Combine Projects into a Portfolio Database
Solving the problems created by project-by-project decision-making requires shifting the focus to the project portfolio. The first step is to collect information about individual projects into a common database. A single project inventory can be constructed containing all of the organization's on-going and proposed projects. Alternatively, multiple project inventories can be created representing project portfolios for different departments, programs, or businesses. Since project portfolio management can be conducted at any level, the choice of one portfolio versus many depends on the size of the organization and its structure. It might not, for example, make sense to force a centralized project portfolio on an organization that practices decentralized decision-making.
The key is to group projects using common resources so as to leverage knowledge and expertise needed for execution. If multiple project portfolios are defined, the groupings should be organized so as to be as independent of one another as possible. Decisions about what projects to conduct within one portfolio should not depend in a significant way on the projects that are conducted within any other portfolio. The decision of how to allocate resources among the various project portfolios can then be made at a higher level, based on estimates of the how the value of each portfolio depends on the funding that it receives.
Since it is useful to be able to monitor and control the mix of various types of projects within the project portfolio, a project classification scheme should be established. Projects can be classified in many different ways. Examples include: size; duration; level of risk; geographic location; skills or technologies required; sponsor, client or market served; asset class addressed (e.g. infrastructure, transactions, etc.); stage of the project life cycle; type of product produced (e.g. research, software, construction); and so forth.
Multiple schemes can be used so that each project is classified in several different ways. No one approach is best for every organization. The key is to choose classification schemes that will yield information useful to decision makers.
The information entered into a portfolio database should include the project name, type, and a brief description; internal and external resource requirements; number and skills of people required; estimated time to completion; and estimated cost. Importantly, the recorded information must also include some level of business justification, risk assessment, and value and urgency calculation. If project information is standardized, a template can be provided for submitting project proposals. Using a standardized project information template will encourage complete proposals and more consistent proposal evaluations.
Organizations invariably find that creating their first inventory of ongoing and proposed projects is a real revelation. "I didn't know we had so many things going on, no wonder we can't get anything done!" Projects look less like discrete efforts and more like an interdependent suite. The initial project inventory often uncovers significant duplications and mismatches. For example, CIO Magazine[2] reports that when Schlumberger first grouped IT projects, they found that 80% overlapped. Duplicate efforts should be eliminated, obviously, and similar projects combined into a single project. Schlumberger reportedly saved $3 million by eliminating project redundancies.
2. S. Berinato, "Do the Math," CIO Magazine, October 1, 2001.
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Problems Caused by the Lack of Clear Priorities
