03/01/2020 Deployment of Organizational Project Management Methodology

Deployment of Organizational Project

Management Methodology

WHITE PAPER ǀ PMO, Strategy, Portfolio Management ǀ June 2015

PMI White Papers
Aziz, Emad E.

How to cite this article:

Aziz, E. E. (2015). Deployment of Organizational Project Management Methodology. PMI White Papers.

Are You Doing The Right Things, Or Just Doing Things Right?
Aligning Information Technology (IT) investments with constantly shifting business goals and priorities continues to be a major
challenge for IT managers. In spite of the best efforts of management to improve project success, an unacceptable number of IT
initiatives continue to either fall short of, or simply miss their target completely.

There is no end to the variety of factors that can contribute to project failure and, as a result, IT organizations have invested heavily
to improve the predictability, productivity and quality of their output. While techniques such as estimating, risk assessment, process
management, deliverables management and project management improve project execution, they fail to address the more critical
issue of investment selection and improving IT performance. In short, the measures aligned with Project Management focus on
“doing things right” while, in many cases, the bigger challenge facing IT organizations is in Project Portfolio Management which
focuses on “doing the right things.” So it is not so much about productivity—but performance.

Clearly, most organizations have some form of disciplined approach to the identification and approval of new investment initiatives
and their related projects. The problem is that these decisions are often made with inadequate or inaccurate information about the
impact these new projects have on the existing project workload. Most project selection methods do a poor job of resource
balancing. The effect of this imbalance causes projects to compete for resources and eventually threatens the viability of entire
projects.

To make matters worse, once a project is doomed a decision is usually made to spawn additional, smaller, less ambitious projects to
compensate for the failure. The problem is compounded; the management of projects becomes more complex; and the project
portfolio starts to lose strategic alignment and value. This inability to focus, and achieve consensus on, “doing the right things”
invariably results in:

• Too many small, low impact projects

• Too many projects for the limited resources available

• Poor project prioritization; failure to kill projects

• Poor data on projects

• High project failure rate.

Although IT performance is measured on delivering projects on time and within budget Ultimately, IT performance is truly measured
by well it supports the organizations current, often competing and sometimes changing objectives. As a result, attention must shift
from incremental gains in productivity to monumental gains in performance by employing processes that continuously validate and
prioritize the strategic and financial value of all planned and ongoing IT project-oriented initiatives. This process, distinct from but
essential to project management, is the “management of the project portfolio” and it focuses the organization on achieving what is
needed, not merely on doing its best.

Project Portfolio Management

Project Portfolio Management is the continuous process of selecting and managing the optimum set of project-oriented initiatives
that deliver the maximum in business value or return on investment. It is a dynamic decision-making process, enabling management
to reach consensus on the best use of resources to focus on projects that are achievable and strategically aligned with their
business goals and objectives. Similar to your personal financial portfolio, your IT projects are investments and fall into a portfolio in
which you must manage risk and enhance your return and value.

A Forum and Protocol for Executives and Managers

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Unlike project management, Project Portfolio Management establishes a forum and protocol for executives and senior management
to collectively and continuously collaborate, agree and act upon the optimum IT investment portfolio that supports strategic
objectives, reconciles competing or conflicting priorities and is achievable given the organizations resource capacity and capability.

The foundation for this portfolio management process is a dedicated database of information about all project-oriented initiatives
designed for executives and managers to easily explore and maintain key project, organizational, financial, and performance data.
This foundation must provide the information needed to make informed, objective decisions about project justifications, priorities and
the allocation of scarce resources and:

• Maintain visibility of all key project information across the enterprise

• Collaborate using common and consistent information to reach a consensus on the alignment of projects with business goals and
objectives

• Access quickly and communicate all relevant information horizontally and vertically within the organization allowing objective
decisions to be made about project priorities, future investments and resource utilization

Exhibit 1. Project Portfolio Management Process

• Establish automatic alerts to notify appropriate individuals when critical schedule, financial or resource thresholds are exceeded or
project conflicts arise

• Forge a link between business strategy, project selection and project execution.

In many ways, poor project portfolio management is the result of a disconnect between the information and the processes used to
support strategic and operational planning and the project management systems that typically manage project execution.

Historically, organizations have attempted to improve project visibility by aggregating timeline, budget, progress, and expenditure
information from detail-oriented project management tools or Enterprise Project Management systems. In order for this to be
successful, all projects must be planned in detail and updated in a consistent and coherent way. This is rarely the case and the
resulting aggregate data is often inaccurate, outdated and misleading.

