THE 120VC PORTFOLIO MANAGEMENT MODEL

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1 THE 120VC PORTFOLIO MANAGEMENT MODEL There are several layers that contribute to achieving the Vision stated in the figure below. The workflow in the figure starts at the bottom left and flows right across the Project Management layer and then moves up to the Program Management layer and resets to the left side of that and the subsequent layers. Each of these layers contribute to the achievement of the Vision. Each layer is thoroughly explained in the following sections VC Holdings, Inc. All rights reserved

2 THE VISION OF PORTFOLIO MANAGEMENT As mentioned before The Purpose of Project Portfolio Management is to enable the CEO and the CFO to make data driven decisions about how to allocate funds and team members across their portfolios to achieve the greatest return for their investment and to complete as many of the Projects in their Portfolio each year for the amount of money that has been allocated. Essentially, a Project Portfolio is no different to them than a financial portfolio with one major exception - a CFO delegates the responsibility of delivering the results of their investment to others and holds them accountable by closely assessing the financial results over time. When one of these delegates is a Chief Portfolio Officer (CPO) or Portfolio Manager, they are responsible for both the investment dollars and completing the projects that will realize the return on investment their CEO desires. Ideally, both the CEO and CFO would receive a weekly or monthly fact-based report from the Portfolio Management Office (PMO) that lists each project in the portfolio with a summary of their health in relation to the project end date and cost. This information would then be used to make decisions for the reallocation of funds and team members from projects with a surplus to projects in need much like an investor would make buy / sell decisions based on the report provided by their finance manager. The example above shows a snapshot of a portfolio report. Try to imagine a report like this that contains over a 100 projects, but the example above is rolled up to only show the top three. Also imagine that the bottom line financials above are the sum of all 100 projects. You can see that the name of each Project is listed on the very left followed by the name of the Project Manager, Project Start and Finish Date. The next field is the assigned Project Managers average Project Review Score. Because 120VC Project Managers all follow the 120VC Project Management Standard, it is possible to quality assure their work weekly and derive an average performance (or quality assurance) score over time VC Holdings, Inc. All rights reserved

3 Ask yourself If all of the Project Managers in a Program were planning, assessing Impediments, assessing Health and Reporting differently, by what Standard would a Program Manager be able to quality assure their work? The answer is Chaos can NOT be quality assured and always ends badly! The reason we include the average review score in the Portfolio Report is simple. We have learned over time that any Project Manager with a review average of 95% or better is moving their Project forward as aggressively as possible. Now just because the Project Manager is rocking the Project, doesn t mean that impediments won t arise that impact Project Heath. It just means that you don t need to indict the Project Manager when that happens. The Project review score also tells executives that the data they are reviewing in the report has been quality assured twice before being presented to them (I promise to explain the Q/A process later in this chapter). The accuracy of quality assured data allows the executives to make confident, data-driven decisions from the report without having to ask 20 questions about each Project, use a secret decoder card, attend 10 meetings per month and hire a private detective to get the information they need to make decisions. The Project Health field is used to differentiate a Project in need from a healthy Project. When a Project Manager turns a Project Yellow or Red, they are generally communicating they need Program or Portfolio level assistance to overcome an impediment to moving their Project forward as aggressively as possible. The Planned vs. Actual fields are used by Program and Portfolio Leadership to prioritize this assistance. For example: A Portfolio may have five or more Red Projects at any given time. All need assistance, but which is the highest priority? If I had a red Project that was planned to be 75% complete, but is actually only 50% complete, and I had another Red Project that was planned to be 30% complete and is actually 35% complete, the Red project that is trending behind should receive Program or Portfolio level assistance before the Red Project that is trending ahead of schedule. In the end, they may all get assistance. Planned vs. Actual is simply the mechanism to prioritize Projects in need. Then there is the financial information associated with each Project. The Baseline Budget reflects the amount the Project Owner approved the Project Manager to spend. The Current Forecast is the amount the Project Manager currently believes is needed to complete the Project and the Variance is the difference between the two. Spent / Committed is the total amount spent and owed for goods and services and Remaining is self-explanatory. Any Project with Yellow or Red health will be accompanied with a solution / request for the support needed to get the Project back to Green VC Holdings, Inc. All rights reserved

4 Now that I have explained the fields I would like to explain how to interpret the figure above. The first Project in the figure above is on schedule, but has an impediment on its critical path which means there is a possibility that the Project End Date and Cost could be affected if the impediment isn t removed quickly. In this case, the best possible solution is to hire an expert consultant for a week. Hiring this consultant was not anticipated and will cost the Project an unplanned $23,743 creating the negative variance reflected in the figure above. When the negative Project cost variance is viewed in correlation with the overall positive bottom line Portfolio variance of $86,592, it is clear that the CEO or CFO can accept the negative variance to complete the Project in need. An alternative to accepting the negative variance is to cancel the Project. This would be a good decision if the Project was a Nice to Have vs. a Must Have for the organization. Since only $16,740 has been spent to date, canceling or postponing the Project would save the organization / Portfolio the remaining funds creating an additional Portfolio surplus of $57, VC Holdings, Inc. All rights reserved

