Project Prioritisation – Why is it Important for the PMO?
During the last delivery of a course Enterprise Portfolio Management and the PMO which I teach, we started with asking participants what their learning objectives were, and the audience took me somewhat by surprise when “Portfolio Prioritisation” was chosen by a few. We were able to address the unexpected need by introducing an additional session, but it still leaves the question “Why is Portfolio Prioritisation so important for the PMO?”
For the purpose of this article, we refer to a PMO as an enterprise PMO or Portfolio Office.
What is Prioritisation? According to Management of Portfolios (MoP) (p. 56), “Prioritizing ranks the change initiatives within the portfolio (or portfolio segment) based on one or more agreed measures.” Given the common constraints of limited budget and finite resources, prioritisation will help decision-makers to decide:
- Which initiatives should we invest in?
- Which initiatives are more important than others?
- What initiatives should get priority access to resources?
Now that we have established what Prioritisation is and which questions it answers, we can start exploring some of the challenges associated with this enterprise management process.
What are the challenges and how can the PMO help? Just reading the definition provides some insights to the challenges an enterprise PMO might encounter, such as
- Change initiatives within the portfolio;
- One or more agreed measures
Let us look at both challenges in more detail:
Change Initiatives Within the Portfolio
The first challenge an organisation faces while trying to prioritise is associated with the process step beforehand – MoP calls the practice “Categorize”.
As a gatekeeper of the processes, the PMO will want to make sure that the change initiatives within a specific portfolio should be there for a reason – the very reason being that they are comparable for the purpose of their contribution to achieving strategic objectives.
Associated with the contribution to those strategic objectives will be different investment criteria or measurements. Who has not seen the portfolio of mandatory or regulatory compliance items being filled up with initiatives that addressed a lot more than compliance? At times, those bringing the initiative forward may have assumed it to be an easier way to investment approval.
The PMO can do the following to address this issue:
- Firstly, making sure that all initiatives belong to one portfolio only for the purpose of prioritisation.
- Secondly, making sure that all initiatives are only addressing the strategic objectives associated with the portfolio (i.e., the initiative is not a combination of regulatory compliance and business process improvement).
Once the portfolios and sub-portfolios are established, the issue of measurements has to be addressed.
Best practice recommendation, including that provided by MoP who call it “multi-criteria analysis”, is clearly towards a number of different measures. By different measures, it refers not to different financial metrics, but to what I would call “value” vs “risk” considerations.
Those with a finance background will know that each of the financial metrics (NPV, IRR, Payback, etc.) has its own shortcomings. As a consequence, PPM software solutions typically offer at least a couple of options and more than one of my clients did initially feel the end to implement all. It would not solve the issue as the financial metrics are not complementing each other. Another criterion concerning value could be strategic contribution or perceived need. As far as “risk” is concerned, factors such as reputation, the likelihood of successful delivery and benefits realisation, change capacity and change capability, or technology come to mind.
Coming up with proposals for these measures may be easier than getting them agreed.
Weighting of Measures
Each stakeholder, and there will be many across the entire organisation, will have their own view with the currently proposed potential initiatives in mind.
This is not helped by the third step in this particular process – establishing the weighting of each individual measure compared to the others.
Here again, the context of each stakeholder will have a bearing on the attitude towards possible agreement. Sounds difficult and complicated? Well, we can do one better even!
So far, our set-up of measures will only account for initiatives that belong to the same portfolio or sub-portfolio. So far it meant dealing with one set of stakeholders but now we have to look at a multitude of those.
One of my clients in the past, the Head of Strategic Planning, immediately understood and while she was completing her drawing on a noticeboard, moved on to thinking about different hurdle rates for ROI for different parts of the business. I was lucky there – the changes would come top-down, agreed by the top-level executives.
The PMO can do the following to address these issues:
- The most difficult piece of advice to follow for the PMO first: KISS, Keep it simple, stupid.
- Go and start in your finance department and agree one financial measure that would be applicable across the entire organisation – the advantage of this approach is clear, no one would challenge the experts in the finance department and given what we said about the different financial measures the PMO will typically have no strong preference towards one specific measurement.
- Next stop: Head of Strategic Planning. I would always see the Head of Strategic Planning as one of the stakeholders of an enterprise-wide operating PMO, specifically when portfolio management is part of the remit. The PMO should be able to obtain the latest strategy, including drivers and objectives, and potential hurdle rates.
- Your CIO will be able to point out measurements for technology complexity and risk.
- If the PMO has the buy-in for those three stakeholders, then the conversations with project managers, programme sponsors, etc. will be a lot easier. And how do you implement the measurements? The Business Case! Best Practices and views on different templates out there in the marketplace to follow… a different challenge altogether.
More About Holger
Holger Heuss is an expert interim manager, advisor and leader on governance and portfolio/change management, PMO, IT Operating Models, and IT4IT with exceptional track record of leading, designing, delivering and assuring large and challenging programmes around business and IT digital transformation, organisational design, portfolio management, IT management, IT finance management and transformation, regulatory, compliance and business and IT process improvement, mainly in financial services; he operates at senior management and executive board levels, with the ability to gain the confidence of stakeholders, influence decisions and deliver results; he manages multiple assignments and leads multi-cultural teams in cross-border and post-merger integration scenarios; he provides leadership and practical insight at various conferences and events about all aspects of portfolio/change management and the different variants of PMOs.