Project Management is Not Enough: Why Companies are Turning to Program and Portfolio Management
A recent Standish Group CHAOS Report on IT spending found an average of 89 percent of projects were over budget. Projects were late an average of 122 percent. "Maybe project management is not enough," said consultant Frank Salidis, a former executive at AT&T and Cisco, during a panel for EMTM students and alumni in May. Project management is a crucial skill in developing new technologies and advancing other organizational initiatives. But in an increasingly complex world with changing technologies, rapid market shifts, an avalanche of data, and Sarbanes-Oxley rules organizations are looking beyond managing individual projects to take a broader view. They are focusing on program management (for a set of projects with common business goals) and portfolio management (for a set of projects or programs across diverse businesses of the organization). At the EMTM alumni event, a panel of experienced executives from diverse industries addressed a series of questions to explore the changing practice of project management and what lies ahead.
Why is project management no longer sufficient to ensure successful implementation of change?
Growing complexity and interdependencies demand a broader view. "There are so many more dependencies among what might have been isolated projects," said Russ Capone, EMTM'03, of Prudential Financial.
Scarce resources have demanded tighter assessments of projects. "How many of you know a vice president in your organization who has a pet
project that almost nobody in the organization knows about?" asked Steve Fahrenkrog of PMI. "If the organization doesn't know about it and
you are trying to account for resources, the portfolio makes sure such resources are spent in the right place to further the organization's
While project management focuses on doing things well, a program and portfolio view can make sure you do the right things. "Successfully
executing a bad strategy doesn't make you any money," said Anthony DeBellis of IBM. "Project management never was sufficient," said Matt
Light of Gartner. "We need to be sure we are working on the right stuff, not just getting it done. Portfolio management puts the project
in a broader context."
How are organizations implementing and benefiting from program and portfolio management?
IT managers are ahead of the curve in implementing program and portfolio management, which are used by about 40 percent of IT organizations compared to 10 percent across industries, said Salidis. Companies may use project management alone for smaller projects but program and portfolio management for most large (multiyear, multibillion dollar) and complex projects. "General business management processes come into play in a larger program," DeBellis said.
The benefits of better management are apparent. Light said Gartner studies found that even a moderate amount of process rigor can boost productivity by as much as 30 percent. Companies are much more interested in quantifying the benefits of better project, program and portfolio management. "They hold us accountable," said Capone. "It is no longer sufficient to say you are saving money; you need to say what specific budget will be affected, and next year that budget item will be cut by that amount."
Even so, organizations should not be too rigid about assessing performance. They might need to consciously allow for a small percentage of skunk works projects below the radar. "You may not want to know what it is, but you do want to manage it intentionally to keep it from becoming too large a slice of the pie," Light said.
What organizational capabilities are needed to operate in this new paradigm?
As portfolio management becomes more important, organizations need to develop a more precise definition of it and what capabilities are involved. "Portfolio management is fuzzy," said Light. "Sometimes managers talk about it like an artist or photographer talks about his portfolio, a big satchel where I throw all my stuff." In contrast, it should be managed like financial portfolios, where risks are carefully balanced.
Organizations also need to develop consistent implementation, establish career tracks for portfolio managers and create processes for transferring best practices. One challenge to implementing program and portfolio management is that project managers often see this as a distraction from their work. Top management support is also needed.
Organizations need capabilities in managing diversity and global perspectives for projects that run 24/7 in a "flat world." Companies need to develop capabilities in risk management and disaster recovery.
DeBellis said companies need capabilities in project management, technical methods and business processes. "All three of these capabilities need to come together at the project level," he said.
Any predictions for this area of practice in the coming years?
While predictions are a risky business, panelists expected that the tools of project, program and portfolio management would become standard business practices in the next five years as the field matures. Companies will become better at tailoring processes to the demands of the organization, putting more investment into mission-critical processes. Agile development has also been gaining momentum and the use of iterative methodologies could be expected to increase. There should be more interplay between the project manager and the business analyst.
What advice do you have for leaders interested in implementing these capabilities?
Project and portfolio managers not only need skills in their own discipline but they also need to understand how the business runs and
how it makes money. "Learn the business and understand the business model," said Capone. "Talk in simple terms. Senior management is
running in a thousand directions. You need to communicate effectively and quickly and don't be afraid to deliver the bad news.
It will come out sooner or later." Managers need to beware of a "green shift" projects become a little rosier and greener as
reports move up each level of the organization.
Companies need to take a more consistent approach to implementation, particularly in large companies. "Organizations are trying this, and that's a good thing, but there is a lot of trial and error going on. It needs to settle out," said Salidis. In the early days of Total Quality and Six Sigma, there were similar challenges. (Salidis recalled the memo to US government departments declaring 1976 the "year of zero defects." The memo was dated "March 36, 1976." Not a very auspicious beginning.)
Questions & Answers
Following the panel discussion, there was a brief Q&A session.
How do challenges of program and portfolio management differ in different organizational structures?
"Implementation doesn't change much based on structure," said DeBellis, but there is a different approach based on business model. The portfolio looks at investments across business models.
"Every organization is different," Salidis said. "Business managers actually spend very little time talking to project managers. Most business managers limit themselves to red, amber or green status reports. You need to get managers educated to some aspects of project management."
It seems that program and portfolio management requires project managers to spend a lot of time managing interdependencies and not the project itself. How do you deal with this?
Project managers have to understand the business and businesses naturally have interdependencies. "A business may want something automated, but the cost of automating may be more than the benefit derived from it," said Capone. "Nothing happens for free."
Understanding interdependencies in large organizations is critical. When one Fortune 500 firm analyzed its projects, it grouped them into independent projects, dependent projects, interdependent project and conflicting projects. (They actually found 13 projects working against other projects in the same organization. For example, one team might be enhancing a system that the other team was phasing out.) "You have to make sure the right people see the interdependencies," said Salidis. "To manage them, you need a more global picture."
How are project, program and portfolio management different in environments with low risk and low technological and market uncertainty versus environments with high risk and uncertainty?
Capone said projects with high risk and high uncertainty are monitored much more closely. Managers look at slippage or what has changed since last week. "If it is low risk, you may only hear about it if there is a problem," he said.