Practical Project Management Tips, Tactics, and Tools phần 8 docx

Issue 3: What If the Project Workscope Changes? Does It Invalidate the EVA? We have already discussed at length the issues associated with change control and scope management. Wherever we have mentioned EVA, we talked about the im- portance of maintaining a valid baseline. We talk about freezing the baseline. Then we give multiple illustrations of when and how it is okay to modify these data. Before you accuse us of being inconsistent and confusing, we need to review a few points that were made earlier. These were: • There must be a baseline plan for the EVA methods to work. • There are legitimate conditions under which the baseline can be changed. • No changes to the baseline should be made without a reason for the change, a set of details about the change, and an audit trail for all changes. • There must be a formal, structured, and heeded system for change control and scope management. Which all lead us to ask: If the project workscope changes, does it invalidate the EVA? The simple answer is no, it does not. However, in order to maintain a valid baseline for EVA, we need to integrate the change control practices with the EVA practices. All that you need to know to do this was discussed in Chap- ter 7.1. Rather than repeat these illustrations here, we direct your attention to Chapter 7.1, Part 3. Issue 4: How Do I Manage the Baseline for Projects Where the Baseline Changes with Each Phase of the Project? We continue now to look at one more issue regarding maintaining a valid baseline for EVA when the defined workscope keeps changing. In this instance, we ad- dress the common situation of a progressively expanding definition of the work at each phase of a development project. We described such projects in Part 4 of Chapter 7.1. We direct your attention to that material to see how it is possible to maintain an EVA baseline as each phase further defines the work and schedule. This is indeed a challenging situation. But it is one that can be fully addressed and dealt with in such a way as to support the EVA process. 260 MEASURING THE VALUE OF WORK TEAMFLY Team-Fly ® SECTION 9 PROJECT PORTFOLIO MANAGEMENT H ave you noticed that there is a new bandwagon to hop upon? It’s called Proj- ect Portfolio Management. There are lots of people talking about this new management theme, even if they can’t really define what it is. It certainly has a nice ring to it. Actually, if we can figure out just what project portfolio manage- ment is, and how we can effectively work it into our overall management prac- tices, we may very well find that it is an important element of the management of the enterprise. In this section on Project Portfolio Management (PPM), we present three chapters that will explore the world of PPM, including exposing its virtues and its foibles. First, we note the emergence of a special set of needs related to the man- agement of projects within the enterprise. Then we explore the impact of these needs on the way that we normally do project management and on the tools that we use for that purpose. We question the use of the terms value and impact rela- tive to projects in the portfolio. We initiate a discussion on project risk, and its role in PPM. We make some suggestions about organizing for PPM and present a list of capabilities needed to implement a project portfolio management practice in the firm. This is all covered in Chapter 9.1, Defining and Implementing Proj- ect Portfolio Management. Project Portfolio Management calls for the integration of two important func- tions within the firm. These are the Operations function and the Projects function. In Chapter 9.2, we discuss Bridging the Gap between Operations Management and Projects Management. We expose the weaknesses and inefficiencies that exist when there is a gap between these two functions, and propose a way to bridge the gap. We also introduce a set of software that has been developed specifically to support our proposed solution. When covering the topic of risk and contingency in Section 6, we indicated 261 that we would say more about risk in Section 9. This is because risk management is an essential part of PPM. There should be a relationship between Project Se- lection and Risk, as we note in Chapter 9.3. But, risk is often ignored. Denial reigns supreme, often leading otherwise sage senior managers into accepting and approving risky projects because they have been led to believe that there is no po- tential downside. Project Portfolio Management is an important approach toward bringing proj- ects and operations together so that the investments in projects are fully aligned with the strategy and goals of the firm. It is quite easy to accomplish, but it re- quires an effort to bridge the gap that traditionally exists between the operations and projects disciplines. It requires some cultural change and a few new prac- tices. It also will benefit from integration of the tools used for both disciplines. All of this is discussed here in Section 9. 