project portfolio management - maturity model - chapter - 4

PM SOLUTIONS’

Project PortfolioManagement

Maturity Model

CENTER FOR BUSINESS PRACTICES

Chapter 4

®

James S. PennypackerE D I T O R

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PROJECT PORTFOLIO MANAGEMENT MATURITY MODEL BY COMPONENT

CHAPTER 4

Project Portfolio ManagementMaturity Model

Organized by Level of Maturity

LEVEL 1

Initial ProcessAlthough there is a recognition that there are project portfo-lio management processes, there are no established practicesor standards, and individual project managers are not heldto specific accountability by any process standards. Docu-mentation is loose and ad hoc. Projects are funded despiteabsence of critical information that demonstrates expectedand achieved improvements in program, business, or missionperformance.

Portfolio Governance

There is no portfolio governance process in place.The evaluation of projects does not consider alignmentwith the organization’s vision, strategy, or objectives.

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PROJECT PORTFOLIO MANAGEMENT MATURITY MODEL

Project Opportunity Assessment

Ad hoc or no standard process exists for identifying projectopportunities or initiating projects.Roles and responsibilities are not aligned with identifyingand managing project opportunities.A list of project opportunities is not available or maintained.Ad hoc or no processes are used for establishing the busi-ness value of projects.

Project Prioritization and Selection

Ad hoc or no processes are used for prioritizing potentialand active work.Projects are funded despite absence of critical informationthat demonstrates expected and achieved improvements inprogram, business, or mission performance.

Portfolio and Project Communications Management

There is no acknowledged division or organization-wideportfolio with a list of approved projects.Portfolio-based information (e.g. status, project categories,etc.) is not defined.Portfolio information is not readily available and/or notcommunicated to the organization.

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Portfolio Performance Management

Ad hoc or no standard process exists for managing thecurrent portfolio of projects.Ad hoc or no standard processes are used for reviewingthe portfolio with the sponsor organization.Project reviews of high-risk/high-value projects are notconducted.Portfolio management controls are unstructured, ill timed,and inconsistent. Management rarely reviews projectperformance data.Organization rarely has an up-to-date and completeinventory of assets.Organization rarely evaluates project outcomes or identi-fies lessons learned.

Portfolio Resource Management

Resources are assigned to projects on an availability basisusing ad hoc processes.

LEVEL 2

Structured Process and StandardsProject portfolio management processes exist in the organi-zation, but they are not considered an organizational stan-dard. Documentation exists on these basic processes. Man-agement supports the implementation of project portfoliomanagement, but there is neither consistent understanding,

PROJECT PORTFOLIO MANAGEMENT MATURITY MODEL BY LEVEL

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involvement, nor organizational mandate to comply for allprojects or project portfolios. Business value andprioritization levels are reviewed at the divisional level forlarger, more visible projects. Information available for man-aging the project portfolio is often a mix between summary-level data and detail-level data.


There is a process for creating and defining division portfo-lio review boards.Each portfolio review board is created and defined withboard membership integrating both project managementand business knowledge.Each portfolio review board operates according to writtenpolicies and procedures in the organization-specific projectportfolio management process guide.Each project investment or proposal is considered by aportfolio review board based upon the alignment criteria.Strategic alignment may be considered in the evaluation ofprojects, but no strategic criteria have been developed.


Basic processes exist for identifying project opportunities.Roles and responsibilities for identifying project opportuni-ties and initiating projects are defined.

Level 2 continued

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A project request form, project charter or equivalent isused to identify and initiate projects.Key stakeholders and near-term business needs have beendesignated for each project.The Project Manager communicates with each of the keystakeholders using the standard, periodic reports.


A standard process at the organization level exists fordefining business value. The process includes the develop-ment of a business case (or equivalent document) whosedetail may be proportionate to the level of investment.Roles and responsibilities are defined for establishingbusiness value.Potential and active projects are prioritized using a simpleprioritization scheme (1, 2, 3, etc.) and sorted at the organi-zational level.Prioritization may also be applied to different projectcategories.The prioritization scheme is based on high-level subjectivefactors.Business value and prioritization levels are reviewed bymanagement, sponsor, and other related stakeholders.


