Project And Portfolio Management - Capgemini

the way we see itAnalysis modelIn order to obtain a deeper understanding of the project business, different aspects need to be highlighted.This is done using the Star Model1 inthe study. The model presupposes thata business and organization can berun based on a number of aspects –components. These components areStrategy, Organizational structure,Incentive systems, Processes, roles andIT, Resources and competence as wellas Culture (see Figure 7). By makingchanges in the components and usingthese as management control measures, ways of working can be stimulated so that the organization becomesmore streamlined and performs better.However, altering behavior in anorganization takes time and requiresthat all management controls co-operate and that there is clear and consistent leadership at all levels.An organization consists of a numberof people with different levels of ability. Together they should work towards achieving goals and strategies.Creating efficiency while avoidingunnecessary work tasks, requiresstructures in the form of organization,roles, working procedures and IT. Tofurther guarantee and stimulatedesired ways of working, the businessis monitored and incentive systemsare put in place (both financial andnon-financial). In the following sections, the results of the study are analyzed based on the Star Model inorder to explain why carrying outwork in project form is difficult andwhat can be done to improve understanding with project and portfoliomanagement.Figure 7Analysis model for an organization or operation – Star Model1. Strategy5. Resources andCompetence2. OrganizationalstructureCulture4. Processes,roles and IT13. IncentivesystemEdvard E Lawler III, From The Ground Up, 1996Project and portfolio management – Experiences taken from Swedish companies and organizations

AnalysisThe key to a successful project is clarity, commitment and strongproject management.AnalysisToday, an increasing amount of work isbeing carried out in project form andthe share of the total budget being utilized is becoming larger. A larger shareof the total budget and a greater shareof personnel working in project form,places higher demands on how projects and project portfolios are handledso as to take control of developmentand guarantee expected returns.There is general consensus in the studyregarding the success factors requiredfor a successful project. The three factors that are advanced as being themost critical are: Clear project goals Firm commitment from the sponsorand steering group Strong project management.At the same time, these success factorsconstitute the area that companies specify as the principal reason for why aproject fails. This is further supportedby other studies1 that argue that it isdifficult to work in project form andthat too many projects fail. An interesting fact is that the success factorsrequired are both tangible and intangible. Projects need to be supportedby better structures and clear directives from management (project manager and steering group) with thepower to make decisions.The most likely reason for failure isalso connected to the complexity created by the fact that a project organization cuts across the traditional lineorganization and the existing powerstructures.In addition, it seems that risk management is a neglected area causing companies to experience difficulties inidentifying and assessing risks. Thisresult in more than 20 % of projectshaving to be closed down duringimplementation, due to the fact thatproject and portfolio managementbecomes too reactive and event-driven(see Figure 8).In the following analysis, each aspect ishandled individually in order to betterunderstand where the basic problemsare located and to be able to addressthe correct measures.StrategyThe strategy component comprises thefocus of the business in both the shortterm and long-term. It serves as a guide(steering principles) for how the business should be organized and run andconstitutes a basis for prioritizing suchthings as investments and projects.Steering principles exist at several levels; at the corporate level, broken downat a unit level as well as for eachproject, program and project portfolioin order to provide a guide for how,where and in what way tasks shouldbe pursued and organized. The studyshows that most organizations activelyprioritize and re-prioritize in theirproject portfolio, but that they are notsatisfied with the balance of the portfolio (see Figure 9).Figure 9Figure 8Success factors and reasons for project failure70%Reasons for failureSuccess factors80%80%71%70%65%50%70%61%60%Understanding the balance inthe project 0%Strong supportClear strategicgoals and relation- from companymanagementandship to projectsteering group1Strong projectmanagemente.g. Gartner Research 2008-12-04, ID Number G001633511031%Unclear projectgoalsInsufficientcommitment bymanagementWeak projectmanagementPrioritizes theproject portfolioHas balance inthe project portfolio

”Most organizations aredissatisfied with how theportfolio is balanced.Project and portfolio management – Experiences taken from Swedish companies and organizationsthe way we see it11