Recognizing that “all projects are not created equally,” project portfolio analysis tools are becoming more and more effective
regardless of a project's degree of definition or the extent to which detailed planning information is available. Selecting toolsets is
addressed in the Portfolio Management Process.

A Proven Portfolio Management Process

The diagram in Exhibit 1 reflects a proven and repeatable process for establishing and continuously improving project portfolio
management and optimization. This process contains four phases, which for the purpose of this presentation, are given “functional
titles.” The process begins with the Inventory Phase, an exercise in defining an inventory of projects and gathering project and
organizational data to support the second phase, Analysis. The Analysis phase is an exercise in summarizing and reviewing the data
and selecting projects. The third phase, Alignment, is an exercise in establishing metrics, modeling and balancing the portfolio. The
final phase is Manage, an exercise in mobilizing and managing the portfolio- performing project scheduling, accounting and
collaboration.

The Inventory Phase

Project information can be captured from any valid source including spreadsheets, project accounting systems, project management
systems or simply interviewing project managers and project participants.

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This phase defines your project portfolio and is used to support the Analysis Phase. Begin by capturing all projects under way and
gathering key project and organizational information. Identify what your project prioritization process or gating process is and decide
what you would like it to be. Determine your project categories and classify each project. Identify your organizations strategic goals
and determine which strategic initiative each project supports. Interview project stakeholders about their view of the financial and
non-financial costs and benefits of their projects—gather their requirements (fields) for this view.

How Much Project Information Is Enough?

While it may be desirable to have all of the organization's projects included in the project portfolio, it is not an absolute requirement—
smaller, shorter duration projects can often be safely omitted. Most organizations are knowledgeable on large project initiatives that
are under way, what they don't usually have any record of, if they don't have some sort of current portfolio /or tracking system is the
mid-size to small project initiatives. An effective portfolio management process can be done without have 100% of the projects into
the system.

Exhibit 2. Sample Project Folder Structure

To know if you have gathered enough project information, input projects into a system with basic project data (this could be as simple
as an Excel spreadsheet). The basic project data should include at a minimum; project name, descriptions, total assigned FTE's,
dollars spent to date and anticipated total spending.

Compare these totals against your planned budgets. If you have reached 80% stop! If you have not, and you are still looking for
projects, clearly you have a portfolio that is “out of control.” A primary area where your portfolio can become “out of control” is having
a vast amount of resources committed to very small and enhancement projects. Individually it makes no sense to track these in the
project portfolio.

Key Project Data to be Collected

The data collected during the inventory phase falls into two classifications, Project data and Organizational data. A key difference
between this Portfolio Management process and that used by others is the initial process of collecting project data. Rather than focus
on detailed project schedules and assigning people to specific project tasks, data collected during this phase is at the highest level
possible and is focused strictly on those pieces of information that will be used in the later Analysis, Alignment and Management
phases of this process.

Project Details
Gather all project details and attributes; Project Name, Project Code or Project Identification characteristics, Project Manager, very
brief description, major milestones, current status, resource assignments at the project level of % utilized and projections of resource
availability. Identify requesting organization. Identify high-level risks or key project interdependencies.

Identify current Projects by their Life-Cycle Phase. It is recommended that you create a generic Project Life Cycle in order to easily
track project status by life-cycle phases and related budgets. Many organizations create “Project Folders” and move the projects
from one Folder to another as projects progress. A sample Folder structure is displayed in Exhibit 2.

Define Cost Elements

• Identifying current and planned project costs to provide a hierarchy of cost elements. Typically, the highest levels of the cost
elements hierarchy are labor, material, and other direct costs.

• Identify how are actual costs captured—by project, by task, by department, by resource?

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• Identify how often are actual costs captured—daily, weekly, monthly, etc.

• Define what type of cost units are captured—hours, dollars, labor, material, equipment, etc.

• Define actual costs compared to budgeted costs—by project, by organization, by resource.

Define Business Value

• Prioritize each project by its business value of High, Medium, or Low. (This may require an interview with the Sponsor or
Executive)

Exhibit 3. Simple Portfolio Plan

• Identify each projects relative value as it relates to other projects in the organization using the recommended Five Point Scale; 0 1
2345?

• Identify the economic value or dollar value of each project's total expected business benefit upon completion. (This should be
included in the Business Case.)

Define Strategic Alignment

• Create a list of Strategic Objectives of Goals that contains all your organizations or company's major business goals. Assign a
single business goal with which the project is most closely aligned.

• Identify the Sponsoring Organization. This can be the executive sponsor's department, or another department within your
organization with which the business sponsor is associated.

Identify Project and Management Reporting Requirements

• Identify what are your project reporting requirements.

• Determine whether project planning information need to be summarized at all levels of the organization.