262 PROJECT PORTFOLIO MANAGEMENT CHAPTER 9.1 DEFINING AND IMPLEMENTING PROJECT PORTFOLIO MANAGEMENT 263 D o traditional measures of project success miss the true business objectives? Are scope, time, cost, and quality independent measures of success, or are they only selected components of the objective? What do these popular project management criteria have to do with meeting the overall business strategic ob- jects? Are these measurements (scope, time, cost, quality) what the senior opera- tional managers really watch? Perhaps this is blasphemous, but I am about to shoot holes in the gospel of project management. Not that what we are preaching is wrong. But it confuses the means to an end with the end itself. Read the PMBOK ® (Project Management Body of Knowledge). Read just about anything else on measurements of project success. They will all dwell on the four pillars of success: scope, time, cost, and quality. We are taught to identify the goals for success in each of these areas and then to create plans that balance these objectives. Then we implement practices and utilize computer-based tools to measure how well we are accomplishing these objectives. But talk to almost any executive in the firm and they will not be interested in this area of measurement. What do they talk about? They respond to measure- ments of profitability, return on investment, delivery of content, and taking ad- vantage of windows of opportunity. We used to say that executives are interested in just two things about projects: when will they be finished and what will they cost. Not any more. Now they ask: “What mix of potential projects will provide the best utilization of human and cash resources to maximize long-range growth and ROI for the firm?” Perhaps this is an oversimplification. However, if we start with this premise and examine its meaning, we can begin to realize the tremendous impact of this observation on the way that we conduct project management and especially in the way that we select and implement project management tools. The Emergence of Project Portfolio Management Certainly, it is not news to anyone that the basic concept of project management has evolved to what we call enterprise project management. At first, we thought that this shift was more of a way of aggrandizing project management—sort of a pompous raising of project management to a higher level of importance. Later, we came to realize that enterprise project management was a reflection of the im- portance of consolidating and integrating all the firm’s projects—for universal ac- cess and evaluation. Now, we come to find that enterprise project management entails consideration of potential projects as well as approved projects. We also find that the emphasis has shifted from traditional project-centric objectives to higher-level operational objectives. Executives have come to realize that projects are the basis for future prof- itability of the firm. Hence, there is a growing interest on the part of executives in how projects are managed. They are precipitating an increased demand for more standardization and automation of project management. But what they are asking for is different from the requests from traditional project manage- ment sources. And what they are calling this emerging project management protocol has also changed. It is no longer just project management, or even enterprise project management. It is now called Project Portfolio Management. But is Project Portfolio Management for real? Or is it just a nice sounding phrase, without real substance? I get the idea that it’s just a lingering melody—a song without words. It’s a pretty tune, and, with the right lyrics, it might be a big hit. But for the moment, I don’t see a consensus as to how this emerging concept will play out. But don’t mistake my skepticism for a lack of support for the concept. My con- cern is not whether Project Portfolio Management is worthwhile. It is how to in- tegrate the concepts of Project Portfolio Management with traditional project management that requires attention. 264 DEFINING AND IMPLEMENTING PPM Effect on Tool Selection We can trace the shifting project management emphasis on the patterns of project management tools. First, there were the project-oriented tools. These provided support for detailed planning and control of individual projects. With the shift to enterprise project management, we saw a change in the project management tools to support multiple projects and multiple users. In some cases, these tools were designed to allow use of the traditional desktop, single project products, by providing a repository-based, client/server environment that consolidated individual projects and added multiproject, multiuser time entry, cross-project resource loading and analysis, and cross-project rollup and reporting. In parallel with that trend, we saw the development of full-featured enterprise project management tools, using built-in multiproject scheduling engines and time entry capabilities. For Project Portfolio Management, additional attributes are required. The ability to add or extract projects for what-if analyses is important. Executives also want to place some value criteria on the projects, so that they can evaluate the relative benefits of adding a project to the mix. Resource and cost impacts of projects will have to be defined at higher than normal levels (because the details might not yet be available or practical to define). Somehow, these