Mastering Project Portfolio Management

MasteringProject PortfolioManagementA Systems Approach toAchieving Strategic ObjectivesMichael J. Bible, PMPSusan S. Bivins, PMPJ.ROSSP U B L I S H I N G

ContentsPrefaceAcknowledgmentsAbout the AuthorsIntroduction to Project Portfolio Management1.1 Acceptance of Project Management1.2 Overview of PPM1.3 PPM Model Overview1.3.1 Strategic Phase Overview1.3.2 Screening Phase Overview1.3.3 Selection Phase Overview1.3.4 Implementation Phase Overview1.3.5 Evaluation Phase Overview1.4 Iterative Nature of the PPM Process1.5 Governance of the PPM Process1.6 Organizational PPM Roles and Responsibilities1.7 Executive (Strategic) Review Board1.8 Portfolio Management Board1.9 Portfolio Process Group'.1.10 Portfolio Managers and Portfolio Management Team1.11 Considerations for Implementing PPM1.12 Summary .'.1.13 Referencesxixvxvi'.'.-.'Establishing the Foundation Through Strategic Planning2.1 Overview of Strategic PlanningRole of Strategic Planning in the PPM ProcessOrganizational Mission and Values2.1.1 Mission Statement—Denning Organizational Purpose2.1.2 Establishing Values and Ethics—Defining Organizational Behavior2.1.3 Vision Statement—Setting Long-term Direction2.1.4 Setting Goals—Benchmarks for Achieving SuccessOrganizational Assessment2.1.5 Establishing Objectives—Defining Performance Outcomes2.1.6 Strategic Plan—Charting the CourseEnvironmental Protection Agency Strategic Plan ApproachSiemens AG Strategic Plan Approach2.1.7 Strategic Planning and Project Portfolio Management2.1.8 Completing the Strategic Phase2.2 American Business University Background & Strategic Plan2.2.1 ABU 324252627272831313232

Mastering Project Portfolio Management2.32.42.2.2 ABU Vision2.2.3 ABU Goal2.2.4 ABU ObjectivesABU Objectives and uction to Ratio-scale Measurements and the Analytic Hierarchy Process3.1 Decision Making with B.O.G.S.A.T.3.2 The Importance of Hierarchies in Complex Problems3.3 Comparison of Ways to Use Numbers3.3.1 Nominal Scale3.3.2 Ordinal Scale3.3.3 Interval Scale3.3.4 Ratio Scale3.4 Compensatory and Non-compensatory Decision Making3.5 Analytic Hierarchy Process3.6 Pairwise Comparison3.7 Overview of AHP in Project Portfolio Management3.8 Introduction to Expert Choice Software Tools3.8.1 Comparion Suite:.3.8.2 Expert Choice DesktopNumerical ModeVerbal ModeGraphical Mode3.8.3 Periscope3.9 Summary;3.10 References.;Prioritizing the Objectives Hierarchy Using Analytic Hierarchy Processes4.1 PPM Role in Prioritizing Objectives4.2 Prioritizing Objectives4.3 Structuring the Objectives Hierarchy4.4 Measuring by Conducting the Evaluation4.4.1 Select Measurement Methods4.4.2 Additional Pairwise Comparison Concepts4.4.3 Preparing the Participants4.5 Synthesizing to Derive Priorities for the Objectives4.5.1 Local and Global Priorities in an Objectives Hierarchy4.5.2 Ideal versus Distributive Mode4.5.3 Consistency4.6 Iterating as Necessary4.7 Present Results and Maintain Governance of the Process4.8 ABU Campus Revitalization Program Example4.8.1 ABU Campus Revitalization Program Goals and ObjectivesIdentify Objectives and Sub-objectivesDetermine the Level of Objectives To Be Evaluated4.8.2 Prepare to Evaluate the Objectives Using AHP and ComparionLogin to Comparion and Create a New 525354545555565757585860606061616262626363

