Effective governance in Project Portfolio Management

Kenneth AKALUGWU Michal AUGUSTINI Carsten BOJERT Tuan Anh DANG Hema PENTAKOTA

This article is the result of a student project, delivered as part of the International Project Management 2 module of the M.Sc. Management of Technology Information Systems, supervised by Luciana CASTRO May 2013

Effective governance in Project Portfolio Management

An analysis on how to avoid pitfalls and solve issues in Project Portfolio Management, comparing secondary literature with expert interviews
For a lot of companies, single project management has become routine. However, when it comes to managing large portfolios of different projects throughout the company, many organizations still show significant and costly deficits. While best-practice companies manage to run 80% of their projects to economic success, poorly managed companies waste more than half of their yearly budgets for projects which failed in the end. 1 This shockingly high amount alerts to identify its reasons. While ever more companies realize the benefits of Project Portfolio Management, fuelled by expected gains in efficiency and a better possibility to really follow the companys overall strategy with every activity undertaken, many seem to fail in the practical realization.

Meskendahl, Sascha et al. The Art of Project Portfolio Management. multiprojectmanagement.org, 2011: 1

Effective governance in Project Portfolio Management

Introduction and problem statement

Project Portfolio Management has taken a leading role especially in large enterprises as it helps mixing resources optimally, and thereby contributes to the achievement of the operational and financial goals, innovation and growth of organizations. However, a welldesigned portfolio management framework alone is hardly sufficient - according to researchers from the Aberdeen Group, "an inability to implement effective governance is a primary reason why companies fail to achieve best-inclass portfolio status2. Obviously, they miss key points of success. What is essential for effective governance in Project Portfolio Management?

PPM basically fulfils three tasks3: 1. screening, selecting, prioritizing projects and allocating resources to project proposals, 2. monitoring and reprioritizing running projects, and 3. tracking and managing the realized benefits of projects. Governance is the process of decision-making and the process by which decisions
4

are

implemented (or not implemented) . The term is used in several contexts and levels, e.g. at a corporate or national level. In the context of this article on Project Portfolio Management, we
3

Ter Mors, Michael, Roel Drost, and Frank Harmsen. Project Portfolio Management in Practice. PracticeDriven Research on enterprise transformation. Vol. 69, 2010: 107
4

Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012: 6

UNESCAP. What is good governance?. 2009. UNESCAP, 15.04.2013 <http://www.unescap.org/pdd/prs/ProjectActivities/O ngoing/gg/governance.asp>

Effective governance in Project Portfolio Management understand governance as the ability of an enterprise or its management to ensure that all stakeholders adhere to the implemented tools and methods as desired, and to be able to identify and solve the issues that arise during the implementation and utilization of PPM processes. increase the readability, similar responses were compiled paragraph. The aim of the interview was to identify the issues faced in the project portfolio management processes and advice on their effective governance. We deliberately interviewed experts together into the corresponding

Methodology
We first analysed secondary sources (mainly academic journals and books). Insights on effective governance were then compared against primary data to find similarities, contradictions or other peculiarities. The primary data was collected through three semi-structured expert interviews conducted in March 2013. These interviews were guided by a predefined set of 7 question blocks, but interviewers were free to rearrange the order of questions or add questions according to the flow of the interview. This enabled us to concentrate on specific questions, and also to flexibly tap into aspects which we had not identified before. Interviews were conducted by two interviewers at a time to ensure a good flow of the conversation and that all applicable topics are addressed. In the background, the other team members took notes and ensured the correct recording of the audio. The interviews were audio recorded with the respondents prior permissions, and then transcribed. To gain insights from body language, pauses after questions, facial expressions and gestures, interviews were conducted face-to-face where possible, alternatively via Skype. In one case the planned Skype connection did not work on the interview partners side, so that we had to conduct the interview via telephone only. The transcript data was compiled, then analysed. The data displayed in the transcript are all literal responses extracted from the audio records. To

with different levels of theoretical background (the highest thereof Dr. Ginger Levin, a member of the PMIs Registered Consulting Program, who is as well an adjunct professor at the University of Wisconsin-Platteville, the SKEMA University in Lille, and RMIT University in Melbourne), from different companies (Isabelle Brun from a Business & IT consultancy and Pascal Allouard who works for a large international insurance company), and also different functions in the respective organizations (Isabelle Brun as a multiclient IT Program Director and Pascal Allouard as an IT Project Manager working in a multinational program environment).

