Project Portfolio Selection Model - Voice narrated

PPM - Project selection

Choosing the Right ProjectsA Subset of Project Portfolio ManagementRussona Consulting presents:

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Why Is This So ImportantThe greatest waste in business is doing the wrong thing well

Henry Ford

Project management is about doing the projects right

Portfolio management is about doing the right projects

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#- Especially in these belt-tightening days, we have scarce resources, and we need to use them where they will best help the organization2

Presentation ContentsOverviewThe Life CycleBusiness VariablesCyclical VariablesScoring Individual ProjectsBalancing The PortfolioSummary

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Project Portfolio ManagementTo be effective, the portfolio assessment needs to incorporate both short and long term perspectives

The management of an effective PPM is about the selection and prioritization of projects to deliver the highest value, based on the pre-established portfolio business decision and priority criteria- Best Practices for Project Portfolio ManagementWhite Paper Serena Mariner, August 2008

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Organizational Context

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#- Need to provide reference for this slide (OPM3 or the Portfolio standard?)5

Life Cycle Phases

here

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Portfolio ManagementProject Portfolio Management covers 3 key areas:Align the portfolio of projects based on highest value and business criteriaEnsure the investment is being managedEnsure the business achieved the expected benefits

Most organizations have more good ideas than they have resources to deliver on

Focus on doing the right projects

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Roles in Portfolio Management

PMIs Portfolio Management Std. 1st Ed.

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Impact of Too Many ProjectsDelayed benefitsThe expected benefits from the changes take longer to be realized

Projects take longerChanges in business / technology / environment mean more challenged projects

Trying to cover too many bases means that nothing gets done wellUnhappy stakeholders, poor quality results

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Life Cycle PhasesFollowing TBS EMF, key phases in the project life cycle are:

Business casePortfolio SelectionProject InitiationPlanningExecution Control & MonitoringClose-out Delivery

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Selection Process - CriteriaEnsure that the projects we select reflect the business criteria in terms of achieving business objectives

Transparency required to ensure support for the process

Needs to reflect the capacity of the organization to commit and deliver on selected projects

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Process DemonstrationThis presentation demonstrates how to model this using MS Excel!

Series of slides demonstrating:Ranking of key business objectives (KBOs) against each other

Selection of key criteria for evaluating proposed projectsBusiness factorsTechnology factorsRisk factorsFinancial factors

Using the criteria to weight the proposed projectsProvides a weighted score on which to prioritize

A two step assisted process to finalize the selected projects

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Inputs Required 3 LevelsBusiness Management (> annual)Business criteria (and groupings)Key Business Objectives (KBOs)

Executive (annual)Overall budgetBudget categories % Allocation of the budget to those categories

List of candidate projects (ongoing, regular basis)CategoryOverall costFor each candidate, a scoring against the business criteria

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Project Phases / Reviews

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Pre-Project Stage

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Roles / Responsibilities

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Portfolio Management ProcessesPMIs Portfolio Management Std. 1st Ed.

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Project Alignment ProcessPortfolio selection follows a 7 step process

IdentificationCategorizationEvaluationSelectionPrioritizationPortfolio BalancingAuthorization

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Should provide definitions of each of these steps

Categorization group initiatives into relevant business groups (e.g. infrastructure, R&D, Project Line X, )- group into only ONE category

Evaluation:Gathering all pertinent information in order to evaluate them

Selection:Some may be rejected at this point (ROI too little), payback too long, Change versus project management?

Prioritization:Rank the components within each strategic or funding category (e.g. R&D, cost savings, infrastructure) that needs to be balanced,Provide results for step 6

Balancing: - find the right balance between the projects.

As New Initiatives Are RaisedIdentification someone has gone through the business requirements and developed a business case. Decision made on which option to select

Categorization in some organizations, budgets will have specific categories that need to be balanced(e.g. infrastructure, research and development, employee development)

Evaluation collect the information required to do selection / prioritization

Selection some projects may not meet required qualifications, be mandatory, or customer / contract driven

Russ McDowell

Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Presentation ContentsOverviewThe Life CycleBusiness VariablesCyclical VariablesScoring Individual ProjectsBalancing The PortfolioSummary

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Key Business Objectives (KBOs)Not all KBOs have the same level of benefit for the organization

While there may be multiple key business objectives, they should have different relative weights to the organization

Our project selection process should reflect this in how we rank support of KBOs to candidate initiatives

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Ranking KBOs

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Convert KBOs To Numeric Weighting Factors

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Scoring the Strategic AlignmentsUsing the relative weights of the KBOs from beforeWe now select which KBOs the project supportsNotice that normally the weighted score would be hidden

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Business DriversThere are a number of additional business drivers that most organizations factor in when determining the viability of new initiatives.

