The ELB Consulting Blog

Building a Better Portfolio Management Process

Is your portfolio management process under-performing?


Are you experiencing any of the following symptoms of an ineffective portfolio management process?

  • Your organization always seems to have more projects in the pipeline than it could possibly resource – yet you continue approving additional projects.
  • There always seems to be a mad rush to the starting line. Your IT resources are more interested in getting projects approved than getting them completed. Moreover, reward systems reinforce this behavior.
  • You are under-spending your portfolio allocation while approved projects remain dormant because resources are over-committed to other approved projects.
  • You are spending more time and organizational energy evaluating projects than delivering those projects.
  • Your review and approval processes are excessively bureaucratic, add little value and consume significant resource time.
  • Your internal client base is constantly telling you that your portfolio management process is broken?


If you are experiencing several of these conditions, then your organization is a candidate for a portfolio process reset.  I’m not talking about minor adjustments but a whole new way of managing your project portfolio.


It’s common for portfolio management teams to constantly tweak and modify their processes only to see the same results.  Why is that?  Most portfolio management leaders are stuck in paradigms that shape and influence their thinking. Here are some of the myths regarding portfolio management that get in the way:

Myth #1: All IT projects must have a charter and formal review process that includes senior level management approval.


Most IT organizations feel compelled to develop business cases and formal charters for all projects, regardless of size or scope. While charters are indeed important for large scale, multi-discipline projects, I submit they are not necessary for most IT projects.  Let me explain.


IT organizations typically have multiple control mechanisms in place to ensure management responsibilities are met:

  • IT budgets are reviewed extensively with pre-set limits for all areas of cost management, including project spending targets.
  • Many portfolios contain limits for various categories of spending and these categories are closely monitored and tracked. Requiring charters and other forms of authorization (except for major projects) creates unnecessary, redundant and costly controls.
  • Even without formal charters, established project cost limits provide another layer of control.


In addition to being an ineffective control tool, formal charters add a significant burden on the organization without commensurate value. When charter preparation is required, it often follows that the charters are reviewed by a senior leader.  This generally results in significant time and effort dedicated to charter preparation – no one wants to look unprepared in front of leadership. This spin cycle consumes valuable resource time and often has little direct bearing on the ultimate decision.  Further, projects typically have sponsors who will drive project approval – the charter serves as a validation instrument rather than a decision support tool.


Moreover, many project requests are not approved. Effort to create an unapproved charter is a misuse of valuable resources.  Excessive effort spent on rejected requests also creates organizational tension and sends a signal that you don’t value people’s time.


There are other ways to provide information to aid in the decision making process and set project parameters. I will discuss later how to provide visibility and awareness to senior leaders while meeting requisite control over project spending.


Myth #2: You must fill the portfolio with projects as soon as possible to ensure that you spend your project cost allotment.


This is a fallacy that frequently gets organizations in trouble.  There are a number of issues that arise from this approach.


First, rushing to allocate portfolio funds assumes that you have a thorough understanding of the organization’s needs when you make the selection.  While committing resources early in the process does not preclude making adjustments to address acute need, it does set up conflict scenarios and wasted energy debating which projects should give way to newly identified, higher priority initiatives.  Further, selecting projects early in the budget cycle is inefficient and wasteful.  Identifying project requirements well in advance of project initiation often results in re-work and refinement as the initiation date approaches.  When decisions are required months in advance, the team simply does not have enough insight to determine deliverables and cost. Once again, this results in wasted energy investing in project planning and resource allocation exercises on projects that may never be selected.


Myth #3: Portfolio allocations must be pre-set based on previous spending levels.


A common mistake made in portfolio planning is assigning budgeted project spending to constituent groups based on past spending levels.  While easy to manage, this approach has manifold issues.  Foremost among them, this method creates an entitlement mindset and often favors large business units, functional organizations or worse, the function overseeing the process.  Over time, this can be very corrosive to the organization. Secondly, pre-assigning project budgets does not factor in urgency or true strategic priority.  Thirdly, poor project performance is discounted or not considered when allocating scarce resources.  In effect, you are rewarding poor performance and discouraging organizations with smaller portfolios from aggressively pursuing projects with potential for significant return. Lastly, this method restricts flexibility and inhibits the organization’s ability to address the most important needs.


Myth #4: An elaborate evaluation process is needed to ensure that the selection is based on highly reliable (and supportable) methodology.


Portfolio Management teams often feel the need to develop highly sophisticated evaluation processes and protocols to assess potential projects.  This provides assurances to the organization that project selection decisions are based on scientific methods that ensure success. If your organization feels comfortable utilizing complex evaluation tools and processes, then feel free to continue using them.  However, simple processes that are built to deliver speedy decisions based on alignment with strategic priorities, business value and ease of implementation are just as effective and easier to maintain.


What does an effective portfolio process look like?


