Project and portfolio management


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B-Tech the way we see it
Project and portfolio management
Experiences taken from Swedish companies and organizations

Contents

Foreword

3

Participating companies and organizations

4

Introduction

5

Definitions

6

Analysis

10

Summary of observations and recommendations

30

Set-up and methodology

32

About Capgemini

34

© 2010 Capgemini. All rights reserved. 

Foreword

the way we see it

Far too much money is being invested in unsuccessful projects around the world.
Generating new knowledge in the area of project and portfolio management is important to us at Capgemini given that we see its enormous potential to benefit not only our own business, but also for that of our customers as well as develop education and research in the academic field.
Capgemini is a market leader in the area of IT and Management Consulting with a long track record of high quality results as well as documented customer satisfaction. This is due in large to our desire and ability to embrace and create new knowledge. In addition, we draw strength from our established collaboration with different colleges and universities. This collaboration enables us to both gain access to research skills and the latest findings, as well as generates new knowledge together. In conducting this study we have collaborated with Jönköping International Business School.
Project and portfolio management is part of Capgemini’s core business and constitutes a global growth area. By staying in the forefront we strive to provide our customers with the best possible advice in this field!
We would like to thank all the individuals, companies and organizations that have participated in this study and shared their views and experiences. Our ambition is that the study will generate new insights as regards project and portfolio management and that this knowledge will be used to help take these organizations forward.

Bo Erixon Vice President

Jonas Winqvist Vice President

Jonas Schlyter Principal

Project and portfolio management – Experiences taken from Swedish companies and organizations



Participating companies and organizations
Several of Sweden’s largest and most successful businesses took part in this study.

ABB Astra Zeneca Banverket Bilprovningen Blekinge läns landsting Com Hem Consafe CSN E.ON Försäkringskassan Green Cargo Husqvarna IKEA Lantmäteriet Lernia Luftfartsverket Länsförsäkringar Mölnlycke Health Care Nordea Nyx Interactive OKQ8 Peltorp Posten

Region Skåne Rikspolisstyrelsen (RPS) SAS SCA SEB SEB Trygg Liv SKF Sveriges Kommuner och Landsting (SKL) Swedbank Systembolaget Södra Skogsägarna Tele2 Telenor TeliaSonera Fritidsresegruppen (TUI) Tullverket Upplysningscentralen (UC) Vattenfall Volvo Cars Volvo Construction Equipment Värdepapperscentralen (NCSD)



Introduction

the way we see it

The use of projects as a mechanism for organizational development has risen during the last decades and many businesses are currently facing a situation whereby they have to manage several hundred concurrent projects. This creates a requirement to lift focus away from the individual project on to an integrated approach embracing multiple parallel projects.
When the number of projects increases so does complexity. This is often due to project interdependencies wherein the information must be managed across projects and individuals together with the need to involve customers and suppliers. That the issues often cut across organizational boundaries only further increases complexity and the challenge posed to the projects.
There are many studies and books written on the subject of project management models and methodology. However there is not so much written about program and portfolio management. We foresee an increase in demand for models explaining these areas of management and future analysis that can help us understand why projects, program and project offices are not more successful and how

project work should be conducted in the future.
The purpose of the study is to create a deeper and better understanding of what problems, obstacles and challenges exist within Swedish companies and organizations dealing with project, program and portfolio management and how these issues could be mitigated1.
The study was conducted with 113 participants located within 44 com­ panies on the Swedish market. It addressed the following roles within these organizations: Project Office Manager, Line Organization Manager, Business Area Manager, Chief Information Officer, Portfolio Manager, Projects Manager and IT Strategist.
The selection of participating companies was done in order to get an overall picture of project and portfolio management covering different problems and aspects regardless of business area, size or type of business.