Contents4.94.104.114.124.13Basic Navigation in ComparionPreliminary Project Management Information4.8.3 Structure the ModelStructure the Model—Entering the Goal and ObjectivesIncluding Sub-objectives in the Objectives HierarchyStructure the Model—Participants and Their Roles4.8.4 Measure—Establish the Evaluation ApproachSelect Measurement Methods1Choosing the Participation MethodCheck the Progress of the ABU EvaluationStatus When Objectives Evaluation Is Complete4.8.5 Perform the Evaluation—Collect Data and Prioritize ObjectivesCollect Data4.8.6 Synthesize the Results to Produce Relative PrioritiesIdeal versus Distributive ModeConsistencyOther Functions Available for the Synthesize Tab4.8.7 Iterate4.8.8 Reports4.8.9 Review and Present for ApprovalPrioritized Objectives—A Major Step:SummaryAppendix 4A—Using Expert Choice Desktop to Create the Model4.11.1 Building the Expert Choice Desktop ModelOpen Expert Choice DesktopCreate the Expert Choice AHP ModelEntering the Facilitators Email AddressSaving the ModelOpening an Existing Expert Choice ModelEstablish the GoalEstablish the Objectives Hierarchy,Including Sub-objectives in the Objectives Hierarchy4.11.2 Complete the Model and Upload to ComparionLocal and Global PrioritiesSelecting the ParticipantsUpload the Model to ComparionAppendix 4B—Synthesizing in Expert Choice Desktop4.12.1 Combining and Synthesizing the Results4.12.2 Ideal versus Distributive Mode4.12.3 ConsistencyReferencesBuilding the Pool of Potential Projects5.1 Pre-screening Process5.1.1 Pre-screening Roles and Responsibilities5.1.2 Soliciting Project Proposals5.1.3 Project Proposal Submission Methods5.1.4 Receiving, Reviewing, and Evaluating Project Proposals5.1.5 Identifying the Pool of Potential 8112112114115116117117118119120

Mastering Project Portfolio Management5.25.35.45.55.65.1.6 Obtaining Buy-in and Approval of Pre-screened ProjectsDetermining FeasibilityOther Considerations for Pre-screening5.3.1 Organizational Risk Tolerance and Attitude5.3.2 Senior Leadership Influence5.3.3 Anticipated Portfolio Budget5.3.4 Understanding the Organization's Capabilities and Resource Pool5.3.5 Project Management Capabilities5.3.6 Portfolio Management CapabilitiesABU Campus Revitalization Program Pre-screening5.4.1 Pre-screening Process5.4.2 Establishing Roles and Responsibilities (Governance)Board of Trustees (Executive Review Board)Steering Committee (Project Management Board)University Facilities Office5.4.3 Establishing the Program Management Office5.4.4 Implementing a PPM System5.4.5 Preparing to Pre-screen Project Proposals5.4.6 Soliciting Project Proposals for the ABU Revitalization Program5.4.7 Evaluating ABU Revitalization Program Project Proposals5.4.8 Obtaining Pre-screening Alignment Matrix ApprovalSummaryReferencesDetermining Candidate Projects and Making the Case6.1 Screening Process6.1.1 Screening Activities6.1.2 Screening Roles and Responsibilities6.1.3 Screening Prerequisitesv6.2 Business Cases6.2.1 Developing Business Cases6.2.2 Special Considerations for Cost Estimation6.2.3 Business Case Elements for Existing Projects6.3 Existing Projects6.3.1 Inventory of Existing Projects6.3.2 Organizational Change Management6.4 Establishing Project Categories or Classifications6.4.1 Common Categories of Projects6.4.2 Strategic Buckets6.5 Defining Screening Models for Project Categories6.6 Potential Screening Model Criteria6.6.1 Nonnumeric CriteriaSacred CowOperating NecessityCompetitive NecessityProduct Line ExtensionTrue Innovations6.6.2 Numeric CriteriaPayback PeriodAverage Rate of 6147148

d Cash FlowBenefit-Cost RatioInternal Rate of ReturnModified IRRProfitability IndexNPV Advantages6.6.3 Screening Model ConsiderationsDeveloping the List of Candidate Projects for ABU6.7.1 ABU Campus Revitalization Program Project Categories6.7.2 ABU Campus Revitalization Program Screening ModelABU Candidate Projects6.8.1 Evaluating ABU Campus Revitalization Project Business Cases6.8.2 ABU Campus Revitalization Program Portfolio CandidatesAlternative Approaches to a Specific ProjectAligning Projects to Objectives—the Alignment MatrixSummaryAppendix 6A—Sample High-level Business Cases6.12.1 Renovate and Expand C. W. Benson Campus LibraryProject NameScreening Criteria OverviewBackgroundProject RationaleProject Objectives and GoalsAnticipated BenefitsProject AlternativesProject Work Breakdown StructureCost Estimates;Resource EstimatesRisks and Mitigation StrategiesConstraints':Assumptions. 6.12.2 Sample Business Case for ABU Indoor Athletic Complex ProjectProject NameScreening Criteria OverviewBackgroundProject Rationale'.Project Objectives and GoalsAnticipated BenefitsProject AlternativesDeliverable Work Breakdown StructureCost EstimatesResource EstimatesRisks and Mitigation StrategiesConstraintsAssumptionsAppendix 6B—Choice Model Alternatives for Student Services CenterAppendix 6C—AACE Estimate 65167167167168168168172173

