08.06.2018 | News
Managing Change and uncertainty with strategic Project Portfolio Management
Increasing organizational agility with proven project management best practices
Thomas Martin, Senior Consultant, next level consulting
The last years have seen an increase in the speed and amount change often described as VUCA: volatility, uncertainty, complexity, and ambiguity. Organizations have responded in various ways: saving cost, increasing innovation, and digitalizing operations.
The underlying cause of the accelerating change is the fourth industrial revolution (4IR). Through the combination of technologies like Digitalization, AI, robotics, IoT, 3D printing, and blockchain integrated on platforms and exploited by ecosystems the 4IR promises abundant possibilities and automation potentials never seen before. The speed of change will increase even further. There is no end in sight. Many organizations realize that what they have done so far might not be enough. With the 4IR storm gathering strength, we realize that we needed to do things drastically different and become truly agile.
Does this hold true for everybody? Yes, it does. You cannot hide from this. But it will apply to you in varying degrees. The 4IR technologies do affect industries differently. Not everybody faces the same speed of and pressure to change. Depending on the speed of change in their sectors and their current (digital) capabilities companies might be able to evolve towards higher levels of agility rather than leap-frogging there like ANZ that replaced its traditional hierarchical organization with an agile organization comprised of 150 teams.
When we discuss with organizations their options to become more agile we first develop a clear understanding of where more agility is needed. For example, when facing customers, making decisions, or allocating resources. Agility comes in all shapes and colours. It unfolds its power in strategy, processes, systems, people, and culture. Achieving it is not a destination but a journey. To get started, you need to identify the first step and take it quickly. As you improve in one area, another will emerge that is holding you back. You address this one next. Achieving agility is an agile process in itself.
After identifying the area that requires higher agility you select the appropriate framework, method, or tool to apply depending on the situation and needs of your organization. There are quite a few ones to choose from including agile project management, effectuation, design thinking, holacracy, and projectization.
An often overlooked but well-established method that is amazingly effective in driving organizational agility is project portfolio management. In this article, I will explain why project portfolio management is a very practical and powerful way to increase organizational agility and how to implement it.
Projects in a world of Change
Projects are vehicles of change. We create them for two reasons: to fix current problems that hold us back and to implement new things to achieve our goals. Projects execute our strategy. They help us to get from where we are to where we want to be. In a world that is highly stable and predictable, we can plot a straight line from where we are and where we want to be. Then we plan the projects to take us there and execute them one after the other.
In a VUCA world, things interfere all the time: a new competitor, an economic crisis, a new technology. Project plans are often challenged as soon they are devised. Dealing with those challenges on a project level benefits from superior project management skills and an agile project management approach, for example. But executing in a VUCA world takes more than doing the projects right. We need to do the right projects. Even worse, what is right changes constantly as our environment changes around us as we go.
A Project Portfolio is a group of projects that are coordinated together, with the target to result in a greater benefit for the company in contrast to if they were coordinated separately.
Project Portfolio Management is a permanent organizational function responsible for the governance of projects to ensure achievement of the company objectives.
This is where project portfolio management comes in: It enables an organization to do the right projects by reviewing a group or all projects together and to keep them on track.
Signs that you may need project portfolio management include:
- Too many ideas, not enough time
- Constantly changing priorities
- Lack of resources
- Unclarity about the status of Projects
Project portfolio management is a permanent organizational function that continuously aligns:
1. Strategic objectives: What an organization wants to achieve?
2. Projects: How an organization executes to achieve its objectives?
3. Resources: How an organization optimally allocates people, money and other assets to optimize project value?
4. Environment: What are the external changes, developments and trends that may have an Impact?
The project portfolio management model described here is called strategic project portfolio management as it combines the external perspective comprised of the environment and objectives with the internal perspective comprised of projects and resources. Project portfolio management is conducted in project portfolio board meetings. They are held regularly (e.g. monthly) on a departmental, functional and/or company-wide level. Project portfolio boards meetings are moderated discussions between the business owners of the projects, typically executives or high-level managers. The moderator is the project portfolio manager, typically a member of the PMO.
Let’s have a look how those discussions take place from the perspective of the four areas of strategic project portfolio Management.
1. Strategic Objectives
Defining SMART objectives requires a realistic picture of your capabilities, capacity, and situation. For example, I have seen organizations who are limited in their ability to execute against their vision not by their imagination but by their access to Talent. As part of a project portfolio board meeting, you will discuss and decide how you need to adjust your strategic objectives in response to the insights you gained during executing your projects, changing resource situations as well as new developments in your external environment.
The continuous monitoring of an organizations environment falls in the hands of a strategic foresight function that conducts continuous horizon scanning e.g. using a PESTLE approach to identify, assess and priorities trends that are relevant for the organization. It then operationalizes those trends in two ways:
1. Suggest new projects in the area of innovation, risk mitigation or research to address and understand the trends better.