5 THE PROJECT MANAGEMENT LAYER The Project Management layer is comprised of three components: 1. An external Project Management Standard that the Project Manager uses to plan and manage their Projects. 2. A proprietary organizational methodology. The organizational methodology outlines processes that the Project Manager is required to follow on each Project to obtain the support necessary for their Projects to succeed. 3. A Project Plan and weekly Project & Budget reports. To explain the role of each of these components I am going to use an analogy. The Project Management Standard in the figure above is similar, in purpose, to the medical standard a doctor learns in medical school. The doctor is required to learn this standard and is then thoroughly evaluated before becoming board certified to practice medicine. Once certified, the doctor goes to work and needs to learn the hospitals methodology. A hospitals methodology would define how they would prescribe meds, order labs tests and how to handle patient s files, but would not cover how to practice medicine. Can you imagine a world where every hospital had their own proprietary medical standard? Each time a doctor changed hospitals it would take years of study before they could actually practice medicine. This would be very inefficient or No Bueno. For those of you that don t speak Southern Californian, No Bueno means Not Good. Essentially, the external Project Management Standard allows new Project Managers to be productive immediately and enables the Program and Portfolio layers. The organizational methodology should contain those procedures that are truly unique to an organization and anything that might give them a competitive advantage. Together, the Standard and Methodology serve as a road map for Project planning and management, which will result in a Project Plan and weekly reporting VC Holdings, Inc. All rights reserved

6 THE PROGRAM MANAGEMENT LAYER The Program Management Layer is broken down into three functions: 1. Quality Assurance: Eliminates any risk to the Project associated with Project Management aptitude by performing daily and weekly quality assurance exercises. This sounds terrible if you jump directly to the worst possible scenario, but there are plenty of legitimate reasons that a competent Project Manager can get in over their head. It is the Program Managers job to realize this before it impacts the Project negatively and helps the Project Manager keep the Project on track. Notice I didn t say, get the Project back on track? That s because the Key Performance Indicators allow Program Managers to proactively manage their Programs instead of waiting until something is negatively impacted to take action. **Key Point: This level of quality assurance is not possible unless the Project Manager is following The Standard. If the Project Manager adopts his/her own approach to planning, assessing impediments / health and reporting, the Program Manager would need a secret decoder card to interpret the success of each individual Project Manager on their team. In most organizations today, the lack of adoption of an external Standard is the primary reason why most Program Managers wait until the Project is negatively impacted to act. Their Project Managers are all doing things differently and therefore the Program Manager can t effectively quality assure the chaos! 2. Program Analysis: Again, because the Project Managers are all following The Standard, the data from each Project can be quality assured and is accurate. With accurate Project data, the Program Manager can effectively analyze their Program to rob from the rich Projects and give to the poor Projects to complete as many of the Projects in their Program each year for the amount of money that has been allocated. 3. Weekly Program Reporting: Once the Program Manager completes the weekly quality assurance process, they are 100% up to speed on their Projects, the decisions that have been made, and why. They have had a chance to ask questions to validate each of the decisions, completed their Program Analysis and have helped the Project Manager, when necessary. This information is then compiled and sent to the Portfolio Layer for review and assistance where necessary VC Holdings, Inc. All rights reserved

7 THE PORTFOLIO MANAGEMENT LAYER The Portfolio Management Layer is broken down into three steps: 1. The Weekly Portfolio Meeting: During this meeting the Chief Portfolio Officer (CPO) or Portfolio Manager reviews the individual Program reports with each of their Program Managers. During the review the CPO asks questions to understand the data being reported, the reasons behind the solutions being employed to get Red or Yellow projects back to Green, and coordinates the allocation of resources from healthy Programs to Programs in need. Let me use a financial example to illustrate a simple situation that might require the allocation of resources from one Program to another, because it will be the easiest to understand. However, the three main things that get allocated across Programs are Funds, People and Slack. In this example there are two Program Managers. Both have Projects that will go over budget by ten thousand dollars. One of the Program Managers has a surplus of funds in their Program that will cover the overage. Therefore, the CPO can simply accept the overage in that Program. The other Program Manager has no surplus and the overage will cause the entire Program to go over budget by ten thousand dollars. In the second scenario, the Portfolio Manager needs to determine if there is enough surplus across all of the Programs (the Portfolio) or cut projects to ensure the Portfolio doesn t come in over budget. 2. Executive Portfolio Report: Once the CPO is up to speed on all of the Projects, has validated the solutions being proposed and has facilitated the allocation of resources across the Portfolio, the Executive Portfolio Report can be produced. The exercise in the Weekly Portfolio Meeting prepares the CPO to lead the Weekly Executive Portfolio Meeting with the CEO and CFO. 3. Weekly Executive Portfolio Meeting: In this meeting the CPO reviews the Red and Yellow Projects with the CEO and CFO. The CPO briefly explains the Impediments impacting those Projects and the solutions being employed. The CEO and CFO will ask validating questions to understand the solutions and will either approve them or provide alternates VC Holdings, Inc. All rights reserved