Mastering Project Portfolio ManagementPrioritizing Candidate Projects7.1 PPM Role in Prioritizing Alternatives7.2 Prioritizing Candidate Projects Overview7.3 Structure the Model7.3.1 Adding Alternatives to the Model7.3.2 Map Alternatives to Objectives to Establish Contribution7.3.3 Specify Evaluators and Their Roles:7.4 Measure by Conducting the Evaluation7.4.1 Select Measurement Methods„ Rating ScalesStep Functions and Utility Curves7.4.2 Establish Measurement Options7.4.3 Prepare the Participants7.5 Synthesize to Derive Priorities for the Alternatives7.5.1 Local and Global Priorities for Alternatives7.5.2 Ideal versus Distributive Mode7.5.3 Consistency7.5.4 Sensitivity Analysis7.6 Iterate as Necessary7.7 Present Results and Maintain Governance of the Process7.8 ABU Campus Revitalization Program Example7.8.1 ABU Campus Revitalization Program Alignment Matrix7.8.2 Prepare to Evaluate the Alternatives Using AHP and Comparion7.8.3 Structure the ModelAdd AlternativesAdd Descriptions for AlternativesMap Alternatives to Objectives to Establish ContributionSpecify Evaluators and Their Roles7.8.4 Measure—Establish the Evaluation Approach„.-.'Select Measurement Methods!'Establish Measurement OptionsAsynchronous Anytime EvaluationSynchronous TeamTime Evaluation7.8.5 Perform the Evaluation—Collect Data and Prioritize Candidate ProjectsCollect and Synthesize DataCollect Data.'7.8.6 Synthesize the ResultsReview the ABU Alternatives Evaluation ResultsIdeal versus Distributive Mode7.8.7 Perform Sensitivity Analysis of Synthesized ResultsABU Dynamic Sensitivity Analysis ExampleABU Performance Sensitivity Analysis ExampleABU Gradient Sensitivity Analysis ExampleABU 2D Analysis Example7.8.8 The Need to Iterate7.8.9 Review and Present Results and Next Steps7.9 Prioritized Projects—A Major Step7.10 Summary7.11 4225225

Contents8 Considerations for Selecting the Initial Portfolio8.1 Funding Levels8.2 Selecting the Initial Project Portfolio8.3 Efficient Frontier.,8.4 Constraint for the Initial Portfolio—Groups8.5 ABU Initial Portfolio Selection Example8.5.1 ABU Initial Project Portfolios8.5.2 Preparing the Model8.5.3 Introduction to the Resource Aligner8.5.4 Preparing for ABU Initial Portfolio SelectionABU Groups for Projects with Multiple Alternatives8.5.5 ABU Initial Portfolio Selection ScenariosABU 200M Portfolio ScenarioABU 50M Portfolio ScenarioABU Alternate Initial Portfolio Using Analysis of the Efficient FrontierComparing Selection by Optimization to Rank Order by Benefit Approach8.5.6 ABU Initial Portfolio Conclusions and Recommendations8.6 Summary8.7 472502522552562569 Additional Considerations for Selecting the Project Portfolio9.1 Organizational Power and Political Environment9.2 Balance and Coverage of Projects Across Objectives9.3 Resource Limitations9.4 Other Types of Constraints9.4.1 Mandatory and Prohibited Projects9.4.2 Project Dependencies and Enablers9.4.3 Establishing Funding Pods9.5 Accounting for Project Risk in Portfolio Selection./.9.5.1 Portfolio Risk:.".'9.5.2 Project Risk.:.9.6 Optimal Portfolio with Dependencies, Balance, Coverage, and Risk9.7 Alternate Scenarios9.8 ABU Optimal Project Portfolio Example9.8.1 Project Dependencies and Mandatory ConstraintsMust and Must Not ConstraintsProject Dependencies9.8.2 Critical Resource Constraints9.8.3 Consideration of Balance and Coverage9.8.4 Creating Charts Showing Costs versus Benefits9.8.5 Consideration of Risk and Risk-Discounted or Expected Benefits9.8.6 Approval to Proceed and Next Steps9.9 Summary9.10 6526626726827027228028429629629710 Implementing and Governing the Project Portfolio10.1 Portfolio Performance Reporting Structure10.2 PPM Governance during Implementation10.3 Evolving PPM Roles and Responsibilities299300302304