Project Portfolio Optimization

Danica -

Assuming the governance committee is looking to allocate a fixed capacity (i.e. there is no easy way to expand it), then when a new project emerges and it is determined that it must be started right away, then some other (lower priority) project likely needs to be put on hold or terminated to free up capacity. Alternately, the new project goes on the backlog and will be initiated once capacity frees up.

Kiron

Danica,

yes, capacity per skill area is the final criterium to decide if a project gets added to the existing portfolio and if a running project may be canceled or stopped. Being able to stop running projects is a measurement for portfolio management maturity and empowerment. If you stop zero projects, maturity is probably low.

This means that the key criteria like ROI, compliance project, strategic fit etc. result in a prioritised list of projects and maybe the #1 project maybe not the best selection in regard to capacity.

On top of this, if you include programs, they can select their own portfolio and mostly own their own capacity, but if they ask for organisational capacity are subject to the same selection process.

Capacity per skill area has to be planned and particular consideration should be on bottleneck resources as they may slow down the whole portfolio if not addressed properly.

Thomas

It is much to write from my side but just to direct you to something I am in charge to implement today and I saw it works I will write the following. In my actual work place we are using Lean Portfolio Management. As the process to use it we are implementing SAFe which is created for IT but it could be used, at least in my experience, for any type of solution. But, SAFe or not (generally speaking I do like SAFe) my recommendation is take a look to LPM (Lean Portfolio Management).

Hello Kiron,

Yes, there is a fixed capacity that will be allocated for projects. Only around 20% of their total manpower hours.

Thank you so much for the input. So if new projects are added, another prioritization of projects must be done?

Whenever the term optimize comes up, the first question is "What do you mean by optimal?" Portfolios don't all have the same objectives which drive priorities, and often people sub-optimize to one important variable without considering the others.

You must decide what are the strategic goals of the portfolio and what project attributes promote those goals. Cash flow, throughput, product performance, workforce capacity, and error reduction are examples of dissimilar goals that could be achieved by projects, so identify which are important to you.

At the beginning of the pandemic, I was managing a portfolio of cost improvement projects. At that time, ROI was a major priority in what was worked with the available resources. After the pandemic changed the business environment, the priorities changed as well including things like what we could quickly complete with the remaining people. That is an example of how priorities not only differ between portfolios, but how they may change over time.