Project portfolio management is not necessarily complex. The goals are clear and simple.
1) Maximizing the value of your portfolio
2) Seeking the right balance of projects
3) Creating a strong link to your strategy
4) Doing the right number of projects
Achieving these goals, on the other hand, is not such an easy task.
If we cut to the core, project portfolio management is only about two things:
Overview and decisions.
It is not difficult to obtain an overview of your project portfolio. At least not the simple overview, which is often sufficient. The hard part is making the tough decisions.
The vast majority of projects are, in isolation, good business ideas, but it is just not possible to pursue them all at the same time. The capacity of your organization to do projects is limited. Thus, good decision-making requires turning down good projects.
Many organizations have realized that a good approach to this is aiming for a project portfolio of short and fat projects. Short and fat projects imply that the company runs a small number of short projects in parallel, armed with sufficient resources.
The alternative is running many long and thin projects concurrently, which means that the organization’s resources are spread insufficiently between many parallel projects that are having a hard time crossing the finishing line. Portfolios consisting of long and thin projects are what we find in most organizations.
The underlying concept is visualized in the diagram below.
Many organizations have nodded approvingly and bought into the logic of this diagram, favoring short and fat projects over long and thin. However, despite this general agreement, the principle of short and fat is only very rarely implemented. It seems as if we often acknowledge the logic of the principle, but do not perceive it to be sufficiently relevant to our own situation.
Why is that? In my experience, it is because of no responsibility on portfolio level, no attention for throughput, no bottleneck handling, unclear strategy, and a false belief in equality. Below, I’ll go into further detail about each of these factors and show how it can be shifted to support the short-and-fat project mindset in your organization.
Assign Responsibility
It is necessary that someone assumes responsibility at the portfolio level. Each project owner has his primary interest in succeeding with his own project and, at most, a secondary interest in his colleagues succeeding with their projects elsewhere in the organization. Which is, by the way, quite natural.
Carrying out successful projects is a difficult task, and project sponsors, project owners, project managers and key project participants must be passionate about the project and fight for it with blood, sweat and tears. That is their mission – and they need to have a somewhat single-minded focus on the project to succeed.
Only by giving a person or a group of persons responsibility and targets at portfolio level will it be possible to make objective decisions about projects. The task is still difficult. The game of resources and prioritization between projects is perhaps one of the most heated and important games in many organizations, and those responsible for the portfolio are placed in the middle of this game.
Pay Attention to Portfolio Throughput
You have to consider project portfolio throughput from a cost of delay point of view. You might, for example, be able to complete a project with perfect resource management (all staff are perfectly busy) in 12 months for $1 million.
Alternatively, you could decide to not do another project and assign those people to this project as well, so you can complete it in only six months. You could also hire some extra people, have them sitting around occasionally at a total cost of $1.5 million, and realize both projects in 6 months.
What is that six months’ difference worth? Well, if the project is strategic in nature, it could be worth everything. It could mean being first to market with a new product or possessing a required capability for an upcoming bid that you don’t even know about yet. It could mean impressing the heck out of some skeptical new client or being prepared for an external audit. There are many scenarios where the benefits of completing a project quickly outweigh the cost savings of drawing it out.
In addition to delivering the project faster, when you are done after six months instead of 12 months you can use the existing team for a different project, delivering even more benefits for your organization. So not only do you get your benefits for your original project sooner and/or longer, you will get those for your next project sooner as well because it starts earlier and is staffed with an experienced team.
Prioritizing based on the effect of projects will result in better decisions.
Improve Bottleneck Handling
Spreading one’s scarce resources between too many projects is damaging to the bottom line – and to the scarce resources. The resources in question can be cash or machines, but usually the limiting factor is your key people.
Usually, you can easily identify 5–10 people who are the most sought-after by your organization’s project managers, and unfortunately, they’re typically allocated to too many projects at the same time.
Following the theory of constraints, these are the people who also determine the progress in your portfolio. It could be their decision-making, or it could be the way they’re prioritized. Either way, they are your bottlenecks.
The handling of these people, and how brave you are in your decisions regarding them, is thus an important factor in project portfolio management. Besides your key people not being effective because they have to juggle many projects at the same time, their motivation will drop because of it, making it even harder to get things done.
Protecting and deliberately assigning projects to your key people is essential.
Have a Clear Strategy
Mike Porter states in his influential book «Competitive Strategy» that an organization creates a sustainable competitive advantage over its rivals by «deliberately choosing a different set of activities to deliver unique value.» Therefore, strategy requires making explicit choices.
Lafley and Martin define strategy in their book «Playing to Win: How Strategy Really Works» as an integrated set of choices that uniquely positions the organization (which can be a company, a department, or a business unit) in its industry so as to create sustainable advantage and superior value relative to the competition.
It is natural to want to keep options open as long as possible, rather than closing off possibilities by making explicit choices. However, it is only through making and acting on choices that you can win. Yes, clear, tough choices force your hand and confine you to a path. But they also free you to focus on what matters.
When you have no clear strategy, it is impossible to select the right projects for your portfolio to execute your strategy.
Stop Believing in Equality
The notion of equality is poisonous to an efficient project portfolio. It does not make any sense that all projects that are good ideas – or equally good ideas – should be treated the same and be allocated the same amount of resources or be initiated at the same time.
Similarly, it does not make any sense to attach the same weight to all organizational areas or project types in a portfolio based on a principle of equality and justice. As a whole, the organization will lose on this. Trade-offs have to be made, even though it hurts.
Closing Thoughts
Remember the numbers two (number of concurrent projects per project participant) and five (maximum number of must-win battles).
Surveys of the efficiency of project members show – both logically and mathematically – that it is best for your project portfolio and its progress if all project members are only allocated to a maximum of two projects at the same time. This outcome is supported by those who are allocated to too many concurrent projects and whose time is inefficiently spread between these – just ask them.
Another number to remember is IMD Business School’s rule of thumb for how many significant strategic initiatives – the so-called must-win battles – a management team should launch at the same time. This number is five. And those five should be held on to until they are fully implemented.
When it comes to organizational development and strategic initiatives, the scarce factor includes intangibles such as the management team’s total amount of attention and the organization’s overall ability to change. These are difficult to sum-up in figures, and, thus, it is important to have the courage to go for the short and fat approach, even though it can’t always be proven mathematically.
Challenge yourself to not allocate project workers to more than two concurrent projects, and not initiate more than five strategic and important initiatives at the same time. It is an experiment worth trying.
In a nutshell: Your projects should be short and fat.