The Business Driven PMO

GUEST POST: Claire Schwartz

In the last couple of posts, we’ve written about the challenges of providing information for decision-making.  From collecting data to converting the data to information that tells a story, it’s all about making sure that we’re providing decision-makers, including ourselves, with what is necessary to make solid, fact-based decisions.  But there is one more variable we need to consider: what is the best way to communicate that information? 

The channels used for communicating, as well as the form and format in which the information is presented, influence both the decision-maker and the decision.  Besides concerning ourselves with the ‘what’ we need to consider the ‘how.’  How can we present the information in a way that assures timely receipt and accurate interpretation?

If you’re like me, you receive and send information for decision-making in lots of ways: emails, reports, presentations and meetings.  While each of these can be effective, in the aggregate we find ourselves bombarded with information from all directions.  While some of the information is useful and relevant, some is not.  Some is clear and well-presented while some is fuzzy and ambiguous.  Some clearly identifies what action is required and some is just ‘FYI.’  Figuring out what information is significant and what is just ‘noise’ is not only time-consuming; the noise can often drown out what is really important.

As with any problem, recognizing that there is a problem is the first step.  But if your job is about providing information how can you reduce the quantity, increase the quality and truly make information a tool for decision making? 

Think about one decision that you need to make on a regular basis.  Now close your eyes and imagine that the all the critical information you need to make that decision is in one place and, at a glance, you have what you need to understand the situation and make your decision.  In your mind’s eye you are probably envisioning a dashboard.  And you’re not alone.  It seems like everyone is asking for dashboards these days.   But just as throwing a bunch of ingredients in a pot does not always make a tasty dinner, jamming a bunch of information on a page does not necessarily make for a good dashboard.  

A dashboard is essentially a mechanism for providing a lot of information in a single place.  It contains the dials and indicators that provide information about what is happening and where decisions or actions are required to either get things on track or keep them on track.  Consider the dashboard in your car - it’s a single location where you can quickly get information about most everything you need to know to operate and control your car when you’re on the road.  Through the windshield you can see where you’re going and any obstacles or hazards in your way, the speedometer helps you control your speed, the odometer can tell you how far you’ve gone.  There are also a variety of indicators that light up to indicate when corrective action is needed like low oil pressure, or that your engine is overheating.  While there may be a lot of other things going on in and around the car, the instrumentation on the dashboard is designed to show you only those things that are important or ‘key indicators’ that are most critical to the operation of the car.  There are a lot of other things it could tell you, but it sticks to those things that count.   

In addition to showing you what’s most important, each of the dials and indicators has a corresponding set of decisions or actions associated with them.  If the speedometer indicates that you’re going too fast, you lighten up on the gas pedal.  If the oil pressure light comes on, you pull off the road and turn off the engine.  If the ‘check engine’ light comes on you check your bank balance and call your mechanic….

Just as a lot of thought goes into designing the dashboard in a car, there are important considerations that go into designing a dashboard report.  First and foremost, you need to remember that one size does not fit all.   A number of years ago I had an opportunity to ‘fly’ a commercial jet in a simulator.  The first thing that struck me as I sat in the pilot’s seat was the mass of instrumentation on the dashboard – nothing like the dashboard in my car.  Why? Because flying a plane is different than driving a car – a pilot makes different decisions than a driver hence different information is needed to inform those decisions.  Likewise, managing a corporation or a division is different than managing a project.  As long as the decisions are different, the dashboard needs to be different. 

Once you’ve identified the audience for your dashboard you need to understand both the decisions that are being made and what key indicators would suggest that action is required.  If you are designing a dashboard for a group of executives managing a project portfolio, keep in mind that managing a portfolio is about managing a set of investments. The decision-makers need to know what those investments are, how they are performing and make decisions about reallocating or reprioritizing those investments to meet the organization’s goals for realizing return on those investments.  In this case your dashboard may include things like the performance of different categories or types of investments (projects), how much money is being spent in different categories of investments, and what return you are getting from the investments already made.  If you’re designing a dashboard for the members of the project team, your dashboard is going to be more focused on the tactical items that help the team member prioritize and focus their work -  what is overdue, what needs to get done today or this week, reminders about upcoming events or milestones. 

