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Tenet #9 - Ten Tenets of Portfolio Management

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by Larry Pendergrass, Principal

Tenet #9: Monitor rigorously.

In my last blog I encouraged you to recognize that the PPM team with the associated processes has in its hands the largest lever to improve product development flow, that of the number and type of projects in the pipeline at any given time. Most firms tend to push the utilization levels up above 100%, believing that this is the best path to superior economic efficiencies. But in reality, our greater understanding of traffic flow and similar phenomenon has shown us that this will cause a system to slow down and eventually come to a complete stand-still. The PPM team must pay careful attention to these utilization levels and reduce them (to around 80%) if maximum flow of new products is expected. Since utilization and queue levels are directly related and since queues are often more easily measured, many firms choose instead to measure queue levels at critical points in the product development, pulling pre-arranged corrective action triggers as queue levels exceed an acceptable level.

In this blog I would like to discuss the need for rigorous monitoring of the PPM process and its results. This admonition has two parts:

  • Monitor portfolio progress: The PPM team must be chartered to dig deep into project execution details, to revisit market assumptions regularly and in general never assume that what is started will hum along as expected without occasional nudging. This nudging may include reprioritization of certain projects, or more drastic action.
  • Monitor the PPM team and process: The leader or leaders sponsoring the PPM team must regularly evaluate the charter, goals processes, and the performance of the PPM team to assure that the team is effective and accomplishing the current business goals.

This may sound like common sense, but unfortunately what may appear to be common sense is not that common. Surprisingly there are many firms that may charter a PPM processes and team, and they in turn may charter projects that are then left to run in a rather open-loop fashion, with very little monitoring and correction unless a catastrophic event takes place.

Monitor portfolio progress, owned by the PPM team: We began this series of blogs describing the role of the PPM processes and the PPM team as continuously “identifying, monitoring, nurturing and sometimes even killing projects”. Tenet #6: “Use visual analysis” advocated the usage of visual tools for these tasks. Some of the tools were used to identify the right projects. Some of the tools were suggested for monitoring the portfolio during execution. Among the tools suggested for the task of monitoring the execution of projects were the stoplight chart, tornado diagrams, product release charts or roadmaps, project schedules, resource tool output, and burn-down or earned value charts. Regular meetings of the PPM team should include evaluation of the execution of each project (at least the major projects) using these or other means of status communication.

Additionally, the market and customer assumptions that were used in authorizing the project should be updated as changes occur. Even if there are no changes in the market or industry, the uncertainties used in the evaluation of the project will change as the project progresses and risk is reduced. The evaluation of changes to the project assumptions should be an expected, regular and rigorous part of the PPM team activities. But no amount of monitoring is of any use unless decisions are made from the information presented. The information about project status, and current market and industry knowledge must be complete, updated, truthful and accurate. The PPM team must be empowered to insist on this level of information being delivered for us at each PPM meeting. Only then can the team fulfill its charter to not only identify, but also to monitor, nurture and sometimes terminate a previously approved project.

Monitor the PPM team and process, Owned by the leader sponsoring the PPM team: I am a big believer in “managing by the exceptions”, that is, sharing objectives, delegating to smart and capable people, agreeing on “out of bounds conditions” or indications that the projects or processes are not proceeding as expected, and reacting to these conditions. But for key corporate initiatives and mission-critical functions, this seldom means winding up a group of people and turning them completely loose with little-to-no oversight. The level of necessary oversight depends on the capabilities of the people, the newness of the processes and the risk and cost of failure. In the beginning with any new processes or with new people working within these processes, greater oversight is required. Over time as the new processes become familiar and the competency of the people involved create greater trust, oversight can be relaxed… for a time. However any set of processes, organizational structures, or roles and responsibilities have with them “half-life” of effectiveness. Over time, charters stray, business needs change and teams get lost. Sometimes “process arthritis” sets in slowing down the pace of decision making, and course correction is needed.

The leader must have significant involvement and provide oversight of the PPM team in the beginning when the team is first chartered, and whenever there is a significant change in participating personnel or in corporate goals. Even when the PPM team and processes are mature, and even without these unusual events and triggers, regular monitoring of the methods and results of the team are highly advised. Any team has a “half-life” of effectiveness, and this drop in effectiveness over time requires the sponsor(s) regular observation and evaluation of the team and associated processes. If the new product development process is key to delivering customer value for the firm (as it is for all high technology companies… just look at the amount spent in engineering and R/D) the sponsoring leader must evaluate the PPM team and processes regularly, and take corrective action before it is no longer effective.

PPM is not an event. It is a set of continuous and interactive steps including identifying the best opportunities and balancing the set of active projects, monitoring the assumptions and the execution of those projects, making corrections to resources and project scopes, and occasionally bringing a project to an early end. This requires constant, highly involved monitoring, and taking action on the information obtained. The PPM team and the sponsors of that team and processes must be diligent in monitoring, in active involvement and in timely decision-making.

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