Portfolio Management - Exploding the Myths

By Keith Clark, Principal, Moorhouse Consulting

Welcome to 2009, these are challenging times!  Previously stable assumptions around customer demand, access to capital and supplier costs now need to be reappraised on almost a daily basis.  This unpredictable environment coupled with the current economic crisis is demanding that companies deliver their strategies with greater focus and agility than ever before.

Improved delivery and ROI

Is this an impossible balance to strike in tough times?  At Moorhouse Consulting we don’t believe so.    Enter ‘portfolio management’, a structured programmatic approach that acts as a ‘force multiplier’ in an organisation, gradually driving change through multiple parts of the business and improving the connection between strategy and delivery at the same time. 

We use a portfolio management approach successfully with a number of our clients, including Transport for London and the Nuclear Decommissioning Authority.  Some of you may have seen our recent presentation on the subject at our annual conference.  Well-executed portfolio management is ever more popular as not only does it increase the overall return on investment (ROI) across the entire portfolio, it also improves delivery effectiveness, efficiency, forecasting and benefits realisation.  So, what’s not to like about that?

Three common ‘myths’ regarding the ease of implementation currently exist in the minds of senior leaders – and it is potentially stopping them reaping the benefits of this dynamic methodology.  Let’s examine each one in turn, and the truth behind what it takes to implement portfolio management and to achieve greater delivery and agility. 

Myth 1 – A highly defined strategy MUST be in place before any portfolio management approach is considered

Truth – There is no doubt that the portfolio management function needs to possess a thorough understanding of strategic objectives.  However, that doesn’t mean that the strategy needs to be well defined, set in stone, or, that the interface is all ‘one way’.  In fact, having a well-defined strategy in today’s changing conditions may serve to dilute the strategic flexibility required to respond nimbly to the fluctuating market.  So, whilst a good understanding of the strategic direction is important when considering portfolio management, a rigid strategy is not.

Myth 2 – The finance community will not support portfolio management as it may challenge their decision-making authority

Truth – For a portfolio management approach to be successfully embedded, the finance and portfolio management functions need to complement rather than challenge one another.  However, there are a few potential areas of conflict here.  For example, the finance team is usually the provider of all financial data that influences key strategic decision-making processes, and an introduction of a portfolio management function that challenges this position with new considerations to add to the mix, could be problematic.  The trick it to get everyone engaged and working together from early on, with shared goals and excellent communications.  If this is done successfully, finance and portfolio management can be great allies in the provision of strategic intelligence and data.

Myth 3 – A mature programme and project management capability must be in place before adopting portfolio management

Truth – To function successfully, the portfolio management team must be fully empowered by the leadership team to direct the action of the programme and project delivery function, and receive relevant data regarding progress, costs, resourcing, benefits, dependencies and risks.  This is essential to portfolio management providing a return on investment.  What it does not need to operate successfully, is a client with a mature PPM capability (i.e. high levels of competence, methods and tools, compliance).  Sure, it would be helpful, but the benefits of portfolio management can still be felt if the delivery function has varying degrees of capability and maturity.  

Conclusion

As far as Moorhouse Consulting is concerned, adopting portfolio management is a ‘no-brainer’ – especially for those in large, complex environments with multiple change programmes in place.  Providing the enabling conditions are in place – the proposition, relationships, ideas, structures and methods – the ‘force multiplier’ effect of portfolio management can be gradually built up by the incremental adoption of the new principles over time.  The function’s structures, governance and processes that are intended to continuously drive out value reinforce this.  Building the function takes a short time, embedding the principles within the organisation, a little longer.  However, the business benefits of agility and improved delivery and ROI are well worth it.

If you are interested in Portfolio Management, click here for information on our indepth publication entitled Portfolio Management - Delivering value from multi-project investment

© 2009. Moorhouse Consulting Ltd.

If you would like to talk to us call on the number below. Alternatively, click on the consultants email address, provide us with your details and we will call you back. We look forward to speaking to you. Contact: Email: Tel: Keith Clark keithclark@moorhouseconsulting.com +44 (0) 20 3004 4482