Chapter 11: Agile Portfolio Management - Aligning Tactical Projects with Business Strategy


Up to now we've been discussing what to do within the project management realm to achieve agility. The focus has been on managing a single project. However, truly agile organizations do not execute projects only one at a time. They execute the right mix of projects to achieve their high-level business objectives. It doesn't help the organization much if you crank through complex projects, only to realize that there are still gaps in the overall business solution. This is the domain of portfolio management—creating, organizing, and prioritizing the portfolio of projects to best meet company objectives.

Portfolio Management

You will recall that our initial definition of an agile project revolved around internal and external uncertainty. Internal uncertainty is specific to the project itself, while external uncertainty is related to the environment in which the project operates. This external environment includes the cross-functional organization running the project, the corporate parent, competition, customers, and the overall economic environment. Portfolio management encompasses those areas that are external to the project but still within the sponsor organization, such as other (related) projects, business strategy, and organizational resources. Figure 11-1 depicts how a project might fit into a larger portfolio of projects within the parent company, as well as its various external influences. Note that external influences to the project are not always external to the parent company.

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Figure 11-1: A general portfolio management structure showing the alignment of high level strategy, business objectives, programs, and individual projects.

Many companies treat portfolio management as an independent process—often an exercise that takes place during the annual business planning cycle. Taken in this context, I probably would not include portfolio management in this book. However, in the accelerated business environment, the project is the business—or, more appropriately, the projects are the business (see Chapter 3). This expanded view of agile PM will further facilitate the quest for organizational agility by ensuring that the company's scarce resources are best utilized not merely within a single project, but within the company's portfolio of projects. This concept takes on an even greater importance as changes in the business environment become increasingly rapid. An annual review of the portfolio is no longer adequate. You must be prepared to reprioritize projects, as needed, whenever events cause selection criteria to change value, or criteria weighting to change, or new criteria to be introduced.

Portfolio management is a key linkage between business strategy and tactical project execution, and it is much more effective than trying to tie individual projects directly to business strategy. In the ideal case, strategy would be translated into business objectives, which would be translated into programs, then to projects. All of these would be filtered through the portfolio management machine for optimization. You would then execute your projects, and business strategy would be successfully achieved. However, as you know, the ideal world and the agile world are two different environments. Projects originate from all sorts of places. Business strategies change more frequently than we would like. Competition forces us to change plans on the fly. What worked last year may no longer be applicable today. Resources are available, and then they're not. Or they get reallocated, causing a ripple effect. All of these realities call for an agile portfolio management process.

Agile Strategy

Use portfolio management to create the vital linkage between business strategy and the tactical execution of individual projects.

In the classic project environment, the waterfall of information flows mostly downhill from high-level strategy to business objectives to the program to the individual project (see Figure 11-2). The real value of the portfolio management process is in keeping all of these areas aligned. In this case, most of the aligning happens at the bottom level, where the individual projects reside. Since the classic project operates in a generally more mature industry, it is less likely to be directly influenced by an event outside of the company. The high level strategy, however, is very open to influence by external events. Therefore, changes in the classic portfolio are more likely to be initiated upstream than downstream.

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Figure 11-2: In classic portfolio management, external influences start at the top and flow downstream.

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Externally influenced changes in the classic paradigm are more likely to be felt initially at the strategy level, then cascade down to the project level.

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On the other hand, agile projects, which are more attuned to external influences to start with, are more prone to feel their direct effect at the project level (see Figure 11-3). They also tend to be breaking new technological ground, giving them a potentially greater importance to the overall business schema. All of these dimensions have the power to cause a ripple effect upstream (see Figure 11-4). Essentially, an unexpected change in an individual project could create a business strategy change in the agile environment.

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Figure 11-3: In agile portfolio management, external influences are felt directly at the top and bottom and subsequently flow both downstream and upstream.

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Figure 11-4: The direction of influence in an agile versus classic portfolio.

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Externally influenced changes in the agile paradigm are felt at the project level, as well as at the strategy and objectives levels. This, in turn, can create an upstream ripple effect from the project level to the strategy level.

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In industries where agility is truly required, portfolio management inevitably consumes an increasingly significant portion of the senior program manager's time. In slower-moving industries, however, portfolio management will most likely remain within executive management's domain. Program and project managers will provide data on the projects, business/financial analysts will weigh the criteria, executive management will select/prioritize the projects, and then the program/project managers will execute the modified portfolio. It is not unusual for this process to take two to three months to come full circle. An annual portfolio review that takes three months may be tolerable (and appropriate) in some industries, but in a fast-paced business environment, this is a recipe for failure. (See Figure 11-5.) Because of the high rate of uncertainty and fierce competition, it will be necessary to do two things:

  1. Integrate portfolio management into the day-to-day/month-to-month project management process.

  2. Bring portfolio management, at least partially, under the umbrella of the program manager.

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Figure 11-5: The portfolio review cycle in an agile versus classic portfolio.

