Monday, December 3, 2012

The Science & Art of Portfolio, Program & Project Management

PMO’s leverage point is: Standardize with flexibility; Set Guideline, but not stifle the change, make a choice without chaos, focus on value, not just cost and schedule. 

There’s paradoxical view about PMO (Project Management Office) or PPMO (Program & Portfolio Management Office), on one side, PMO plays a significant role in project delivery,  portfolio optimization and governance; on the other side, from industry survey: In some cases, the IT organization's performance may improve once the PMO was eliminated.

The debate point is: Should project management be centralized or decentralized? How to maximize business value through portfolio, program and project management?

1. Three levels of transformation: portfolio, program and project management

There are three levels of business transformation management: portfolio, program and project management. Each level focuses on different objectives but works cohesively to deliver business value with effectiveness and efficiency.

  • Project management is doing things right: focus on delivering a tangible outcome from an individual project; The result is that organizations deliver projects on time and within budget, but the value delivered from those projects is not optimized or aligned to the organization’s strategy.
  • Program management:  Realizing the Benefit, it is the intermediate layer that is focused on the delivery of business benefits through the identifying interdependence of a series of inter-related projects.      
  • Portfolio management is doing right things: focus on the decision-making process around which programs and projects should be executed based on their alignment with the goals and objectives of the organization, also focus on preventing value leakage — is, therefore, getting increasingly more attention with large organizations that have poor visibility and control over their project portfolio.

2. PMO’s Pros and Cons

Project management takes a lot of work, and IW 2012 Enterprise Project Management Survey of 500+ business technology professionals revealed plenty of challenges.

Develop “dealing with complexity” mechanisms for managing enterprise projects. It’s not all about task management, nor is it about business process and strategy, nor is it about organizational behavior. Each one of these must be addressed to pull off truly effective business technology projects

However, from the other IW article: “Will most companies that implement a project management office take on higher IT costs without improving performance?” That's the bold headline of a Hackett Group study of more than 200 organizations. When projects don’t work out, there’s plenty of blame to go around, the factors include insufficient manpower and poor requirement planning,  lack of business engagement, a failure of executive IT leadership, a lack of support, training, documented requirements and sponsor involvement., etc. all are causes why many IT project might not have delivered expected results. Sometimes, the PMO and its project managers are what’s being blamed at as the problem rather than the solution. So what are pros and cons of PMO or PPMO?

  • Pros: PMOs can be incredibly valuable when they manage the right projects through to business-focused guideline and kill the projects that don't measure up. Smart enterprises also understand there’s going to be stuff that isn’t within the direct span of control of the PMO, define what should be in the span of control of the PMO, and what shall not. A success PMO or PPMO office will focus on five practices: Centralized IT demand management, accountability for business benefits, standardization of processes and architecture, program and project reviews, project risk/governance.
  • Cons: PMOs aren't right for every organization, creating a PMO under the wrong circumstances is likely to produce nothing but more project overhead and add another layer of management complexity. The survey also found that more PMO oversight doesn't necessarily improve business results. Some businesses shared their experience: "In a weak PMO, poor management of time, resources, requirements or customer expectations encourages shortcuts that increase design weaknesses that drive higher maintenance and support costs,".  In some cases, agile development and collaboration methodologies such as Scrum can eliminate the need for heavyweight PMOs. For example, organizations are still picking the more complex tools for the same reason they’ve established the “totally centralized” PMO, the reality is: that a diversity of tools will yield the best outcome. The small groups of employees who are free to choose an appropriate tool set and execute on their vision in a way that makes sense for the task at hand.

3. Portfolio Management

While some organizations may be excellent in the execution of project management, they may not have a mature portfolio management process in place, which causes issues with the strategy alignment of programs and portfolio. In order to make the portfolio executable, an organization needs to make sure that enough resources are available to deliver the programs and projects, also manage the interdependencies of the project via enterprise architecture framework. Further, the portfolio management process itself is a governance process which is usually tailored to match the organization’s type of business, culture and company size. The steps include:

1)     A translation of the strategy into initiative: Collections of programs and projects that are designed to help the organization achieve its targeted performance — are the means through which a vision is translated into practice. Strengthen the strategic alignment of programs and projects to prevent initiatives being undertaken that do not support the enterprise strategy; Strategic initiatives are not the same thing as strategic objectives or strategic goals. They are the vehicle for achieving a strategic goal; it is focused on the “how” rather than the “what.”

2)  The Rationalization of Programs and projects: Portfolio rationalization is an activity more critical than ever because economic cycles are getting shorter, and decision cycles are getting shorter. Most of the organizations concern on how to simplify things and create an infrastructure that can be more reactive & proactive to the needs of users? What can be condensed, consolidated, and thrown away?

Enhance the overall economic value of the portfolio in order to get the optimal return on investment. This step is focused on the tangible business benefits of programs and projects. The initiatives that defined at a high level are translated into project charters that should include action plans, a business case, scope, metrics and a risk assessment.

Risk plays an important role in this step.
Top-down-driven risk activities
• Risk review and monitoring of high-risk programs and projects
• Selection of portfolio with in line with corporate risk appetite
• Set risk  policies and standards

Bottom-up-driven risk activities
• Take project and program risk into consideration in portfolio decision making (risk intelligence)
• Risk management best practice
• Risk metrics: from tactical to strategic KPIs.

3)   The optimization of the portfolio: Enhance executive decision making on programs and projects based on company-specific criteria. Such as:  how does the initiative fit in the enterprise architecture, how do risks and interdependencies come into play, how does the organization deal with compliance initiatives. The decision framework and optimizing economic value for new or optimized initiatives come into play. Key input for portfolio optimization is a consolidated overview of all of the organization’s programs and projects. Such an overview would typically contain information about performance to budget, resource requirements, risks, business value, links to strategic objectives and interdependencies. In order to make the portfolio executable, an organization needs to make sure that enough resources are available to deliver the programs and projects,

In summary, PMO’s leverage point is: Standardize with flexibility; Set Guideline, but not stifle the change, make a choice without chaos, focus on value, not just cost and schedule.


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