• Define what is the reporting frequency? Weekly, Monthly?

Organizational Data
During the analysis phase of this process, time is spent in analyzing resources. What type of skills does people in the organization
have, how many people have those skills, what projects are they assigned to and what projects don't have enough of the right
people. In order to do this level of analysis a resource pool data needs to be assembled.

Skills do not have to be detailed. The goal is to simply understand the primary type of resource that is required by the type of
projects they are working on. With this data you can create a high-level workforce plan. You can receive immediate value from
something as simple as assigning a single primary skill type to each individual in the resource pool.

Resource Pool
The key resource data collected should include:

• Resource Name

• Resource Primary Organization

• Primary Skill

• Financial Rate (It is suggested to use a fully burdened standard rate as a best practice so there might only be a few rates to chose
from).

Charge Back Codes

A best practice is establishing at least a memo charge back system. While this is in no way required as an initial step, collecting the
data on which department or line of business is requesting the project provides very useful information during the analysis phase.

Categorizing Projects and Creating a Strategic Portfolio Plan

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Most IT organizations are given an annual budget and are responsible for meeting either end user or customer demands in the best
manner possible. While this approach tends to over value the needs of the “squeaky wheel,” this approach can produce a portfolio of
reasonable value to its constituency. What this approach does not accomplish is optimizing the value of the portfolio based on
alignment to strategic goals and over all value to the organization or company as a whole. This process recommends establishing a
Categorizing System that breaks your projects into categories. Create your own or use the Meta Groups Categories.

Meta Group Categories

• Proposed Projects (for all the pipeline projects)

• Approved Projects (for all projects that are approved and have been funded but may not be active)

• Major Project (Meta group uses the term GTB—Grow The Business)

• Maintenance and Enhancement (Meta group uses the term RTB—Run the Business)

Exhibit 4. Generic Gating Process

• Completed (required to track post implementation return)

• Cancelled (basic data should be retained on canceled projects for future reference).

A Simpler Approach
A simpler approach is to define your projects into Growth or Survival categories. The definition of a Growth Project is: a project that if
not completed will have a significant negative impact upon the growth and or success of the company. New products and new
technology fall into this category. The definition of a Survival Project is: a project that if not completed will have a significant negative
impact on the business's operational survival or a project that is required to keep the “lights on.” Compliance, operational and
maintenance projects fall into this category.

The results of this exercise will establish a simple strategic portfolio plan (refer to Exhibit 3). The strategic plan will allocate a certain
percentage % of funds for both Survival and Growth—this is your portfolio of projects and the basis of your strategic portfolio plan.

Additional IT Classifications
To further define and manage your Project Portfolio mix, you may also classify projects into the following categories:

• Investment Types: Application, Infrastructure, etc.

• Infrastructure Types: E-Business, Information Access, Platform Standardization, Data Warehouse

• Application: Utility, Enhancement, R&D, etc.

Components of the Project Approval or Gating Process

• Identify who has the authority to create a project

• Identify how a new project is created, approved, and funded

• Define the flow of the Project Approval or Gating Process

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• Describe the gates, the criteria for making approval decisions

• Describe the role and the responsibilities of the Steering Committee or the Management body that authorizes and approves
projects and budgets

• Define whether standard Business Cases are used.

This process recommends that your organization adopt a standardized Business Case and Gating Process to support the Portfolio
Management process. A Sample Gating Process is displayed in Exhibit 4.

Benefits From the Inventory Phase

Simply completing the Inventory Phase of this process can offer organizations and companies' significant advantages. For example,
one company was able to determine form their inventory that they had a number of projects that were essentially duplicate efforts.
By canceling some of the redundant projects they were able to reassign resources and free funding up to do new projects in
strategically critical areas. Upon completion of the Inventory phase the newly constructed portfolio will be able to help Management
answer the following kinds of specific questions:

Exhibit 5. Bubble Chart—How Do You Align Your Technology With Your Business? (Courtesy Pro Sight Inc. Copyright © 2002.

• How many projects are there?

• How many maintenance and growth projects are in progress and/or contemplated?

• What is the value of the portfolio in terms of cost? By Category?

• What is the value of the portfolio in terms of benefits or opportunity?

• When is a project scheduled for delivery? Is the project late or on track?

The Analysis Stage

The Analyze Phase assesses the current strengths and weaknesses of the Project Portfolio—what are you doing well and what are
you doing not-so-well. There are many kinds of analysis that can be done simply by scanning the Inventory data now that it is
available and accessible in one place. For example:

• A simple sort by project justification may reveal multiple projects that are attempting to solve the same or similar problems. These
projects might be more efficient if they were combined, or perhaps some of them should be cancelled.