Your target audience can also tell you a lot about the best way to present the information.  Typically we like to use graphs and colors in dashboards because one picture, colored dot, or downward facing arrow can convey a lot of information in a small space.  But as nifty as graphics and colors are, they may not be informational to the user.  For example, in the team member’s dashboard a graph showing the number of their overdue tasks by week since the beginning of the project is not as useful as a short list of the overdue tasks for this week.  

You also want to be mindful of how you use the space on the page.  The best dashboards are easy to read and use the white space on the page to clearly separate the information so that any given indicator can be located and read quickly.  You also shouldn’t need a magnifying glass to read a list or the labels on a graph – just because the software you use to generate your chart allows you to set the font size on your labels to 2 point tiny-type, doesn’t mean that you should use it.

Last but not least, don’t forget that for many decision-makers more detail may be needed to make a well informed decision.  Here the dashboard provides the launching off point, but the underlying detail needs to be as readily available as the dashboard.  I’m very partial to dashboards and reports that provide the ability to ‘drill through’ into more detailed information.  For example, if I’m managing a portfolio of projects and one of my investment categories within that portfolio is not performing well, I might want to drill through to see which projects are contributing to the problem and why.  What was important on the dashboard was recognizing that action is needed, but the detail needed to decide what that action is going to be is also readily available.  It’s really like that ‘check engine’ light in your car – if it goes on you know you need to do something, but what that something is may require further action.  On the flip side, if the light stays off you can just ignore it. 

Dashboards are a great way to help reduce the ‘noise’ and help individuals focus on the information that really matters most.   If you’re designing and building dashboards, you’ll probably need to go through a few iterations with your stakeholders but the results are well worth the effort.  Just remember – NO TINY-TYPE! 

This is part two in a three-part series discussing the importance of portfolio planning. This series provides insights on portfolio management best practices in process, metrics and reporting.

When organizations set a budget they typically go through a process to essentially build lists of things that they need or would like to get accomplished during the budget cycle, assign a cost to that activity, and go through some prioritizing to get to the total assigned number. Whether you know or not, if this sounds like a process you have then you are executing a non-structured portfolio activity.

This old-school process has been successful for decades, but with today’s pace of business and the impact of macro-environmental change, organizations need to build processes that are more responsive to that change.

Recognizing this, organizations are beginning to evolve and adopt portfolio concepts. However, these efforts tend to lag, mostly due to a focus on improving the prioritization process and fall into some classic pitfalls: 

• “We’re overworked.” A tendency to focus on capacity first. Although I argue that capacity is one of the constraints in portfolio management, initiating planning exclusively to focus on managing capacity is froth with errors. Organizations focused exclusively on workload have a tendency manage resources at a micro level and that just isn’t sustainable. I once had a client that when he moved his focus from matching capacity to demand and focused on the right things, the dialog changed and he became more connected to the business. Dialog between the organizations ensued that actually increased the quality of business outcomes. 
• “Emotional.” I call this prioritization without principles. Without a framework to evaluate an investment, it always ends up that the individual who screams the loudest, has the best presentation (sales skills), or was the last one in with the bosses won. 
• “We’ve already spent the money.” It’s OK to hold or cancel and investment when change happens - It just makes good business sense. When an organization doesn’t hold or cancel a project, when it’s not the “right thing” and the investment resources are tied up in the wrong projects, that’s a lost opportunity. 
• “We don’t revisit the evaluation criteria.”This is the one that really frustrates me. Just because it worked three years ago doesn’t mean the criteria is still valid. In reality this criteria not only reflects current business climate, it also represents the decisions we made in the past. Good governance always validates the criteria before anything in the portfolio. 
• Lack of Investment Selection Cycles. Once a year (budget time) really is no longer valid. An organization needs to match their investment selection cycles with the velocity of their executing projects. In other words, if the majority of your projects are short term, then more frequent cycles are required. If, however, the majority of your projects are multi-year then a minimum of four times a year should be sufficient to just validate the investment outcomes are still desirable. 
• No Formal Investment Governance. Governance provides transparency. We now know (during the recent economic crisis) without proper transparency, investment chaos ensues. 
• Everything in the Same Bucket. If we only work on the highest priority projects, then quality/value of lesser priority assets will erode to a point of being a liability to the organization. Having a well thought out diversified project portfolio insures that organization remains healthy.

Non-structured portfolio activity is unavoidable, but knowing what to expect and understanding the potential pitfalls related to portfolio planning will help you plan for and address them in advance, keeping your portfolios on track—and  saving valuable time and resources.

