This is the fourth in a series of blogs summarising key themes from the Managing Portfolios guidebook.
In our first blog we provided an overview of the Managing Portfolios Model including the 12 portfolio management practices encompassing Portfolio Design and Portfolio Delivery. But just performing these practices isn’t enough – we need to do them the ‘right’ way, and that means adhering to the six key success characteristics. The last insight blog examined the first three of these key success characteristics, and here we consider the remaining three: Active, Disciplined and Transparent.
Key Success Characteristic 4: Active
Russell Ackoff says, “A good deal of the corporate planning I have observed is like a ritual rain dance; it has no effect on the weather that follows, but those who engage in it think it does. Moreover, it seems to me that much of the advice and instruction related to corporate planning is directed at improving the dancing, not the weather.” The challenge is therefore to ensure that we ‘influence the weather’ with a bias for action by:
- Re-visiting the investment decision at stage/phase gates reviews at set points in the initiative life-cycle. The effectiveness of these (go/hold/stop) decision point reviews is enhanced where staged release of funding is also applied – so unless an initiative pass the relevant gate, funding ceases;
- Actively managing resource constraints and dependencies to improve the portfolio’s performance in terms of initiative delivery and benefits realization; and
- Capturing and leveraging emergent (unplanned) benefits.
Key Success Characteristic 5: Disciplined
Research by NPD portfolio expert Bob Cooper found that the difference between the winners and the losers is often not so much that the losers don’t engage in portfolio management, but rather that they don’t do it consistently – that is, they allow managers to bypass the agreed procedures and apply agreed decision criteria inconsistently. I spent some time with a large multinational organization that has won awards for its approach to portfolio management. The portfolio manager was presenting a session outlining the progress they had made and their priorities going forward. At the end of the presentation, one of the most highly regarded portfolio analysts leaned over to me and said, ‘Steve, it’s like Game of Thrones round here, all the senior managers are stabbing each other in the back’. I say this not to denigrate the progress this organization had made, but to highlight the challenges faced by many organizations in ensuring portfolio management is applied consistently in the interests of the organization as a whole.
Yet if we treat projects and programmes as investments (and we should), we should also expect see a return on investment where the benefits realized have a value (non-financial or financial) that exceeds the costs incurred. This requires discipline and consistency in application – including senior managers being willing to take the hard but necessary decisions to stop initiatives and re-allocate funding when required. Beyond this, we need to have checks in place to ensure that stop actually means stop. Too often in practice we encounter:
- ‘Zombie’ projects that somehow live on, funded from local budgets despite the best efforts of governance bodies to kill them off
- ‘Ghost’ projects that reappear after they have been stopped, presumably on the premise that people will have forgotten the decisions previously reached.
To avoid these pitfalls, the PfMO should ensure the finance department shuts the relevant cost centres. More generally, senior executives need to be prepared to call out silo-based non-compliant behaviours and encourage honest reporting.
Key Success Characteristic 6: Transparent
Portfolio management holds a mirror up to the organization, providing a clear line of sight in relation to the ‘what’ (the initiatives we are investing in) and the ‘why’ (the strategic contribution they will deliver). Specifically, portfolio management should provide a reliable and consistent view of the initiatives and the collective portfolio position on spend against budget, delivery against schedule, and benefits realization against forecast.
Transparency is also facilitated by the use of short summary documents such as:
- Investment scorecards and checklists for assessing attractiveness and achievability;
- Portfolio dashboard reports and one-page summaries of delivery, spend and benefits realization; and
- Graphical summaries such as portfolio ‘bubble’ maps.
Another way in which transparency (as well as stakeholder engagement and effective decision-making) can be facilitated is through an Obeya room where portfolio reviews are undertaken and the walls are used to display charts, tables and other data visualizations showing updated progress towards the portfolio objectives.
In the next Managing Portfolios Insight we will examine lessons that can be learned from the OKR framework.
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