High-Performance PPM: The Essence of Effective Management

What’s in a Name (or Acronym)?

Consultants are well known for their love of acronyms. BPR and BPO. OCM, SCM and CRM. SWOT and COTS. RACI, TQM, MMEE, etc., etc. (Can you tell which of these I just made up? See answer below). The problem with this alphabet soup is that it’s not always clear what’s being talked about. Take BPM – is it business process management or business performance management?

And then there are the multiple acronyms that refer to similar processes or technologies. For example, CPM, corporate performance management, means much the same thing as enterprise performance management, or EPM (to say nothing of BI or BPM).

Because we are pragmatists at heart, we at Infinitive believe acronyms don’t matter much provided everybody is on the same page in defining what needs to be done and then doing it in the most efficient and effective way possible.

Which brings us to Project Portfolio Management (PPM) and Portfolio Management (PfM). In our view, these acronyms refer to nearly identical and strategically critical disciplines that exist at the crossroads of several other important capabilities, notably project management, program management and CPM (there’s that acronym again!).

Effective PPM/PfM fundamentally equates to effective overall business management. No matter what your organization may choose to call them, these capabilities can be game-changers in their ability to deliver bottom-line results by ensuring project portfolios are lean, strategically aligned and effectively managed. To instill, establish and improve their PPM/PfM capabilities, most organizations should focus on a few building blocks and enablers, which I highlight below.

Defining Our Terms
For the record, here is our definition for PPM/PfM:

The continual process, typically executed by a review “board” consisting of key stakeholders, of evaluating and prioritizing a collection (or program) of projects throughout the project lifecycle to ensure that budget and resources are appropriately allocated so that business goals and objectives are achieved.  

To a large degree, it all boils down to making choices. PPM/PfM are all about selecting (based on a clear evaluation of all the options) the right investments and activities based on the company’s goals, objectives and available resources. As those goals and objectives are moving targets, the process of evaluating and selecting must be repeated. That’s the big idea – PPM/PfM is a repeatable and continuous process, not a one-off event or task to take on during a crisis or to check a box.

It’s important to remember that making choices can be very difficult. Choosing X may mean not choosing Y (even though they both might have passionate advocates). Even if you choose both X and Y, one may merit more funding or a larger team. The decisions get even tougher when existing projects must be assessed against new investments.

For all these reasons, the company that has complete and reliable data (notice I did not say ‘complex’ here – simple is almost always better), appropriate inputs and strong, accountable decision-making processes has a significant advantage. It is impossible to overestimate how important the right tools and processes are to reaching the right decisions.

Enabling Effective PPM/PfM

So how do you enable effective PPM/PfM within your organization? In our experience, a handful of critical steps are most powerful.

GOVERNANCE: Review boards or portfolio teams need the authority to decide which projects are selected and funded, and the relative importance or urgency for each project. This authority should be established through recognized and official governance (and with it should come decision-making processes and metrics). Senior executive sponsorship is critical to ensure PPM/PfM becomes part of the culture.

Established governance policies are also important for establishing accountability and stopping any second-guessing or politicking once “defunding” or “kill” decisions have been made. Advanced sign-off of these policies means criteria and authority can be cited if necessary. (Like we said, these can be tough choices to make.) Here again, getting buy-in from stakeholders to support a formalized process is critical.

CLEAR EVALUATION CRITERIA: Evaluation and prioritization exercises should apply to project requests and proposals, planned and green-lit projects, as well as active projects. The evaluation criteria for existing projects should include current performances, budget consumed vs. projection, resource requirements and availability, and stated goals and objectives. If any of these change significantly, the basic value proposition may no longer apply. For such cases, the decision to “kill” needs to be a viable option. Specific individuals or a designated group must have the authority to choose project investments, terminate underperforming ones or put others on alert status.

ACCURATE DATA: Both senior executives responsible for project and project review teams should have access to accurate and complete data to assess the performance of all projects on an ongoing basis. Ideally, the information should match up to initial project plans, and the specific criteria that were used to bless the project in the first place. Projects, just like financial performance, can and should be viewed in terms of “projected vs. actual.” Generally speaking, the better the data, the better the portfolio decisions are likely to be.

