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300.3.1 Brief Description of Each of
the Ten Steps |
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As we described earlier, the PortfolioStep
life cycle consists of four major phases: Prepare; Plan; Execute; and
Harvest; and these phases encompass ten steps as briefly described
below.
Prepare
Categorization: Step 1 – PortfolioStep Setup
The Project Management Institute defines
categorization as: "The process of grouping
potential components into categories to facilitate further
decision-making", and it defines a category as: "A predetermined key
description used to group potential and authorized components to
facilitate further decision-making. Categories usually link their
components with a common set of strategic goals."
When first implementing portfolio
management, obviously you must first establish what you are going to
manage. That is, you need an overview of the extent and variety of
existing and potential work, how it maps into the organization's overall
strategy and so on. In other words you must have a good idea of the
extent and size of your mandate.
So, for the first time through we've
brought this heading to the top, but prefer to refer to this first step
as "Setup". In subsequent passes, you may well decide that it makes more
sense to conduct detailed categorization following identification of all
the new portfolio components. Setup is where you define the terms, scope
and definition of your portfolio, and gain agreement on your basic
portfolio model.
Example: You need to define
information like the following:
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The departments covered, e.g. will you
include the entire organization or just certain departments?
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The type of work included, e.g. does
your portfolio include projects, support, operations, etc.?
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The categorization scheme. This helps
you balance your portfolio in areas that are important to you so
that you can optimize the overall allocation of resources. For
instance, categories could include work that "supports the
business", "grows the business" and "leads the business". You could
also categorize work as high, medium and low-risk, or perhaps in
global versus local categories.
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The balance points. For each
categorization you define, you would also set some guidelines as to
how you think the work should be balanced.
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The financial models. When it is time
to prioritize the work, you want to make sure that you choose
projects that are aligned to your goals and strategies, as well as
have the highest value. It is impossible to compare apples to apples
if each project has a justification based on different models. You
need to understand the models that your department wants to employ
and make sure all projects are justified using those models.
The Setup step may be lengthy the first
time you implement PortfolioStep for the Business Planning Process.
However, in subsequent planning cycles, you only need to review the
prior cycle's Setup. If the Setup information is still valid (and it may
be), then this step will be over very quickly. Usually, however, changes
in emphasis will occur that will result in changes to the Setup.
Example: In the first year of using
PortfolioStep, you may decide to include only project work in the
portfolio. In the second year, you may decide to include all other
Portfolio Components as well. This might also result in changes to your
categorization scheme.
Identification: Step 2 – Identify Needs and
Opportunities
This step starts with an evaluation of your
environment through a Current State Assessment and then contrasting the
current state with a Future State Vision that describes where you want
your organization to be in the future. This process results in the
validation (or creation) of your mission, vision, strategy, goals and
objectives. In particular, your strategy and goals will provide the
high-level direction that will help align and prioritize all the work
for the coming business cycle.
The Identification step can also be very
lengthy the first time you use PortfolioStep. The Current State
Assessment, for instance, may take a long time to complete. However, in
subsequent years, you only need to recognize the changes. For instance,
your strategy and goals may change slightly to put new emphasis in a
couple different areas. However, they should not be radically different
from one year to the next. Since your department probably has not
changed a lot over a one-year period, your Current State Assessment may
need to be reviewed and updated, but probably not performed again from
scratch.
The Identification step is also where all
of the potential work is surfaced for the coming year. At this point,
each request should have a simple Value Proposition document that
describes the work, the value that it will provide to the organization
or department and the basis of alignment with the overall organizational
strategy and goals. If you are including all work, the Value
Propositions will include projects, support, discretionary and
leadership work.
Plan
Evaluation: Step 3 – Evaluate Options
You cannot make decisions on prioritizing
work without knowing what the organization or department feels is
important. This is where you need to revisit the documentation from
PortfolioStep Setup (Step 1) and ensure that you have a proper basis for
evaluation of all the work opportunities included in the portfolio. This
will result in establishing the context within which work priorities and
approvals will be made.
This step includes validating the Value
Propositions prepared in the previous step and perhaps clarifying the
most likely candidates.
Selection: Step 4 – Select the Work
In this step you or your portfolio group
must make serious and potentially far-reaching decisions. Although it
may sound simple, this effort must be meticulous and rigorous. For
instance, if there is any question about a particular but likely Value
Proposition, the Value Proposition may need firming up. In all but minor
work efforts, a more detailed Business Case should be created for all
projects that survive the initial cut.
Thus, during this step you should have had
a complete review of all the Value Propositions and/or Business Cases on
the table and end up with a selection of work that you expect to conduct
during the ensuing period.
Prioritization: Step 5 – Prioritize the Work
One of the key assumptions of PortfolioStep
is that there is much more work requested than the department can
execute in one year. (If, in fact, you could do everything requested,
you might not need a process like PortfolioStep. However, experience
tells us that this is very unlikely unless the business is in a state of
decline.)