executives will expect that the new Project Portfolio Management systems will be able to sup- port ROI calculations (but I don’t think that they have yet defined how this would be done). Tool Tip Software support for Project Portfolio Management requires capabilities and features that extend beyond those in traditional PM systems. Key extensions include: improved mul- tiproject capabilities, adding and removal of projects from portfolios, association with strategic plans, workforce impact analysis, and integration with some of the Operations tools. The ability to slice and dice large repositories of project information becomes paramount in these systems. The data must be able to be rolled up and expanded, and must be able to be viewed from several perspectives. As the volume of data increases, we will need more sophisticated ways of manipulating the data, so that we don’t have to wait for the analyses. Expanded coding capabilities are essential to enabling effective summarization and data extraction. EFFECT ON TOOL SELECTION 265 Misconceptions and Conceptual Gaps While the overall concept of Project Portfolio Management makes a lot of sense, there remains a tremendous gap between perceived applications and practical re- alities. I know of at least one instance where senior management expressed a de- sire to implement a Project Portfolio Management capability (and backed it up with funding). Yet they had little interest in project management itself. It was as if the firm’s project mix could be managed and manipulated without management of the projects themselves. Is this possible? There is an increasing interest in knowing where the firm’s resources are committed and what the firm is getting for their resource investment. Again, I have to ask How can this be satisfied without knowing to what work the re- sources have been assigned and how well that work is going? We might, at the higher level, have built a plan that models resource allocation versus time. But if 40 percent of the way into the project, only 20 percent of the work has been accomplished, then that situation has to be factored into the portfolio analysis. Wouldn’t it be absurd to assume that all the work in the portfolio is proceeding exactly as planned? One of the ways to do this is to use the Earned Value Analysis (EVA) capabili- ties of our project management software. This simple and effective protocol can provide important schedule and cost variance data. This is important not only as a way of remodeling the resource demand for the project(s), but also as a measure- ment of how well the project is meeting its objectives. Yet, when we mention EVA to the very people who are asking for Project Portfolio Management, they shud- der at the mention of that subject. It is assumed to be too technical for the high- level view that they seek. Nothing can be further from the truth. I don’t see how a Project Portfolio Management system can be put in place without using EVA as part of the perfor- mance analysis approach. The resource and cost commitments may have been reasonable (as measured against the expected gains) but there has to be a point where deteriorating performance (increasing investment or time-to-market) crosses the profitability line. More on this in Chapter 9.3. What Is the Value of a Project? Another thing that puzzles me, about the emerging concepts of Project Portfolio Management, is how to fix a value on the project. For instance, I have seen re- quests for the following types of information, under the concept of Project Port- folio Management: 266 DEFINING AND IMPLEMENTING PPM • Find out which proposed projects have the highest value to the organization and therefore should receive priority in resource allocation. • Evaluate proposed projects in terms of their impact on the overall portfolio, specifically with regard to resource availability and the performance of other projects. • Identify which projects are 25 percent or more behind schedule, and ana- lyze the impact to the overall portfolio of canceling those projects, again in terms of resource availability and performance of other projects. These queries seem to be a bit vague to me. How is value being defined? How is impact being defined? I understand the importance of being able to get an- swers to these queries. But has anyone thought about just what data is required to answer these questions? Project Portfolio Management and Strategic Planning We have fought a battle for years to convince senior management that they can’t implement a project management capability by just bringing in project manage- ment tools. This holds true for Project Portfolio Management as well. The tools process information. They don’t generate knowledge that isn’t there. If manage- ment cannot describe the aspects of value, or define to conditions of impact, the system will not know what to do. This brings us to the realization that the true strategic value of a proposed pro- ject must be determined and quantified before it can be placed into the project mix. And this step cannot be executed by the supporting enterprise project man- agement software. I would hate to think that Project Portfolio Management would be used as an excuse for lack of good strategic thinking. The fact is that Project