The benefits of a portfolio view of capital projects
Project management teams are usually pretty well organised at a tactical, day to day level in many organisations, even in situations where PM maturity is low. There are task management and scheduling systems in place to ensure that daily ‘to do’ lists on projects are being completed on time. At a portfolio level however it’s a different story. Many organisations still don’t have the visibility necessary to inform their strategic decision making and their operational efficiency and execution. Organisational leadership cannot easily identify whether they have invested in the right capital projects, or if they will realise the required benefits at the other side. This is the value of implementing programme and portfolio management software and it’s especially significant for companies who have a portfolio of multi-million pound capital projects to manage.
Why do capital projects experience more management issues?
At the heart of good capital portfolio management is governance, control and investment decision making. The portfolio is comprised of long term, expensive projects and the organisations running them need to ensure the right decisions are being made at the right time, or they risk wasting a lot of money. The C-Suite needs quick answers to questions like: How are we progressing overall on projects? Are the significant risks being efficiently managed to ensure projects cannot be derailed? Are budget cost over-runs efficiently being managed? How? What are the implications? HS2 offers a good example of where issues can arise without a portfolio view. The project hasn’t even started yet, but there are already indicators of it going billions over original budget estimates, because the right level of governance and control over the whole programme is lacking.
Based on discussions we have, with leading companies running multi-million pound capital project portfolios, they typically share a common problem. They are spending too much time entering and manipulating data, rather than undertaking the necessary value analysis and they lack an aggregated view. So many organisations still haven’t got a grip of this.
Here are 5 scenarios to be mindful of:.
Inefficient and inconsistent communication
Without a common platform it becomes difficult to communicate efficiently between locations and share information in a standardised fashion. Some companies try to overcome this using project update documents, which are emailed to different stakeholders. Or they try to use Microsoft Sharepoint, Project or Excel, but this results in duplication of data entry and inconsistencies in the way the information is presented. It’s a surprisingly common problem in even the largest organisations.
Low visibility decision making
PMOs can vary wildly in their levels of PM maturity but even the more mature - those with well-established project delivery processes - often lack visibility at a portfolio level. In terms of total portfolio investment management and the execution of projects, even though the organisation may have the required processes to evaluate, prioritise and approve projects, everything tends to be completed manually. Without portfolio level visibility, although each project may be meticulously managed, the lack of a wider, collective view makes scenario planning and decision making more difficult, if not impossible. This is a problem we observe frequently, even in organisations with higher PM maturity.
Missing strategic priorities
Without the right visibility, it then becomes very difficult to ensure a properly balanced portfolio. If projects can only be measured in isolation, at the level of ‘this is something we should do’, it becomes impossible to ensure key strategic initiatives are properly represented within a portfolio. So, an organisation may have strategically aligned projects active, but if out of 10 of them, 8 support 1 initiative, then only a fraction of the strategic goals will be achieved.
Resource management mismatches
Not having portfolio level visibility also means resource allocation becomes difficult to manage in practice, resulting in the classic ‘demand and capacity planning’ problem. Too many concurrent projects at any one time to be delivered and no one with the required view of resourcing availability. It’s then very hard to establish whether the resources needed to deliver to as a set timeframe are available.
Too much change
People are pretty adaptable, but there is only so much change we can expect to achieve at any one time. Consider a scenario of 4 IT projects being delivered to one part of an organisation simultaneously. It’s likely that the people involved will struggle to absorb such massive change at once and it will need to be spread out over time, allowing them to embed and adopt new ways of working sequentially. Having an aggregated portfolio view makes it much more obvious to model how different stakeholders will be impacted by change, allowing it to be better managed by the business.
What does best practice look like?
Project Objects has been supporting oil and gas exploration companies for many years, helping them to improve visibility and control at the highest levels, of all contractors working across their global capital projects portfolio. Our solution gives them real time visibility and includes highly customised business process management to support ad hoc technical queries and the approval of change requests, with corresponding amendments now automatically made to resources and cost allocations. These are critical aspects of capital project portfolio management – being able to account for exceptions and giving executive management access to an accurate aggregated view from a financial and risk minimisation perspective.
Due to all the hype around agile methodologies, it is easy for companies to be distracted by short term task management and delivery, at the expense of carefully considering the strategic impacts and benefit to be realised through a portfolio of long term capital projects. With the right tools in place, it’s possible to achieve both.