Common Pitfalls in Project Portfolio Management Part 1

Common Pitfalls in Project Portfolio Management – Part 1

This is the first of two parts of this article on PPM pitfalls.

One in six projects is a “black swan,” or a project that goes so badly it threatens corporate financial stability. Now more than ever, companies must critically examine their project portfolio management (PPM) processes for optimizing success.

Organizations are continually asked to do more with less. The temptation to short cut project governance processes that are perceived as unneeded or a waste of time increases with every additional project added to the company’s workload. Ironically, it is usually short cutting the process that leads to manifested risks, increased costs, and additional workload.

It is our experience that the problem is typically not the governance process itself. It’s the perception that the process is too complex or too time consuming. Unfortunately, this leads to common pitfalls that are not accounted for as the corporate governance system is designed or modified.

How can companies ensure that their project portfolio management system is used effectively and reaps the expected benefits? To explore this, let’s examine the major components of an effective PPM system. In this first part, we’ll cover corporate project and program governance. In Part 2, we’ll look at project analytics and corporate strategy and culture. We’ll examine the problems typically encountered and make recommendations that could prevent or solve these problems.

Corporate project and program governance

Demand management can result from numerous sources, including corporate strategy (transformed into objectives and projects), balancing or aligning the current portfolio of projects as a result of change or new directives, and the “raw demand” of needs that result from daily operations and often take the form of ad-hoc requests from individual contributors, teams, and others.

Common pitfalls

Organizations will often take the “crawl before you run” approach to project governance for reasons that make sense during the period of transition to a new method of governance but many times lead to a number of problems later on.

Developing governance bodies asynchronously: Governance bodies should be set in tandem at the division and corporate levels. Launching a corporate-level body without a corresponding division-level body will result in a lack of confidence by division-level managers and below in the corporate-level body. Doubts will arise that the group has all the information it needs to make educated decisions in forming and adjusting the project portfolio while accounting for stakeholder needs. Similarly, corporate-level management will often doubt decision making at the division level. As division-level management feels the pressure to deliver “everything,” corporate-level management will begin to question priorities and financial decisions as the portfolio is filled to capacity (and beyond) due to the division level manager’s fear of saying “no.”

Failing to fully leverage project analytics and establish formal decision-making criteria: While there are hundreds of portfolio management tools on the market today, all of them are useless in performing project portfolio analytics without guidance from governance bodies. The two must go hand in hand.

We often see decision-making criteria that are not aligned with corporate strategy. This leads to a disjointed, complex, and (sometimes) agenda-driven approach that may benefit certain divisions, while not necessarily delivering on corporate strategy. Decision-making criteria should be aligned with corporate strategy goals, documented, and reviewed regularly with governance teams.

Many governance bodies do not plan for their own decision-making process, seemingly expecting executives and directors (who have their own agendas and objectives) to make collaborative decisions in a fact-based and objective manner. Failure to achieve governance level goals often happens because new behaviors were not defined or planned for. Additionally, decision-making criteria are often focused solely on demand intake, and not portfolio balancing. Corporations that are mature in portfolio decision-making will have often adopted decision-making tools to assist in the process. Many have even established strategy-aligned attributes or questionnaires for evaluation in project charters, SOWs, or other project artifacts to streamline the evaluation and portfolio balancing process through the formal governance channel.

In addition to supporting demand intake, PPM analytics should be provided (no matter the maturity level of the tool or process) to include, at a minimum, some level of understanding of impact to the current portfolio of projects. We often hear clients make statements such as “we’re not good at forecasting” or “we are immature at capacity planning,” yet they conduct these activities informally each day. We have seen clients successfully use spreadsheets at the initiation of project portfolio management to gauge staffing bottlenecks. Using common sense and basic understanding of the resources available, they begin changing behaviors and focus on a more objective and fact-based approach that aligns with corporate strategy. By doing so, clients are far more successful in growing into enterprise-level project portfolio tools because the decision-making criteria and decision-making process have been established.

Failing to formalize the governance process: Formalization means a number of things when it comes to project portfolio management. Chief among them is the need to clearly identify from the top down all project governance objectives, procedures and desired outcomes. We sometimes see clients attempt to launch project governance bodies in a bottom up manner or with little support from the C- Suite. Simply put, organizations that sidestep this critical item are doomed to fail.

Governance comes with a significant set of changes related to people, process, and technology (PPM tools, Help Desk tools, etc.). Without a plan to understand current behaviors and required future behaviors, and without consistent, visible support from senior management, the probability of success in this endeavor will be very low.

Plan to have as a major sponsor for your initiative a significant C-Level influencer who is visible at all corporate-level governance meetings and appears at division-level meetings from time to time. Additionally, have a plan to reinforce new decision-making behaviors that will initially challenge the organization. Formalization will lead to documented staffing plans, business cases, and dependency mapping across projects; change management addenda; and more. These may be new to the organization, but they are required to perform adequate, fact-based PPM.

Companies that are mature in formalizing the PPM governance process typically employ business-relationship management to ensure a focus on IT-business alignment. By working with a focus on each corporate line of business from a centralized unit, demand can be reviewed in one “source of the truth” (typically a combination of request management and PPM tools) to gain further efficiency in the governance process.

To learn more about Wavestone US’ services, visit https://www.wavestone.us/capabilities.