Project portfolio management is how we choose the strategically important work—the work that provides the most business value to the organization now. There are two pieces to project portfolio management then: how to choose the work, and for how long.
Many organizations struggle to use ROI (Return on Investment). You can try to use ROI. I certainly have in the past. And, it always felt as if I was making the numbers up. How many people really would buy this product or use this system? How much would it really cost us to create the product or system?
I decided long ago that I needed a better approach to determining the strategically important work. That’s why I use a series of questions, both qualitative and quantitative to help decide which work is more important now. And, I select a relatively short time period in which to re-evaluate the work.
Ask This Question Before Any Others
One question trumps all other questions about the projects in the portfolio: Should we do this project at all?
It’s astonishing how many projects are assumed to be on the organization’s to-do list. I once worked with a CIO, Tom, who had just assumed responsibility for a 100-person IT group. He asked questions about all the projects. At the end of it, one of his directors, Dick, said, “Ok, we can get to your first choice as soon as finish Project A.” Tom asked “Should we do Project A at all?”
He waited for his directors to explain why they should do Project A. No one said a word. “Dick, tell me about Project A. Why should we do it?”
Dick paused for a minute, and said, “You know, it’s been on our list forever. I can’t remember why we thought it was important now. We just started it a couple of weeks ago. And, based on our discussion today, I’m trying to think of a reason to defend it, and I can’t.”
Tom decided to put Project A on the parking lot for now, and to see what his peers said in the future. “If no one asks for this project, we’ll kill it at the next project portfolio evaluation meeting, ok?” Everyone agreed that was a great idea.
It sounds crazy to have to ask this question, but sometimes projects take on a life of their own, whether the reason to start or to continue still makes sense.
Ask Qualitative Questions First
When you look at work to decide if it’s strategically important, you don’t want to forget the work that removes waste in the organization. If you remove waste, you allow everything else to go faster. And, you can’t decide what removes waste until you ask qualitative questions such as these:
- What kinds of workarounds are you using now?
- After this project is complete, what changes?
- Do we know what success looks like for this project?
When you ask these questions, all of a sudden the project to automate part of the testing for a frequently-released product looks pretty strategic. So does the speed-up-the-build-system project.
You may not have projects like that in your organization. But I bet you do. And, I bet they are always relegated to the last place in the project portfolio. But if you look at waste first, you can decide if these projects should be first, for a time. It’s much easier to make project portfolio decisions with projects that deliver value incrementally in short time periods, because you don’t have to commit to six months of test automation work. You might just commit to one month of it for now, and then do some more projects, coming back to the project later, when the waste is too much again.
Sometimes the “what does success look like” question isn’t specific enough. In that case, ask the “what will the users be able to do once we’ve completed this project?” question.
When you consider technical debt projects such as the test automation or build projects, it’s easy to say, “our users won’t get any value out of them.” You’d be correct if you look at direct benefits. And, if you look at indirect benefits, you can see “wow, we might be able to release every quarter.”
For other projects, asking the “what will the users be able to do with this project when we are done” question prompts people to discuss which users can perform which work when. That helps you know if you need to do that project for Finance or Sales, if you’re an IT group. If you’re a product development group, you may be able to distinguish between new customers or existing customers.
Ask Quantitative Questions, Too
Quantitative questions may help you define the strategically important work. These questions are a useful start:
- How will this project affect revenue?
- How will this project help us acquire new customers or retain existing customers?
- How will this project reduce our operating costs?
- How will this project move the organization forward?
If a project does not affect revenue, maybe it changes your customers’ perspective of you. Or, it might reduce operating costs. In some way, the project moves the organization forward, allowing some people, whether they are external or internal customers to do something they had not been able to do before.
What’s the Duration of This Decision?
As you manage the project portfolio, you will need to change your decisions. Projects complete, freeing up teams to work on another project. Or, your business changes, and projects that were important before are no longer important. Or, your funding changes and you can staff more (or fewer) projects than before.
When you think about managing the project portfolio, think about how long it takes for you to make decisions now and how often you revisit those decisions. The more you ask people to multitask, the fewer decisions you make. The more you move people from project to project, the more you change your mind about the decisions.
Project portfolio management is about making decisions for now, and deciding how long you will wait until you change your mind about which project is ranked where.
To help you make good decisions, you need projects to deliver to interim milestones.
How Frequent Are Your Interim Milestones?
I like projects that work in an incremental fashion, i.e. they deliver completed code into the code base at dependable intervals. I prefer iterative/incremental projects, such as agile projects, because they deliver completed product into the code base at relatively short intervals.
The more you can depend on projects to deliver completed product—those interim milestones—the easier it is to make project portfolio decisions. If all of your projects deliver completed product every two weeks, you could change your mind about the project portfolio every two weeks.
You could. You might not want to revisit the project portfolio as often as every two weeks, but you might. A colleague, Don, was running a small engineering organization where they had massive technical debt. They needed to fix problems in the existing product on a regular basis, and to respond to different customers at different times.
Don asked the engineering team to work in two-week timeboxes, making sure they had a releaseable product at the end of every two weeks. It took them almost three months, but they finally finished the backlog of outstanding problems and cleaned up the code base. They retained all their customers, and turned the angry customers into raving fans.
During those three months, Don changed the order of the projects five times. Because the team completed work inside the timeboxes, he had the ability to change his mind as the customers called to complain. He could ask some customers to wait while the team worked on other problems. It required help from salespeople to make the ranking possible, but because the team achieved a releaseable product every two weeks, he had that option.
Now, Don reviews the project portfolio on a quarterly basis. Last quarter, when their primary competitor released a new product, they re-examined the project portfolio, and decided not to do anything about that product. It was a conscious decision.
Managing the project portfolio—not just reacting every day to a crisis—helps the entire organization finish more projects and therefore increases their capacity. Remember, managing the project portfolio is to select the strategically important work for now and to know how long that decision is valid. When you know your decision doesn’t have to last forever, it’s a lot easier to make the decision.
Copyright © 2009 Johanna Rothman. Originally published on PMBoulevard.com