The study shows that there are fourgeneral explanations as to why companies are not able to balance theirportfolios.1. There are too many projects running in different time frames, thereby making an overview more difficult.2. The projects are not clearly linkedto business strategies and goals.Capgemini’s observations andrecommendations3. Governing principles and guidelines for how prioritization shouldbe carried out are missing or areunclear.It can be debated whether or not therewill be one or several portfolios, but in ouropinion, initiatives/projects should be organized in separate portfolios according totheir objectives and be supplied with separate budgets. Separate portfolios will facilitate prioritization since it will be possible toapply similar assessment criteria withinthe portfolios.4. Internal politics and power struggles limit the possibility for prioritizing on rational grounds.”Governing principlesand guidelines for howprioritization should becarried out are missing orunclear.There can be many reasons for havinga large number of projects. The studyillustrates the fact that it is difficult toobtain a decision to start majorprojects and that this is often solvedby parceling the initiatives into smaller projects. This enables decisions tobe made within the current decisionmaking procedure and without regardto or coordination with either theoverall strategy for the business orwith other projects being carried outin surrounding areas of business.When many projects have to be prioritized with regard to each other, linking them to general strategies andgoals could be the method used.Decisions about prioritizations wouldbe facilitated with uniform projectdirectives requiring a connection tothe strategic goals, however, in thestudy, 71 % thought that the projectdirectives did not have clear objectivesand goals.Furthermore, having a large numberof projects causes difficulties in identi-12fying the interdependencies betweenprojects. These interdependencies alsorequire attention when prioritizing.Assembling projects with a commonobjective and/or mutual dependenciesin separate portfolios facilitates prioritization.Another complicating factor when prioritizing projects has to do with thestrategy of the business. According toCapgemini’s experience, the officialstrategy can be perceived to be unclear,or at worst not communicated to thebusiness, leading to different opinionsregarding what the projects should beprioritized against. Furthermore, it iscommon that the businesses havedefined a large number of goals thathave not been ranked internally, e.g.using a Balanced Scorecard, whichmakes things even more difficult whenprioritizing projects.This implies that a Balanced Scorecardis more a measurement and analysistool for visualizing and understandingthe business than a tool for controllingand prioritizing (e.g. a project).The fact that a strategy is unknown inthe business may be due to the factthat it takes time to communicate andestablish.

the way we see itCommunicating economic awarenesscan be done fairly quickly, but changing the strategy when there are changesgoing on in the outside world andpassing this on within the organization,often takes time. Experience shows,that there is a gap from the time a decision is made about the strategy andbefore this is known and applied within the organization. During the transition period, the old strategy still continues to apply and this affects thebehavior of the employees.This organizational inertia createsuncertainty about what applies andwhat should be applied during prioritization.According to the studies, re-prioritizations and balancing are carried out tooinfrequently and are not a direct consequence of changes in general goals andstrategies. 57 % believe that prioritization is not changed when strategy ischanged. The study also shows that reprioritization is far too much a consequence of the annual budget processbased on financial measures rather thanwhat is of most strategic importance.Capgemini’s observations andrecommendationsThe fact that so many people in the studyfeel that they have difficulties with prioritization indicates that this is a troublesomearea requiring extensive changes. Thosecompanies that make a clear connectionbetween projects and strategies will havea better base for success in taking on theright project. By establishing a good basisfor decision-making (clear project directives linked to prioritized goals), transparency is created between strategy andproject prioritizations and thereby the rightconditions for starting “the right project”and shutting down “the wrong project”.Organizational structureThe organizational structure component comprises the allocation ofresources and responsibility betweenline, project office and projects. Aclear organizational structure, showing how roles, responsibility andmandates are allocated, provides better conditions for management, competence development and resourceutilization.The study shows that there are primarily three areas that address organizational shortcomings and ambiguitiesas regards project and portfolio management:1. Allocation and responsibility forresources between the line organization and projects2. The role, responsibility and tasks ofthe project office3. Responsibility and mandate of thesteering group.Project and portfolio management – Experiences taken from Swedish companies and organizationsAllocation and responsibility forresources between the line organization and projectsIt is obvious from the study that successful projects require dedicatedmanagement and efficiency. However,these areas have turned out to be difficult to manage concurrently. It is difficult to combine project work with linework and the general feeling (86 % ofthe companies) is that project work“always” has a lower priority than linework. Often the situation occurs whenpart-time resources are allocated whomust simultaneously carry out theirnormal work or who alternatively areallocated to several parallel projects. Ifthese resources are key persons, a bottleneck will arise that will risk delaying the projects.According to other studies, it is possible to create a more efficient utilization of resources by using part-timeresources, as time slots can be filledwith several tasks. However, at thesame time, this will make thingsmore difficult for management as theresponsibility for the resource will beunclear and the need for coordinationbetween different projects and withthe line will increase considerably.Capgemini’s observations andrecommendationsBy increasing the number of key personnelassigned full-time to the various projectsand by simultaneously ensuring that otherresources take care of the line duties, efficiency will increase in both the line and theproject.13

