Project Portfolio Alignment &
Strategic Objectives
Practical Tips In Aligning Project Portfolios With Strategic Objectives
Jim Peters, PMP
1/13/2012 2 © 2012 SoftwareMatters.com, Inc.
Presentation Abstract
Practical tips in Aligning Project Portfolios with Strategic Objectives
Practical techniques to help establish and maintain the alignment between projects and
organizational strategic objectives. The presentation focuses on the perspective of project
managers and PMOs in understanding and maintaining strategic alignment.
The issues addressed came from implementing PPM software for large organizations. PPM
solutions include assessment of customer requirements and the design of business processes
used to manage projects, project portfolios, and resources. Often during the requirements
process a gap is identified between the project and project portfolio data available in
the organization and the ability to link that data to the strategic objectives of an
organization. Many projects and programs begin with clear strategic alignment, but that
clarity often fades as work on the project begins. This limits the ability of an organization
to reassess and respond to changes in their industry. And it often results in decisions made
on perceived importance or priority. Effective project portfolio management processes
and metrics can help everyone keep the priorities in focus and allow resource managers
to make objective decisions in utilization of resources.
1/13/2012 3 © 2012 SoftwareMatters.com, Inc.
The Problem with Alignment
What are some of the issues with lack of alignment of projects to the strategic plan of an organization?
Symptoms of alignment problems that often exist include:
Strategy at high level not clearly linked to project and operational plans
Inability to link projects to strategic objectives in quantifiable ways
Gap in project and project portfolio data available versus balanced scorecard requirements
Initial clarity on strategic significance of a project diminishes over time (the world moves on)
Inability to assess the ongoing value of a project as it relates to the strategic objectives.
Decision making on the basis of perceived importance instead of the strategic importance.
Lack of visibility of the project portfolio in terms of strategic objectives (i.e., no clear link between the data shown in the balanced scorecard and the portfolio management data)
Evaluation criteria created with the preferred outcomes in mind
…
1/13/2012 4 © 2012 SoftwareMatters.com, Inc.
Exploring the Problems
The symptoms of alignment issues fit into four problem types:
Differing Agendas – Alignment is a matter of perspective. Establishing a common framework keeps it
clear.
Change - It happens not just to projects but to strategies and strategic plans as well. Including assessment of
the impact on projects as part of the change management process allows for more objective and transparent
decision making.
Data – Availability of data necessary for controlling projects is a base requirement for PM/PPM systems.
Applying the same design process to the data required for strategic planning can result in close to real time
assessment of project portfolio alignment.
Decision Making – Failure to have a consistent method for identifying the relationship of projects to the
strategic plan often results in repeated negotiations for resources or other project commitments. Making
strategic priorities clear at every level provides an objective basis for approaching project trade-offs and
resource allocation.
1/13/2012 5 © 2012 SoftwareMatters.com, Inc.
Perspectives & Goals
Or …
Why do I care?
Why do PMs care?
Why do you care?
What can I do about it?
What can PMs do about it?
What can you do about it?
Support of strategic planning within the PPM
tools should not be an afterthought or a
periodic flurry of unplanned activity.
1/13/2012 6 © 2012 SoftwareMatters.com, Inc.
Overview
Foundational Terminology
Projects, Programs, & Project
Portfolios
Strategy & Strategic
Objectives
Tactics & Tactical Objectives
Operational Programs
Organizational Strategy & Objectives
Operational Planning
Initiatives
Strategic Planning
Project Portfolio
Strategic and Operational Programs & Projects
Comprehensive Portfolio View The Standard for Portfolio Management, Second Edition
(Project Management Institute ©2008)
1/13/2012 7 © 2012 SoftwareMatters.com, Inc.
Projects & Project Portfolios
For Definitions and standard practices see PMI
Standards, Max Wideman’s PM Glossary, and
numerous PM text books.
Project
Project Portfolio
Projects are at the core of most strategic plans. Numerous
terms are used to refer to the collective work of the
organization. For this discussion Project Portfolio
Management will be used as the common term.
Project Management (PM)
Project Portfolio Management
(PPM)
1/13/2012 8 © 2012 SoftwareMatters.com, Inc.
Jim’s Simplistic Overview of
Strategy & Alignment
“Strategic
Plan. All
projects should
support the
organization’s
strategic
goals.”
PMBOK® Guide, Fourth
Edition ©2008 Project
Management Institute
Strategy Mission/Vision & Goals summarize the strategy.
Organizational values & principles provide guidelines on how the Mission/Vision and Goals are
transformed into a clear strategy.
Strategic objectives express the method to be used to implement the Mission/Vision and/or the
goals. The objectives may have multiple levels or variations based on department or product
area.
