Project Portfolio Management -
The First Cut is the Kindest Cut
One of the common problems faced by project-oriented organizations is having too many projects relative to their capacity. Therefore, one of the first things that needs to be done is to determine what can be done is to determine what should be done . . . and what should not be done.
An appropriate priority process can be described as one that identifies projects that best support the organization's efforts for increasing its ability to achieve its goals. Assuming that we are talking about a for-profit organization, the goal is probably defined (or at least measured) chiefly in terms of making (more) money now and in the future.
Every organization, at any point in time, has some primary source of limitation - a primary constraint - impeding its ability to do more of what it's trying to do. Even more important, and useful to us as I will point out later, is the fact that this constraint colors the policies, practices, and resulting problems found throughout the organization.
One false step taken by many organizations is undertaking "improvement" efforts (and the projects that implement them) spread all around the organization, addressing the local symptoms and strengthening all of the links in the "value chain." (It's only fair. We don't want to shortchange any particular area. Otherwise they won't support our budget next year.)
The problem is that this is a significant waste of time and attention, because only those efforts that address the constraint (the weak link of that value chain) are worthy of being called real improvements. Improvement is not related to local changes in the individual links, functions, or processes, but only to the ability of the organization -- the entire chain -- to lift more weight, so to speak. Improvement only comes from the ability of the organization to acheive more of its goal(s).
Understanding this aspect of organizational systems and this definition of improvement, it becomes obvious that the projects that should be highest on the portfolio list should be those that address or support the major constraint.
The first step, then, is to identify the organization's primary constraint and an appropriate direction for an organization-wide strategy for dealing with it. Then, identify the projects that are most directly related to that strategy, and to the ability of other aspects of the organization to support it. Note that by focusing on organizational constraint issues, this ranking is more of a qualitative, intutive process more than a typical mathematical matrix. Obviously, a comparison of ROIs may come into play for fine-tuning, but if you start with addressing the constraint, the returns will be real and significant, and you won't go too far wrong.
My suspicion is that of most projects in a typical portfolio, there are actually very few that address more than just local cost-cutting efforts of questionable value; very few that actually support growing the ability to attract demand from the market and deliver against it reliably and profitably. Without an understanding of your major constraint and some rational direction for addressing it, any simplistic effort at rating or ranking your list of projects will probably fall short of what is needed.
The good news is that getting a handle on the constraint and a strategy for dealing with it is easier than it sounds, as long as the right people are involved. Since I would expect that unexamined portfolios cover most if not all of the functional areas of the organization, those areas all have an interest in the process for determining the priorities. Even more than that, the management team has the responsibility for being involved. A Program Office or Project Management Office can provide a process for understanding the constraint and prioritizing projects, but the top management responsible for the functions and processes have to provide the intuition and input regarding what is important to them.
TOC provides a process for quickly identifying the organization's real constraint for and aligning the individual functions with the efforts required to address it. This process is based on identifying the top functional problems and putting them in context with that constraint.
Remember that the existence and the nature of the constraint is linked to most major issues faced throughout the organization. Once management understands how the constraint is at the root of their own individual problems, they will quickly come to agreement on what projects are needed to address it, and more importantly which projects are not appropriate efforts for the attention of scarce resources. What better way is there to get an group of people behind an effort than to bring them to understand what is in it for them individually are solutions to their major headaches.
The process for doing the above can usually be facilitated with about a week of effort, assuming a typical participating management team of 8-12 executives with some minimal pre-preparation. Once an appropriate mind-set is developed through an introduction to the concept of the constraint as the appropriate center of management attention and to how it can be applied to a variety of typical organizational functions and processes, the actual process of understanding the organization's situation can start.
The first actual step is aimed at understanding the individual pains felt by the management team and the functions they represent, and from that understanding, dig down to identify the core, constraining issue. Frem there, directions for dealing with that constraint and for for the original individual problems that align to it, and through it, to each other. It is expected that a number of projects in the incoming portfolio will surface as supportive of these solutions, and a number of others will be obviously seen as of questionable value. After that, we assess any remaining "borderline" projects, identify precedences that will also guide priority, and finalize buy-in to the list as an appropriate portfolio for meaningful organizational improvement.
As a result of this effort, management participation assures appropriate input on what needs changing and informed intuition for developing what might be considered strategic directions. It also yields clear and consistent messages regarding the appropriate project priorities across the organization.
If you are interested in applying this process to your portfolio, please contact Focused Performance.