1 In this report we continously will use the term company for both companies and organizations.

Project and portfolio management – Experiences taken from Swedish companies and organizations



Definitions

Project work can be can be divided into three levels; project, program and portfolio. Each has its own distinct function (see Figure 1).
In order to support project, programs and portfolios a project office can be established with one or more of the above functions. Depending on the role of the project office varying amounts of support and governance is provided.
Project A project is a series of activities, which in a temporary organization with the allocated recourses, must produce predetermined and well-defined deliverables within given time and cost frames. The project level is the operational level within project and portfolio management (see Figure 2).
Figure 1 Three levels within project and portfolio steering

• Establish direction – Guarantee prioritization of the right initiatives and projects so that the strategic goals and needs for change of
Portfolio the business can be achieved • Responsibility: Management

Program

• Do the right things – Guarantee achievement of business effects by managing and coordinating ongoing and planned projects with interdependencies
• Responsibility: Program management

Project

• Do things right – Guarantee implementation of individual projects and delivery of defined results • Responsibility: Project management

Program
A program is a group of projects with a common purpose or goal. Unlike the project, which must deliver predetermined deliverables within the given timeframe, the program encompasses all activities from analysis and design through to implementation with the purpose of realizing business value. The activities of a program can be undertaken either as formal projects or as assignments within the line organization. In order to ensure that business value is achieved the program continuously evaluates the needs to start new initiatives or projects in order to realize its goals. A program is temporary in its nature and normally exists until its objectives have been met. The program level is the tactical level within project and portfolio management (see Figure 3).
The term program can have a different meaning depending on whom you are talking to. The above definition of program is somewhat unusual. More common is to view a program either as a very large project or as a collective term for multi-project management where focus lies on deliverables (generating delivery objects), and not to ensure implementation in the receiving organization or the longterm return on investment.

Figure 2 Examples of project structure Project

Activity 1


Activity 2

Activity 3

Activity 4

Figure 3 Examples of program structure

Program A

Project A1

Project A2

Project A3

the way we see it

Portfolio Unlike a project or a program, a project portfolio is not a one off occurrence with a set time but part of the strategic planning process within the organization. The portfolio contains the initiatives, projects and programs required to change the organization and develop the business to achieve the overall agreed goals and strategies. The portfolio level is the strategic level within project and portfolio management (see Figure 4).
Organizations with many projects and programs can group these in portfolios

organized by interdependencies and purpose in order to simplify overview and governance. Examples of different portfolio types are:
• Product (Projects that are prioritized by financial factors) and deployment plans
• Efficiency and cost reduction (Projects that are prioritized by financial factors)
• Health, Environment, Security (Projects that are prioritized by risk factors)
• Governance (Projects that are prioritized by legislative requirements).

”In contrast to a project
and a program, a project portfolio is not a one-off phenomenon with a time limit but is linked to strategic company planning.

Figure 4 Examples of portfolio structure

Portfolio

Project 1

Project 2

Project 3

Project 1+n
Project A1

Program A
Project A2

Project A3

Project and portfolio management – Experiences taken from Swedish companies and organizations



Project office
A project office is an organizational unit for supporting the company in its management of projects through all its phases. A project office can have different tasks and roles at a global level. Capgemini regards project offices as having three different roles; adminis-

trative, supportive and advisory. The organizational location depends on the role. The purely administrative project office is often located lower down in the organization whereas the controlling and advisory project offices report to the highest level of management. The roles build upon each

Figure 5 The different tasks/roles of the project offices

other where the advisory project office is also supportive and administrative by nature (see Figure 5).
The tasks of a project office revolve around six different areas but have a different focus depending on their role (see Figure 6).

Administrative project office
• Keeps track of existing projects using a common project inventory
• Provides methods and models for project management
• Compiles individual project information
• Provides project managers • Constitutes a competence centre for
questions pertaining to projects.

Supportive project office
• Requests information from project managers
• Interprets & analyses collected project information such as risks & delivery forecasts etc.
• Identifies, coordinates interdependencies and controls overall deliveries
• Prioritizes between projects • Gives advice and supports project
managers • Handles project decisions through
to completion

Advisory project office
• Analyses content & status in the portfolio
• Provides recommendations about rearrangements in the portfolio to client and management groups
• Prioritizes between projects/portfolios • Prioritizes between new ideas &
existing projects • Places demands on project model
and overall control models • Facilitates the generation of ideas,
implementation and realization of benefits

Figure 6 Examples of areas of work of a project office (regardless of task/role)

• Prioritization • Risk assessment • Coordination with other
initiatives • Resource optimization • Communication

• Project controlling • Reporting/follow-up • Audit and risk analysis • Benefit tracking • Quality assurance

