Anthony Gayter10 November 2015

The Role of the PMO in Enabling Effective Portfolio Management

The financial performance of any one year represents the combined results from project investments in preceding years.

2014201320122011 2018201720162015

Historical Projected

A Company Can Be Seen As A Collection Of Projects

Balance Sheet(Working Capital)

Income Statement

Balance Sheet(Gross Assets)

Traditional Project Portfolios• “ cc

The Role of the PMO in Enabling Effective Portfolio Management

Typically, when companies undertake a specific project such as an acquisition or an expansion into a new business line, they prepare an economic profile that factors in the forecast amounts and timing of all cash outflows and inflows over the estimated project life. An internal rate of return can then be calculated, which is simply compared to the firm’s hurdle rate to decide whether or not to proceed with the project. At this point all governance/analysis/reporting is usually only “Cost”

Traditional Project Portfolios

• A big problem for many PMOs is that all they get to talk about are costs. Many companies have no consistent, company-wide way to value what Project investments deliver.

• “Every business has revenue”, but Projects typically do not … because Project/PMO owners don’t have the discipline to capture the benefit in a way that can be shown to the CEO or executive committee and have numbers that are real.

The Role of the PMO in Enabling Effective Portfolio Management

Traditional Project Portfolios

• “ These are my 10 things, but I don’t want to do cost/Benefit” I’ve been doing this business for X years.’ I know these are the right things – Real quote

• There’s no substitute for CEO support.

• The next point of tension comes in forcing business unit leaders to rank the projects they want.

• Often Business units stack rank 1, 1, 1, 1,

The Role of the PMO in Enabling Effective Portfolio Management

Fund Managers

CEO/Board

SBUs

BusinessOpportunities

How do I influenceShare Price?

What is the best wayto allocate my capital?

How do I improveexecution?

Questions

Project Delivery

Portfolio Delivery

Strategy Delivery through Project Portfolio Management

PfMO

PgMO

Business Outcome Driven Project Portfolios

The Role of the PMO in Enabling Effective Portfolio Management

• PMO Seat at the Corporate Strategy Table• Portfolio Leaders ensure Projects outcome deliver to strategy • Clear standards definitions for prioritization within a portfolio

Not Everybody’s “pet” project makes the cut

• Constant delivery practices• Accountability for outcomes (Revenue, Cost, Brand, M&A)

Continuous measurement (beyond Project delivery timeline)

• CEO & CIO• Total Project Spend

• Executive Council – “C” Suite• Decide on which innovation/projects will be done and in what order within

pre-determined spend….• Draw the line on what is in and what is out and then hold the line!

• CIO• Overall IT Strategy

• Program/Portfolio Management Office• Delivery of Projects that align with the strategy• Track & Report KPIs (KISS) – Pick 6

The Role of the PMO in Enabling Effective Portfolio Management

The Roles within Effective Portfolio Management

5 Key Drivers of Effective Portfolio Management 78% Senior Management Receptivity

66% Competent portfolio governance

62% Standardized metrics and criteria

59% Consistency and logic of organizational strategic objectives

58% Mature PMO

The Role of the PMO in Enabling Effective Portfolio Management

PMI’s Pulse of the Profession – In-Depth Report (Portfolio Management)

Our Journey to Effective Portfolio Management

The Role of the PMO in Enabling Effective Portfolio Management

Our Journey to Effective Portfolio Management• Measurable value on the project(s) “revenue” of

Projects.” • The sum of all the benefits, both hard dollar and intangibles, that a project

delivers in the 12 months following full implementation.

• Captured the benefit in a way that showed the CEO and executive committee numbers that are real • figures had credibility with execs because they’re based on cost-benefit analysis

agreed to by business unit leaders and their controllers,• Finance numbers, not Project Manager numbers. “These groups are very

comfortable acting to data.

The Role of the PMO in Enabling Effective Portfolio Management

Establish KPIs & continuously Measure Cost & Benefits

The Role of the PMO in Enabling Effective Portfolio Management

PMO driven Portfolio Management

The Role of the PMO in Enabling Effective Portfolio Management

New

Candidate

Estimated

Recommended

Interlocked

In Planning

Active

In Closing

Complete

On Hold

Cancelled

Obsolete

“The Line”

“The Portfolio”

Below the Line

14

HP IT Transformation

AfterBefore

• Active Projects: 1240

• Teams: 2 to 10 person teams

• CBA Analysis: 3+ years

• Project Delivery prior 3 Years: 1,200

• Innovation vs. Support: 30 / 70

Portfolio Management

• Active Projects: 500

• Teams: 10 to 30 person teams

• CBA Analysis: 6 months

• Projected Project Delivery: 3,000+ over 3 years

• Innovation vs. Support: 80 / 20

15

Numbers