A list of active and pending projects is maintained for eachdivision, and is updated periodically.


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A defined process and cycle is used for reviewing andupdating the portfolio of projects within each division.Cross-divisional projects apply project management pro-cesses according to corporate standards.Project status is communicated to the division that hasresponsibility for the project.Each project contains: descriptive information; owner andsponsor information; timing and estimated resources; andhigh-level status information (e.g. potential, active, hold,cancelled, completed, next milestone, etc.).Each project is categorized to ensure that investments arebalanced to meet the enterprise’s goals and objectives (e.g.;by program, functional area, strategic vs. tactical, etc.).A basic process exists for aggregating project data to builda portfolio “snapshot” for the division.Portfolio information is communicated across and downthe division through meetings and other communicationprocesses.


Portfolio information is reviewed periodically with thesponsor organization.A defined process is used for analyzing and reporting onthe portfolio, including reporting tools (graphs, charts,presentations, etc.). The process involves multiple levelswithin the organization including senior management,

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steering committees, project management office, and otherstakeholders.High- risk/high-value projects are easily identified andtypically conduct project reviews to apprise executivemanagement of current issues.There is a project oversight process in which the organiza-tion monitors all projects relative to cost and scheduleexpectations.Each project’s up-to-date cost and schedule data areprovided to the appropriate portfolio review board .Using established criteria, the portfolio review boardoversees each project’s performance on a periodic basis bycomparing actual cost and schedule data to expectations.The portfolio review board directs special reviews of projectsthat have not met predetermined performance standards.The portfolio review board ensures that corrective actionswere developed and tracked.


Resources are identified according to their skill set andavailability.Each division has captured the skill sets of its resources andmanages their time availability in a collaborative fashionfor project matrix management.Project prioritization is established at division-level, but thereare guidelines for managing project priorities with limitedresources in a cross-divisional and collaborative fashion.


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LEVEL 3

Organizational Standards andInstitutionalized Process

All project portfolio management processes are in place andestablished as organizational standards. Nearly all projectsand project portfolios use these processes with minimalexception—management has institutionalized the processesand standards with formal documentation existing on allprocesses and standards. Senior management is regularlyinvolved in input and approval of key decisions and docu-ments and in key project portfolio issues. The project portfo-lio management processes are typically automated. Eachproject and project portfolio is evaluated and managed inlight of organizational strategy and business value.


Division portfolio review boards consolidate and report toan enterprise-wide portfolio review board.Criteria for aligning project investment decision-makingauthority are established and maintained.Specific strategic criteria, such as alignment with businessstrategy, customer need and satisfaction, and competitiveadvantage, have been developed and projects are evalu-ated against these criteria to establish their acceptance inthe portfolio.


A documented, organization-wide process is used foridentifying and tracking project opportunities.

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Formal communication is provided back to each requesteridentifying the current status of a project opportunity orinitiated project.An organization-wide process and documents are used todefine business value of a project. The process includes astandard business case that is integrated with projectmanagement processes, financial and accounting practices,and other business processes.Roles and responsibilities are clearly defined for establish-ing business value.A formal project initiation process is used and maintainedby the enterprise. Included in the project initiation processare formal approval processes.There is a process for examining the fundamental cost,benefit, schedule, and risk characteristics of each projectbefore they are funded and combined with other projectsinto a portfolio.Each portfolio review board ensures that the cost-benefit-schedule-risk data and other required data are validatedfor each project within its span of control.


Roles and responsibilities are clearly defined for prioritizingthe portfolio of projects.A flexible prioritization scheme exists for ranking the portfo-lio of work based on agreed upon criteria. The prioritizationscheme is supportive in aligning project strategy withbusiness strategy and business unit/functional goals.


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The organization uses a structured process to develop newproject proposals.Executives analyze and prioritize new project proposalsaccording to established selection criteria.Executives make funding decisions for new project propos-als according to an established process.Division portfolio review boards assess each of their projectinvestments with respect to the project portfolio selectioncriteria.Each division portfolio review board prioritizes its portfolioof project investments using the portfolio selection criteria.