Exemples • The portfolio management
process • Project model • System development
methods • Models and methods for risk
analysis and project auditing

Management Control

Maintenance

Project office

Competence development

Support

Tools and IT

• Training • Reuse • Research

• Coach/mentor • Project support • Method support • Administration • Manage change

• Support for project planning • Follow-up tools • Routines, templates, check lists



the way we see it

Analysis model
In order to obtain a deeper understanding of the project business, different aspects need to be highlighted. This is done using the Star Model1 in the study. The model presupposes that a business and organization can be run based on a number of aspects – components. These components are Strategy, Organizational structure, Incentive systems, Processes, roles and IT, Resources and competence as well as Culture (see Figure 7). By making changes in the components and using these as management control measures, ways of working can be stimulated so that the organization becomes more streamlined and performs better. However, altering behavior in an organization takes time and requires that all management controls co-operate and that there is clear and consistent leadership at all levels.

An organization consists of a number of people with different levels of ability. Together they should work towards achieving goals and strategies. Creating efficiency while avoiding unnecessary work tasks, requires structures in the form of organization, roles, working procedures and IT. To further guarantee and stimulate desired ways of working, the business is monitored and incentive systems are put in place (both financial and non-financial). In the following sections, the results of the study are analyzed based on the Star Model in order to explain why carrying out work in project form is difficult and what can be done to improve understanding with project and portfolio management.

Figure 7 Analysis model for an organization or operation – Star Model 1. Strategy

5. Resources and Competence

Culture

2. Organizational structure

4. Processes, roles and IT

3. Incentive system

1 Edvard E Lawler III, From The Ground Up, 1996

Project and portfolio management – Experiences taken from Swedish companies and organizations



Analysis
The key to a successful project is clarity, commitment and strong project management.

Analysis Today, an increasing amount of work is being carried out in project form and the share of the total budget being utilized is becoming larger. A larger share of the total budget and a greater share of personnel working in project form, places higher demands on how projects and project portfolios are handled so as to take control of development and guarantee expected returns.
There is general consensus in the study regarding the success factors required for a successful project. The three factors that are advanced as being the most critical are:
• Clear project goals
• Firm commitment from the sponsor and steering group
• Strong project management.
At the same time, these success factors constitute the area that companies specify as the principal reason for why a project fails. This is further supported

by other studies1 that argue that it is difficult to work in project form and that too many projects fail. An interesting fact is that the success factors required are both tangible and intangible. Projects need to be supported by better structures and clear directives from management (project manager and steering group) with the power to make decisions.
The most likely reason for failure is also connected to the complexity created by the fact that a project organization cuts across the traditional line organization and the existing power structures.
In addition, it seems that risk management is a neglected area causing companies to experience difficulties in identifying and assessing risks. This result in more than 20 % of projects having to be closed down during implementation, due to the fact that project and portfolio management becomes too reactive and event-driven (see Figure 8).

In the following analysis, each aspect is handled individually in order to better understand where the basic problems are located and to be able to address the correct measures.
Strategy The strategy component comprises the focus of the business in both the shortterm and long-term. It serves as a guide (steering principles) for how the business should be organized and run and constitutes a basis for prioritizing such things as investments and projects.
Steering principles exist at several levels; at the corporate level, broken down at a unit level as well as for each project, program and project portfolio in order to provide a guide for how, where and in what way tasks should be pursued and organized. The study shows that most organizations actively prioritize and re-prioritize in their project portfolio, but that they are not satisfied with the balance of the portfolio (see Figure 9).

Figure 8 Success factors and reasons for project failure

80% 70% 60% 50% 40%

70%

Success factors 65% 50%

71%

Reasons for failure 61%

43%

30%

20%

10%

0%
Clear strategic Strong support goals and relation- from company
ship to project management and steering group

Strong project management

Unclear project goals

Insufficient commitment by
management

Weak project management

Figure 9 Understanding the balance in the project portfolio

80% 70%

69%

60%

50%

40% 30%

31%

20%

10%

0%

Prioritizes the

Has balance in

project portfolio the project portfolio

1 e.g. Gartner Research 2008-12-04, ID Number G00163351 10

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Project and portfolio management