Advantages and pitfalls

Even though adopting elaborate Project Portfolio Management is rarely a smooth process, its advantages are generally perceived as higher than possible pitfalls.5 The numerous advantages include that proposals are discussed on objective grounds, i.e. principles which have been agreed upon before, and projects with a low or even unprofitable ROI are not realized anymore. Stakeholders thus feel equally treated, and

Ter Mors, Michael, Roel Drost, and Frank Harmsen. Project Portfolio Management in Practice. PracticeDriven Research on enterprise transformation. Vol. 69, 2010: 119

Effective governance in Project Portfolio Management projects cannot be kept alive just because it is the assigned project managers heartfelt wish to complete them. In fact, stopping redundant projects is a quick win when introducing PPM. Since the company obtains an umbrella view over all projects that are going on, synergies are easily detected, and budget overruns are less likely. In a nutshell, portfolio management helps managers to make the right decisions for the right reasons.6 Rad and Levin also identify better competitive positioning, more effective project teams, and lower overall project costs as benefits.
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the managers flesh. Especially frustrating are delays of several weeks because of tardy paperwork, as Ter Mors et al. illustrate with an example of a manager whose project was not discussed in the upcoming budgeting cycle due to such formal reasons.9

Critical success factors

Especially in the light of these obstacles, it is important to understand how PPM can be implemented and governed effectively. What are the critical success factors, and where are the areas for improvement? Comparing our interview results with existing literature on the field, various requirements for successful portfolio management crystalize, which we can cluster into seven main points:

However, these advantages are not understood and/or welcomed by everyone in the company immediately. Depending on the previous state of the company, Project Portfolio Management can lead to significant changes in work habits and create tensions. This is because it is often perceived as very bureaucratic and restrictive. For some apparently unknown reason, ever-more report sheets need to be filled out for the upper management, just to see that freedom of decision about projects is restricted. Managers are also forced to justify their decisions, a transparency that is not appreciated by everybody. Berkshire calls this the big brother perspective, which keeps the workforce from accepting PPM as a valuable process. As time is a crucial factor in projects, meeting deadlines for allegedly superfluous paperwork is a thorn in
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Tools

and

procedures.

First

and

foremost, PPM means the implementation of new tools, for instance in the form of new reports, matrices to evaluate projects, scorecards, dashboards, and frameworks to record the lessons learned etc. The list of such tools is countless, but they must be adequately chosen to fit to the company10, so that no procedure is superfluous and hence ineffective. A problem currently faced in this area is that of getting everyones support and also making them adhere to the processes. Mr. Pascal Allouard summarizes: Sometimes PPM as a global tool is not implemented into a company because high

6 7

ibid.: 120
9

F. Rad, Parviz. Ginger Levin. What is Project Portfolio Management?. 2008: 1

8

Ter Mors et al. : 120

10

Berkshire Consultancy Ltd.. Project Portfolio Management: The issues, challenges, business opportunities and future trends. 2005: 2

Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012: 4

Effective governance in Project Portfolio Management level managers dont want to complicate the paperwork. In essence, there is a perceived inability to identify and track every running process. One cannot completely ensure that every project is aligned with the overall performance goals of the company. There needs to exist a standard format for a business case for each project and program which should be continually checked against existing metrics. Also, it is important to see whether the goals of the organization have changed with time (for instance in the case of a merger, acquisition or downsizing activities) and also if this project or program still corresponds to its new goals.

