Successful leaders know that their key driving force should be bringing more value to their organizations. They make it their focus to understand the value their departments deliver and make decisions with the objective of increasing this value. Successful leaders also realize time is a precious commodity and it should not be wasted on administrative tasks that do not add value. In the end, they integrate making value-based decisions into all aspects of their portfolio management activities including project prioritization, understanding resource availability and creating project schedules.
Making Value-Based Decisions
There are many opportunities to make decisions throughout a project’s lifecycle. Which are the best projects? What resources should we put on a project? Which task should I work on next? Often, these decisions are made for the wrong reasons – they are knee jerk reactions based on who screamed the loudest.
Really, the work we are all doing is intended to bring value to our organizations. Making value-based decisions means thinking about the consequences of our work in terms of the benefit it will bring to the entire organization, not just one individual or department. The consequences of not making value-based decisions can be substantial: losses in productivity, increased costs, and most importantly the unrealized profits from making bad decisions.
Value-based decisions need to be made throughout the life-cycle of a project, by everybody involved in the project. The responsibility obviously falls on the executive team and portfolio managers. However, project leaders and team members need to ask themselves the critical question often as well: What value will my next action bring to the organization? In order to accomplish this, everybody from the executives to the project team members needs to understand the value of their work and how it relates to organizational objectives.
Which Projects Should I Choose?
How do you assess value and the criteria of value-based decisions as they apply to project prioritization? Most organizations think of project value purely in terms of financial criteria – project costs vs. benefits in dollars. However, there can be many more aspects to value – strategic benefit, risk, alignment and balance. The criteria and their individual importance will vary from organization to organization, and may change over time. The important thing is to consider all aspects of value, not just the purely financial. For example, one project may not bring a lot of financial benefits on its own. But, it might reduce risk or enable other projects that do produce significant financial benefits.
By applying value-based decision methods to your project prioritization process, you will truly determine the best projects for your organization – your top initiatives. This is where the focus should be placed. The beauty is that the prioritization process need not be overly burdensome. For example, for most organizations a simple weighted scoring model combined with knowledge of alignment with business objectives is enough to assess value and make project comparisons. Once in place, this will also facilitate agreement from the executive team on the top initiatives.
Why Hasn’t My Project Started!
Possibly the single most important imperative derived from centralizing all of your projects into one single place – a portfolio – is to decide which projects you will be able to start and when; your forward-looking portfolio schedule.
The three main constraints for positioning project start dates are capital, staffing, and risk confluence. Downstream from the identification of top initiatives, staffing the project as well as risk confluence (and accumulation) with other active projects become the main constraints in scheduling the start dates of top initiatives.
Most organizations are so resource constrained, relative to the demand placed on their portfolio, that resource availability becomes the driving factor in determining the portfolio’s forward looking view. A preliminary understanding of the general scope of a project is necessary in order to determine its resource needs. Once you know the resource requirements, analyzing resource utilizations becomes a valuable tool in answering questions such as “When will the Top Initiatives start?” and “Why can’t my project start right now?”. In addition, understanding resource utilization allows the opportunity to balance resources to avoid extended periods where resources are over-used or under-used, and to determine skill sets that might we be lacking.
Modeling Resource Loads
The basic building block of modeling resource utilization and capacity is to be able to accurately model the loads placed on your resources. The first impulse may be to simply sum all of the tasks assigned to a resource to determine their load; after all, isn’t that what all of those detailed project work plans are for? Unfortunately, this technique is very costly as, instead of leading projects, project managers are now in the clerical position of tracking down the status of every single task and ensuring that every single task’s level of effort is precise. Loading with this the level of granularity becomes time consuming as it is difficult to decide whether a task will take 1.5 hours or whether it will actually be closer to 2.0 hours. Ironically, determining resource loads with a bottom-up, task-oriented approach is not only very costly, but in the end, is very inaccurate also. Successful leaders see this as a non-value add method of resource loading and the added detail is not worth the effort.
Rather, for the purposes of portfolio planning, the value-based approach of resource loading is best done top-down - at the project level. The ability to estimate is fundamental to project management and any technical profession. For each resource on each project, an estimate of the overall percentage of a resource’s time that will be committed to that project during a given time frame is the proper level of accuracy necessary for the purposes of portfolio planning and resource utilization. Typically, percentage estimates such as 25%, 35%, or 50% are within the margin of error for resource utilization purposes. The end result is a resource utilization model that is not only easier and less time consuming to manage, but more accurate as well.
Putting It All Together
Making value-based decisions seems logical. The question is why more organizations are not applying these techniques in their portfolio and project management processes. The answer could lie in the fact that most portfolio and project management methodologies and tools still advocate a bottoms-up approach that mires organizations in details. In reality, the true value is in the business benefits of the portfolio as a whole, not the completion or a single project on-time and in-budget.
Applying value-based decision making to portfolio management will produce greater financial benefits for an organization. In addition, other benefits of making value-based decisions should not be overlooked. It will also produce buy-in and motivation for projects and activities from the entire organization.
Steve Chamberlin and Bob McMurray founded 3 Olive Solutions, LLC (www.3olivesolutions.com) with the mission of developing software solutions that help executives and managers be more effective leaders within their organizations. 3 Olive’s flagship application, Portfolio Intelligence®, is an on-demand project portfolio management solution with a methodology that is ideal for small and mid-sized organizations or departments within larger companies such as the project management office (PMO). Portfolio Intelligence® is an affordable and easy-to-implement solution that enables executives and managers to organize, control and make better decisions on their work efforts resulting in higher business value, better resource utilizations, and lower costs. For more information, please contact 3 Olive at email@example.com or (800) 753-5821.