A process exists for aggregating portfolio level informationto the business unit (or organizational level) for review andevaluation of impact to investment balance.Detailed information is tracked for each project. Informa-tion should include descriptive and performance informa-tion, resource estimates (high-level), business value, status,project categorization, and cost and schedule information.Risk information may also be tracked for each project/work opportunity.A project list/database is maintained accounting for newprojects, completed projects, and changes to the projectportfolio organization-wide.Organization-wide projects are conducted with standard-ized project management processes and stakeholders work

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together in a collaborative fashion both in terms of accom-plishing the current project objectives and anticipatingfuture project and portfolio requirements.


Organizational standards and institutionalized processesexist for analyzing and reporting on the enterprise portfo-lio (roll-up includes business units, functional units, projectcategories, etc.).The portfolio is actively analyzed (using varied views) andused in making balanced investment.Organizational standards involve the use of consistent datafields, common definitions, and standard business rules.There is a process that builds upon the project oversightprocess by adding the elements of project benefit and riskmanagement to the control process activities.An organization-wide portfolio review board monitors theperformance of the projects in the portfolio by comparingactual cost-benefit-schedule-risk data to expectations.Using established criteria, the portfolio review boardidentifies its projects that have not met predetermined cost-benefit-schedule-risk performance expectations.The portfolio review board ensures that project managersdevelop an action plan to apply the corrective actionsidentified.All projects conduct project reviews to apprise manage-ment of current issues.


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A resource-pool management process exists that capturesskills sets, availability and knowledge management acrossthe organization.Project priorities are established from the enterprise portfo-lio review board and division leaders are expected tooptimally assign resources based upon resource skills,prioritization, and established project priorities.Resources other than people are also contained in theoverall resource pool. Equipment, hardware, softwarelicenses, specialty teams (such as testing) are included inthis category to ensure that all constraints are tracked.

LEVEL 4

Managed ProcessProject portfolios are managed with consideration as to howthe portfolio performed in the past and what is expected forthe future. Common objectives and metrics are defined forthe portfolio and reviewed periodically with senior manage-ment to maintain/balance the portfolio. Project portfolioinformation is integrated with other corporate systems tooptimize business decisions. Senior management clearlyunderstands its role in the project portfolio managementprocess and executes it well, managing at the right level, andclearly differentiating management styles and project portfo-lio management requirements for different sizes/complexi-ties of projects and project portfolios. Project portfolio man-

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agement processes, standards, and supporting systems areintegrated with other corporate processes and systems.


Enterprise portfolio review board integrates lessons learnedand processes portfolio status into current and futuremanagement project decision-making.Strategic criteria are being used to both accept the projectsinto the portfolio and in prioritizing the projects.Consideration is given to the various combinations ofprojects to maximize the value of the projects in relation tothe strategic criteria.Project review boards review the fit of each project andcombination of projects at each project review boardmeeting to ensure that any changes in vision, strategy, orobjectives are evaluated with regard to the portfolio.


There is a process for conducting post-implementationreviews to learn from past projects and initiatives bycomparing actual results to estimates.A portfolio review board identifies the projects for which apost-implementation review will be conducted and a post-implementation review is initiated for each designatedproject.Quantitative and qualitative project data are collected,evaluated for reliability, and analyzed during the post-implementation review.


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Lessons learned and improvement recommendations aboutthe investment process and the individual investment aredeveloped, captured in a written product or knowledgebase, and distributed to decision makers.Project opportunity information is available by searchcriteria in an enterprise portfolio repository.


Standard models/business prioritization processes are usedby management to prioritize projects/work at differentlevels within the enterprise.Standard models/business prioritization processes arevalidated by analyzing historical benefit/cost informationand revised as required.A process exists for periodically updating the prioritizationscores and business value of portfolio of work.There is a process used by decision makers to create andcommunicate to the organization the criteria used to selectand fund projects.The enterprise portfolio review board approves the coreproject portfolio selection criteria, including cost-benefit-schedule-risk criteria, based on the organization’s mission,goals, strategies, and priorities.The project portfolio selection criteria are distributedthroughout the organization.