rhythms) and of IT requirements.12 To remedy this rigour problem, not only does the office monitor ongoing processes on lower levels, but also the PMO itself needs to be evaluated regularly. Dr Ginger Levin said, The PMO needs to be evaluated because it is an operational activity just as you would evaluate the Human Resources department should we outsource it. PWC mentions that all stakeholders (should) follow an issue-escalation process that they agree upon before.13 Issue-escalation is considered to be one of the solutions to ensure that no problem in a project remains uncommunicated. Dr. Ginger Levin said, An issue-escalation process is an excellent approach for governance on projects and on programs. Since not all the stakeholders share the same understanding of when and which issues should be escalated, it is important to have such a standard in place. It helps to determine what can be approved and what needs to be taken forward. If a Project Manager faces any difficulty in the project, it is always better to express this difficulty openly so that help can be rendered in time, Isabelle Bruns said. In some cases, projects do not begin as expected. Developing a contract can be time consuming and also could depend on customers decisions. project directors are always certain of a real risk before an escalation is made, a statement quoted by Isabelle Brun. She further

Rigour. Often, a designated Project Office the (PMO) portfolio manages the

Management should follow

companys project portfolio. These managers management processes from beginning to end. Especially the third step, i.e. benefit tracking in order to learn for future projects, is often neglected or problematic.11 But this step is beneficial as it enables expansion into successful strategic directions, and it is also necessary to know whether the efforts have been worth it or if they have brought a positive yield at all. Again, rigour is needed when coordinating PPM cross-functionally. Adherence to the PPM tools must be ensured in every business unit, and it might lead to difficulties if they are on different maturity levels (i.e., they might not be on the same stage of the PPM implementation). Challenges here are the alignment of calendars (as business units usually have different

12

Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012: 7
13

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Ter Mors, Michael, Roel Drost, and Frank Harmsen. Project Portfolio Management in Practice. PracticeDriven Research on enterprise transformation. Vol. 69, 2010: 113

Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012: 6

Effective governance in Project Portfolio Management expressed that If we face any difficulties when dealing with the customer, we can escalate the issue to the manager who is responsible. For issues within the company, we need to solve the issues by ourselves. Pascal mentions that these issues could be escalated through mails, going through the necessary hierarchy - from the client to the top manager then to the PM himself. This may be time consuming but is still effective.

CEOs tend not to stay very long. So, whenever a new CEO comes, his or her priorities would be different. Some high value projects which are underway might have to be cancelled now. In such a case, the CEO should make it clear that it is not the teams fault and must have some alternative for it. We should not completely rely on the tools to drive the process. People make decisions based on the data in the information systems. It is important to ensure the information in the those systems is accurate, up-to-date, reliable and timely. This requires that there should be someone to review the content from time to time, as Dr. Ginger Levin underlines.

Continuity. It is recommended by Mr.

Pascal Allouard that regular meetings and awareness are the keys to ensuring effective communication with the stakeholders either through face-to-face meetings or by online tools. If there is no regular communication, the stakeholders will have a problem keeping track of the processes as well as their concentration: they will lose track, they forget your project and it doesnt get the attention from [...] management, by Mr. Pascal Allouard. Social media was suggested as an effective online communication tool. There are companies which have already implemented such tools not only for the purpose of reducing the amount of email sent, but also to keep the stakeholders of the project informed with the changes and the processes of the projects. It will be crucial for project managers to find a way to actually have people use such a system actively - e.g. through only sharing information there. Notifications via email about new content might also help shift from email to social network communication. The topic of (dis)continuity can also be understood as (un)stable objectives of top management. Many project managers face changing objectives during their projects. This cannot be avoided at all costs, and no tool will help. According to Dr. Ginger Levin, senior management is always going to change priorities.

Involvement. Here, the focus is on both

every employee on all organizational levels involved in projects and the top management (Clevels, i.e. CFO, CEO, COO, CIO) who decides to implement PPM. The latter can be educated by lectures and presentations, but this is only the first step. Top management must be presented logical data and its analysis to receive their buyin. Managers proposing portfolio management should demonstrate that too many projects run simultaneously, and they should also expose gaps in budget control, alignment with the strategy etc.14 The ideal situation is, that it should be a Chief Portfolio Officer who is at a comfortable level to someone such as the Chief Operating Officer, the Chief Information Officer, the Chief Finance Officer, Dr. Ginger Levin says. This makes involvement much easier. When the top management is convinced, every of

14

Kendall, Gerald I..Project Portfolio Management Principles and Best Practices. The AMA Handbook of Project Management, second edition, Chapter 22, 2006: 290