A more selective, just-in-time approach to project prioritization is recommended. Obviously, long-lead projects with significant resource commitments are excluded from this conversation.  These projects tend to have dedicated teams, standalone budgets and senior sponsorship.  I am referring to projects that have shorter life cycles, non-dedicated resources and fit within the previously mentioned spending categories.


There are several reasons for utilizing a quick turnaround selection process.

  • A fast-paced portfolio selection process provides tremendous flexibility. The organization can react quickly to changing business needs and can activate projects when the need arises.
  • Less time dedicated to selecting projects means more time delivering them.
  • You have better insight and understanding of project the requirements the closer you are to initiating the project. This will reduce the amount of rework and validation. If a project proposal was evaluated months ago most project teams will want to review and re-validate the project commitments.  Also, it’s common for project team turnover to occur which adds to the rework.
  • Project sponsors may have moved on to other roles and the new leader may not have the same priorities. This calls into question the overall value of the proposal.


The selection committee should be comprised of a well-respected cross-section of business and IT representatives.  Their primary responsibilities are to ensure that the portfolio is balanced, aligned with strategic initiatives and achievable.  Their selections must fit within budget parameters established for the portfolio by senior leaders.


To accommodate a streamlined, more responsive selection process it is imperative that the project evaluation process be extremely efficient as well. You must have the ability to evaluate projects in a matter of hours or days as opposed to timelines that can extend to weeks.  This can be accomplished by adopting the following:

  • Narrow the evaluation team to a select few – relevant architect(s), project manager, subject matter expert(s) and resource planning team member.
  • Establish a set of criteria that can be readily assessed by the evaluation team. The key is to determine where the project fits within a set of ranges in each criteria category. The goal is not to develop a specific project plan but rather create a general project framework. Some examples of criteria categories include:
    • Cost Ranges
    • Technical Complexity
    • Institutional Knowledge to execute project requirements
    • Resource Availability
    • Staff Augmentation requirements
    • Change Management Challenges
  • Empower the evaluation team to assess the viability of projects. The inclination of management is to weigh in on pet projects but for this process to work the team must have the  independence to provide an unbiased assessment of projects.


These evaluation sessions should be facilitated by architects and project managers and should be conducted when a project has been identified as having high potential to move forward.  The results of this evaluation are presented to the selection committee for consideration when making a final determination.


Once a project is selected, periodic check-ins with project sponsors are required to ensure that projects are staying within assessment boundaries.  If the project team identifies deviations from approved ranges (particularly cost), they must raise those issues to the project sponsors as soon as practical.  If the deviations are significant enough, the sponsors may choose to cancel a project.  In a traditional portfolio process, this might be viewed as a failure.  In a streamlined, highly efficient process this should be viewed as an acceptable risk.  Obviously, ongoing measurement of the evaluation process with appropriate corrective action is a must.  Over time, the evaluation teams will become very effective at determining project size, scope and cost.  The resultant process will provide nimble, responsive and low-cost.


While most portfolio processes are designed with well intentioned control features and review mechanisms, they often prove to be counterproductive, extremely costly and unnecessary.


The primary focus of any portfolio process design should be SPEED! It’s imperative that you emphasize efficiency in all that you do.  Why is speed so important?

  • Typically, a very high percentage of project execution costs are resource related – said another way, they are fixed costs. You should be driven to get the highest possible utility out of those resources.  The goal is to avoid having idle or poorly utilized resources who could be delivering new capability to the organization.  While this seems obvious, most organizations do not adhere to this principle.
  • It goes without saying that the sooner projects get completed, the sooner the organization receives the benefits from the delivered capability. Many of the projects in the pipeline are targeting a specific need with a prescribed timeline. Failure to make timeline commitments results in lost benefit realization.  This is another case of stating the obvious but ask yourself, how often have you missed a critical time commitment due to an inefficient portfolio and project delivery system.


As you begin your journey to streamline your portfolio process, constantly challenge the value proposition for each of your current processes.  Ask yourself the following questions:

  • Are the process steps necessary?
  • Do they add value or add cost?
  • If the process step is intended to provide control, are you already providing adequate control through other means?
  • Ask yourself repeatedly, WHY. Why do we do this step? Why do we have 3 review steps?  Why is portfolio allocated in this manner? If you cannot identify obvious value added rationale for performing these process steps/activities, challenge them.  Eliminate as many inefficiencies as possible.


Before you begin your process redesign, establish metrics and measures aimed at assessing throughput.  As you make your changes be sure to note when the changes occur and track progress from that point.  Be careful to not introduce too many changes at once.  It makes tracking the impact of a specific change difficult and can create chaos rather than the transformational impact you are seeking.  This gives fuel for naysayers to shoot down the entire effort.


Some of the concepts proposed fly in the face of conventional wisdom but if you step back and think about what they are intended to accomplish you can see that a faster, more nimble portfolio management process will yield more projects and greater value to the organization.


Good luck!

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