In Part III of Portfolio Planning, I will demonstrate the portfolio lifecycle and the key characteristics of the framework.

Back in November, I gave a presentation to an audience of PMO practitioners

at PMO Symposium on the reality of putting theory into practice—the feedback was fascinating. While I know how rare full life-cycle portfolio management is, the audience feedback confirmed that fact and the reasons.

In brief, portfolio management can be broken down into three parts: 1) Portfolio Planning, the process by which projects are selected and placed on the active portfolio, 2) Portfolio Monitoring, the practice of reviewing the active set of projects to ensure balance and performance, and 3) Portfolio Results (aka Benefits Realization),  the practice of measuring the return on the investments the projects represent.

I asked the 100+ PMO directors, managers, and other practitioners in the room to raise hands for each practice they have actively in place. As expected, almost all hands went up for monitoring, a little more than half went up for the planning processes, but only two hands were raised for Portfolio Results. That’s two percent in an admittedly non-representative sample. Non-representative in the sense that the attendees at the Symposium are the more mature PMOs!

So what’s going on here? A look at each piece brings the problems into focus.

Portfolio Monitoring at its most basic is simple to implement and provides a lot of bang for the buck. Simply listing all active projects and tracking their health gives executives a much better view of where the money and resources are being spent, allows them to re-allocate if needed, helps them provide visibility to their business colleagues, and allows them to manage performance by exception. Most of this work can be performed by the PMO and project managers, with the results distributed to all stakeholders.

Portfolio Planning requires a bit more effort and requires stakeholders to actually get involved. Many companies have serial, or ad hoc, demand management processes. This path of least resistance requires specific steps be followed,—such  as a business case, formal review, and funding approval—be followed. However, by not comparing all requests, serial demand management suffers from prioritization issues and project churn, often since higher priority projects interrupt already approved lower priority projects. By show of hands, this was the most popular, though definitely not the majority, method in use by these PMOs.

Cyclical demand-management reviews on a regular cycle – often monthly or quarterly –forces project stakeholders to compete for resources to support them where a cross-functional steering committee often makes the final decisions. The result is a high-priority portfolio where investments are strategically aligned with corporate objectives. The roadblocks center on getting those cross-functional reps engaged – and getting reps that can actually make decisions!

Of all the components of portfolio management, one would think results would be the most important. And most everyone in the room felt the same. So why is it so rarely practiced? In a word: accountability. To work, business sponsors need to not only to present a business case, but propose metrics that actually get measured post go-live. These measurements might be taken in increments for months or even years in order to fully understand the impact of a given project. Turns out business sponsors know they need certain work (aka projects) performed, but don’t want to take the time for full ownership of the results.  

How did the few that successfully implemented benefits realization manage to overcome this organizational resistance? Typically, it was a CEO mandate. Proving once again there’s nothing like good executive sponsorship to drive success.

We recently bloggedabout key takeaways from the Gartner Symposium / ITExpo, noting a few things that CIOs are likely to be concerned about in 2012: (1) CIOs want flexibility to fall back to a Plan B, if Plan A doesn’t work out, (2) IT budgets will likely be flat, and (3) IT will focus on creating measurable, financial benefits for the enterprise.

In this “New Normal” environment of business uncertainty, there are some critical steps CIOs should consider to ensure they manage IT through the volatility and maintain healthy relationships with the business.

Here’s the checklist that every senior IT leader should consider for 2012:

1.) Create Visibility and Plan Accordingly.

Too many IT organizations are unclear about their priorities and the actual work they do from week to week, including software projects, infrastructure upgrades, enhancements, and “keeping the lights on” work. At a minimum, a CIO should have a well-defined list of projects updated monthly so she can see the forest for the trees. If a CEO needs to scale back costs mid-year or increase investment due to some positive economic signals, a CIO will be able to make strategic and tactical decisions based on accurate information.

2.) Implement a Governance Process for Unplanned Demand.

With a baseline understanding of the work being undertaken in an organization, a CIO must ensure that the IT group doesn’t become overloaded with new, unplanned work, especially if resources are tight. Without a governance process, it’s all too easy for a business unit to demand an urgent new project and bring existing work to a standstill due to project overload. Instead, put a steering committee in place to convene monthly or quarterly to prioritize demand and approve new projects.

3.) Understand Scope and Capacity for Agile Demand.

