White Paper

Focus Under Pressure:
Why Project Portfolio Management (PPM) becomes mission-critical in a down economy

by Demian Entrekin, Founder and Chief Technology Officer
INNOTAS

When economic conditions get tough, leaders and managers look for ways to control costs. One way leaders control costs is to rein in their project budgets, and this effort usually starts by asking basic questions: What projects are we working on? What projects can we trim? What projects can we cut? Where do we need to focus our energies? These questions lead directly to delicate decisions. In many cases, the projects themselves are designed to improve the business' overall economic situation. Perhaps, for example, there are several projects in the pipe that will lead directly to increased revenues. Perhaps some will increase efficiency and reduce costs. Without an integrated solution for Project Portfolio Management (PPM), the entire exercise of prioritizing the project portfolio budget can become uninformed guesswork.

Today's economic forces are requiring that organizations look at their project list as a collection of expenses and then attempt to balance them against priorities, budgets and available resources. Leaders who effectively manage this process get leaner while still maintaining their ability to produce value. These leaders use a variety of techniques to make the ends meet, and this paper will discuss each of these five techniques in detail:

Assess the overall project portfolio looking for obvious places to cut costs.
Compare high value projects against one another to decide on the right combination of investments to fund.
Look for ways to allocate limited resources to the most important projects.
Look for opportunities to merge projects to gain efficiencies.
Monitor project performance closely to get better control of potential cost overruns.

While PPM is a necessary tool for managing these processes, in tough economic times, many organizations may avoid implementing PPM due to the assumption that they cost multiple hundreds of thousands of dollars and require months, if not years, to implement. However, especially In tough economic times, Software as a Service (SaaS) is the ideal way to implement PPM. SaaS PPM is faster to implement and much less expensive than installed PPM solutions, and carries a much lower risk burden than traditional enterprise software.

I. ASSESS THE OVERALL PROJECT PORTFOLIO LOOKING FOR OBVIOUS PLACES TO CUT COSTS

In cases where PPM has not already been implemented, it is common for a project-driven organization to have many more active projects than leadership realizes. It is, in fact, not uncommon to underestimate the active project list by as much as 300%. I recently interviewed a departmental manager who discovered that his team was actively engaged in more than 60 major projects, when they had originally thought they were working on approximately 20.

So leading organizations begin by creating a catalog of major projects. But what exactly is a "major project?" This question tends to surface very quickly when implementing PPM. This question is, in fact, preceded by an even simpler question: what is a "project?" If we are going to create a catalog of active projects, we need some way to identify them. The answer to the question "what is a project?" usually depends on what the organization is trying to accomplish. If the leadership team wants to throttle down the work load, they might opt for a project definition as simple as "any task that takes more than 40 hours." If they are not feeling quite as much urgency, they might opt for 80 or even 160 hours. But if we don't standardize our definition with something quantifiable, we won't be able to create a reliable project catalog.

Once we have our list, we can pick off the low hanging fruit. In the early days of a PPM implementation, there are often some easy pruning opportunities, such as projects that should have been closed and just keep on going without an end in sight. We might also find redundant projects that can be consolidated, or perhaps projects that should never have been started in the first place. When there's urgency to rein in costs, one starts by tuning the project catalog.

II. COMPARE HIGH VALUE PROJECTS AGAINST ONE ANOTHER TO DECIDE ON THE RIGHT COMBINATION OF INVESTMENTS TO FUND

Once we have dealt with some of the easy pruning work, we may find that we must confront a list of high-value projects. At this point, the leadership team encounters a tougher decision-making situation. If the available resources can comfortably handle the projects remaining on the table, then the team can begin to focus on improving the delivery process, and the stakeholders will be sanguine. If not, then the leadership team may need to make some tough tradeoff decisions.

In some cases, you may be able to preserve the pruned catalog by manufacturing bandwidth. You can create bandwidth by going back to project management basics, such as scope adjustments or schedule adjustments. These kinds of adjustments can impact the perceived value of the overall project portfolio, and team leaders may need to focus on managing stakeholders' expectations. But at some point, you may need to say one of two things:

We can give you what you want but it will take more time.
We can meet your deadline but we will have to deliver less.