Portfolio Management is part of the normal strategic planning process. We wouldn’t have the problem of so many failed and aborted projects if the people who autho- rized these projects were more organized and diligent about their decisions to proceed. How many times have you seen a business case presented, with a most likely scenario, a best case scenario, and a worst case scenario? Then the pre- senter says that “the downside will never happen” and the execs buy it? No wonder projects fail. How many times have you seen a project authorized and work initiated, only to learn later that the project scope and objectives (if they were actually defined) do not fit with the firm’s overall business strategies and objectives? PPM AND STRATEGIC PLANNING 267 Practical Project Portfolio Management and Risk Assessment So, in order for this modern Project Portfolio Management to work, we need to get back to the sound basics of identifying a range of satisfactory performance parameters for any project. We have to have a predetermination of acceptable performance, so we can set alarms and alerts within the Project Portfolio Man- agement system to advise us of out-of-tolerance conditions. The ROI analysis can’t assume just a single result. It must consider a spread of possible scope, time, cost, and quality conditions and identify what values (limits) reduce the ROI to an unacceptable number. • When does an increase in time-to-market make the project significantly less attractive? • How much of a cost overrun can be tolerated before it blows the pro- jected profit? • When does a reduction in scope reduce the expected benefits of the project? We must consider if the project is worth the risk. This means conducting a thorough risk assessment, identifying both the potential for risk and the impact of risk events. We must consider risk mitigation actions. And then we must evaluate whether the project is still worthwhile after factoring in the costs of risk mitiga- tion. After we have considered the risks, does this project still support the higher- level objectives and strategy? The New Project Portfolio Team To make this whole thing work, we have to have specialists who are responsible for evaluating and communicating these essential business/project data. We are already getting management to accept the necessity of the Project Office. Next, we have to expand this to include people who will be responsible for portfolio and risk management. Why not a Chief Risk Officer (CRO)? How about a Project Portfolio Manager (PPM)? And, with the increased concern for resource avail- ability and utilization, perhaps a Chief Human Resources Officer (CHRO) could be justified. In this enlightened environment, no project should be considered without re- view by the CRO. No resources should be allocated without review by the CHRO. And no project should be added or removed from the portfolio without review by the PPM. I can see an advisory committee, made up of these three managers, plus the CPO, the Chief Project Officer (or head of the Project Office) and the CFO, to decide on project viability and management of the portfolio. It is 268 DEFINING AND IMPLEMENTING PPM these leaders who would use and support the tools that would provide essential information and analyses in support of the projects. Implementing Project Portfolio Management I am convinced that Project Portfolio Management is the way to go. I am equally convinced that the success of a Project Portfolio Management initiative is depen- dent on how the organization develops and supports an environment for Project Portfolio Management, rather than just on tool selection. However, once the de- cision is made to implement Project Portfolio Management, and once the support structure is in place, the team will want to find tools that adequately support their new way of life. This tool set should include most of the following capabilities and features, over and above traditional project management software functions: • Electronic time sheets, supporting the collection of actual time spent on project tasks and auxiliary work. These must allow the posting of time to all projects in the system, and should support various means of remote entry. These tools should also provide for management review and control of time reporting. In some environments, the time entry tools must also support progressing of the work, including revised estimate-to-complete data. • Posting and retention of project data in an open, SQL-type database. This database acts as a repository for the data produced by various PM tools, as well as connectivity to other data of the enterprise. • (For some applications) integration with corporate accounting systems. For seamless integration, look for Projects modules provided by ERP vendors as part of their financial packages, coupled with integration engines provided by your project management software vendor. (See Section 10.) • When projects and operations data is integrated it often becomes volumi- nous. In order to interrogate the data and reduce it to meaningful infor- mation, look for OLAP-based slice-and-dice analysis engines, or other means of prearranging the data for rapid access. Also, for the slice-and- dice capabilities, the enterprise project management software must have robust project classification systems (coding) with support for hierarchi- cal structures. • Earned value computation to support schedule and cost variance analysis. • Mid- and high-level resource loading and budgeting, with discrete spread- ing capabilities, to allow analysis of proposed projects without requiring planning at the detailed level. • Risk assessment, including ranking of project risks, determination of risk possibility, and impact of the risk event. Good risk management practice IMPLEMENTING 269 [...]