The Money Files

Let’s say you have been through your programme and are ready to close it out. There is obviously quite a lot to do, and the finance elements will be part of that. Here’s what to consider when closing out the financial management of a programme, inspired by the Standard for Programme Management.

Benefits stewardship

The programme will have created benefits, some of which have probably been realised as the work progressed. Towards the end of the programme, you may need to estimate the ongoing costs for making sure those benefits continue to be realised. For example, maybe recruiting an additional person to manage some deliverables once the programme team is stood down. This should last for as long as the benefits are going to be tracked for, or as long as you think is appropriate.

Any ongoing costs that will be passed to the operational teams should be made clear and budgeted in their ongoing profit and loss accounts for the department.

Leftover funding

Will you have any money left at the end of your programme? Probably not – in my experience project and programme teams tend to spend everything allocated to them!

On the off-chance that you do have funds left – let’s say, in the case of closing the programme a little earlier than expected – you should be in a position to hand some funding back. Any contingency funds that have not been used can be returned to the corporate ‘pot’.

Reporting

You’ve been creating financial reports for the duration of the programme, and those will now stop as the programme is wound up. However, stakeholders may be relying on that information. If there is the expectation that some of the financial reporting is still required, perhaps in a slightly different or amended format, you should put in place options to make that happen.

For example, perhaps another department can pick up running the reports, or they can be automated.

Tip: Even if you are automating the reports, please make sure each report has an owner! When we migrated a load of reports from a legacy system into a new one we weren’t sure which reports were used and which were no longer required because there was no data ownership. We didn’t migrate a bunch of them, figuring that if they were missed someone would say! Nobody said anything, so it’s probably those were simply no longer required, even though the system produced them regularly.

Sustainment

Sustainment of a programme is the work required to make sure the outcomes are maintained going forward, once the programme structure itself is no longer there to support them. Beyond benefits, there might be some additional funding required to sustain the programme’s vision, achievements or outcomes. For example, perhaps you implemented new tools and now the business needs to have someone in post to maintain that software.

In my experience, people who enjoy the environment of delivery are not always the same people who enjoy the day job. You may find that programme resources are not interested in staying on in ‘day job’ roles to support the ongoing running of whatever needs to be sustained, so you could end up having to budget for hiring new roles.

Close out checklist

At the end of your programme, check to make sure you have the following aspects covered from a budget perspective:

• Financial inputs to the programme closure report and any final financial reports or closure statements
• Updates to the financial management plan if necessary
• Updates to the lessons learned database or organisational knowledge repository
• Any related documents that might be useful in the future
• All invoices and supplier contracts wrapped up and closed
• Programme budget and cost centre/cost codes shut down so no further work can be allocated to them.

What else would you consider when closing out a programme budget? Let me know in the comments!

The Standard for Program Management, Fourth Edition (2017) defines Program Financial Management like this:

Activities related to identifying the program’s financial sources and resources, integrating the budgets of the program components, developing the overall budget for the program, and controlling costs during the program.

As you can see, there’s a lot more to crunching the numbers for program finances than simply having a single budget spreadsheet!

Let’s look into that definition a bit more and I’ll give some examples from my work as a programme manager (as we would spell programme in the UK).

Identifying financial sources

This means finding out where the money is coming from. In a large program, you might have a single source of funding, or several. Research projects, for example, might have grant income, so within the program you might have several funding sources.

On the large healthcare program I led, the Finance team created a brand new cost centre for the work so everything could be tracked in one place. Funding was centrally agreed and moved into that cost centre.

Identifying resources

This sounds easy, but in practice a large part of my role as a program manager was finding the right people to do the work and then helping them find the time to actually do their tasks! Admittedly, it’s a lot easier if your program has dedicated resources.

For some of my work, we’ve been able to budget for backfilled resources so we could bring people out of their day job and second them to projects. Then the project could pay for someone to cover their job while they dedicated their expertise to the work.

Integrating budgets of program components

Programs are made up of several (sometimes many) different projects and often a BAU component too. As a result, the program manager has to juggle the budgets and create a master, summary budget.

There’s work to be done here in making sure the whole thing is put together holistically and with the least repetition possible. For example, if you are securing a legal expert to support on one project, it makes sense that they are also kept on to help with another project as they will have gained some awareness of the program overall and the company. If the timelines can be made to work, or you can pitch a larger engagement for the legal consultant, you may be able to secure their time to get consistent resource (and maybe even a cheaper price for a longer engagement).

Developing the overall budget

When all the program components are effectively budgeted and you can bring the whole thing together, the program manager can create an overall budget and a way of tracking against that.

Controlling costs

Controlling costs is part of project, program and portfolio management, so it’s definitely up there as an important activity for program managers!

Luckily for me, my program costs were so large that I had the support of the Finance team – I think the company wanted the extra governance and accountability for having accountants pour over the details. Project budgets and costs were centrally managed and controlled in our cost centre. Tracking became a job of getting the data and consolidating it. Controlling costs became an issue of making sure change requests were done in an appropriate way and ensuring there was enough oversight of where we were spending the money.

