The Role of Executives in Project Portfolio Management
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Transcript of The Role of Executives in Project Portfolio Management
© ICS Group 2002 1
The Role of Executives The Role of Executives in in
Effective Effective PProject roject PPortfolio ortfolio MManagementanagement
K.C. YelinK.C. Yelin
ICS GroupICS Group
PPMPPM
© ICS Group 2002 2
Stating that executives need to be aligned with our portfolio management strategy seems intuitively obvious. But taking that from an intellectual statement to a behavior can be a challenge. If an alignment is not true, we soon find that new projects are being championed and interjected atop our current portfolio commitments and we are spending time defending a position rather than delivering upon it.
© ICS Group 2002 3
Assumption: Executives will impact Assumption: Executives will impact Project Portfolio Management Project Portfolio Management (PPM)(PPM)
• Natural role in organization - decision-maker
• Formally or informally, executives will make decisions on portfolio content
• Those decisions will impact the portfolio• Direction
• Ability to resource, to deliver
© ICS Group 2002 4
Informal executive decisions more Informal executive decisions more typically increase the risk to achieving typically increase the risk to achieving goals of goals of PPMPPM
• Approving lobbied-for projects outside of the process
• Redirects investment of assets to special interests, not necessarily in strongest alignment or in balance with organization’s strategy
• behaviorally reinforces that PPM is hers alone, ensuring future circumventions
• “Piling-On” - deciding/demanding more projects be launched than can be resourced, resulting in
• lack of focus
• lower % of projects completed and business objectives met
• employee exodus when economy good
© ICS Group 2002 5
Optimization of executive impact on Optimization of executive impact on PPMPPM
• Provide a specific role for execs in PPM
• First - have a clear structure for PPM
• Clearly define roles, accountabilities, sources of information, review & decision calendars
• Role for execs: Investment Management - iM
• Linkage: iM is the driver of PPM
• Bound scope of executive decisions (strategy, alignment, investment categories mix, funding of investment, external implications)
• Transparency
• Publicize the process
• Publicize decisions
© ICS Group 2002 6
Leveraging executive decision-making Leveraging executive decision-making ability ability
What is “appropriate” executive What is “appropriate” executive decision-making contributing to decision-making contributing to effective effective PMMPMM??
We want to tap in to that ability and direct it at the appropriate issues, at the appropriate level, in an appropriate forum that is consistent with the strategies and objectives of the enterprise.
© ICS Group 2002 7
Nature of decision-making in Nature of decision-making in organizations with highly effective organizations with highly effective PPMPPM
• At the top, an Investment Management (iM) Team comprised of executives from across functions
• iM Team establishes organization-wide allocation of assets among investment categories in line with strategy
• iM Team identifies overarching performance goals for portfolio
• Portfolio Manager(s) determine specific projects to launch, monitor and measure
• Based on performance measurements and external conditions, iM Team validates or redirects the investment strategy
© ICS Group 2002 8
Providing a visual framework helps make Providing a visual framework helps make it more tangibleit more tangible
Of these 3 ways people take in information - visually, audially and kinesthetically -
The primary processing style for over 80% of us is visual.
Facilitate understanding complex inter-relationships among iM, PPM and other processes with a picture.
© ICS Group 2002 9
Initiation Planning Execution Closure
Solution Delivery
Operations
25 %
20 %15 %
25 %
15 %
20
Project Management
Program Management
Go
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e P
roce
ss
es
Pro
jec
t Life
Cy
cle P
roce
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es
Exe
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Ma
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Bu
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Are
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an
ag
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en
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Ma
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roje
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am
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Diagram: Framework for Governance in the Project-Based Organization. Copyright 2001 Andrews Dimensions/ICS Group
AnnualQ
Q
Q
Q
Framework for Governance and Decision-Making
Portfolio Management
Investment Management
Who is responsible
Cycle Timing
Processes
© ICS Group 2002 10
Quantification of Assets
Project Screening
Prioritization
Portfolio Planning
Business Strategy
Initiation Planning Execution Closure
Solution Delivery
Operations
InvestmentAsset Allocation
25 %
20 %15 %
25 %
15 %
20 %
Project Management
Program Management
Go
vernan
ce Pro
cessesP
roject L
ife Cycle P
rocesses
Exe
cuti
veM
anag
emen
t
Bu
sin
ess
Are
a M
anag
emen
t
Mat
rixe
d P
roje
ct T
eam
s
To Invest
Resource Capacity/ Doability Test
Selection
Approval
AnnualQ
Q
Q
Q
Data:
Portfolio category performance
Future performance risks
Changes in market
Regulatory environment
Availability of funds
Data for each project::
Performance schedule, cost, quality
Future performance risks
Issues & solution options
Recommendation to keep/kill
Which Projects will we keep, kill, start, to effectively achieve performance measures?