Effective governance in Project Portfolio Management the lower levels will either also more readily understand and accept, or at least be forced to adhere to the processes, Kendall argues . However, it seems more promising and sustainable when employees are not forced, but educated. This can be done through various means, for example via a Webinar that is accessible to everyone in every organizational level, as Dr. Ginger Levin suggests. The different aspects of portfolio management in the organization such as the goals and the processes involved should be made very clear, so there is not a deep dark secret. Also, it is important to regularly update the Webinar, to inform the others when the processes are changed and to explain why they had to be changed. Employees will be more supportive in the change process when they get a demonstration of how the new procedures can be helpful, not detrimental. Especially important for all other levels, however, are transparency, pragmatic solutions, and the encouragement by an interpersonally savvy manager, as described below:

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the performance and business value of PPM.17 Dr. Ginger Levin adds another interesting aspect: Everybody should know where their own project(s) stand(s) in the company. That is to say, the value each project brings to the company must be transparent, and the manager of a rather irrelevant project should know how to get the top decision makers attention if needed. You have to have the knowledge of all the work underway, and then you have got to put in place a process that everyone buys into to show this is really important [...] Yes, we are working on the number one project! Adding to this point is the idea of accountability, so responsibilities are clear to everybody.18

Pragmatic solutions. As indicated above,

an overload of tools can significantly decrease decision-making speed and leads to a less effective application of PPM. Dr. Ginger Levin advises that in the beginning, an organization should have an easy process where the projects and programs will be selected, their value evaluated within the portfolio and their priorities regularly assessed. Then, we can build up the process by adding more criteria to it. Another example is mentioned by Isabelle Brun, who addresses the issues when two companies merge - filling both an Excel file and an internet application with the same data means double

Transparency. This means that everybody

involved in or affected by the portfolio decisions should know the grounds on which decisions are made, and the status of currently running projects. This might be effectively done through proper communication tools such as mutually accessible dashboards or newsletters. Transparency will demonstrate fair treatment of all projects, and raise understanding if ones project is changed or stopped. It also emphasizes
16

17

Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012: 6
18

15 16

ibid.

Ter Mors, Michael, Roel Drost, and Frank Harmsen. Project Portfolio Management in Practice. PracticeDriven Research on enterprise transformation. Vol. 69, 2010: 119

Berkshire Consultancy Ltd.. Project Portfolio Management: The issues, challenges, business opportunities and future trends. 2005: 4; and Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012: 6

Effective governance in Project Portfolio Management work on a regular basis, and this is certainly not what companies want PPM to function like. Therefore the project portfolio management process must be formalized and rigid, to allow peoples adherence to predefined and objective criteria, but also flexible enough for speedy decision-making. The administrative burden should be minimized19. Examples like the one mentioned by Isabelle Brun also warn us of inefficient double work. Surely, portfolio managers will need to find the right balance by regularly going into a meta-perspective and checking which processes are really needed. And even if for instance the level of paperwork for a steering committee cannot be reduced, then the problem of slow decision-making could be counteracted with more frequent meetings.

people to develop their skills Obviously, project managers need to be prepared to be patient for newly-composed teams to deliver the expected results, and provide guidance and support.

Conclusion
These seven points demonstrate that the right tools and rigorous portfolio management with all its functions (especially also the after-action reviews) are only the beginning of the story. Strong efforts are required to work on the people factor, as it will be decisive for the success or failure of the Project Portfolio Management in a company. Through continuity in processes, e.g. by keeping the portfolio management practices alive in regular meetings or through internal social media platforms, people can be habituated to adhere to them. Real involvement however rises from seeing the support of C-level executives, education through forms such as Webinars and objective and transparent decision criteria. A neatly implemented portfolio management governance, which is correctly balanced between formality and flexibility, and whose purpose is understood throughout the company will be successful. In the end, every manager in the company plays an important role in spreading the awareness of the strong benefits we have seen in project portfolio management throughout the organization.

