From Balanced Scorecard to Project Portfolio Management

From the Balanced Scorecard to a Project Portfolio

Roberto Toledo, MBA, PMPAlpha PM Consulting, Inc.

“PMI” is a registered trade and service mark of the Project Management Institute, Inc. ©2010 Permission is granted to PMI for PMI® Marketplace use only


Agenda

Background: Project Portfolio Management in an Organizational Context

PMI’s Standard for Portfolio Management Strategic Planning The Balanced Scorecard Alignment Processes Prioritization Processes The Strategic Questionnaire An Investment Map Conclusions


Tools you can take with you from this presentation…

Project Portfolio Management The Balanced Scorecard The Strategic Questionnaire An Investment Map A Project Portfolio System


The Big Picture

New ProductsFinancial

Cancelled InitiativesPostponed Initiatives

Customer

Internal

Learning

SELECT

PRIORITIZESTRATEGY

Resources and Budget

Authorized Projects(Project Charter)

Project Portfolio

Initiatives

Strategic Plan


Organizational Context

©2008 Project Management Institute

Vision

Mission

Organizational Strategyand Objectives

High-LevelOperationsPlanning andManagement

ProjectPortfolio

ManagementPPM

Management of On-Going

Operations (recurring activities)

Management of Authorized Programs

and Projects (projectized activities)

Organizational Resources

Goals and Objectives Definition

Rule every organization

al effort Processes to establish proper actions to accomplish goals and objectives

Compo-nents

that guarante

e an efficient

and effective executio

n©2009 Project Management Institute


What is a Project Portfolio?

A collection of projects and/or programs -and other related work-, grouped to facilitate effective management of that work to meet strategic business objectives.

The “portfolio components” (projects and programs) may not necessarily be interdependent or directly related

PMI’s Portfolio Management Standard.




PMI® Standard for PPM

Strategic Plan:• Goals• KPI’s• Capacity

Identify Components

EvaluateComponents

SelectComponents

CategorizeComponents

Significant

Change

PrioritizeComponents

BalancePortfolio

AuthorizeComponents

Component Execution

and Reporting

Strategic Aligning Controlling Components

No

Yes

Monitor & Control Risks

Risk ID & Analysis

Develop Risk Responses

Communicate

Portfolio Adj.

Review Portfolio

Performance

Monitor Bus.

Strategy Changes



Strategic Planning: The Basics Mission

• What we do. Our guiding objectives as an organization. Vision

• Our desired position and Strategic Intent. Values

• Guiding principles that will help members from the organization in their decision-making process

SWOT Analysis• Internal: Strengths and Weaknesses (+,-).• External: Opportunities and Threats (+,-).

Resources• Budget linked to the strategy defined

People• Incentives linked to the strategy defined

Bill Dannenmaier

People ARE resources so need to make it parallel


Balanced Scorecard (BSC).- A helpful tool

A strategic management and planning system to align

business activities to the vision and mission of the

organization

Helps to improve internal and external communications,

and monitor organizational performance against strategic

goals

Used extensively in business and government

organizations worldwide

The Balanced Scorecard Institute


In a few words…

The BSC gives structure to the strategic plan

A structure you can use to plan and manage the evolution

of your company or organization

A tool to improve Communication A tool that helps with Strategic Planning, but most

importantly with Strategic Implementation


The Road to a BSC

Strategy

• Mission, Vision, Values and Long-term business plan

Objectives• Develop the strategic Objectives and classify them in the

4 perspectives

Metrics• Develop metrics and targets that measure progress

towards the strategy

Initiatives• Identify the projects that move the organization towards its

mission and its vision


The Four Perspectives

Financial Customer

Internal Processes

Learning & Growth


The Strategy Map

13

Increase value of the company

Increase sales

Increase Cash flow Increase

revenue margin

Increase client retention

Fulfill customer’s

expectations always

Increase customer

satisfaction

Minimize financial risks

Improve our subcontractors

team

Improve internal administrative

services

Best in class team

Increase the participation of

the team in improvement

projects

Improve our systems and technology

infrastructure

Improve our customer contact and recognition

Improve the organizational

culture

Improve our sales sand customer satisfaction kills

FIN

AN

CIA

LC

USTO

ME

RIN

T. P

RO

CESSES

LEA

RN

ING

&

GR

OW

TH

Strategy Map

Increase Cash flow

Increase client

retention

Improve our subcontract

ors team Improve our

systems and

technology infrastruct

ure


Bridging the Strategic Gap

14

Project Portfolio

Mission

Vision

StrategicObjectives

StrategicObjectives

StrategicObjectives

InitiativesInitiativesInitiativesInitiativesInitiativesInitiativesInitiatives

StrategyMap


An Example…Goal Métricas 2011 2012 2013

C1 Increase Sales

C1.1 % of yearly sales increase 30% 30% 30%

C1.2 RFPs of Projects greater than $300k 150 per year

170 per year

190 per year

C1.3 Projects greater than $300k 25% 30% 33%

C1.4 % of contracts awarded vs. RFPs greater than one million 33% 33% 33%

C2

Increase client retention (focus on Top 35)

