Almost all businesses are currently subject to unprecedented demands to cut costs. In well run organisations, every project will have a business case demonstrating its sound commercial value - but even projects with clear benefits are being slashed to cut expenditure. The dilemma is how best to cut costs without impairing future capabilities and competitiveness.
Distressed cost reduction should be surgery - not butchery. Achieving, say, a 25% reduction in costs should not mean cutting 25% of the resources of each project. A careful but rapid appraisal should be made of the impact of cuts to each project, bearing in mind their respective objectives, inter-dependencies, financial merit and survival imperatives. That appraisal should also address ways in which earned value can be preserved for the future.
The first stage of a Project Portfolio Appraisal is to agree the scope and style of the review. Consider these three types of assessment:
Consider whether the study should be overt or covert. In an overt study, senior management must be seen to support and participate in the study so that all personnel understand the need to co-operate fully and rapidly - even where their personal interests might be at stake. A covert review might be preferred where there is risk of disruption to morale or efficiency. Covert studies tend to take longer and may have to use less reliable data.
Senior management should then agree the overarching criteria that should be applied. Different organisations will have different views on how to balance such things as cash flow against future benefits, financial results against staff morale, shortterm survival against long term growth. The assessment team should agree a set of rules that express how differing factors should be viewed when seeking a necessary level of cost reduction.
In parallel to this, the team will already be building the portfolio data. It is striking how often this information contains surprises for the management team. Not many organisations seem to have a complete picture of their project investments.
|In one UK market leader, a majority of projects did not have budgets - rising to 97% in one of the divisions. The full catalogue had never before been collated and was not known by anyone. In another case, the desired levels of saving were achieved simply by cutting the projects that generated no benefit.|
The portfolio information falls into four categories:
Using the balance of criteria set out by management, there will be one of four outcomes for each project:
For each project requiring action, a recommended way forward should be defined to achieve the targets set. In addition, you should identify any potential improvements in the way the overall project portfolio is managed. Further recommendations may be made for efficiencies such as better approaches, improved practices, and shared services.
Routine portfolio management should be part of the normal responsibilities of the organisation's management. This tends to break down when existing portfolios need to be re-appraised, particularly where more than one manager is involved. This is because:
In difficult situations, it is best to use external specialist advisers who can provide the impartial information you need to make difficult decisions - decisions which may be the difference between staying ahead, falling behind or failing. Each management team's imperative is different. You need to form a balanced view of your business and IT projects using experienced reviewers and a proven process.