Strategic Plan Strategic Plan captures the strategy in a form that can be used in managing how the organization
can implement the strategic objectives and evaluate the results.
Balanced Scorecards, KPIs, and dashboards are used to visualize and monitor the Strategic Plan
during implementation.
Alignment Alignment is the process of ensuring that the work performed and the products or services created
by the organization match the work, products, or services specified in the Strategic Plan.
Alignment is ongoing, requiring that project and operational initiatives are monitored to determine
if the strategy as defined in the strategic plan will be achieved.
1/13/2012 9 © 2012 SoftwareMatters.com, Inc.
Five Attributes of Strategic Objectives
Tip #1…
Identify the specific, measureable, attainable, responsible person, and time specific attributes of your organization’s strategic objectives.
Strategic objectives should be SMART:
1. Specific
2. Measureable
3. Attainable
4. Responsible Person (Accountability)
5. Time Specific This version of the SMART mnemonic from Strategic Planning for Dummies (Wiley Publishing ©2007, page 240). Numerous other sources including citations referencing the original source. See Wikipedia article for some other variations on the words used to make up the mnemonic device.
1/13/2012 10 © 2012 SoftwareMatters.com, Inc.
Projects & The Strategic Plan
Tip #2…
Learn your organization’s strategic planning process, the cycle, and the methods used to select and monitor projects.
Projects and Programs interact with the Strategic Plan in many ways. Some specific uses include:
Projects/Programs are used to implement strategic plan objectives
Project Portfolios are created to manage major elements of the strategic plan
Project performance and status data feed balanced scorecards
Projects created to support measurement requirements
1/13/2012 11 © 2012 SoftwareMatters.com, Inc.
Alignment Made Practical
• Update/Create the Strategic Plan
• Identify the Strategic Drivers(objectives or
subcomponents of the objectives)
• Identify the Projects & Programs that are
included in the project portfolio
• Identify the standard metrics required to
support Balanced Scorecard, KPIs or
dashboards used in monitoring strategic
alignment.
• Map the strategy to the project
• Determine how that measurement data will be
collected Collect the measurement data
• Review / Verify data from other systems used for
metrics
• Distribute data for dashboards / Balanced
Scorecards
• Identify any follow-up or ongoing measurements
required after implementation
• Include alignment status in the final project status
report, stakeholder and sponsor closeout
Organizational Activities Project Manager Activities
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Implementing Strategy:
A Project Perspective
Three Phases of Implementing Strategy (From a Project Perspective)
Strategic Plan – Defines strategy and determines criteria used
for decision making
Budgeting, Resource Forecasting & Project Selection – Maps the
strategy into a plan for implementing the strategy
Strategy Implementation – Executes the projects selected to
implement the strategy monitors the implementation of the
strategy
Three Roles of Implementing Strategy (From a Project Perspective)
Executive Management – Responsible for Strategy
PMO / Project Oversight Group – Responsible for Alignment
Project Management – Responsible for Project Execution
1/13/2012 13 © 2012 SoftwareMatters.com, Inc.
Strategic Planning & Execution Process: A Project Oriented Perspective
Exec
uti
ve M
anag
emen
tP
MO
Pro
ject
M
anag
emen
t
Strategy ImplementationStrategic Planning Budgeting, Resource Forecasting & Project SelectionPhase
Create Strategic Plan and Objectives
Create Evaluation Criteria
Assign weights to evaluation criteria
Transform Evaluation Criteria into measureable Selection Criteria with methods for
rating / raking projects.
Update Business cases with ratings/values for each of
the evaluation criteria
Set Budget Target (Cost and Labor
Projections)
Determine Resource Capacity
Create / Update / Review estimates for each project
Review Business Cases for
consistency / accuracy of estimates
Create Project Portfolio Alternatives (applying weights for evaluation
criteria to the proposed project list)
Review and Select Project Portfolio
Alternative
Create Project Portfolio
Execution Plan
Provide estimates (both cost and
schedule)
Update Evaluation Criteria ratings for
proejcts
Update Project Schedules /
Resource Commitments
Monitor Project Execution
Monitor Strategic Plan
Implementation
Review Projects with Sponsors/
Stakeholders
Initiate Projects / Monitor Status
Review Selection Criteria and rating/ranking approach
Add Selection Criteria as part of
Business Cases Development
Review Strategic Plan
Implementation Status
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Project Selection Processes
A project
selection
process
bridges the
gap between
a strategy
and the
implementatio
n of the
strategy.
Effective project selection processes:
Help insure that projects are launched that are in alignment with
the strategic plan.
Provide a framework for project teams and project managers to
make decisions in alignment with the strategic plan.
Facilitate creation of objective measures for all projects,
avoiding reinventing KPIs and dashboards for each new
initiative.