These typically do not vary from year to year, and there may be a lot of similarity between organizations within the same industries

Not all of these factors will have the same weight in scoring initiatives

Some examples of factors include:Size of the initiative (people, investment capital)Number of business units involvedFinancial returns (pay-back period, NPV)

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Which Factors to IncludeDetermine the factors that you want to use in your organization

Determine the high level groups and their relative weighting

Create sub-sets if that is not granular enough for your organizationCalculates weighting based on combination of two levels

All factors will be used to compute the total weighted score for each proposed project

Remember, all projects will have to provide a score for each of these criteria

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Done in a piecewise, hierarchical fashion27

High-Level Categorization

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Provide More Granularity as Needed

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Calculated Weights for Sub-categories

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Annual ChangesTotal amount of budget for the organization

Amount required for keeping the lights onWhats left is the budget for new initiatives projects

Possibly new strategies and goals KBOs

Concept of budget categoriesAllocation between them may change more frequently

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New Initiatives and ProposalsThe categories are used to score a project as the independent initiatives come in:Use of drop down menus to limit variance of inputUse a visible legend to assist with interpretationInitiatives can be scored as they come inKeep the weighted score invisible, concentrate on the objective score for the initiativeThis data input could be done by a number of different areas:Business analystsPMO functionPortfolio secretariat

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Scoring the Independent Initiatives

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The Big Picture- Combine all the new initiatives that have come in and determine where you need to draw the line

Shows a series of sheets that:Add all the initiatives in one sheet, with weighted scoresShow them being copied / sorted in orderShow how the cumulative costs contribute to pass 1 decision

For some organizations thats enoughFor others, they may want to apply budget bucketsShows how you can take it one step further to balance the buckets

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Applying the Business Criteria Weighting

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Not that this is not directly using the results from the previous table.Should simplify 38

First Pass at Balancing

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Second Pass at Balancing Categories

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#Selected Projects! Balanced ApproachThat is your list of projects to charter- that is when you know definitively that it is a project- soft commit pending the planning phase

The selection process followed will help in project success becauseOnly approve projects that you can deliver onMethodology lends itself to ensure senior management support for projects selectedWhen resources become available, everyone is aware of the next project that should be selected

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ConclusionsReadily available tools

Techniques are simple to implement

Separate the scoring from the business weights

Project portfolio is selected from the highest scoring projects within the resources available

Easily extendible to provide for budget categories to ensure adequate funding to traditionally low scoring areas

Logical, methodical approach facilitates stakeholder focus on approval of projects that support the business objectives

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Russ McDowellProject Portfolio ManagementPMI OVOC Symposium - 2008#BenefitsProvides a quantitative, logical process to ensure projects selected best match the strategic direction of your organization

Ensures senior management support because the project is focused on tangible business criteria

Focuses everyone on making the right decisions based on the organizations business drivers

Garners support the result because the process is both visible and fair

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Thank you for your time!Russ McDowell, M. Eng., PMP

Russona Consulting Corp.E-mail: [email protected]: (613) 836-6182

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Vision

Mission

Organizational Strategies and Objectives

High Level OperationsPlanning and Management

Management of On-Going Operations(recurring activities)

Management of Authorized Projects(projectized activities)

Project Portfolio Planning and Management

Organizational Resources

Vision

Mission

Organizational Strategies and Objectives

High Level OperationsPlanning and Management

Management of On-Going Operations(recurring activities)

Management of Authorized Projects(projectized activities)

Project Portfolio Planning and Management

Organizational Resources

Sheet1Criteria CategoriesRating

Business Category40%Financial Category20%Risk Category5%

Human Resources Category10%Marketing Category10%Technical Category15%

100%

Sheet1Criteria CategoriesSpecific CriteriaRatingC. RatingBusiness Category40%strategic alignment75%30.0%business impact15%6.0%employee satisfaction5%2.0%customer satisfaction5%2.0%100%Financial Category20%cost savings30%6.0%payback period10%2.0%cost40%8.0%Net Present Value (NPV)20%4.0%100%Risk Category5%business risks50%2.5%technology risks20%1.0%implementation risks15%0.8%public relations15%0.8%100%Human Resources Category10%resources available75%7.5%impact on working conditions25%2.5%100%Marketing Category10%time to implement80%8.0%estimated product life20%2.0%100%Technical Category15%archetecual alignment33%5.0%conformity to standards33%5.0%RAS34%5.1%100%

100%100.0%