily be interdependent or even related—but they are managed together as a group to achieve strategic objectives.”
You can see that this will only relate to a few people in your business, or one particular team. It’s a strategic, high level job rather than a hands-on project management job, although you don’t have to have the job title of Portfolio Manager to be eligible to apply.
What are the pre-requisites?
As with the other PMI credentials, you’ll need to meet certain criteria before you can apply. You’ll need a high school diploma or equivalent with at least 7 years of portfolio management experience in the last 15 years. Or 4 years’ experience if you have a bachelor’s degree or equivalent.
Then you’ll need to demonstrate 8 years of professional business experience. As PMI say that one of the roles of the Portfolio Manager is to establish and guide the selection, prioritization, balancing, and termination processes for portfolio components to ensure alignment with organizational strategy you’ll have to show that you’ve been working at a senior level in your firm.
What’s involved in the application process?
Your application will be reviewed by a panel of expert volunteers who are also portfolio managers. This bit takes around 4 weeks. Then there’s the exam. You’ll have to take the exam within a year of passing the panel review. It’s a multiple choice computer-based exam, so if you have taken any other PMI credentials you will be familiar with the format.
Will it help my career?
Who can say? Only you can answer that question.
On one hand, it’s a new credential so until there is a critical mass of portfolio managers holding it employers may struggle to recognise its worth.
On the other hand, getting it in the early days will set you apart from the rest of the field when you apply for new jobs.
As with any credential, having it shows that you have demonstrable skills and experience and the commitment to the profession to study for and sit an exam. I think it’s too early to tell if candidates with the PfMP credential will earn more than others in the same role but from past experience and the salary surveys from PMI it’s probably likely that they will in time.
Credentials and certificates are an investment, and it is always worth talking to your manager about whether he or she will fund your application and exam fees, or even give you time off work as study leave. They may say that they won’t fund it but you might be pleasantly surprised! I’m looking forward to watching this credential as it evolves and more people take it: as PMI are positioning themselves and project management as a strategic thing this fits well with their current focus (or at least that is how it looks from the outside).
Has anyone got any experience of PfMP credential process or the pilot? Let us know your thoughts on it in the comments.
At PMI’s Synergy conference at the end of last year, Stephen Carver gave a well-received presentation which included some information about the different types of complexity, as perceived by the brains at Cranfield.
He talked about what success looks like on projects and said that the level of complexity faced is part of whether a project is deemed to be a success or not. The 3 types of complexity he identified are:
Let’s look at each of those in turn.
This is the ‘easiest’ level of complexity and it involves the scale of the work on the project. A project is structurally complex when it has many stakeholders, workstreams or other elements. There is a lot for the project manager to manage and control, with many variables.
This is where the project is changing around you, for example increases to the price of steel in a construction project or stakeholders who were not identified at the outset suddenly needing to be included. It encompasses projects where there are a number of unforeseen issues or where the situation is unknowable, for example where there is a great deal of novelty perhaps in the technical set up or the way the commercials are being managed.
This is where the project suffers from hidden agendas and lots of politics. There is little transparency and at the worst end of the scale maybe even sabotage. There are conflicting priorities and resistance. Cultural IQ becomes really important for the project manager along with being able to adequately manage the people involved and creating a shared understanding of objectives and the project’s vision in order to align agendas effectively.
Stephen said that most training courses cover dealing with structural complexity but in a survey of 246 project managers who were asked which of these 3 areas they found most challenging, socio-political complexity came out on top.
Which is hardly a surprise.
“Projects,” he said, “are deeply emotional things.” Whether the Millennium Dome, for example, was seen as a success or failure is down to your point of view and the passage of time: rebadged as the O2, it’s now a very successful arena and venue. The Sydney Opera House, Concord and Terminal 5 at Heathrow were other examples he gave of projects where the definition of success was difficult to pin down and would mean different things to different people.
“If you don’t do anything, you won’t make any mistakes,” he added. “We do a lot so we are bound to make mistakes.” Unfortunately, on complex projects these mistakes tend to be in the socio-political arena and they can be very hard to undo. Not setting up proper workstream reporting, for example, might give you a structural problem at the start of your project but it’s easy enough to address that sort of complexity and put it right. Dealing with damaged egos or senior stakeholders who each think the project is going to address their own pet issue is a far harder situation to deal with.
He didn’t give any pointers as far as I can remember about being able to deal with socio-political complexity, although I imagine that a 45 minute presentation about project success was never going to have much time to touch on what project managers can do differently (better) in order to address these challenges.
What tips do you have for managing projects with this type of complexity? Is it just good stakeholder management or are there other things that you can do to deal with it successfully? Share your thoughts in the comments below.
At the PMI Global Congress EMEA in Dublin last month Terry Williams spoke about his research into early warning signs on complex projects. Last week I wrote about what causes problems on projects. One of the things his research team considered was the role that external reviews have to play in uncovering those problems.
External reviews at all points in the project are useful. These provide a sense of legitimacy; comfort that you are doing the right thing. However, they need to be well focused, with guidelines. And of course it is not enough just to do a review and create a list of issues: issues have to be acted on as well.
However in some cases it was the process of doing the review was the most useful. The interview forced the project team to defend what was happening and therefore helped them uncover what was indefensible.
Having to justify the decisions made the project team question them and this process was identified as a good tool for flagging where things were going wrong.
Barriers to identifying early warning signs
You may expect warning signs to be successfully identified and dealt with in an environment where gut feel is taken seriously and reviews are carried out. But it is not like that everywhere.
Terry also shared some of the barriers to identifying early warning signs in projects. Here are some:
I am not a big fan of organisational politics, and I often wish we could cut through the hidden agendas and just get things done. However, fast tracking projects through politics means you don't have time to assess early warning signs, Terry said.
What are the early warning signs?
As a result of their research the team was able to make lists of typical early warning signs by project stage. These are helpful guidelines for people doing project reviews - pointers for what to be looking for. The lists included:
During project set up
In early stages of project
During project execution stage
Do you do project reviews? If so, have you spotted any of these warning signs or any other signs that things might not be going to plan?