PREDETERMINED & ACTIONABLE “GATES”: But just having the information is not enough. Individuals who are accountable for PPM must, at pre-defined decision points linked to project timelines, decide the future and fate of the individual projects. In other words, action should be taken. In many cases, we’ve seen “gated reviews” that drive project visibility and accountability through phased funding decisions. Specifically, funding is only approved or released when certain milestones have been met.

In practice, however, gates too often become exercises in paperwork. Nearly all – we’re talking 99.9% – projects filter through all of the gates; that includes projects with dubious business cases and poor track records. We sometimes refer to this approach as “olé PPM” (red cape anyone?), and it’s dangerous in that it furthers the misconception that review boards and PMOs are bureaucracies without benefit. To extend the matador metaphor a bit further, killing the bull – poorly conceived or underperforming projects – is necessary in these cases.

THE RIGHT TEMPO: As for the timing of reviews and gates, we generally recommend that reviews of project portfolios take place on a regular and recurring basis. Depending on the size and breadth of your portfolio, monthly or bi-monthly might be the right tempo for reviews. At a minimum, they should take place quarterly. In our experience, companies that conduct reviews only annually or at new kickoffs have only limited success with PfM/PPM.

THE RIGHT TEAM: Clients often ask us where PPM/PfM should exist within the organization and who should participate in project review decisions. Large, cross-functional and enterprise-wide programs are ideally assessed regularly at the highest levels of the organization, and measured carefully against initial stated goals. For operational or business unit portfolios, PMOs may support the effort, or “review boards” may be a subset of a PMO, or even members from several PMOs across the organization.

Some senior management participation is advisable, though senior sponsorship is a necessity.

What’s most important is that management has an integrated view across the entire portfolio. The CIO, COO and CMO should not maintain separate portfolios. Program management offices, which may be involved in the PPM process, and are almost always responsible for executing on portfolio decisions, should be more granular in their primary efforts. Their responsibility is to gather data and keep relevant stakeholders and executives updated on status at regular intervals. In some ways, they play a decision support role.

A STRONG TOOLSET: This is where an objective toolset comes into play. Many companies evaluate each and every project on an ad-hoc basis. A typical scenario is that a manager or executive senses that a project is in “red” status and thus asks the project team for an update. After a scramble for data, which is hastily reviewed, the executive may organize a brief call with his or her peers. This is no way to make decisions about substantial investments.

At one Fortune 500 client, we created standards and tools to define the business case and objectives for all types of projects, as well as scorecards to benchmark progress and track performance on an ongoing basis. Defining clear and objective metrics – not every piece of data but only those that were most telling – that could be applied consistently was the key to success. There is no single tool that works best. Some companies use value-based scorecards that contextualize individual projects within the entire portfolio so that overlaps, conflicts, gaps and potential collaboration opportunities can be seen. Other firms invest more heavily in a “diagnostic” approach and tools to business case development; that is, they don’t start with a list of potential work to undertake, but rather with the business goals and then seek to identify the right projects to deliver against those goals.

In building the business case, companies need tools that allow them to factor in and consider many variables, not just cost. This is especially true in IT. Obviously, strategic alignment of every dollar invested should be viewed as a requirement, but impact on end-users, customers and suppliers, fit within the existing portfolio and the need for training and process re-engineering are important considerations in that they ultimately affect adoption and can become major stumbling blocks to achieving ROI.

Bottom Line: Maturity is Within Reach

PPM/PfM is a process, not an event, though too often it’s thoughtof as a one-off decision that must be made to invest in a new process or piece of technology. More rarely, it’s the decision to kill off an underperforming project. Again PPM/PfM is about making decisions about projects, not managing the projects themselves. It’s important to make the distinction so the PPM effort is not looked upon as micromanaging individual projects, but rather as necessary strategic oversight that sets the direction for the company as a whole.

As we see it, PPM/PfM is what management bodies should focus on. We should probably call this critically important practice “plain old management” (POM?). Indeed, organizations capable of prioritizing investments and allocating resources based upon objective and disciplined value assessments have a competitive edge over companies that pursue a fragmented or subjective approach. And those that are successful at doing this can call it whatever acronym they wish, because they will be MMEE (that is, much more efficient and effective).