I was talking to a colleague yesterday who was under some pressure – a business colleague (let’s call him Bill for the sake of argument) was arguing forcibly that they didn’t need the “bureaucracy” of an investment appraisal because the project under review wasn’t a £2 billion programme.  That may well be true but the investment, in terms of the project and running costs, still runs into many millions – and that’s taxpayers’ millions.  Which means we need to be able to know the answer to three questions: 

1. What impact the project will have;
2. That that impact can’t be achieved more cost effectively; and
3. In an environment of funding constraints, it represents the best use of funding in light of the whole portfolio of change initiatives.

 After all Bill, it is taxpayer’s money.  

As part of the research I currently working on (looking at the case for Portfolio Management, what does ‘good’ look like, and how should we measure it?) I’ve been pondering a question – why is it that even when the analysis has been provided, governance bodies have been slow to take action with failing projects continuing to be funded long after it was clear they should have been killed?   

One thought did occur to me – on the one hand evidence shows that a key success factor in projects is the level of stakeholder commitment, but on the other hand we don’t want this commitment to blind managers to emerging new evidence that affects the case. Yet humans are often not very good at updating their positions to reflect new evidence. The problem is that our commitment, that we believe to be based on a rational analysis of the situation, quickly becomes an emotional commitment that is relatively impervious to new evidence.  As Ian Ayres says in ‘Supercrunchers, Why Thinking-By-Numbers Is the New Way To Be Smart’, “humans not only are prone to make biased predictions, we’re also damnably overconfident about our predictions and slow to change them in the face of new evidence.  In fact, these problems of bias and overconfidence become more severe the more complicated the prediction.”   

Being aware of this helps, not least in highlighting the importance of making the right decisions as early in the pipeline as possible – killing failing and non-strategically aligned projects is a success not a failure, but only if the decision is made as early as possible.   Another defence against such optimism bias are regular ‘stock takes’ with robust, independent scrutiny to ensure that the investment justification stills holds true.  But why don’t we shift the basis of presumption – so that if a project goes outside tolerance, the assumption is that funding will be cut?  Funding may of course still continue, but the case for this needs to be made.   This is more effective than the reverse where failure puts funding at risk, but unless positive action is taken, funding continues.

I’m just finishing a piece of research for the Cabinet Office looking at the case for portfolio management.  One theme I noted was that implementation of portfolio management usually seems to be driven by an external stimulus – the failure to re-appoint the Director-General on the programme I worked on; the legal requirement of the Clinger-Cohen Act in the US government; or the bombing of Manchester by the IRA which led to a significant increase in project activity that needed to be managed.  What was largely missing (with a few notable exceptions) were cases where adoption of Portfolio Management was driven by a belief that it’s the right thing to do.   It now looks like our moving into more fiscally constrained times may be about to provide a more wide-ranging stimulus to the adoption of portfolio management.    I’ve just finished reading a report that examines government department’s capability across a range of performance areas and noted that one of the biggest challenges for departments was stated to be:  “Prioritisation.  When asked what would make the most difference to enabling change to happen, the most common factor identified by the SCS[1] was ‘clear objectives’ – ‘real prioritization: deciding what the key changes are and really following them through’ and ‘clear communication…about goals and mechanisms for getting there, and being very clear about individual roles.’  Factors hindering change included ‘too many competing priorities’ and ‘lack of common objectives and prioritization.’  There is a widespread perception within departments that leaders are not setting priorities effectively enough, and this links back to the challenge of developing strategies that are both deliverable and delivered.”  The money is running out – and if that provides a stimulus to a more active and widespread approach to ensuring we ‘do the right’ projects as well as ‘doing them right’, then I am one tax payer who is delighted. Steve Jenner is a Director with the UK Ministry of Justice.  He is currently on secondment to the Cabinet Office to help develop and promote portfolio management pan-government.   

[1] The Senior Civil Service

Portfolio Management guidance issued by the Project and Programme Management (PPM) community here in the UK places Portfolio Management firmly in a hierachical relationship to PPM: §         The Office of Government Commerce (OGC) guidance issued in 2004 identified the pre-requisites for successfully implementation of project portfolio management as including – “Organisational capability in Programme and Project Management (PPM) governance and standards”§         The OGC’s P3M3 Maturity Model sees portfolio management building on existing project and programme management maturity – “This means that organizations can use the model to evolve their maturity across all disciplines in an integrated approach or by addressing Project Management then Programme Management and then Portfolio Management in sequence.”[1]   §         Most recently, Venning[2] (2008) states that the prerequisites of portfolio management include, “Organizational capability in programme and project management with consistent standards” and, “organizations should not attempt to establish a portfolio management function until they are confident that they have reached an appropriate level of maturity in their programme and project management approaches.  The minimum recommended level is Level 3 of the OGC’s P3M3”.   The problem we immediately face is that one of the explanations for the absence of formal evaluation of the P3M3 maturity model is that the majority of organizations are at relatively low levels of maturity.   If we accept this analysis, then most organizations should not even consider implementing project portfolio management.  But this analysis is illogical and furthermore it rests on a misunderstanding of the nature of portfolio management.  Firstly, the consequence of the above view is that an organisation needs to develop its capability to deliver projects irrespective of their business value before asking the question are they the right projects to undertake in the first place – so putting the ‘delivery’ cart before the ‘strategy’ horse.  Secondly, portfolio management calls for a different set of competencies and disciplines from project and programme management.  Whilst the latter involves detailed planning and a focus on managing implementation, portfolio management core competencies relate more to the disciplines of business strategy, finance and economics – in deciding what projects to undertake, where to continue to invest and how to optimise value from the investment made.    Let’s be clear – the two discipines are related but project portfolio management is not Über-programme management.  Consequently, whilst effective project and programme management plays a crucial role in addressing the delivery issue of ‘doing projects right’, ultimately portfolio management addresses the wider questions of, ‘are we doing the right projects and programmes’ and ‘are they achievable’ and ‘are we realising the potential benefits’?  Seen from this perspective, and whilst not underestimating the importance of PPM, project portfolio management can add value irrespective of the degree of organisational maturity in project and programme management.   It’s time our PPM colleagues realised this. 

[2] Venning C (2007) Managing Portfolios of Change with MSP from programmes and PRINCE2 for projects, TSO

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