C2.1 Clients want to work with us again 95% 100% 100%

C2.2 Brokers wanting to work with us100% of

BK, 3 times per year each

100% of BK, 5

times per year each

100% of BK, 7 times

per year each

C2.5 Contracts awarded with Top 35 client list 60% 70% 80%

C2.6 % of Returning clients on the Contract Schedule 60% 70% 80%

C3Increase Client’s satisfaction

C3.1 Results of the customer satisfaction survey 85% 90% 92.5%

C3.2 Recommendation letter issued 70% 80% 90%


Align


Identification of Projects

Of all the initiatives identified in the BSC, we must select those which will be included in our Project Portfolio

At this point in the process it is important to have an structured and documented approach• Defined and supervised by the PMO or another specific

group in the organizationThe use of a Selection Committee is the best

practice• Diverse composition• Usually comprised of all or part of the Senior

Management team• Could be more than one Committee, at different levels of

the organization


Consider 2 types of Components

Identifying these components is usually a discrete task that may be performed periodically (annually, bi-annually, quarterly)

Or it may be a continuous task during the year Identifying actual projects is not a trivial task, especially in large

corporations

Inventory of actual and

running projects

Inventory of new project proposals


Project Inventory


Prioritize


One of the easiest ways to create alignment between the Strategic Plan and the Project Portfolio

Provides an objective selection mechanism, using both objective and subjective criteria

Deals with subjects that are difficult to evaluate, such as:• Implementation complexity• Added value• Strategic consistency• The four perspectives

A Strategic Questionnaire


An Example…Customer Perspective 18 4

How will the project impact the perception our customers have of us?

100

Positive high impact 100 Moderately high impact 60 Null Impact 5

Negative Impact 0

Financial Perspective 18 5

What impact will the project have on the company’s EBITDA? (considering a 2 year horizon)

30

High (more than 5%) 100

Medium (between 3% and 5%) 60 Low (between 0% and 2%) 5 Null or Negative 0

6

How many internal resources will be assigned as FTEs to the project?

30

4 or less 100 Between 5 and 8 60 Between 9 and 12 20 13 or more 0

7What is the capital investment in this project? 40

Only recurring costs (NCI) 100 Low <= $500k 80 Medium between $500k and 2 MM 60

High >= 2 MM USD 20


Another Example: Financiera Independencia

• Mexican Financial Institution: Microcredits of up to $2,000 dollars

• Founded in 1995, IPO in 2007 with great success in Mexico’s stock market

• In 2009 reaches 4 million credits• 9,500 employees, 200 branch offices all across

Mexico• In 2011 applies to obtain a license to to

to become a full-service chartered Bank


Strategic Objectives

Objectives Low Med High

Reduce dependency on outsourced contracts 3 5 7

Differentiate our products and services portfolio 3 5 7

Grow our client’s database 3 5 7Increase our payment reception points 3 5 7Attract, develop, and retain the best talent in the Mexican financial system 3 5 7

Develop alternative sales outlets 3 5 7

Invest in brand building 3 5 7


Versus Operating and Change Impact…

Impact Low Med HighSignificantly changes our core processes 5 2 1

Requires new skills from our staff 5 2 1

Changes the way we approach our clients 5 2 1

Represents a move towards a new core capacity different from our traditional 5 2 1

Generates dependency from an outside company (know-how) 5 2 1

Impacts our customer service 5 2 1Reduces our number of employees 5 2 1


Investment Map

Impacto Operativo

Impa

cto

Est

raté

gico

Size of bubbles represent size of Project Budget


Prioritized Portfolio

Priority


Consider…

The prioritized portfolio should be established at the beginning of each period, but is by no means static

The organization’s budget and the available resources are the major defining constraints

Balancing the Portfolio? Easiest way: Pareto Rule Risk analysis may be another factor to include in

the analysis, along with implementation complexity

All projects should be made official by Senior Management before execution• Main purpose of the Project Charter


A final thought… Portfolio Report


Conclusions

Strategic Planning is of paramount importance in current environment

Establishing simple mechanisms for Strategic Planning and PPM processes is much more efficient and effective

Organizations must know at all times where their resources are being invested

PPM does not necessarily mean having a new department, but it does mean assigning the responsibility to someone!


Tools you can take with you from this presentation…

Project Portfolio Management The Balanced Scorecard The Strategic Questionnaire An Investment Map Project Portfolio System


Questions???

Roberto Toledo, MBA, PMP

Alpha PM Consulting, Inc.

[email protected]

www.alphapmconsulting.com

Tel. +1.956.519.4862

Twitter: @robertoledo

mailto:[email protected]

http://www.alphapmconsulting.com/

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From Balanced Scorecard to Project Portfolio Management