Agile Strategy

Integrate portfolio management into the routine project management process, via the operational infrastructure as much as possible, to avoid the "once annually" portfolio review.

A good project management infrastructure (see Chapter 10) provides a common framework for efficiently processing day-to-day project data, thus freeing up the valuable time of the project manager to keep a vigilant view on the project and the environment external to the project. The portfolio that surrounds a project is, in fact, one of those critical, external elements that must be watched by the project manager. By integrating portfolio management criteria into the project management infrastructure, you let the infrastructure's systems and the program analyst process the routine data. In this way, the portfolio is constantly and efficiently monitored for changes in strategy, weighting criteria, or the projects themselves that may trigger the need for a reprioritization/rebalancing of the portfolio. Therefore, the project or program manager only needs to get actively involved when certain triggers are hit. For example, let's say adealis closed that requires a new customer project to be initiated immediately. There are no resources available, so they must be pulled from an active project, effectively putting it on hold. This on-hold project, in turn, is a dependency for another internal project. The triggering event for this second project is the delay in the first project (its dependency) and would be flagged by the program analyst. At this point, the program manager would get involved to determine if it still made sense to push forward with the second project, or if the portfolio should be rebalanced until the first project is restaffed.

Agile Strategy

Make portfolio management part of the program manager's responsibilities. Since the program manager works in the middle between the high-level strategy and tactical projects, she is best able to manage the two-way interactions and impacts between them.

By bringing portfolio management under the wing of the program manager, you accomplish two things. First, you significantly reduce the end-to-end cycle time of reacting to a change. Second, you reinforce the concepts that the projects are the business and that program managers need to be aware of the business environment external to the actual projects. These concepts involve a major role change for most program managers (and functional managers) and should be approached with caution. In Chapter 5, when we discussed having the project manager take an outward orientation, it was primarily to monitor external factors so that he can make appropriate adjustments within his project. Now I am suggesting that program managers (who are generally more senior than project managers) be given responsibility for overseeing the company's project portfolio, which is really an overlap of functional and executive management's traditional roles (see Figure 11-6).

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Figure 11-6: Portfolio management responsibility in an agile versus classic portfolio.

This shifting of responsibilities is necessary in order to increase overall organizational efficiency, and there are a few practical ways to implement it. The most direct implementation is to give the program manager responsibility for identifying triggers anywhere within the corporate/business environment that cause the portfolio to be revisited and for making recommendations to rebalance/reprioritize the project portfolio. Executive/functional management would still make the decision on whether (and how) to act on the recommendations. This scenario develops the program manager. It pulls her deeper into the business decision-making process and, simultaneously, frees up executive management from focusing on the tactical portfolio management process, so executives can instead spend more energy on matters such as understanding the customer's needs, the competition, resources, and the macro business environment.

Agile Strategy

Ease into agile portfolio management by delegating responsibility to program management for identifying triggers, performing analysis, and making recommendations, while maintaining ultimate decision making at the executive level.

Another possibility is to give ongoing tactical portfolio management responsibility to the functional/executive manager who is closest to the core program objectives and/or who owns the majority of resources involved. This shift is taking place more and more frequently because these managers already have a good understanding of the business thresholds, especially resource-related ones, that trigger portfolio rebalancing. By providing them with real-time information via the project management infrastructure (which is now integrated with portfolio management), they will be able to effectively monitor and adjust the portfolio on a fairly continuous basis to meet business objectives.

These are just a few ideas for getting started with integrating project management and portfolio management. Every organization is somewhat unique, and the actual implementation must be tailored to that business. However, the bottom-line message is that integrating portfolio management with project management is an efficient way to ensure that your valuable resources are working on the right projects.

Agile Strategy

Another approach to implementing portfolio management is to delegate this responsibility to the functional manager closest to the overall project set. This not only gets functional management more deeply involved at the strategy and project levels, but also paves the way for establishing a project-based organization.




Agile Project Management(c) How to Succeed in the Face of Changing Project Requirements
Agile Project Management: How to Succeed in the Face of Changing Project Requirements
ISBN: 0814471765
EAN: 2147483647
Year: 2006
Pages: 96
Authors: Gary Chin

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