We did not use EVM to track and monitor costs, but this might be part of your program management environment. If that is the case, you’ll probably have software to help you track and monitor costs and also to support with the reporting.

Summary

Program financial management might seem a daunting task but it’s very similar to managing your project budget. The numbers can be a lot bigger, but the maths is the same principles. What’s your experience of program financial management? I imagine it looks very different for every program as there are plenty of ways of setting up programs, and many variations on what financial management is necessary and appropriate.

What does it mean to manage a portfolio? And what does portfolio management look like? For most of my career I have been involved with IT portfolios that were a blend of business-led projects and operational work. However, portfolios can be department-based, geography-based, customer-based or whole-company, or even another split. Basically, a portfolio is just a way to group work to make it easier to manage, monitor and control.

I think there are 6 main responsibilities for a portfolio management team. I’m sure there are more, but these are the main things that I feel form the priority To Do list for people in that role. The 6 features that make up portfolio management are below.

1. Assessing ideas for projects

Ideas for projects can come from anywhere, but often they come from people already working within the organisation, who are involved in projects somehow. For example, project or product teams could be working on one initiative, receive a change request, and realise that would make a great addition to scope, even if it cannot be incorporated into the project right now.

The portfolio team should be on the look out for relevant project suggestions, making it easy for people to put forward new ideas. Then they should review and assess suggestions. That list then feeds into the next key feature of portfolio management: deciding which projects to do.

2. Prioritising projects

Next, we have prioritisation. Part of the role of the portfolio team should be prioritising the order of projects and deciding when projects should start. Some lower priority projects might need to be started work if, in fact, they provide the infrastructure or enabling architecture for more important projects. The team should consider the whole portfolio and make choices based on that, as well as the relative priority of individual projects.

3. Strategic integration

Projects don’t exist in isolation, so although the portfolio team may have quite a lot of say over what gets done and when, based on the results of their assessment, there’s also a job required to align what project work is proposed with the rest of the business strategy. This draws on the ‘run the business/change the business’ approach, where some teams focus on delivering new stuff and others focus on keeping the business going. Either way, both ‘sides’ of the organisation should talk to each other.

The purpose of the alignment is to make sure the overall strategy can be delivered, but also to make sure risk management is carried out in a ‘whole company’ way. It’s no good having a risk-heavy portfolio if the operational side of the business is also falling on the side of taking chances. Overall, the organisation’s work should balance a risk profile that is acceptable to the leadership team. Perhaps they are OK with taking risky measures – I wouldn’t be though.

4. Governance

The whole point of using portfolio management techniques is to improve oversight and decision making – in other words, to put decent governance in place. That includes project steering groups or project boards (and the programme equivalent) as well as monitoring the delivery of the work inside the portfolio.

Monitoring and oversight might be a light touch or involve multiple layers of approvals, depending on the investment and method, and the consequences of decisions taken. It will help to have some documentation here to spell out exactly what is required.

5. Tracking results

Yes, benefits tracking! Someone has to be responsible for tracking benefits, and the portfolio management team is in a good place to be able to do that at a portfolio level. You may have individual programme managers or department heads tracking benefits for their areas, but if you want to see the results at an organisational level, this data needs to be consolidated at the top. And de-duplicated, because you don’t want benefits to be counted twice (I’ve been there – it doesn’t look good).

6. Portfolio management processes

Finally, the portfolio management team is responsible for the management of the portfolio. I know, it sounds obvious to write that but someone has to be the gatekeeper and guardian of the processes, life cycles, review process, approvals, funding requests, paperwork and people. The day-to-day operation of the portfolio is also a key responsibility.

In your experience, what else do portfolio teams take responsibility for? What are the other key features of working in portfolio management? Let us know in the comments below!

The PwC Global PPM Survey talks about the different levels of portfolio maturity. There are five levels:

Level 1: Tactical

At this introductory level investment decisions are made locally, and based on a case-by-case analysis. There’s no overall resource management and resources are allocated to projects and programmes at departmental level. There are governance controls but these are only around capital expenditure.

Level 2: Controlled

With a little bit more effort, companies can move to Level 2 on the maturity scale. Here, investment decisions go through a defined governance framework. There are businesses cases produced that justify the expenditure and someone keeps a master list of all the major capital projects that the company is doing.

Level 3: Managed

The biggest jump on the maturity curve is between Levels 2 and 3. At Level 3 you’d expect to see a standard method for measuring how aligned projects are to the overall business strategy. There is a central governance structure which includes the discipline of ‘portfolio management’. When projects are put forward, there is an initial risk profile done which helps prioritise the work in the portfolio and contributes to the decisions around whether a project should go ahead.

I imagine most companies fall into this category, or at least would like to.

Level 4: Optimised

Taking it further, at Level 4 you’ll see quantitative evaluation of initiatives using a standard model. Projects and programmes are prioritised taking risk and return into account, with a model based on numbers instead of gut feel. Planning future work takes capacity and constraints into account along with risk assessments.