The project leadership team may want to use this time as an opportunity to revisit the project management process. In some cases, the two concessions listed above can actually lead to better projects. This is especially true in IT projects where an iterative approach can lead to a tighter feedback loop with end users. But the project organization should only facilitate this tough trade-off process. In the end, the business owners must make these tough decisions. When the project teams get caught up in setting the priorities, they are playing a dangerous game. What's important here is that the project team members must demonstrate that they have control over their available resources. The demonstration of control leads to credibility in any trade-off discussions. This is where PPM becomes the fulcrum by which they show control, and thus gain credibility. If the project team members cannot demonstrate control over their resources and their processes, then they will have limited credibility in their attempts to force the tough tradeoffs.

III. LOOK FOR WAYS TO ALLOCATE LIMITED RESOURCES TO THE MOST IMPORTANT PROJECTS

Once the portfolio has been tuned, and the key stakeholders are able to agree on what's in and what's out, then the project leadership team can begin to reallocate available resources to get the best fit between the team and the work. This may not happen as a clean and tidy step that follows the portfolio tuning process, but it can certainly lead to improved efficiencies and outputs. If the project portfolio has changed substantially, there may be some ruffled feathers among team members, so it remains important to pay close attention to individual people, and to understand their needs and concerns.

Quite often, individual contributors have invested themselves in the projects that they are working on and may need some coaching through the transition process. This is to be expected, and in fact, desired. We want individuals who invest themselves in their work, and so those transitions require excellent communication from the leadership team. The opportunity to reallocate people to other projects should be treated as a time to focus on individuals and their needs, talents and weaknesses. It may be considered trite to say, but people have unique talents and character traits. Quite often, leaders can get so caught up in their own concerns that they forget to pay attention to the needs of their teams. Great leaders never lose sight of this issue.

IV. LOOK FOR OPPORTUNITIES TO MERGE PROJECTS TO GAIN EFFICIENCIES

While this may seem self-explanatory, there are often surprising opportunities to combine projects into joint initiatives. Projects emerge from many different places, and it is not uncommon for different projects to share fundamental goals and objectives. Even if they don't immediately appear to share goals, they may rely on quite similar fundamentals. There are times when a project team was able to merge different projects into one single project to great benefit of the team and the stakeholders. There may be some effort required to convince stakeholders that the joint initiative represents an improvement, but you may find that the stakeholders are receptive to any creative ideas that allow them to continue moving toward the original goals of the project they sponsored in the first place.

Many project teams benefit from stepping back and looking at the bigger picture. From a distance they might ask, "How do all these projects relate to each other? Do we have a holistic view of our strategy?" Let's say, for example, you have several different marketing projects around providing more value to your customer base. Some might be related to communication, some to support, some to product enhancements. There is a pretty good chance that these projects can be combined into one integrated initiative.

V. MONITOR PROJECT PERFORMANCE CLOSELY TO GET BETTER CONTROL OF COST OVERRUNS

Finally, the performance of projects has a significant impact on the business' economic conditions. Scope adjustment is one way to control costs, but with a PPM system in place, the teams gain a new level of visibility into status and progress. This visibility forms the foundation for improved execution in terms of the basics: scope, schedule, and financial performance. By implementing a standard set of dashboards to report on the execution of the now highly optimized project portfolio, the team can demonstrate a level of control that not only improves the perceived value of the project teams, but has a tangible impact on the basic command and control aspect of project execution. In some projects, cost overruns can be disastrous. In a resource-constrained environment, these overruns have a collateral damage effect that can ripple through the entire portfolio. With PPM in place as a centralized, visible management framework, these kinds of unforeseen meltdowns can be avoided much more easily. The PPM system itself won't do the work for you, but it should be able to tell you that you may have a problem so that you can either mitigate the impact, or even prevent the problem from happening in the first place.

CONCLUSION

Tough economic conditions can place extreme pressures on those individuals who are responsible for the financial viability of an organization. Those pressures are real and they generally lead to tough decisions. It's true that "you can't cost-cut your way to greatness." But it is also true that business owners will not accept losses for very long. Cost cutting measures are a fact of life. The question then becomes "how can we cut costs while retaining what's great about our organization?" That begins with a well-conceived and well-executed portfolio of projects. Organizations engineer change through projects. The project portfolio will play a huge part in getting the organization back on stable ground.

Software as a Service is no longer just an interesting concept. SaaS is the ideal way to implement PPM in tough economic times since SaaS is faster, cheaper and carries a much lower risk burden than traditional enterprise software.

To see how the Innotas on-demand IT PPM offering can help you, contact us today.

Visit http://www.innotas.com or call 866.692.7362 or +1.415.814.7700.