Churchill on Project Portfolio Management
By Carl M. Manello
“Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong these are the features which constitute the endless repetition of history.” —Sir Winston Churchill
Is it the same in your organization too? Getting out of the rut of inefficiencies is challenging, time consuming, and never quite at the top of the list. Do you find that there are more projects in the pipeline than in the original approved budget? Is performance less than adequate on some key initiatives? Do you find that projects which are going sideways don’t seem to have a steering mechanism or brake to help with correction? Do you find that you are surprised that this is the same environment you were unhappy with last year?
This becomes the embodiment of the oft-cited saying “Those who cannot remember the past are condemned to repeat it.” Breaking the cycle takes action. Action takes a plan. Action requires taking risks. Action can improve performance and effectiveness, but it requires concentrated effort and some investment.
Unfortunately, many clients dismiss the required focused effort on internal improvements thinking that things are ‘good enough’ at the moment. And, with corporate budgets being squeezed, it is no wonder that poorly articulated improvements don’t receive appropriate attention or funding. How can improvement opportunities be tightened-up and how can leaders change the future?
Changing the Future
If projects are slipping, under-delivering, or not hitting their mark, one solution is to give executives the processes and methods for stopping them. I don’t mean a ‘hack and slash’ campaign to randomly shut down errant projects. On the contrary: instead of a cancellation process I suggest a change to the funding processes. An organization can establish a funding process for projects that releases funds only to an initiative as it demonstrates the ability to deliver. In this way, if a project is not showing positive results, it can be more easily brought to an end. One measures the delivery effectiveness by assessing how a project hits its milestones, spends its budget, and how it stays within the defined lines of a scope document. With an incremental funding process in place, gone are the days of full appropriation funding at initiation. Organizational budgets are too constrained to allow full funding; it is especially inappropriate when funding is based on loose estimates.
Breaking the Cycle
Simply because a project was estimated, approved, and funded does not mean that it should not be cancelled, postponed, sub-divided, or creatively managed in a different way. Sunk costs are just that. We cannot get those funds back. Therefore, we should not use the premise of “we spent $5 million, so we must keep going.” Projects can be cancelled. Even after investments have been made.
Organizations that have adopted staged appropriations find that they gain much better control over their initiatives, their budgets, and their performance. If early estimates are inaccurate, then management can fund enough of the project to ensure better estimates. If management wants to ensure they are getting a return for their investment, they should apply metrics throughout the project lifecycle, not just at the end. Putting meaningful controls (governance) in place over both the delivery and the financials of a project can lead to much improved results. With improved results, cancellation is less often the option.
Action Takes a Plan
To manage the value in an organization, there is need for an investment management process. So stated Susan Cramm, former CIO at Taco Bell and CFO at Chevy’s, a Taco Bell subsidiary, in the CIO Magazine article A Cry for Full-Cycle Governance. Why is this process so important? With methodical, standardized tools and measures an organization can determine the state of their investment before assigning more funds.
Investment capital can be allocated to an initiative throughout the lifecycle. The differences in this approach, from allocating a project budget en-masse at the onset, are not superficial. First, investments made during the initial phases of the lifecycle process may be treated differently from an accounting standpoint. As the initiative is essentially going through a research and development stage, capital appropriated during this time may receive different treatment under generally accepted accounting principles as research and development expense.
Additionally, at the beginning of the project, the outcomes of analysis and design are unknown (though hopefully well thought out and predicted) and the changes due to risks, bugs, and changes in scope are unknown. These challenges become better understood as the project proceeds. Therefore, a commitment of funds at the beginning stages may be relatively small, reflecting an investment only in the more certain components of the project. Supplementary funds may be allocated as the project gains ground and shows results. Alternatively, funds may be cut off or shorted, depending on the results from the early phases of the initiative.
As stated above, action implies risk, but as we look to make our future better, we’d do well to listen to F. W. Hirst, British journalist, writer, and editor of The Economist magazine: “If there were no bad speculations there could be no good investments; if there were no wild ventures there would be no brilliantly successful enterprises.” Let’s put a plan in place, take some risk to make improvements, make some changes, and ensure that we have more brilliant success than wild ventures.
Carl Manello is a Solution Lead for Slalom‘s Program & Project Management practice based in Chicago who enjoys exploring how to tightly couple the art and science of project delivery with business operations. You can read from Carl on his blog.