1 Insights on governance, risk and compliance Portfolio management transformation How to effectively screen and align your program Portfolio with strategic objectives Contents Are you doing the right projects?..2. Portfolio management Portfolio management in This insight on governance, risk and compliance (GRC) is part of a series of boardroom reports focused on program risk management (PRM) please see Insight on Portfolio management Building confidence in executing Predicting project risks improves success GRC thought transformation IT programs leadership Key questions Are you doing the right projects? How well are your important Are you ready to run a major project? projects doing? Is the project set up for success? Are your people aligned toward success? Who would be COOs/CEOs/CIOs who are CEOs/COOs who are interested in CEOs/COOs who are interested in developing interested on?
2 Focused on selecting those developing competitive advantage competitive advantage by outperforming projects that are aligned with by outperforming their peers in their peers in program execution their organization's vision and program execution CIOs who want to understand what drives best support business success CIOs who are interested in effectively program success and how to better predict CFOs who are interested in and successfully managing programs program issues and performance maximizing the value of their CFOs who are interested in CFOs who want insight into potential capital investments better cost performance of their program performance issues prior to budget organization's programs and time overruns Introduction Do you have a risk-based approach to Portfolio management ?
3 Today's economy is increasingly competitive. Market volatility, ceaseless pressure on margins and demanding stakeholders increase the difficulties of thriving in an increasingly interconnected, interdependent and unpredictable global economy. Many organizations have yet to adapt to this new state of the economic landscape. Doing nothing is no longer an option they need to adjust and take action now. As a consequence, many organizations are now transforming their businesses to Effective Portfolio strengthen their organization to save costs, create more client-centricity, restore stakeholder confidence and/or embed new business models. For many organizations, management provides long-term success depends on the success of these transformation programs. To make the organization with it more challenging, the margin for error continues to be small, and the environment in which transformation needs to happen continues to increase in complexity.
4 A mechanism to make Organizations already disoriented by today's market turmoil need to execute sure it is doing the numerous increasingly complex transformation programs and projects in parallel, while at the same time keeping the business functioning. In many multinational organizations, right things. hundreds of such programs and projects are running across different functions and geographies. This complexity causes organizations to struggle with both doing the right things and doing things right. This means that many organizations continue to receive a poor return from their investment in projects, and programs are failing to unlock the full value of their capital investments. Doing the right things Organizations continue to struggle with selecting the right programs and projects in which to invest.
5 Selecting inappropriate projects or programs that do not support the corporate strategy will fail to add the expected value to the organization and may limit sufficient capital to do the right things. This is within the scope of Portfolio management , as it is concerned with the translation of the strategy into tangible programs and projects. Effective Portfolio management provides the organization with a mechanism to make sure it is doing the right things. Doing things right Most organizations encounter issues in program and project delivery. Although they may have selected the right project or program in which to invest, ineffective execution of these initiatives causes an inability to realize timely expected benefits and will most likely incur additional costs and schedule delays.
6 As a result, programs and projects are underperforming and require additional resources just when organizations want to spend their hard-earned capital elsewhere. This concern is within the scope of a program risk management function, as it is focused on effective delivery of initiatives to improve execution performance and achieve expected outcomes. How to transform projects through Portfolio management | 1. Are you doing the right projects? Organizations execute their transformation programs on three main levels: Portfolio , Innovation is how companies programs and projects. These three levels have distinctly different objectives but should stay ahead of their work coherently to deliver transformations effectively. competition; this means While project management is focused on delivering a tangible outcome, Portfolio that successfully executing management is focused on the decision-making process around which programs and innovative projects will drive projects should be executed, based on their alignment with the goals and objectives competitive advantage.
7 Of the organization. Program management is the intermediate layer that is focused However, just successful on the delivery of business benefits. The objectives for Portfolio , program and project execution is insufficient first, management are summarized below. organizations must identify and choose the right projects in which to invest. Figure 1: Portfolio , program and project objectives Level Definition Key objective Portfolio A group of programs and/or projects Portfolio management is focused on managed in a coordinated way to doing the right things. support business strategy and to deliver benefits in line with strategic objectives Program A set of interrelated projects managed Program management is focused on in a coordinated way to attain the realizing the benefits.
8 Business objectives and benefits Project A project is a temporary endeavor Project management is focused on to create a unique product, service doing the things right. or result 2 | How to transform projects through Portfolio management Since the establishment of the Project management Institute's Body of Knowledge (PMBOK) and the Projects In Controlled Environments (PRINCE2) standards, Project Portfolio organizations have made significant investments in project management . As a result, the project management capabilities of these organizations have been strengthened. analysis helps to However, we continue to see a lag in the ability of organizations to adapt their project balance and prioritize management approaches to the new complexities of the initiatives in the Portfolio .
9 The Portfolio for While some organizations may excel in the execution of project management , they still may not have a mature Portfolio management process in place, and this can the greatest overall cause issues with the strategic alignment of programs and projects. The result is that investment, risk and organizations deliver projects on time and within budget, but the value delivered by those projects is not aligned to the organization's strategy. reward. Investment resources are always limited, so organizations are always keen to overcome such potential value leakage. Portfolio management focused on preventing value leakage is therefore getting increased attention within large organizations that currently have poor visibility and control over their project and program portfolios.
10 Figure 2: Portfolio , program and project management objectives and activities Key objective Key activities Strategic t and alignment Doing the Governance right things Agility Portfolio Funding (re)allocation . management Veri cation and validation Realizing Program management Prioritization the bene ts Resources Scope Doing Quality Project management things right Cost Time How to transform projects through Portfolio management | 3. Portfolio management challenges Many organizations struggle with keeping their project Portfolio under control and relevant. Typical issues faced by organizations include: Too many projects running at the same time that, ultimately, do not deliver because of a lack of focus Strategic objectives that are not supported by a project or program Investments in a project or program that are not aligned to strategic objectives Lack of continuous monitoring the Portfolio performance and adjustment decisions A more comprehensive overview of Portfolio management challenges is provided below.