Figure 10 The primary responsibility of theproject g toolsand templatesfor projectsAdministrationof processesand methodsAdministration ofproject portfoliosThe responsibility of the projectofficeHistorically, project offices have beenestablished to improve control andcoordination of projects and programsin large and complex organizations.However, most project offices havelimited possibilities to manage andsupervise resources and work changes. The study makes clear that this hasresulted in project offices primarilyfocusing on work of an administrativenature, on data acquisition, reportingand other relatively simple work tasks(see Figure 10). Approximately halfof the companies approached feel thattheir project offices create insufficientvalue, as they do not work with theright issues.Through their administrative role, theproject offices have an overview thatis not utilized since they do not haverepresentation in steering groups or inthe strategic planning.Considering the current economicsituation, there is an obvious risk thatthose project offices that do not takeon greater responsibility for projectimplementation and achievement ofresults or create value by taking onbudget planning, helping the company determine how money should bestbe spent, will be closed down within1-2 years1.Most project offices (54 %) feel thatthe responsibility for prioritizing andre-prioritizing initiatives and projectsis not well defined. Normally, projectoffices try to take responsibility, butthey lack the formal authorization.Without a formal and clear role withrepresentation in not only the management group but also in steering114Gartner Research 2008-12-04, ID Number G00163351groups, there is an increased risk forconflicts of interest and ineffectivedecision-making processes resulting inincorrect decisions.Capgemini’s observations andrecommendationsThe project offices wish to have a greatercontribution to the strategic process withadvice and the prioritizing of projectsas well as the following up of businessresults. This role cannot merely be takenon but requires a formal mandate as wellas acceptance from affected decisionmakers in the line.In order to create the right conditions forproject office to be accepted in an advisory capacity, responsibility for runningthe entire decision-making process – fromidea/initiative to project initiation, implementation and coordination as well as thebenefit realization – should be assignedto it. In addition, the project office shouldbe responsible for assuring the quality ofthe structure and adherence to differentresponsibilities within the project organization in order to secure the means for anappropriate basis for decision-making.

the way we see itThe responsibility of the steeringgroupNormally, a steering group is responsible for and has authorization tostart and stop projects, add resources,provide policy decisions and approvedeliveries. More than half (51 %) of thecompanies feel that the steering groupsdo not take responsibility, primarilydue to the following reasons: Steering groups have difficulty inreviewing and managing coordination”Many companies feelthat there are too manyconcurrent projects inprogress and thatconsequently it is difficultto see the interdependencies and the need forcoordination. Members of steering groups lackpreparation time prior to the steering group meetings The data on which decisions arebased is inadequate (Incomplete,of poor quality or not confirmedwith stakeholders) Lack of knowledge within the steering groups about what is expectedfrom their work.Many companies (48 %) feel that thereare too many projects in progress at thesame time and therefore it is difficult tosee the interdependencies and the needfor coordination. When each projectalso has to report to a dedicated steering group for that particular project,there is an increased risk of a poor outcome, i.e. decisions are taken without acomprehensive view and considerationfor adjacent projects and the companyas a whole.The study shows that there is a desireto combine the function of projectcoordination and portfolio management.This solution works normally, as longas the projects are managed withinthe framework of a dedicated area ofresponsibility. The fact that coordination and decision-making doesnot work between different areas ofresponsibility could be attributed toan individual’s desire to optimize theirpersonal area of responsibility and thefact that there are different opinionsabout what is best for the company asa whole.In order to achieve complete and correct data and to enable an effectivedecision-making process, we assumethat the project will address all theneeds of stakeholders by allowingthem representation on the projectwhere required, e.g. in a steeringgroup, a joint action group, a referralgroup and a reference group.If groups of stakeholders are not represented or are not allowed to exertsufficient influence, conflicts of interest and shortcomings in data used tomake decisions can easily occur, rendering the decision-making processmore difficult.Project and portfolio management – Experiences taken from Swedish companies and organizationsBy having a function for quality controllinked to the project, the project canbe evaluated with respect to how thestructure meets the needs and requirements that exist and to what degreethe responsibility of the organization isconsidered.Capgemini’s observations andrecommendationsBy having the same steering group representing projects with interdependencies,increases the decision-making capacity ofthe steering group and decreases the riskfor poor decision-making. The decisionmaking process is accelerated with positiveconsequences for the lead times of theprojects involved. Furthermore, improvedconditions are created for attending to thecompany as a whole, increasing consensusregarding different issues and solutionsas well as reducing poor outcomes. Inaddition, above and beyond taking necessary decisions, the steering group shouldassume a more obvious responsibility byshowing that they stand behind the projectboth in words and deeds.15

”Incentives are usedto stimulate desired workpractices and include allkinds of rewards – bothfinancial and non-financial.16

the way we see itIncentive systemIncentives are used to stimulate appropriate actions and include all kindsof rewards – both financial and nonfinancial.The study shows that there is a lackof not only interest but also of needto stimulate actions associated withprojects using rewards. What emergesis that customary compensation in theform of salary seems to suffice (in addition to current structures such as me

Project and portfolio management – Experiences taken from Swedish companies and organizations Figure 4 Examples of portfolio structure In contrast to a project and a program, a project portfolio is not a one-off phenomenon with a time limit but is linked to strategic company planning. Portfolio ” Unlike a project or a program, a project