After all the work has been selected, a
prioritization process begins. First, work is prioritized within each
business unit or group, and the Business Cases for all the work are then
prioritized to come up with a final list of prioritized work. This
process is easily described, but hard to accomplish because of the need
for collaboration and consensus amongst all the senior managers and/or
stakeholders.
Portfolio Balancing: Step 6 – Balance and Optimize
the Portfolio
Having selected and prioritized the work,
it is important for you to step back and take an overall hard look at
the resulting work now contemplated. Is it "balanced"? That is, does the
resulting mix satisfy the overall direction of the organization and its
overall priorities? Just as important, does the resulting mix produce
the best or optimum benefit value?
You may find the answer to the first
question is relatively easy to answer by adding up the estimated work
under each of the categories and comparing that with the strategic plan.
The answer to the second question is more difficult because you not only
need to estimate the value of the anticipated future benefits, but you
may find yourself trying to compare different types of benefits. Some of
these benefits may not necessarily be identifiable in financial terms
and you will need to apply subjective judgment.
Example: A new process or system
will lead to a reduced number of steps compared to a previous process.
The benefit is not likely to be realized in reduced cost (no one will be
laid off as a result), but it should lead to reduced errors, consequent
higher customer satisfaction, customer loyalty and repeat business. Here
there is a clear and desirable benefit, but not one that can be compared
in direct financial terms.
Execute
Authorizing: Step 7 – Authorize the Work
After the balancing step, the work thus
finally selected is authorized for the coming year. This process lists
and sets aside requisite budget and resources to carry out the selected
work. This is not necessarily a guarantee that the work will be funded
because changes in business conditions or newly surfaced work during the
year could bump some authorized work off this approved list. However,
all things being equal, authorized work will be scheduled and executed
in the year.
Activation: Step 8 – Plan and Execute the Work
Activation is the process of actually
scheduling and executing the work throughout the year. In this
Activation step, managers build schedules to start and complete as much
of the approved work as possible. Operations and support staff are in
place at the start of the year and will be in place all year. Obviously,
you cannot start all projects at once at the beginning of the year.
If you tried to schedule all your projects
to start at once, you would have to hire excess staff during the peak
workload, and then have staff idle during the slower time. Hence,
projects and leadership initiatives need to be scheduled throughout the
year based on business urgency, availability of staff and/or the logical
relationships of outputs. This is rather like assembling a jigsaw where
everything must fit together.
This Activation step should also contain a
mini-Business Plan Process to account for new and unexpected work that
arises during the year. Such work also needs to be selected, prioritized
and authorized. If new work is authorized, it may mean that some work
that was previously authorized will need to be canceled or delayed.
Activation includes keeping track of old
projects to track value metrics and lifecycle costs, as well as keeping
track of future work to ensure that all work authorization and
activation is scheduled appropriately based on business priorities and
availability of staff.
Harvest
Portfolio Reporting & Review: Step 9 – Report on
Portfolio Status
It is one thing to report on the progress
of individual work and individual projects, but with a large portfolio
this results in a lengthy and often too detailed report. In any case,
what the Executive will want to know is how the overall portfolio is
progressing, what results are being achieved, what the overall portfolio
picture looks like, and so on. In short, are the various benefit
enablers being achieved, and if so, what results are they currently
returning?
Put another way: What is the status of our
strategic goal achievement, asset contribution, current corporate risk
profile, and our corporate resource capability? Answers t these
questions may well lead to some modification of the authorized and
activated work, and the need for further review and re-forecasting.
Strategic Change: Step 10 – Improve the Portfolio
Over the longer term, e.g. annually, when
products and other benefit enablers have been launched and the
harvesting of benefits commenced, the results of the PortfolioStep
process can be collected. These results should be fed back from
Operations to the Executive for information and to the portfolio
management group for thorough examination and analysis. These results
should enable you to assess the effectiveness of the PortfolioStep
process and propose changes to improve the whole cycle.
Some of these changes may even imply or
require changes in the Executive vision and strategy. Other changes may
be focused on how the process itself is conducted but nevertheless
involve any of the three main parts of the organization.
Example: You have established a
PortfolioStep Portfolio Management Process and in its second year you
have gained experience of the process in the organization and are ready
with changes to detailed procedures to improve its effectiveness. You
have also identified opportunities to improve efficiencies in project
management, by inviting that group to adopt a common process such as the
TenStep Project Management Process®. However, you feel that expected
benefits are not being realized to their full potential because of
weaknesses in product launches, marketing, selling, training, support,
and so on.
From Figure 300.0-1 you can see that these
shortcomings are essentially the responsibilities of Executive
management and Operations. You will need to make a carefully documented
case of how the portfolio process can be improved overall, and who must
be responsible, if the organization is to reap the full benefits of its
work investments.
PortfolioStep Flexibility
We must emphasize that all the steps
described above do not necessarily have to be strictly sequential.
Management is often an iterative exercise and, as with our other TenStep
products, you must exercise judgment how far you go with each step, and
in what order, to make the whole work together.
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