Problems with Implementing Portfolio Management
What are some of the best-known problems with creating an effective project portfolio management system with organizations? While there are numerous factors that can negatively affect the use of portfolio management, recent research seems to suggest that the following are some of the most likely problem areas that need to be properly addressed in order to gain maximum benefit from a portfolio of projects. Common problems include:
- A technical community that will not give up projects. Within many organizations is the technical core of project engineers, research scientists, and other technical personnel who work to develop the firm’s project prototypes. One common phenomenon is this technical cadre’s unwillingness, often due to pride or sheer stubbornness, to give up on project ideas that are deemed too risky, too costly, or inappropriately aligned with strategic goals. Top management may seek to trim the catalog of ongoing projects for sound strategic reasons. Getting the engineers and scientists to accept this reasoning is, however, another problem.
- Projects and/or the portfolio no longer reflect the company strategy. Sometimes a firm can begin the process of realigning and reprioritizing its strategic outlook yet continue to develop projects or invest in a portfolio that no longer accurately reflects the new strategic vision. Strategy and portfolio management must accurately reflect a similar outlook. When they out of alignment, either the project portfolio will lead to the continued pursuit of outmoded goals or the firm’s strategy will de facto, shift back to earlier emphases.
- Poor quality projects. The worst-case situation is for a company to populate its portfolio of project initiatives with poor quality or unnecessary projects. Portfolio management within the context of product lines adheres to the notion that a firm’s product portfolio must be routinely rebalanced to ensure that a sufficient number of products of differing type are available to offset each others’ weaknesses. For example, “cash cows” are used to support and fund the costs associated with innovative new products. In project portfolio analysis, a similar need for ensuring balance is required. Sometimes, the critical analysis of a firm’s portfolio requires hard decisions, project cancellations, and readjusting resources. But it is precisely this attention to the ongoing status of the portfolio that can prevent it from becoming over-populated with the wrong kinds of projects.
- Resources are too scarce. One of the key resources for all projects is human beings. Personnel costs comprise one of the highest sources of project expense. Prior to spending large amounts of time creating a project portfolio, it is necessary to ensure that the required resources, when needed, will be available. A principle cause of project portfolios that under perform is a lack of adequate resources, especially personnel, to support the development of the portfolio.
Portfolio management is the tool that project organizations use to more closely align overall corporate strategy with their project management practices. By creating a sense of complementarity among all ongoing projects, these companies can start reaping the potential benefits from having their project management teams working together, rather than at cross purposes. Portfolio management is a visible symbol of the strategic direction and commercial goals of a firm. By the projects they promote and develop, they send a clear signal to the rest of the company regarding priorities, resource commitment, and future directions. Finally, portfolio management offers an alternative and useful method for managing overall project risks by seeking continuous balance within the portfolio among various families of projects, risk versus return trade-offs, and efficiently run projects versus non-performers. As more and more organizations reorient their work toward project management, it is highly likely that ever-larger numbers will take the next logical step, towards organizing their projects using portfolio management.