In this article I want to share with you three of the most common signs of trouble in a Project Portfolio. If any of these sound familiar, I hope the insights I provide, which I have learned the hard way in my years of experience, will help you to adjust and mitigate risks early. However before we jump straight into the sordid details of the problems, it is important to understand how your portfolio has been established in the first place.
For most organisations, simply keeping the lights on and running the business will never be enough - just ask Kodak. For those that want to evolve sustainably there will be a need to constantly change and build bigger, better or more efficient products and services. This is the demand that will eventually cause organisations to establish a project and it is unlikely, unlike Highlander, that ‘there can be only one’. All of a sudden you have multiple projects and as a result you have a portfolio. Having more than one project does mean that you have scale and of course there is a tremendous up-side to that. However, it is important to not get lost in promises of bigger and better returns without keeping a close eye on the risks.
One of the biggest risks in any portfolio is where your individual projects compete with each other - for investment dollars, for resources and for the hearts and minds of end users when projects release value. This competition is difficult to manage and as a result, failing to manage it can be catastrophic for the project and will likely have ramifications for the broader portfolio and even the organisation itself. It is the Catch 22 of Portfolio Management where scale has a direct correlation with risk - the more projects, the higher the likelihood you may see some fail.
Now before I get too doom and gloom on you (yes, I know I used the word ‘catastrophic’) every risk or issue provides a learning experience. One of the greatest processes in Project Management is to retrospectively review issues and failures as well as successes, to iteratively improve. By sharing these we can identify certain problems and use tried and tested mitigation strategies to course correct and, most importantly, better yourself and your portfolio.
While my ego will definitely prevent me from dwelling too much on my failures (As Stephen Hawking put it “We spend a great deal of time studying history, which, let's face it, is mostly the history of stupidity”) there are many experiences that I can share which I believe can help the wider Project and Portfolio Management Community. Ultimately if you can spot the early signs your Portfolio is in trouble, you can intervene early, fix the problem and use the experience to improve Portfolio Management competencies. While there is a potentially long list to choose from, the following have been some of the most critical in my experience and if any of these sound familiar, I hope my suggestions help you to take immediate action.
1. Organic Portfolio Growth
I mentioned earlier in this article about portfolios being created once organisations establish more than one Project. What can happen if the Portfolio is built from the ground up (from a collection of projects) is that the Portfolio Management processes are a bit accidental.
Signs where you have an organic portfolio like this can include:
- The same roles you had for Project processes are the same for Portfolio level processes just now with additional responsibilities;
- No demand management process or metrics - just a pile of business cases in the ‘in-box’ for approval;
- Bottom up reporting - subjective project information creates the Portfolio view.
Without a distinct Portfolio framework and governance, Projects tend to get used in such a Portfolio as augmentation of existing operations. What this means is that your Investment budget, earmarked for projects, gets used up by Operational Managers who submit a project to overcome their operational constraints (need more people and dollars to ‘run’ my business). These projects are almost never strategic nor will they be likely to benefit the entire enterprise or deliver true value.
The good news is setting up a Portfolio properly can be done at any time, in fact it can be easier setting it up around existing projects. The key is to establish Portfolio Management tools, techniques, processes and most importantly, metrics that the enterprise can follow.
Your CFO may not like it but ultimately you will need separate roles and responsibilities for proper governance which can add overhead costs. One option to avoid adding more cost is to consider it part of the overall Investment budget not a new cost. Every project business case pays a ‘tax’ which means the dollars required to govern the project or use the licenses for tools (as some examples) are considered project costs. Everyone pays a small % of the costs for the collective benefit.
Once you have your framework, set up the metrics and demand management processes that will show clear alignment of projects to strategic outcomes and allow for greater visibility in execution.
It will allow for governance forums such as Project Investment governance committees who review project requests but be careful that these don’t just add to your problem (read on).
2. ‘Yes’ is the answer to everything
Out of the last 10 project approval requests you saw in your Portfolio, how many had been rejected? If the answer is none, meaning that all 10 were approved, you need to urgently have a closer look at your demand management and governance processes. Most people see a ‘no’ response as being a bad thing but very few quality control metrics have a pass rate of 100%.
When a Portfolio is passing through every project that asks for investment, there is likely to be a number of low quality / low value projects being approved that end up competing for the same resources as the high quality / high value ones. The impact of a low value project failing might not be major but think about the consequence if it takes down your flagship strategic project with it.
Ideally your Portfolio is governed by a forum or Committee that can oversee and approve new project requests. However just having one is not in itself a solution. In many Portfolio governance committees, there is a remit for progress which means that saying ‘no’ to a request is a bad thing given it will hold things up.
Take a closer look at the Terms of Reference for your committees and focus on demand management metrics that establishes a high benchmark for project approval. Where a committee can use data to make decisions, they will inevitably be better and remove subjectivity.
This should mean a ‘no’ or rejected approval request is based on what is best for the portfolio and not something to be feared. It can also remove decisions that are based on politics or power and remove the concept of ‘lobbying’ in a portfolio where a new project wins over approvers or uses personal relationships which results in bias in a decision.
3. You can’t see the wood for the trees
At no time ever has there been a scenario where an operation or process can be completed with no or low visibility. No matter what the size of your Project Portfolio there is investment at stake and misuse of those dollars will definitely have far-reaching impacts.
A Portfolio will have data and as a result, it will also have data and as a result, information (those of you familiar with the below image will know where I am going with this).
However insights that can help decision making in a portfolio can only come with a proper strategy as to how that data will be used. So to explain my ‘wood for the trees’ idiom reference, you need proper insights to see what is really going on rather than be satisfied with noting basic data points. What you need is wisdom.
As mentioned earlier, the most common mistake is to allow your portfolio data to be established bottom-up. What this means is that the Portfolio simply inherits the attributes of the project. As a result, reporting processes are subjective and insights will be biased. An example of this is project status reporting. Unless the data collected independently summarises information they are pretty useless and you’ll end up with a ‘watermelon project’ which is green status on the outside which you can see but red status on the inside which you can’t see without getting into it.
Instead it is important to set up a proper portfolio hierarchical data model and data strategy. Define the questions you want asked and structure your data and processes to answer them. An added benefit is you can then automate your reporting rather than waste Project Manager time writing it.
It's always a bit uncomfortable but equally cathartic writing about past mistakes and I will always keep thinking about what I can learn from these experiences. The good news is there are so many successes that can come from good Portfolio Management that can be a game changer in the success rates you will start seeing. Early intervention is key and if you are going to fail, fail fast, stop doing the process that is not working and iteratively improve.