Managers interpersonal skills. Where

resources are limited and projects compete internally for approval and assignment of the budget Project managers claim, portfolio managers will necessarily have to deal with difficult interpersonal situations. As LaBrosse emphasizes, they will therefore not only need their dealing technical with abilities, but also strong
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negotiation skills, statesmanship and tact in competing demands . When generally asked for things to improve in portfolio management, Isabelle Brun mentions staffing projects as one of the major problems. It is very difficult to find the skill and profile. [...] We do our best, but we also have to train junior

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Ter Mors, Michael, Roel Drost, and Frank Harmsen. Project Portfolio Management in Practice. PracticeDriven Research on enterprise transformation. Vol. 69, 2010: 118
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We would like to thank our interview partners Dr. Ginger Levin, Isabelle Brun and Pascal Allouard for their very insightful participation and our teachers Luciana Castro and Krzysztof Markowski for their valuable feedback.

LaBrosse, Michelle. Project-Portfolio Management. Wiley Vol. 37 Issues 2, 2010: 76

Effective governance in Project Portfolio Management

References Berkshire Consultancy Ltd. Project Portfolio Management: The issues, challenges, business opportunities and future trends. 2005 Kendall, Gerald I..Project Portfolio Management Principles and Best Practices. The AMA Handbook of Project Management, second edition, Chapter 22, 2006: 290 LaBrosse, Michelle. Project-Portfolio Management. Wiley Vol. 37 Issues 2, 2010: 75-79 Meskendahl, Sascha et al. The Art of Project Portfolio Management. multiprojectmanagement.org , 2011 Moysey, Stephen. T. Finch, Jonathan. Strategic Portfolio Management: How governance and financial discipline can improve portfolio performance. PWC, 2012 Ter Mors, Michael, Roel Drost, and Frank Harmsen. Project Portfolio Management in Practice. Practice- Driven Research on enterprise transformation. Vol. 69, 2010: 107-126 UNESCAP. What is good governance?. 2009. UNESCAP, 15.04.2013 <http://www.unescap.org/pdd/prs/ProjectAc tivities/Ongoing/gg/governance.asp>

The authors Kenneth Akalugwu is a student of ESIEE Paris where he pursues an M.Sc. in Management of Technology - Information Systems. He obtained a B. Sc. in Computer Engineering in 2010 and became an Oracle certified SQL Expert in 2011. In January 2012, he earned a place as an Oracle Associate (database administration) while on the job at NIIT Nigeria. He speaks fluent English, good French and Igbo as mother tongue. Michal Augustini is student of Masaryk University in Brno, Czech Republic. He is on the Erasmus exchange program studying at ESIEE Management in Paris. In 2011 he graduated with a bachelor's degree in Applied Informatics. During the studies he started his professional carrier at IBM and continued in Dixons and Pixmania as IT specialist and tester. Nowadays he is focused on marketing, design and management. He is a passionate guitar player and musician. He is driven by a motto: Its not about good or enough. It is all about detail and perfection." Carsten Bojert is an ambitious M.Sc. student of Management of Technology Information Systems, an intense and internationally focused program which trains future hybrid project managers working at the interface of management and technology at the cole Suprieure d'Ingnieurs en lectronique et lectrotechnique in Paris. After successfully graduating from Heinrich Heine University of Dsseldorf with a B.A. in English and Communication and Media Science, Carsten gained profound hands-on

Effective governance in Project Portfolio Management experience in rail passenger and product marketing at Deutsche Bahn, as well as two years of expertise in media consulting with special focus on the insurance sector at Zenith, an affiliate of the worldwide Publicis S.A. network. Tuan Anh Dang obtained a B.Sc in

Information Science during his 7 year stay in New Zealand. He worked as an intern for Eureka Vietnam Stone Company where he functioned as the web and system administrator of the companys website. He has the ambition to become an elite project manager in of Information Technology Technology. from the Currently, he studies for an M.Sc in Management prestigious ESIEE, Paris. Hema Pentakota holds a Major in Computer Science & Engineering. She worked for HSBC for one year, as a customer service executive. She decided to go further by pursuing higher education in a multicultural international environment. She now studies Management of Technology - Information Systems at ESIEE Paris. Hema speaks fluent English (fluent), Telugu as mother tongue and has a good working knowledge of French.

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