Investment Strategy –
Stay or Redirect?
Decisions
Portfolio Management
Investment Management
Data & Decision Flow
Framework for Governance and Decision-Making
Diagram: Framework for Governance in the Project-Based Organization. Copyright 2001 Andrews Dimensions/ICS Group
© ICS Group 2002 11
20 %
15 %
25 %
20 %
-
Diagram: Governance within the ProjectBased Organization. Copyright 2001 Andrews Dimensions/ICS Group
Data & Decision Flow
Enrolling executives in the processEnrolling executives in the process
• Leverage something familiar to the executives
– speeds buy-in and support of framework
• Assume all execs have a personal, financial portfolio
• Map the familiar financial portfolio management elements to the iM / PPM framework
© ICS Group 2002 12
Working with a financial portfolio manager, a client communicates his goals and often decides the targeted allocation of assets, e.g. 40% in equities, 20% in bonds, 30% in real estate and 10% in collectibles. The client does not select the individual investments that comprise each asset category. The financial portfolio manager keeps in close contact with the client and shares the performance of the portfolio relative to the client’s goals, and in the valued advisor role, continues to educate and counsel the client, allaying fears of situational ups and downs, keeping the focus on the longer term.
© ICS Group 2002 13
Apply the 3 Stage Financial Portfolio-Client
Model
1. Buy-in to portfolio strategy & process
2. Transition to desired portfolio mix
3. Management of portfolio to achieve strategy
Assume the role of the professional financial portfolio advisor. The executive is in the role of client.
© ICS Group 2002 14
Financial Portfolio – Client Model
Stage 1 – The portfolio manager gains client’s buy-in to portfolio strategy & process
• Understand client’s overall long-term objectives• Understand client’s current assets and how they are invested• Identify future stream of funds, $ needed to live on• Understand client’s risk tolerance
• Educate client on investment categories (following 2 slides)
• Discuss range of potential returns on investments – and elements of measurement
• Agree on desired allocation of assets across categories
• Communicate how we will work together – e.g. monthly informational performance reports, quarterly meetings to discuss any major issues that require agreement on buying/selling, annual rebalancing of allocation, portfolio manager may have full or partial discretionary authority to make day-to-day trades, fees associated with managing/ administering the portfolio
• Sign agreement on how we will work together
© ICS Group 2002 15
Asset Allocation Personal Investment Categories
• Equities (stocks)
• Fixed Income (bonds, CDs)
• Real Estate• High Risk (start-up, art)*• Money Market
* Unsubstantiated
70% of achieving a portfolio’s goals is related to picking the right asset allocation
70% of achieving a portfolio’s goals is related to picking the right asset allocation
Allocation of Assets in Client's Portfolio
Equities55%
Fixed Income10%
Real Estate20%
Money Market10%
High Risk 5%
- different investors, different goals, different market conditions, different allocation, same categories
© ICS Group 2002 16
Asset Allocation Project Investment Categories
• Infrastructure • new or improved technology,
process or facilities
• Maintenance • staying in business
• New Products• development and launch
• Research • future possibilities
• Unsubstantiated
Corporate Asset Allocation
Infrastructure20%
Maintenance10%
New Products50%
Research20%
- different investors, different goals, different market conditions, different allocation, same categories
The executive investment management team decides the asset allocation of the portfolio
The executive investment management team decides the asset allocation of the portfolio
© ICS Group 2002 17
Financial Portfolio – Client Model
Stage 2 - Transition to desired portfolio mix
• Analyze current investments against target allocations and return measurements. Recommend new portfolio composition – specific investments to sell, hold and buy.
