Category: Portfolio & Program Governance

When considering getting a hand on a “portfolio” of work or initiatives, most organizations are looking at change – either through the array of work or how they do the work or how they manage the work. Or even some combination therein. The bottom-line is there is a call to action driving the need to deliver this portfolio of investments and committed outcomes to the business. Looking at this list of initiatives holistically as an ongoing set of investments, portfolio governance is central to effectively delivering change. Otherwise we fall back into the trap of making short term, isolated decisions, in granular initiatives, losing the real potential of executing across our strategic commitments.

So where to start? How do to know if I am focusing on the right levers? Thinking of governance as an “operating system” might help. And this system could land anywhere between lean and comprehensive, depending on the demands of your function/PMO and maturity. Still, there are basic components worth considering ensuring launching with a solid foundation. First, defining the drivers behind the “call to action” and related impact to culture. Aligning on mechanics and KPIs or data points. Lastly, laying out the process and related discipline so it runs effectively and does not just become another bureaucratic distraction.

DRIVERS AND CULTURE

Of course, we are speaking of the drivers of change (to stand up portfolio governance) and the behaviors to support these drivers. Example drivers are as simple as understand all the work going through the organization, closely monitor for rapid course correction, ensure all investments deliver the committed results. These are the north stars objectives that must be embraced and supported in the culture through leadership. Leadership models this mindset shift and cascades the culture down through their teams. Modeling the shift may be actively participating in the Governance process or setting up new incentive criteria in their organizations tied to portfolio performance.

MECHANICS AND METRICS

There are core mechanics for portfolio governance to stand up the leanest possible system, that can then be enhanced with additional features as the organization matures. Similarly, key performance indicators or metrics have a baseline set with many more to suit the organization’s capability, bandwidth, and desire for data. Basic mechanics align with the governance process and KPI’s with the associated reviews or decisioning consistently across the portfolio. Mechanics are things like candidate project intake, scoring model, initiative hierarchy, and alignment to strategic elements (pillars). Also, the logistics of capturing data, reporting, formalizing key decisions, tracking changes, and switching phases (Intake, Execution, Benefit Capture). KPIs and/or metrics are the minimum set of data to effectively evaluate and track initiatives “apples to apples” across the portfolio planning lifecycle.

PROCESS AND DISCIPLINE

Outside of culture, the process across which the portfolio of invested work is governed serves as the glue. The mechanics, data, and people come together in the process. The process through which the portfolio is governed typically spans three (3) phases: intake, execution, benefit capture. However lean or complex, these phases have common objectives that sew together across both initiative and portfolio lifecycles. Intake focuses on the description, prioritization, and acceptance of initiatives into the portfolio for a given planning cycle. Execution is that familiar phase where initiatives are funded and performing their work. And Benefit Capture focuses on the transition from Execution to start measuring the results of the work delivered.

Running this process with the associated mechanics, data, and people takes discipline to stay the course, leverage the data, and ultimately realized the outputs of the portfolio investments. With so many moving parts, it is crucial to establish governance in a framework that clearly supports the linkages and visibility throughout.

We often see a fourth phase where optimization is employed to enjoy lessons learned and further tailor the framework to the organization for maximum benefit production and minimal risk.

What is the most important component? Obviously, every team and organization is different, but it is safe to say culture. The hearts and minds of leaders, then their teams, need to be committed to the changes that portfolio governance can usher in.

Many organizations are exploring a more structured governance of their investment and transformation portfolio (critical programs and projects!). With the ongoing demand for rapid change and modernization, these portfolios of work have become more and more unwieldy for even the most competent teams.  Implementing Portfolio governance can drive huge results by (1) structuring initiative approvals, (2) visualizing portfolio health in execution, and (3) tracking results. But where to start?

A financial portfolio gives you an overall picture to manage risky investments against or offset by conservative investments to meet goals within given risk tolerance. Similarly, launching strong portfolio governance across an organization’s book of work creates strategic linkage, business discipline, visibility, and line of sight to results. Taking a holistic view upfront, the concept of portfolio governance takes into account the overall strategic aims of the company and compares it with proposals at hand.

If your organization is committed to launching portfolio governance, it starts with aligning on the objectives for governing the portfolio of work. Is it to meet strategic objectives, is it to meet and hold the line for a budget value, is it a combination? Once alignment is in place as the leadership level, then there are really two dimensions that shape the design and launch of Portfolio Prioritization:

1.  the mechanics of how managing the portfolio will function
2. the leadership culture to support the discipline

Some teams feel that they need to re-evaluate the current or in-flight inventory of initiatives. Others simply “grandfather” in those investments and work with what remains in the budget. The decision really should just tie back to the overall objectives of prioritization. Does one way or the other significantly dilute the business case?

The next step in launching is establishing intake and scoring of candidate initiatives against strategic criteria set by the company to establish a whole process of portfolio governance. After the total budget “line” has been set and the scoring criteria established, heads of each business unit should sit together to review qualifying candidate initiatives. A competent, consistent structure is the key to successful portfolio governance that can make an empirical decision to fund a project based on how closely it is related to the strategic aims of the firm – as defined by the scoring mechanism. This uniform procedure of evaluation can identify proposals of any overlapping projects, limit the attention to initiatives with poor business cases (also high risk), and help in alignment between projects from varying sectors of the firm. In this first cycle, it is important that the leaders are involved in this pressure testing of the intake process.

The next step in launching portfolio governance and prioritization is setting the portfolio (based on prioritization). Again, it is important leaders are at the table throughout this process and engaged in the decisions. Rich discussions happen here where we have ties between equally qualified initiatives in different business units and where “puts and takes” are determined as initiatives move above and below “the line” – the budget limit. This horse-trading exercise needs to happen quickly, be data-driven, and involve all leaders so everyone is committed to the final portfolio.

As you may have gleaned, throughout the initial launch steps we are looking for leaders to potentially change their mindset and participate in a different, structured, and cross-functional culture. Included in this change thinking is the fact that approved initiatives are accepted into governance as opposed to disappearing into the PMO (program/project management office), and therefore be tracked through execution to results delivery.

Much more on that later, but hopefully this launch summary triggers some thinking about how it might work in your particular organization and culture.