Keep the strategic objectives visible and connected to the work
performed of project teams.
Provide a natural forum for realigning or balancing of the
project portfolio.
1/13/2012 15 © 2012 SoftwareMatters.com, Inc.
Project Selection Process Example
Objective project selection requires that the selection criteria be established independently from the development of the business cases.
A Quick Guide to Enterprise Project Management, J. Peters (MTA 2008)
1. Create selection criteria
2. Develop measures
4. Rate projects
7. Establish cut line
6. Rank projects
3. Weight the selection
sriteria
5. Set budget & resource
capacity
Strategic Plan
Prioritized Project
Portfolio
1/13/2012 16 © 2012 SoftwareMatters.com, Inc.
Project Selection Process
Cut Line Established The result of this process is a list of projects that can be sequenced from highest priority to lowest. Applying the available budget (or range) shows what’s included, what’s not included, and what may be included in the project portfolio.
Projected budget
$2.5-$3.5 Million
Changes in the weighting factors
for the selection criteria result in a
different prioritization.
Changes in selection criteria
ratings / values should only occur
if an error was made.
In
Maybe
Out
1/13/2012 17 © 2012 SoftwareMatters.com, Inc.
Alignment From the PM Perspective
Project Managers need to understand how their projects fit into the organizational Strategic Plan. This directly impacts communication planning and status reporting.
Things to keep in mind as a PM:
Strategic Planning is not a project management activity.
The PMBOK® Guide references the Strategic Plan as a reason for a project to exist –
“to support the organization’s strategic goals” (PMBOK® Guide page 75).
Project Managers rarely participate in the creation of the organizational strategic
plan.
Project Managers, in their role as PMs, are not responsible to achieve the strategic
goals of the organization. But it is critical that PMs in inform stakeholders when the
project will fail to achieve the goals the project was intended to satisfy, presumably
the project is a part of the strategic plan of the organizations.
Project Manager’s role Strategic Planning:
Manage Projects used to implement the strategy
Provide data to support balanced scorecards, KPIs, and Dashboards
Manage project resources committed for implementation of the strategy
Ensure alignment activities are planned for and performed during project initiation,
planning, execution/control, and closeout.
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Stakeholder Mapping –
A starting point for Project Alignment
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Project B
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Project C
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Project Y
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Project Z
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Projects Projects
Suppliers
Governance Boards/
Steering Committees
Users
Impacts
Impacted By
Tip #3…
Map the relationship of your project to the organization’s strategic objectives including the measurements necessary to ensure ongoing alignment.
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Alignment Mapping
Strategy to Project Alignment Mapping is a visual approach for a project manager to understand the relationship of a project to the strategy.
It does not replace the a strategy map that may have been created as a part of the strategic planning process. In fact, if there is a strategy map that clearly ties to the projects then this alignment exercises may be unnecessary.
The result of the process should assist the project team in being effective in responding to project or environmental issues that may affect the strategy.
The intent is not to create a new project artifact. More than 30 minutes is probably too much.
Use flip charts, Post-Its, or napkins.
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Strategy to Project Alignment Mapping Steps 1-3: Set the context
© 2010 SoftwareMatters.com, Inc. 20
Other
Systems &
Data
Organizational Strategy & Objectives
Operational Planning
Initiatives
Strategic Planning
Project Portfolio
Strategic and Operational Programs & Projects
Comprehensive Portfolio View The Standard for Portfolio Management, Second Edition
(Project Management Institute ©2008)
1. Create a Stakeholder Map for the project.
2. Review the Strategic plan and strategic objectives for your organization.
3. Identify systems and data utilized to support dashboards or balanced scorecards used to monitor execution of the strategy and/or the status of the project portfolio.
KPIs
Dashboard
Balanced
Scorecard
Strategic Plan
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Strategy to Project Alignment Mapping Steps 4-5: Identify how the strategy drives your project
Strategic Drivers
© 2010 SoftwareMatters.com, Inc. 21
KPI
Dashboard
Balanced
Scorecard
Organizational Strategy & Objectives
Operational Planning
Initiatives
Strategic Planning
Project Portfolio
Strategic and Operational Programs & Projects
Comprehensive Portfolio View The Standard for Portfolio Management, Second Edition
(Project Management Institute ©2008)
4. Identify the strategic objectives driving your project.
5. Identify the components of dashboards or balanced scorecards
used to monitor and report performance relative to the strategy.
