Bob Walker EPM TSP

The Importance of Organisational Portfolio Management

• Agenda:• In this session we will be discussing and

reviewing • The importance of aligning Project and

Programme Portfolios to key business goals

• Formulating and executing sound business processes

• Identifying key metrics• How to identify and select the right

portfolio • Microsoft HR use of Portfolio Management

The Importance of Organisational Portfolio Management

Vision(Short- and long-term strategy)

Strategic Performance Indicators(Key drivers & metrics for assessing progress)

Key Structures & Capabilities(Organisation, Business & Technical Architecture, Performance Mgt)

Business Activities(Projects, new initiatives, day-to-day work)

Skills, Competencies & Behaviours(Training & Development, Reward Structure)

The strategic context for effective portfolio management:Holistic, inclusive, top-down

World-class companies can demonstrate a clear alignment throughout their organisation and studies have shown exponential performance improvements for those who adopt this approach

Investment in activities and initiatives that do not clearly align with strategicgoals is wasted.

5 Key Elements of Effective Strategy

• Initial focus on issues, not numbers• Inclusive, open discussion –

involving unit heads as well as CXOs – to promote communication and understanding of final targets

• In-built ‘what-if’ and scenario planning, with reviews and updates as necessary, not dictated by the calendar

• Agreed ‘strategic’ metrics to track progress – not necessarily all financial – reviewed regularly

• Linked to performance management / compensation package

Primary Source: McKinsey, 2004

50% of projects are still evaluated independently rather than as part of a portfolio

45% of projects only go ahead because a senior executive insists

21% of projects, in hindsight, should have been approved but lost out to those with more vocal support

40% of organisations don’t conduct any kind of post-implementation review

36% of projects are found to have over-stated their potential benefits

The business context:The track record is disappointingly poor

Significant Issues

Regulatory requirements (SOX etc) necessitate greater transparency in decision-making

Need to cope with growing organisational complexity

Ever-more challenging business climate: - requires demonstration of effective results, quicker - need for greater agility and flexibility

Pressure to minimise spending while investing in value-added activities

84% of organisations remain unable to demonstrate the link between IT or capital budgets and business needs

69% of major capital projects are neither on time nor on budget

Industry average for ‘successful’ investments is 50% or less

Primary Source: Standish Group, 2006

Primary Source: McKinsey Survey of 2500 global executives, 2007

4 Key Reasons Why Organisations Turn To Portfolio Management:

1. To save money / budget2. To demonstrably add value in the programme / project

investments3. To improve transparency – usually at the behest of

external stakeholders4. As a catalyst for significant process improvement, usually

in one of the following areas:• Business case / project approval• Business agility (‘what if’/ scenario planning)• Delivery control and benefits management

Confidence, Transparency and Flexibility

• Creates a common currency for comparing investments and making better-informed decisions

• Ensures decisions made according to verifiable data, not politics or ‘noise’

• Creates a clear and quantifiable link between strategic objectives and initiatives undertaken

• Uses a benefits-led approach to delivering strategic projects.

• Reduces management time spent on decision-making through greater focus on high value initiatives

• Reduces overall spend by eliminating low value investments

• Promotes organisational agility through modelling of ‘what-ifs’ and other detailed scenario analysis - decisions to change taken within minutes

Generic Benefits

• Define your strategy• Prioritise your strategy• Capture your investment proposales• Align your investments• Make good decisions• Review & renew

How to identify and select the right Portfolio

• “The plans made or the actions taken in an effort to help the organisation fulfil its intended purpose“

• Drives Competitive Advantage• A strategic organisation can choose to be

tactical, a tactical organisation cannot choose to be strategic!

What is Strategic?

• All your intentions may now be strategic........

.....but not all strategies are equal!• Create a prioritisation based on reality

not emotion

Strategic Priorities

• Standard criteria for measuring:• Costs• Benefits• Resource requirement• Time• Risk

• Common process• Build a “book”

Where are my projects?

• Who shouts loudest?• Boss’s prerogative?• It got passed over last time?• Everyone else has one!• Compliance and regulation?

How do you Choose!

• Be flexible• Kill quick• Review regularly• Be provocative

Change is a Constant

Microsoft HR and Portfolio Management

• Previous fiscal years had ~80 projects in the pipe • Organizational overload• Prior business framework attempt did not achieve desired

results• No measurable link of projects to strategy• HR Operational Excellence Team established in FY07 to

address planning issues:• HR Leadership team sponsorship • 2 Program Managers• Project Delivery Framework virtual global team ~ 14 people• Portfolio Management Office virtual global team ~ 18 people

Business Situation

• Prior IT project selection was more of a funding process because projects were pre-determined by the business

• IT receives disparate IT project requests from each HR area – not a consolidated list

• IT budget is allocated to each HR area based on prior year’s budget instead of by rationalizing the strategic impact of projects

• IT had no governance or focus around IT investment ROI or project rationalization

• IT Personnel did not feel “strategic” to the organization• IT Business Architecture and Foundation Solutions Team

established in FY07 to address portfolio and integration issues:• Business architect• Six Sigma Black Belt Process Engineer• PMO Program Manager• Integration Solution Manager

IT Situation

• Pain• Confusion• Costs• Blame• Not consistent• Re-invention

Summary of HR & IT Situation

• Learn from the past• Take small steps – phases and quick

wins• Strong emphasis on change

management and stakeholder management

New Approach

• Think globally• Program manage it like a

project/establish cross functional team • Leverage the Project Portfolio Server

2007 tool to help facilitate the process (focus on the process vs. tool)

New Approach

• Portfolio went from 84 projects to 14• Portfolio aligned to HR and IT drivers and

goals• On-track to deliver dialed movement to

business drivers• Better HR and IT resource allocation

Results

• Improvements led to:• Better communication• Clear governance and accountability• Streamlining of the project selection

process• Focus on business and shareholder

value• Clear rationalization of IT investment

Results

• Executive sponsorship• Clear Strategy to make trade-offs • Phased approach• Leverage best practices and expertise in

process, change management and program management

• Diversity of cross functional team • Project Portfolio Server enabled real time

decision making

Success Factors

• Measure strategy and portfolio outcomes• Complete project framework to enable

consistent execution• Manage change and on-going project status

updates • Refine planning for fiscal year ’09• Expand scope to include “small” projects• Incorporate gap analysis on business

capabilities • Move organization bandwidth from “As Is” to

“Aspire to”

Next Steps: Continuing the Journey

• Secure leadership team sponsorship• Keep it simple• Take small steps to demonstrate quick

wins• Communicate often along the way• Leverage technology like Project

Portfolio Server to enable data driven decisions/trade offs

Recommendations

• Portfolio Management involves all parties• Do not try and take on everything• One persons Strategic is another

persons tactical• Executive Sponsorship from Business

and IT is essential

Take Away’s

• Chris Mills – CxO Consulting• Paul Major – Program Framework• Microsoft –

• Carol Bubar, Senior Director Operational Excellence, Microsoft HR

• Francis Gan, Senior Director HR Business Architecture and Foundations Solutions, Microsoft IT

• http://technet.microsoft.com/en-us/library/cc297284.aspx

Thanks

Thank you