It's a common, dangerous problem for organizations.
For a variety of internal and external reasons,
projects gradually get out of hand. Before a
company fully realizes the impact of the situation,
they've spread their resources too thin - especially
their people - and their established business
strategy
becomes disconnected from day-to-day operations.
To achieve organizational success requires a strong
alignment between strategy and projects. This
means every project must focus on executing the
company's overall strategy (See our issue: Make Your Company
Vision a Reality - The Critical Role of Strategic
Planning)
What Causes the Disconnect?
Projects become disconnected from strategy
because of internal and external factors. Internally,
a manager may develop an interest in a specific part
of the company and initiate extra projects to serve
his interest. Another may think that creating the
perception of being proactive will help her cause
when review time comes along, so she may start a
pet project as a way to showcase her talent.
Externally, a competitor may introduce a new
product or service or land some substantial
publicity. Your company may roll out initiatives in a
knee-jerk fashion as a way to ward off the perceived
threat of the competitors' developments. Or your
industry may suffer an unexpected downturn from
unforeseen circumstances. You develop projects to
turn things around. But if these initiatives are
introduced without considering your business
strategy, it's easy to see why the company could
founder.
Too Many Projects, Too Few Results?
Here are some reasons why initiating too many
projects or a high number of low-value initiatives
creates an organizational challenge.
- It spreads your people, capital and discretionary
funds too thin.
- Projects are viewed as separate entities that are
not linked to the organization's strategies.
- Projects are driven by individuals, rather than by
the business.
- Redundant projects exist across the
organization.
- Some projects may conflict with others within the
organization.
- Projects are begun based on someone's "gut" and
not on the established business strategy for the
organization.
So what can a company do to ensure that projects
are developed and executed to fulfill strategic goals?
The key to success is to implement a portfolio
management system.
This formalized review process involves decision
making, prioritization, monitoring and measurement.
It helps management understand the project
objectives, costs, timelines and overall fit with the
strategies of the organization. Through portfolio
management, the organization can assess the
tradeoffs among competing investment opportunities
in terms of their benefit, costs, and risks to the
business.
The result is that the organization can decide on a
cross-enterprise project mix that makes sense and
allows for the proper allocation of resources to each
project.
How Portfolio Management Works
The goal of portfolio management is to facilitate
informed decision making related to projects. It
includes the following components:
- Identification - taking inventory of
current
projects
- Evaluation - learning the business case
and
resource requirements for each requested project
- Prioritization - the ranking of projects in
order of
business importance
- Investment - the assignment of
budgets
- Accountability - the ongoing reporting
and
evaluation of projects
- Measurement - an understanding of how
the
project is meeting, or not meeting, expectations
Success Factors for Portfolio Management
A portfolio management system will work only with
complete buy-in at the executive level.
In companies that use the system successfully, an
executive team or cross-functional senior
management team meets annually to establish a
portfolio plan that includes a detailed budget
outlining resource, capital and discretionary funding.
Then at regular intervals - monthly or quarterly - the
team reviews the organization's entire portfolio.
This commitment to ongoing review helps keep
projects and people on track. (See sidebar for
components of a successful portfolio review.)
Organizations that adopt and execute an effective
project portfolio management system will see its
potential to improve customer satisfaction, minimize
risks, improve employee morale, and increase their
overall success
