How Do You Manage Your Investment Portfolio?
Imagine that your organization managed your investment portfolio by using any of the following principles:
- Continuing to invest despite poor performance of a fund
- Investing only in high-risk hedge funds
- Investing only in low-yield bonds
- Investing, but not monitoring performance
- Investing without considering market conditions and economic forecasts
- Investing only in funds whose fund managers are charismatic and persuasive
As part of their fiduciary responsibility to oversee the financial health of your organization, your board would not stand for this kind of investment “management.”
And yet, not many organizations use a disciplined process to optimally select the projects they are investing in with people, dollars, and time. I’ve seen—and you probably have too—examples of the unsound investment principles above…
| Principle | Example |
| 1. Continuing to invest despite poor performance of a fund | Due to inadequate project oversight and/or belief in the sunk cost fallacy, an organization continues to fund a project that is substantially over budget. |
| 2. Investing only in high-risk hedge funds | An organization has many large, risky projects in process at the same time, exceeding its resource capacity. |
| 3. Investing only in low-yield bonds | An organization starts projects without considering how they will support business objectives. |
| 4. Investing, but not monitoring performance | An organization doesn’t follow up on completed projects to see if they have realized the anticipated benefits. |
| 5. Investing without considering market conditions and economic forecasts | An organization implements an outdated system because they are not aware of newer technology that is available. |
| 6. Investing only in funds whose fund managers are charismatic and persuasive | An organization prioritizes project requests from the most persuasive line-of-business owner, rather than conducting an objective evaluation process. |
Project Portfolio Management Defined
Project portfolio management (PPM) is a process used to evaluate new project requests, review progress on all active projects, and to evaluate the impact of the project deliverables to ensure the highest return on investment and impact. It is the remedy to avoid issues like the examples above.
Evaluating New Projects
So, where do you start? The most important step in PPM is deciding which projects to invest in. A good project prioritization/approval process is objective, consistent, transparent, and includes a variety of perspectives from throughout the organization.
Assessing the value of proposed projects is a multi-variable decision, so you will need a method to evaluate the primary variables. Creating a rubric, or a matrix of weighted criteria, is an effective way to evaluate new projects. The following is an example of a rubric with criteria that would work for many organizations.
To customize the rubric, prioritize the criteria that are most important to your organization and decide if any of the criterion should be weighted more heavily than the others. You will most likely need to adjust the descriptions for each level of scoring and the weighting if your results differ significantly from the participants’ intuition about how the projects should be ranked relative to each other.
Once you have created your rubric, require that all project requests include a business case that provides enough information that the project can be fairly assessed against the criteria.
Who is the Decider?
To ensure that your project evaluation process is objective, consistent, and transparent, you’ll need to involve staff from the different departments of your organization. Varied perspectives are essential, so it will not work for one person to be “the decider.”
Instead, create a cross-functional team to score the projects—it could be the executive team or another group empowered to make the decisions. It must be consistent with your organization’s culture (unless it is autocratic and, in that case…well, I’m sorry). Each member of the team will bring a unique perspective and the rubric will help the team evaluate the proposed projects as consistently as possible.
What’s Next?
Once you complete the evaluation, you’ll have a prioritized list of projects. It will likely contain more projects than you have resources to complete within a reasonable timeframe. Consider establishing a threshold and eliminate projects that score below that number.
This list should be shared with staff. They should understand the process that was used and you should have a mechanism for appeal in case their business case was not clear for their project. You probably won’t have the resources to do them all so some project requesters will be disappointed. It is best to break the news to project requesters that their projects are not approved then to give them false hope when you know you won’t be able to do the project.
Implementing a PPM process often requires organization culture change and like any new process, it will take some time before staff will adapt to it. So, patience and persistence are essential for success. In the end, your organization will focus its resources on the projects that will make the biggest difference. The results will be the reward.
But Wait…There’s More!
There is a lot more to the process of PPM! Read all three parts of this blog series:
Part II: Resource Scheduling
Part III: Monitoring and Evaluation
Need help with establishing a PPM process? DelCor can help.
Mike was a guest on DelCor’s Reboot IT podcast, Episode 12: Talkin’ IT Leadership.
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