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The project portfolio selection criteria are reviewed usingcumulative experience and event-driven data and modi-fied, as appropriate.There is a process for comparing worthwhile projects andthen combining selected projects into a funded enterprise-wide portfolio.The portfolio review board assigns project proposals to aportfolio category.The portfolio review board examines the mix of proposalsand projects across the common portfolio categories andmakes selections for funding.The portfolio review board approves or modifies the an-nual cost-benefit-schedule-risk expectations for each of itsselected project investments.A repository of portfolio development information isestablished, updated, and maintained.


Project portfolio information is audited to validate the dataand assumptions.The organization’s asset inventory is developed and main-tained according to a written procedure, includingchanges.Project investment information is available on demand todecision makers and other affected parties.Historical asset inventory records are maintained for futureselections and assessments.


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Common objectives and metrics are defined for the portfo-lio of work and reviewed periodically with management tomaintain/balance the portfolio of projects.Portfolio analysis using standard metrics is integrated intomanagement’s decision processes.There is a process for evaluating portfolio performance andusing this information to improve both current projectportfolio management processes and future portfolioperformance.Comprehensive project portfolio performance measure-ment data are defined and collected using agreed uponmethods.There is a process for analyzing and managing the succes-sion of identified project investments and assets to theirhigher-value successors.The portfolio review board develops criteria for identifyingproject investments that may meet succession status.


Enterprise and division resource analysis and reportingoccurs on a scheduled basis to ensure that the organizationmaximizes its potential productivity and effectiveness inrealizing the objectives of the projects and financial driversfor the portfolio.

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LEVEL 5

Optimizing ProcessProcesses are in place and actively used to improve projectportfolio management activities. Lessons learned are regu-larly examined and used to improve project portfolio man-agement processes, standards, and documentation. Manage-ment and the organization are focused not only on effec-tively managing project portfolios but also on continuousimprovement. The metrics collected during execution areused not only to understand the performance of projects andproject portfolios but also for improving management deci-sion-making capability for the future.


There is a process used to exploit management decisionmaking to improve the value of project portfolio gover-nance processes.Baseline data are collected for the organization’s projectportfolio governance processes.External comparable best-in-class project portfolio gover-nance processes are identified and benchmarked.Improvements are made to the organization’s projectportfolio governance processes.


There is a process used to exploit management decisionmaking to improve the value of project opportunity assess-ment processes.


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Baseline data are collected for the organization’s projectopportunity assessment processes.External comparable best-in-class project opportunityassessment processes are identified and benchmarked.Improvements are made to the organization’s projectopportunity assessment processes.


There is a process used to exploit management decisionmaking to improve the value of project prioritization andselection processes.Baseline data are collected for the organization’s projectprioritization and selection processes.External comparable best-in-class project prioritization andselection processes are identified and benchmarked.Improvements are made to the organization’s projectprioritization and selection processes.


There is a process used to exploit management decisionmaking to improve the value of portfolio and projectcommunications management processes.Baseline data are collected for the organization’s portfolioand project communications management processes.External comparable best-in-class portfolio and projectcommunications management processes are identified andbenchmarked.

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Improvements are made to the organization’s portfolio andproject communications management processes.


There is a process used to exploit management decisionmaking to improve the value of project portfolio perfor-mance management processes.Baseline data are collected for the organization’s projectportfolio performance management processes.External comparable best-in-class project portfolio perfor-mance management processes are identified andbenchmarked.Improvements are made to the organization’s projectportfolio performance management processes.Reports are developed on trends at all levels of theorganization’s portfolio. Aggregate performance datatrends are analyzed.Portfolio process and portfolio improvement recommenda-tions are developed and implemented.Project investments are periodically analyzed for succes-sion and appropriate investments are identified as succes-sion candidates.The interdependency of each investment with other invest-ments in the project portfolio is analyzed.The portfolio review board makes a succession decision foreach candidate project investment.

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There is a process used to exploit management decisionmaking to improve the value of project portfolio resourcemanagement processes.Baseline data are collected for the organization’s projectportfolio resource management processes.External comparable best-in-class project portfolio resourcemanagement processes are identified and benchmarked.Improvements are made to the organization’s projectportfolio resource management processes.

Level 5 continued

project portfolio management - maturity model - chapter - 4

Economy & Finance

project opportunity

project communications

mance management

portfolio

lio management

organizations

standard process

ad hoc