Level 5: Maximised

Finally, the most mature organisations have a structured, consistent and integrated process for managing their portfolios. Initiatives have what PwC calls “multiple delivery versions including in-flight exit versions” (which I looked up and am still none the wiser but I assume means they are planning for what happens if the project has to change course and close early). The PwC model also says that businesses at this level map their portfolios against an “enterprise efficiency frontier” (which I also had to look up and believe means the tradeoff between risk and return).

Why portfolio maturity matters

While it’s nice to be able to point to the curve and select your level and know that you aren’t at the bottom, there is more to portfolio maturity than that.

In 2012, PwC reports that as many as 30% of programmes were in conflict with the overall business strategy. That means that one in three projects were delivering something that was contrary to what the business wanted to achieve. That’s a waste of money and a waste of resources. Even if you’re the best project manager in the business, you can’t help the company achieve its goals because you’re working on the wrong project: one that fundamentally doesn’t and can’t contribute to the future of the business.

In 2014 the picture is much better. The figures from last year show that almost 80% of projects are aligned to strategy, so the number of conflicting initiatives is dropping. That still means that one in five projects isn’t fully aligned to strategy.

I suppose we should ask whether being aligned to strategy is as important as all that. Does it matter that 20% of what we do isn’t strategic? Doesn’t that cover the smaller projects that keep things ticking over, the tactical initiatives, the departmental priorities that improve work/life balance but don’t necessarily contribute to the big ticket items set out in the annual report? Without knowing the details of which projects aren’t considered by the project managers to be ‘aligned’ we won’t know if they are incorrectly categorising their projects. Perhaps they don’t fully understand the strategy and can’t adequately make the call as to whether the projects are aligned or not.

Where next?

We can continue to monitor the outcomes of surveys like this and see if portfolio maturity and alignment to strategy improves over time. I think it will: it will have to as companies cannot continue to work in a way that puts key resources on initiatives that don’t add any long term value. However, statistics like this are missing a lot of key context. I’d like to know how mature these organisations are and how large they are because I imagine this is something that mid-size firms find particularly difficult to get right. Small businesses do it by default almost, larger ones through design, and medium ones will struggle to fit their governance processes to their size in an appropriate manner.

I speculate… What’s your experience? Let us know in the comments.

This month on ProjectManagement.com we’re talking about portfolio management. Portfolios are ways to organise the business of change so that companies can achieve their strategic objectives. You are probably most familiar with portfolios made up of projects and programmes. The OGC, the group behind the PRINCE2 standard, defines portfolio management like this:

“Portfolio management is a coordinated collection of strategic processes and decisions that together enable the most effective balance of organisational change and business as usual.”

But portfolios can do more than just manage change as a result of projects. Portfolios can also be used to make investment decisions, and managing work by portfolio is one way to get a view of financial data.

Pat Durbin and Terry Doerscher, in their book, Taming Change with Portfolio Management, write this:

“No matter how you characterise your portfolio objectives, almost all portfolios include some form of financial data as one or more of the parameters used for analysis. Aligning financial information to the demand-related information structures offers you a way to improve the quality and visibility of information about money, the most ubiquitous portfolio characteristic.”

They go on to say:

“As a basic accounting practice, every organisation has a mechanism to allocate and track money based on how it is distributed to the organisation. While this organisational view of financial expenditures shows you how money is spent, it does not show you why.”

For most project managers, what happens at portfolio level is a bit of a mystery. We get on a do our jobs, delivering the stuff that is required for the project, and let other people work out how it all joins together into an organisational and business strategy. As a result, portfolios can seem a bit remote from what we do day-to-day.

However, you have to realise that whatever you do as a project manager automatically feeds in to the bigger picture. If you don’t know what that bigger picture is, you can’t be sure that you are achieving it in any way. That doesn’t mean that you have to have an intimate understanding of what is going on ‘way up there’ but I do think you should have some understanding of how what you do contributes to the organisational strategy.

This does work both ways. After all, as Durbin and Doerscher say, there is no way that portfolio managers can tell why money is being spent just by looking at a corporate balance sheet. The story behind the expenditure is your story. It’s project business cases and project budgets that explain why money is being spent. They can’t get to the bottom of where the money is going without your input. It is the project manager and the project team members who play a critical role in making all this happen. It’s your tracking that shows how the budget is being spent, if it is realistic and whether or not the project will meet its goals. It’s your evaluation and recommendations that may lead to a project being sped up so the company gets the benefits earlier, or slowed down if something else takes priority for the resources, or stopped completely. Numbers are just numbers – without the narrative, there is no way of telling whether the project, programme or portfolio is performing as you would expect.

Of course, those in charge of corporate financial portfolios may not agree with how the money is being spent. If that’s the case, there are routes to redeploy those funds and resources using the standard corporate governance channels like project steering groups and boards. It could result in your project getting shut down, and if that does happen you should ask why. It could simply be that the company has a higher priority project elsewhere and your project has drawn the short straw. Don’t take it personally.

Management by portfolio is becoming more and more common. As businesses shift towards managing knowledge work, portfolios become the sensible way to get things done. Project managers have a huge part to play in making sure that portfolio managers have the information they need to make the right decisions. Just make sure that when you tell your story it’s a good one!