• Gain agreement on specific new portfolio composition and the plan to transition to it.
• Execute the buys and sells to achieve the desired portfolio composition.
© ICS Group 2002 18
Financial Portfolio – Client Model
Stage 3 - Management of portfolio to achieve strategy
• Portfolio Manager “manages” the portfolio– Monitor investments performance against return assumptions
– Identify trends, research, and make mid-course corrections
– Has discretionary authority to buy and sell specific investments
– Provides monthly reports to client investor
• Quarterly face-to-face client meetings: Review performance, forecast future, options for defensive or offensive opportunities. Client makes decisions based on options presented.
• Annual client meetings: Rebalance Portfolio Allocation targets based on client’s current state, changes in client’s overall strategy and short term objectives and market conditions.
© ICS Group 2002 19
Project Portfolio Management can provide clear structure,
context and information enabling executives to make
appropriate decisions.
Project Portfolio Management can provide clear structure,
context and information enabling executives to make
appropriate decisions.
“High office teaches decision making,
not substance. [It] consumes
intellectual capital; it does not create
it. … they [executives] learn how to
make decisions but not what decisions
to make.”
Henry A Kissinger, White House Years
“High office teaches decision making,
not substance. [It] consumes
intellectual capital; it does not create
it. … they [executives] learn how to
make decisions but not what decisions
to make.”
Henry A Kissinger, White House Years
© ICS Group 2002 20
Summary from experiences
• Ability to be competitive tomorrow depends on the effectiveness of project portfolio today
• Executive behavior and decision-making impact that effectiveness
• An enterprise PPM framework enables executive participation and decision-making
• Leveraging something familiar to the executives speeds buy-in and support of framework
• Transition to living the framework requires powerful leadership
© ICS Group 2002 21
About the Speaker
K.C. Yelin is a much-called upon speaker and innovator on issues related to process, teams, communications, technology and the integration of those items. Those who collaborate with her benefit from her insight into the human elements which enable teams and organizations.
Ms. Yelin founded and led ICS Group from 1982 to 1999. She is the author of the ICS Group Project Leadership Process and its Portfolio Management Model. Prior to founding ICS Group, Ms. Yelin held management positions with IBM, Control Data Corporation and Digital Equipment and was on the faculty of the University of Connecticut Graduate School of Business Administration. K.C.’s area of specialization is the Project Portfolio Management practice for ICS Group.
(800) 248-0056 www.icsgrp.com
© ICS Group 2002 22
About ICS GroupICS Group is a consulting firm specializing in building project management competency in organizations. Its mission is to help business leaders and their project teams succeed. The project best practices and models that ICS Group employs have been developed during its 20 year practice in collaboration with Fortune 100, government and non-profit organizations such as those listed below.
Aetna, American Red Cross, AT&T, AXA, Blue Cross/Blue Shield, BOC Gases, Bristol Myers/Squibb, Chase Bank, CIA, Cigna, Con Edison, Connecticut Mutual, Duke Energy, EDS, Emory University, Ford Foundation, Fort James, Fujisawa Healthcare, Gartner Group, GE, Grolier, GTE, Heublein, International Flavors and Fragrances, IRS, IBM, Johnson & Johnson, John Hancock, Kraft, Mass Mutual, McNeil Consumer Healthcare, Merck, MTV Networks, Nabisco, NASA, Pepperidge Farm, Pepsi, Pfizer, Phillips Laboratories, Pitney Bowes, Prodigy, Rich Products, The Travellers, United Illuminating, United Nations, United Technologies, US Army, US Census Bureau, USDA Forest Service, Washington Metro, Xerox . . .
(800) 248-0056 www.icsgrp.com