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:
- the mechanics of how managing the portfolio will function
- 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.