• A sort by resource category may reveal future shortfalls early enough to allow thorough consideration of the options: increased
headcount, use of contractors, or cancellation of some projects.

• A sort by user department may show that customer service is soon to be overwhelmed by the simultaneous release of three new
application systems.

More sophisticated tools can be used to illustrate the degree of alignment between the current inventory and the organization's
strategic priorities. For example, bubble charts (such as the sample chart below) can provide graphical views of:

• How do you align your technology with your business

• The resources (both people and dollars) that are being committed to each major strategic initiative.

• The overall risk of the project portfolio as a whole by comparing the probability of technical success against the anticipated benefit
from the project.

Once the analysis is completed, executives and managers can view the portfolio in a wide variety of dimensions. After this stage is
completed, a clear understanding of the entire project portfolio model will be presented.

The following sections describe some basic analysis that may be done on the portfolio to address the areas of Alignment,
Performance, Balance, and Value.

Alignment
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In the inventory phase most projects were at least superficially aligned to the strategic goals set by the company. In the analysis
phase, the process entails digging into the results of the inventory and making sure that things are aligned in a number of different
ways. The types of alignment analysis that can be performed during this phase are:

• Are the critical resources working on the critical projects?

• Are their projects aligned with all the strategic initiatives the company wants to under take?

Performance
Analyzing the project portfolio isn't simply an intellectual exercise and it absolutely isn't as simple as running a number of formulas.
One of the key variables during this phase is understanding what, on the long list of things desired, is actually possible to achieve.

Achieving Resource Capacity

Success in this area is dependent on having the right resources available to do the work. During this phase obvious resource
shortfalls identified during the inventory phase can be analyzed to determine possible courses of action. Possible types of analysis
might be:

Exhibit 6. Metrics Table

• Evaluating projects with shortfalls to see what project phase they're currently in. (If two projects have an impending requirement
and are in early phases, it might be possible to consider whether or not they can be postponed until existing resources free up or
whether or not they're so critical they require resources off another project).

• Determining long-term courses of action. In the short-term resources might have to be moved, or contractors hired, but in the
long-term, additional resources can be trained or new people with the right skills can be hired.

Dependencies and Conflicts

From a portfolio project perspective, project dependencies show the inter relation from one project to another. When you are
evaluating any given project analyze what dependencies are on other projects and what projects are dependent upon it. This puts an
emphasis on project performance even more then project value.

Achieving Balance
Strategic Fit—The portfolio should be reviewed to determine the degree of strategic fit—there should be a balance between near-
term growth opportunities, the need for long-term technology-renewal goals, and the drive for developing long term innovation.

Strategic Alignment—Once projects are aligned to a strategic goal, the next factor to look at is the number and nature of these
projects. Many companies have repeatedly found when they reviewed their portfolio; the distribution of projects aligned to different
strategic goals didn't make economic sense. They would never have realized this fact if they hadn't looked at it from a project
portfolio perspective.

Probability of Success—This analysis does not refer to the probability that the project will end up delivering its end product. It
refers to the probability that the end product will deliver the business value (return) expected. This analysis tends to be highly
subjective. One possibility would be to perform a forced ranking within a number of categories, such as alignment, value, risk, etc.
Projects receiving composite low scores would be given low probability of success values.

Risks
The types of risks analyzed at the portfolio level are not the specific detailed risks evaluated at the project level. A short list of
portfolio risks that may be evaluated are:

• Financial Risk

• Schedule Risk

• Technology Risk
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• Scope or Deliverable Risk

• Resources Risks (availability or quality).

Value and Financial Metrics

In 2001, the Meta Group conducted a survey on assigning value and using metrics. The survey resulted in the following statistics:

• 74.7% of companies do not run IT with any focus on its business performance.

• 89% of companies are unable to adjust and align their budgets with business needs, other than once or twice a year.

• 66% of IT organizations have no idea of their performance profile in terms of costs or business value generation.

• 89% of companies are flying blind. They have virtually no metrics, except for finance.

The most common financial metric companies use is ROI to measure the value of their projects. Traditionally, ROI goes beyond
simple payback, or determining when the investment will pay for itself. It uses metrics such as net present value and the internal rate
of return—which consider the value of money invested over time and the cost of the company's capital—to compare the cost of
implementing an IT project with the financial benefits it provides. Depending on the project, those results can be operating-cost
reductions, revenue growth, or both. The benefits may be evident in months or could take years. Exhibit 6 displays other common
financial metrics in use.

Exhibit 7. How Do You Balance Your Objectives With Your Budget? (Courtesy Pro Sight Inc. Copyright © 2002.