... truth and penalize those that are diligent about risk analysis and honest about potential project risk exposure Project Portfolio Management One of the emerging themes for the new decade is Project Portfolio Management Senior management is paying closer attention to the strategic management of a portfolio of projects, requiring the merging of project and operations management and all the tools and practices... resources, and costs Earned value measurements and analysis Flexible reporting and communication Needs: Enterprise Project Management Early project management tools were designed for individual projects Today, we rarely find projects that stand or get managed alone Multiple projects are the norm in today’s firms and the sharing of resources across multiple projects adds new requirements to our project management. .. best management practices But what we can do is to minimize the problems and minimize the deleterious effect of the eventual problems, by organizing properly for projects (with a CPO and a CRO), by implementing a solid risk management program, and by fostering proactive management for early recognition and rectification of such problems SECTION 10 PROJECT MANAGEMENT, ENTERPRISE PROJECT MANAGEMENT, AND. .. operations management and project management For organizations that will be depending on project success for success of the overall enterprise, a well-structured bridge, built on a good foundation, is the preferred way to overcome the traditional gap between operations and projects management CHAPTER 9.2 BRIDGING THE GAP BETWEEN OPERATIONS MANAGEMENT AND PROJECTS MANAGEMENT The Important Role of Project. .. risk management system Such a system, as part of a project portfolio management system, must contain all the necessary elements that we would have in our PM system This includes a risk management process, tools to support the risk management process, training in the process and use of the tools, and clear support for the process at all levels of management An enlightened, risk management- aware senior management. .. execution of projects and the attainment of schedule, cost, scope, and quality objectives In doing so, a project management planning and information system is put in place, and periodic measurements of project progress and performance are conducted A problem, common to many firms, is that there is no connection between the Operations and Projects functions, nor is there a structured, consistent, and meaningful... TrackView, and CostView with Oracle Projects, as shown in Figure 10.2b The ProjectView/Oracle Projects interface facilitates the transfer of system-level data, such as organizational structure, calendars, and resource data from Oracle Projects to ProjectView Project templates stored in Oracle Projects can also be used to open a standardized project in ProjectView Once the project is established, via either... have a position of Chief Project Officer With CEOs, COOs, and CFOs, why not a CPO? Furthermore, in an environment of project portfolio management, why not a Chief Risk Officer? The CRO would be responsible for establishing standards for risk analysis and management, and for implementing a system of risk practices and tools The input of the CRO would be required before a proposed project is accepted into... adjustment of the portfolio, and an early warning system to alert responsible managers of imminent danger Now we can actually do Project Portfolio Management CHAPTER 9.3 PROJECT SELECTION AND RISK Risk Management Is an Essential Part of Project Portfolio Management A popular subject for the start of the new millennium is Project Selection As we move toward the management of multiple projects within the enterprise,... and systems that are available to support the projects function, we also have to consider the tools and systems that may be in 281 282 PM, ENTERPRISE PM, AND ERP place to support the finance and human resources functions, as they relate to project activity During the past decade a specific group of tools has emerged to provide such support It is called Enterprise Resource Planning (ERP) software, and . BETWEEN OPERATIONS MANAGEMENT AND PROJECTS MANAGEMENT The Important Role of Project Portfolio Management 271 O ne of the hot topics in the management of the enterprise is Project Portfolio Management. In Project. project management emphasis on the patterns of project management tools. First, there were the project- oriented tools. These provided support for detailed planning and control of individual projects emerging project management protocol has also changed. It is no longer just project management, or even enterprise project management. It is now called Project Portfolio Management. But is Project