Continuing with our series of real life track record articles illustrating how delivery reliability is built on a systematic improvement of the basic project management processes, I elaborate this week on portfolio management.
Facing new constraints on the capital budget, this publicly owned electric utility needed to more effectively apply its capital. PA developed a process and toolset to evaluate and select projects from across the business, which maximized investment return by effectively allocated capital.
Considering our hierarchy of practices in the pyramid below, portfolio management is one of the Integrating Practices which normally is addressed once the basic project management practices building blocks are in place to shift reliability performance up the maturity curve.
What we found?
- Each business unit identified, selected, and approved its own projects in its own way with no links to corporate budgeting and approval
- No management of multiple competing objectives, requirements, or constraints
- No explicit link between project selection and corporate level strategic priorities
- Project approval was not based on business cases, instead those who argued their case best and had the best political connections had projects approved
- Project costs were only considered in the roughest means at the highest levels, retunes were not considered at all
- With no capital constraints, most every project was approved regardless of potential return, cost, or resource needs
What we did?
- Evaluated existing processes to determine areas for improvement
- Developed standard project evaluation methodology and toolset (linear programming model) and corporate inputs to ensure consistency
- Independently evaluated projects under consideration
- Designed corporate project approval process and interfaces with business unit project selection, evaluation, and approval processes
- Designed and delivered standard business case training to project owners across business units to ensure consistency in evaluation
- Provided expert advice and process fine tuning during implementation
What was achieved?
- Capital budget allocated at corporate level
- Explicit linkage between project benefits and corporate strategic aims
- Project evaluation and approval based on consistent process, inputs, and business cases
- Project portfolio return tested and optimized within expressly selected constraints with linear programming model
- Gated approval process provides greater oversight without excessive controls or bureaucracy
The portfolio, governance and project management processes benefitted from these improvements shifting the company from basic-level performance to good-level practice within a short seven months, mainly because of the commitment of the client to improve this key process for its key stakeholders.
Do you have any experiences in portfolio optimization to share with us?
PA Consulting Group