For companies that have adopted an approach similar to the balanced scorecard to their strategy development, value can also be
derived from other factors. This approach would ensure that strategy is evaluated from a minimum of four perspectives—customer,
internal, financial, and learning. This concept promotes a more balanced strategy.

Scoring Model
This is a form of analysis where decision-makers rate the project on a number of questions that distinguish superior projects,
typically on 1–5 or 0–10 scales. These ratings are added to yield a quantified Project Attractiveness Score, which must clear a
minimum hurdle. This Score is a proxy for the “value of the project to the company,” but incorporates strategic, leverage and other
considerations beyond just the financial measures.

Benefits From the Analysis Phase

The key benefits of the Analysis Phase all center around having gained “a thorough understanding of what the problems really
are and what the future solutions might be.” The Alignment Phase centers around making the best decisions about what to do in
the immediate term. The analysis phase provides the data on which to base those decisions. When the analysis phase is completed,
the hard decisions required in the Alignment Phase can be done with more assurance.

Alignment Phase
The Alignment Phase results a “new” project portfolio. In brief, this means that each project in the portfolio is a candidate for
reclassification: from on-hold to active, from active to canceled, from idea to feasibility, etc. It may be necessary to commit resources
to generating ideas for new potential projects to support strategic concerns that are not adequately addressed in the current portfolio.
The decisions made during the Alignment Phase are designed to achieve the delicate balance between what is desired and what
can be achieved, between the theoretical ideal and the realistic optimum.

Deciding which projects to delay or cancel can be a particular challenge. In conventional financial portfolio management, buying or
selling investments optimizes the portfolio. If an investment is under performing, and if it isn't being held as part of a long-term
diversification strategy, it's relatively easy to make the decision to sell the investment and purchase something else. With a project
portfolio the decision is more complex since the perceived value may be different for different stakeholders and the actual cost and
projected benefits may be highly subjective estimates.

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During the Alignment Phase alternative project portfolios are evaluated by modeling a number of “what-if” scenarios. For example,
based on the reports run during this phase, it's possible to create a list of projects that might be canceled or delayed and then to
model the effect on the project portfolio if these decisions were implemented—or to model how you balance your objectives with your
budgets. Exhibit 7 is a sample report displaying how you may balance your strategic objectives with your budget.

The key challenge of the Alignment Phase is to avoid modifying the decision criteria or the project data to make the current project
portfolio appear more optimal.

Management Phase
(Reallocation/Reprioritization/Reschedule)
At this phase in the process, Management should be able to view the project portfolio and have access to be able to collaborate on
issues such as project prioritization, categorizations, budgets, go/kill milestones, scarce resource allocation, what projects to invest
in and where to invest and what to delay. This is the stage that true “Portfolio Management” occurs, where projects are aligned with
corporate or strategic goals, projects are cut, budgets and resources redistributed, you can identify your architecture in terms of your
business (refer to the sample report in Exhibit 8).

Exhibit 8. What's Your Architecture in Terms of Business? (Courtesy Pro Sight Inc. Copyright © 2002.

The challenge now becomes one of how to communicate the portfolio information as actionable plans both horizontally and vertically
within the organization. This is where automation (tools) can help feed updated project priority, schedule, budget, and resource
information back to the department and project managers that manage the resources and projects.

A major step in the Management Phase is mobilization and it requires that department and project managers be given portfolio
information in a format that meets their specific needs and that directly feeds more detailed resource and project management tools.
This is the step where you implement the project portfolio process and best practices

Selecting Portfolio Management Tools

There is no silver bullet—no single product solution that has all the functionality you require. Currently you should look for an
integrated solution—a combination of products that will feed a Project Portfolio Management System. Your integrated solution should
include:

• Project Management Programs(s) with a database of all projects, resources, milestones, budget, time recording, etc.

• Process Management System with a database of best practices, standardized processes and templates

• Project Cost System with the ability to cost/estimate projects

• Human Resource System with a database of resources, skills and rates

• Project Portfolio Management System with the ability to create credible models so Management can view the Project Portfolio
from the Top Down as well as Bottom Up.

In selecting a Portfolio Management System begin with the key Inventory project, organizational and reporting data fields you
defined early in this process—use these as a base for your requirements.

Select a toolset that that fully integrates with your supporting systems. Make sure the portfolio can be sustained with a minimum
amount of manual effort yet does not depend on the uniform, enterprisewide adoption of detailed planning tools.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly
prohibited. For permission to reproduce this material, please contact PMI or any listed author.
Proceedings of the Project Management Institute Annual Seminars & Symposium
October 3–10, 2002 • San Antonio, Texas, USA

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