What do you do when you think your PMO is as good as it can be?  Make it better. 

The science and practice of setting up and running PMOs is moving forwards in leaps and bounds.  Businesses have seen the benefits of better control over project execution and want more, but we’re now starting to see the limitations of how far you can go with that approach.  Once you’re near the top of your game, the law of diminishing returns comes into play, and you don’t get the same payback for the effort to improve further.  So, where do we look next for that big advantage? 

More and more, we’re seeing innovative businesses lifting their sights from project execution to portfolio management; and for those that do it well the rewards can be significant.  We have seen businesses double the ROI they get from their strategic portfolios (and sometimes better).  That may seem like a bold claim, but it really is achievable, and here are our thoughts on some first steps to making that a reality for your business...

We like to think of portfolio management as split into four distinct, but closely related, areas of activity: 

• Project prioritisation 

• Portfolio rebalancing 

• Capacity planning 

• Portfolio scheduling 

So, let’s dive in and look at some ideas for getting that game-changing increase in ROI from each of those areas. 

Project Prioritisation 

This one is great.  It’s about picking the right projects to move the business strategy forward, which sounds obvious and easy, but is generally done very badly.  In fact, according to PMI data, 20% of projects in a typical portfolio are so badly aligned with the business goals that they should be stopped.  That’s 20% of your time, effort and money going on the wrong things.  So, the payback for stopping these projects (or even better, not starting them) is obvious; and when you consider that every project should have a return greater than its cost, the impact of switching those resources to better-aligned projects is even bigger. 

So, how do you pick better-aligned projects?  Well, our approach is based on proven decision science theory and practice, packaged in a software platform that makes the potentially complex process simple and bakes in collaboration, transparency and scalability.  Using it is easy, decision-makers have far more visibility of the costs and benefits, and the result is better decisions and less wasted effort. 

To learn how it works, click here. 

Portfolio Rebalancing 

One of the challenges we often hear about from clients is that there is so little time/effort/money left after they’ve resourced all the BAU work, that it doesn’t go very far in getting the important stuff – the transformation projects – off the ground. 

Let’s say you shake things up a little and split your projects into two portfolios: one for BAU and one for transformation.  Once you’ve prioritised all your projects, you know how much each cost and how much value it delivers to the business.   

So, now it’s time for some important business decisions.  Do you really need to resource all the BAU work first, or can you take some risk and divert the resources to the transformation projects that are going to move the business forward?  That’s a pretty crunchy executive decision; and we’re not here to tell you what the answer is.  But we do have some excellent tools (such as the efficient frontier graph – find out more here) that expose the relative costs and benefits.  Just a small reduction in the BAU portfolio can release enough resources to have a big impact on the transformation work: more strategic return for no more cost. 

Capacity Planning 

Now, this is a slightly controversial idea at first sight, but don’t write it off too quickly.  If you overload your people, you get less real output; back off a little and you’ll achieve more.  If you load your teams to more than about 80-85% of their theoretical maximum capacity, things slow down because people are always task-switching, which is inefficient and increases errors.  According to the American Psychology Association, this can waste up to 40% of your capacity.  So, it really does make sense to take your foot off the gas to go faster.  Still not convinced?  Have a look at this video to hear our CEO explaining how it stacks up.

The theory is great but putting it into practice is fiendishly complicated.  With multiple resource pools and different levels of demand for each from all your projects, there are just too many variables for a mere mortal to handle.  That’s why we have built an AI module into our software, that simulates thousands of options in a few seconds and produces a recommended portfolio that maximises the value you get from your resources.  And if you don’t like it, just change the parameters a little and run it again. 

And capacity planning isn’t the same as resource management.  Resource management is the detailed task (that PMOs love) of allocating resources to projects to keep things moving and avoid too many bottlenecks.  That still must be done, but capacity planning is the work up front that means the supply and demand are already well matched and sets up resource management to succeed rather than fail. 

Portfolio Scheduling 

So now you have a plan based on projects that are properly aligned with your strategy, with risk balanced intelligently across BAU and transformation, that is properly matched to your resource capacity.  Well, done!  You’ve already turned things around and can deliver much more ROI, but there’s more to de done. 

Another mistake we often see is businesses that kick off the newly designed portfolio at the start of the financial year, and the pressure to deliver means they start all the projects at once.  Remember what we said about task switching and how that can waste up to 40% of your capacity?  Well, poor scheduling can put it straight back into play. 

And just like capacity planning, staggering the start of your projects speeds up delivery.  Plan to do the important or urgent ones first and sequence everything to manage peaks in demand for your critical resources and you get value back to the business quicker and even free up capacity to fit more projects in.   To see it brought to life, click here.

But, again, this is complex with all the moving parts to plan around, so most PMOs try to aim for something that isn’t obviously broken and just rely on fire-fighting to get them through.  Our AI-enabled software can help here too, producing an optimised portfolio schedule in seconds.  And if the world changes (as it has a habit of doing), don’t worry; it’s just as quick and easy to run it again, and again, and again… 

You can always do a little better, but not on your own

So, in summary, there’s a big prize out there for businesses that are prepared to think a little differently and lift their PMO from project execution to portfolio management.  Doubling the ROI from your strategic portfolio is not only achievable, but also beatable.  But this is not something the PMO leader can do alone, it needs the involvement of the executive team.  More than that, they need to own it and lead it; because it’s not just about what the PMO can do, it’s about how it is used in the business.