2. Informs the existing projects about changes in the environment that may impact them.
As part of a project portfolio board meeting, you will discuss and decide how to reassign resources, re-prioritize or stop existing projects or launch new ones as well as how to adjust your strategic objectives and KPIs in response to the environmental changes detected by your strategic foresight activities.
In a VUCA world, organizations need to change faster and undertake more projects. This not only increases the need for better project management skills on a personal and organizational level but can also lead to burn-out and attrition - often among your best people. At the same time, financial reserves are stretched thinner. Resource shortages are an increasing cause of project challenges with our Clients. As part of a project portfolio board meeting, you will identify resource shortages, discuss and decide about how to optimize resource assignments to the most value-adding projects and protect your people by re-assigning staff from one project to another, adding new internal and external staff or avoiding waste by stopping runaway projects that don’t generate benefits anymore.
Projects are the primary way to execute strategy. Projects with a clear and significant contribution to the strategy are often labeled “strategic”. Project portfolio management maps the strategic objectives to each project and tracks the contribution of each project to the achievement of the strategic objectives. As part of a project portfolio board meeting, you will discuss the status of each project and the impact of external changes on the project business cases and decide how their strategic objective mapping has to be adjusted and optimize the resource assignment accordingly.
Implementing project portfolio management typically starts with cataloguing all existing projects and making operational decisions about assigning resources to the currently running projects in one part of the business. It then moves on to include other project types and launch new projects while it is rolled-out to other parts of the organization and becomes increasingly strategic by considering environmental factors. Implementing project portfolio management successfully often takes two years. Not because cataloguing projects, writing portfolio reports and organizing portfolio board meetings is difficult but because project portfolio management drives significant cultural change.
Transparency, trust & alignment
Project portfolio management reports the status of projects objectively and shares it will all members of the portfolio board. These may be all executives and high-ranking managers of a company. Often, for the first time in an organization, this creates transparency on the status of projects in the area of responsibility of each executive. On a single slide it will be visible whose projects are running well and which are not. Some project sponsors may feel challenged by this. Blaming and finger-pointing may occur. At least initially.
With good moderation, this will change into a situation where the executives will trust and support each other to be successful with their projects. At that point in time, you will see productive discussions about how and where to assign resources from across the organization to optimize the overall achievement of the joint, corporate, strategic objectives instead of just the individual sponsors’ personal objectives. This creates a prosperous environment where executives align on the corporate priorities, collaborate effectively and make decisions jointly in the best interest of the organization. It is this optimal end that takes time to reach when implementing a project portfolio management function.
Such an effective project portfolio management can transform an organization from a hierarchical to an agile project-based organization. During its project portfolio management maturity journey, one of our customers started to dedicate more and more resources to managing through projects e.g. by using more dedicated, full-time project managers and adopting an agile way of managing the project portfolio that launches new projects as soon as resources become available.
Agility is the capability to respond to change effectively. Agility guarantees survival: responding to an economic crisis, countering a hostile takeover attempt or responding to the launch of a new product by your biggest competitor. Agile organizations require:
- Openness to recognize change early and create urgency
- Fast decision-making
- Flexible resource allocation
- Immediate execution
- Continuous adjustment
Strategic project portfolio management is a good starting point for developing many of those agility requirements. It facilitates openness, realism, and urgency by considering the external environment continuously and moderating a common perspective between executives about what is going on. It implements a pragmatic way for continuous executive communication, collaboration, and fast decision-making. It aligns external change with objectives, resources, and immediate execution in the form of projects. It is performed regularly and allows an organization to adjust its course of action continuously and learn. As a mature and proven method, it fits well into established organizations and is easy to implement. It does not have the novelty characteristics of newer agile methods that may make them harder to implement and accept.
Its high impact potential results from its positioning at an executive decision-making level in the middle of the organization. From there, it can bridge and integrate several aspects that together represent a large part of the essence of an organization and answer key questions critical for the success of an organization:
Strategy and Execution:
- What is achievable in the current Situation?
- What is desirable in the current Situation?
- Are we having sufficient resources in the right quality and quantity for our Projects?
- Are we on track with our Projects?
- Are we achieving our objectives?
Realism & results:
- Do we have an open mind and are we listening properly?
- Do we understand what is going on in the external environment?
- What are our capabilities and resources?
- Are we realistic about what we can achieve with our current resources in the current Situation?
- Are our projects producing the results we want?
- Do we respond quickly and powerfully enough to the challenges we face?
- Are the results we are producing sustainable in the long term?
- An organization that asks and answers these questions regularly is on a good track. It will remain agile and be seen as responsive to change.
Strategic project portfolio management is an established and mature way to establish a rhythm of regular executive communication that improves alignment and agreement about strategy execution. It is easy to implement, increases the strategic value of projects, and optimizes the use of resources. It contributes greatly to the success of the entire organization by increasing organizational agility.
Please feel free to share your thoughts with the author at firstname.lastname@example.org.