Even though it might appear there is budget and resources to take on new work, there may be hidden issues if an organization doesn’t plan in advance. Most IT organizations need to plan for non-project workloads, such as production support and administrative work. In-flight projects should not be interrupted, as this causes excessive churn. In addition, there may be future commitments, such as a new major IT project for a seasonal launch in three months, which will consume resources. If an organization doesn’t account for new projects ahead of existing commitments in a smart way, this can lead to resource contention and delays. Furthermore, if there are strategic reasons to keep some capacity available to manage, say, a potential acquisition, capacity planning enables an IT organization to remain agile and maintain service delivery.

4.) Drive IT Consensus at the Corporate Level.

If a CIO is prioritizing on behalf of the business units, it’s the equivalent of having a target on her back and it’s unlikely she’ll survive long. In an era of scarce resources and tough prioritization decisions, it’s critical that these choices are made by the business and not by IT.  I once brought a list of major projects to an executive team meeting. The list was obviously overwhelming, and a VP wondered how the list would be prioritized. “That’s why I’m here” was my response, at which point each VP started lobbying for their pet project. At the end of the meeting a broad consensus was reached based on corporate – not business unit – objectives.

5.) Communicate the value of IT in business terms.

CIOs are chief information officers, not chief computing officers. IT is part of the business – not separate from it—and IT must communicate accordingly. IT must lose the habit of speaking in technology terms and learn to express benefits in business-oriented language. A great example is defining IT in terms of business services that align with business groups and capabilities so the business value can be clearly articulated. Implementing a Sales Force Automation (SFA) tool does not tell a business executive anything of value. Telling the Sales VP that you can help him manage the incoming leads and give real-time visibility into the sales pipeline – that’s gold.

This checklist is a roadmap to success. If a CIO has most of this covered, she will be well positioned to manage the IT organization through the uncertain times in 2012.

GUEST POST BY: Alan Shefveland

“If anything is certain, it is that change is certain. The world we are planning for today will not exist in this form tomorrow.” – Philip Crosby (Quality Guru)

In this three-part series, I’ll attempt to discuss the importance of portfolio planning and provide some insights on portfolio management best practices in process, metrics, and reporting. I’ll attempt to provide an understanding of why we do portfolio planning, introduce a framework to plan the portfolio and discuss some techniques and guidelines to plan a portfolio.

I have had a number organizations tell me “just give me the process and I’ll execute it,” but portfolio planning is more of an art than a process. Tools like spreadsheets, metrics, scorecards, and investment maps can provide insight based on past experience, but you still need to make the decisions.

Today an enterprise has (or should have) a well-defined strategy that outlines its performance objectives and how it plans to reach them. In order to deliver on those objectives the enterprise organizes into multiple business units or organizations with their own unique operational objectives that contribute to the enterprise. Classically these organizations are focused around the operation of a specific asset type of the organizational value chain.

Portfolio planning is unique to the asset type, the distribution of assets, and to the performance objectives of the portfolio - not all portfolios are the same. For example:

• Enterprise portfolio versus organizational portfolio
• New product development versus IT
• Initiative versus program versus project
• Management of assets versus management of delivery

All of these are important portfolios for an organization; however, for the purpose of this discussion I will focus on an organizational portfolio of projects to manage delivery.

There have been a number of books, whitepapers, vendors and consultants that have provided us the benefits of having a portfolio, but for project portfolio management it boils down to three major points:

1. Capital constraints – we’d all like to have a blank check, but we know that’s not practical; 
2. Resource constraints – not enough or overworked staff;
3. Or both.

One of the best references for portfolio management has been the Coopers and Edgett book on portfolio management. Besides the outstanding examples on metrics and other tools for portfolios, the authors were successful in conducting a syndicated study on portfolios and metrics. The study covered 205 companies in North America; mean size of company was $6.4 billion in annual sales.

The conclusion they came to was that companies exceed business performance when the portfolio processes possessed these characteristics:

• Projects are aligned with business objectivesPortfolio contains very high value projects
• Spending reflects the business strategy
• Projects are completed on time
• No “gridlock”
• Portfolio has a good balance of projects
• Portfolio has the right number of projects

So that’s when it works smoothly. What happens when things go off track?  In my next post, I’ll discuss the pitfalls of portfolio planning and address how to keep portfolios on track when dealing with non-structured portfolio activity