Strategic Plan
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Strategy to Project Alignment Mapping Steps 6-7: Identify how your project impacts the performance reporting
© 2010 SoftwareMatters.com, Inc. 22
Measurement
Data
KPI
Dashboard
Balanced
Scorecard
Other Systems
& Data
Organizational Strategy & Objectives
Operational Planning
Initiatives
Strategic Planning
Project Portfolio
Strategic and Operational Programs & Projects
Comprehensive Portfolio View The Standard for Portfolio Management, Second Edition
(Project Management Institute ©2008)
6. Identify the measurements used to monitor implementation of the strategy.
7. Map the flow of data from your project to the balanced scorecard or
dashboards.
Strategic Plan
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The Problem with Metrics
Project Status Focus:
Addresses the process of implementing one component of the Strategy.
Focus is on the project performance and outcomes in terms of cost, resources, schedule, scope and quality.
Strategy Implementation Status Focus:
Addresses the result of putting the strategy in place.
Focus is on the strategic objectives (e.g., new products, improved efficiency, etc.) and monitoring the outcomes of the implemented strategy.
Project Alignment:
Identifies the elements of the strategy the project supports.
Establishes methods to gauge both the impact of a project on strategy during project execution.
Establishes methods to gauge the impact of the results of a project on strategy.
Project status metrics used in monitoring projects differ from metrics used to monitor strategy. Some projects require strategy specific metrics. For other projects the generic PM metrics such as earned value may be sufficient.
1/13/2012 24 © 2012 SoftwareMatters.com, Inc.
Alignment from the PM/PPM Process &
Tool Perspective
Other considerations for maintaining alignment:
Include strategic planning process data requirements in PPM solution design – Availability
of data necessary for controlling projects is a base requirement for PM/PPM systems. Applying the same
design process to the data required for strategic planning can result in close to real time assessment of project
portfolio alignment.
Include monitoring of strategy as a part of project change Management – Change
happens, not just to projects. Monitoring changes in the organizational strategy has very little cost and can help
project teams be proactive in assessing the impact of and responding to change.
__________________________________________________________
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1/13/2012 25 © 2012 SoftwareMatters.com, Inc.
Alignment and PPM solution design
Tip #4…
When setting up the project repository a new project / program or configuring a PPM system, include strategic plan attributes and measures as fields and ensure processes are in place that result in ongoing maintenance of this information.
Project Selection Process output…
Attributes of selection process useful in standard
project / program reports
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Applying Strategic Planning to PM/PPM
Tools Example – Project Selection Process
The project selection process of many organizations results in clearly stated selection criteria,
approaches to express the value of projects whose benefits are often intangible, and final ratings
as to the relative priority of projects relative to other projects. Some opportunities to help maintain
alignment related to project selection processes include:
Include the results of the Project Selection processes as attributes of projects or
programs in the PM/PPM tools – Often data used as the basis for the selection of projects is not moved from the
spreadsheet or PPM optimization tool into the PM/PPM software used for planning and tracking. Prioritization criteria values,
assumptions, savings/benefits targets, etc., are useful from a tactical perspective in managing project portfolios.
Use the results of the project selection process as part of the project decision making process – Making strategic priorities clear at every level provides an objective basis for approaching project trade-offs and resource
allocation. Failure to have a consistent method for identifying the relationship of projects to the strategic plan often results in
repeated negotiations for resources or other project commitments.
Create Project / Program level metrics tied to the Project Selection Process – Even organizations that
use a rigorous project portfolio selection or balancing processes often fail to use the result of these processes to monitor the
implementation of the overall strategy. Project metrics that correlate to these criteria can streamline the monitoring of the strategy
implementation. This helps project managers speak the language of business and not just the language of project management.
1/13/2012 27 © 2012 SoftwareMatters.com, Inc.
Revisiting The Problem with Alignment
Some specific ideas on the problems we started with….
Strategy at high level not clearly linked to project and operational plans
Integrate strategic plan related project selection criteria and metrics into the
PPM system.
Create project selection process that forces strategic alignment
Inability to link projects to strategic objectives in quantifiable ways
Create user defined fields used for every project/program in the portfolio
Implement audit process for strategic alignment fields and related measures
prior to every strategic planning sessions
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Revisiting The Problem …
Gap in project and project portfolio data available versus balanced scorecard requirements
Create views in PPM system that mimic balanced scorecard data
Integrate non-PM/PPM system data used for balanced scorecard with PPM system data via standard reports or data integration
Initial clarity on strategic significance of a project diminishes over time (the world moves on)
Create views in PPM system that mimic balanced scorecard data
Integrate non-PM/PPM system data used for balanced scorecard with PPM system data via standard reports or data integration
1/13/2012 29 © 2012 SoftwareMatters.com, Inc.
Revisiting The Problem …
Inability to assess the ongoing value of a project as it relates to the strategic objectives.
Include the project value determination method in regular project/program
reviews with stakeholders
Reassess project / program value as part of project change management and
risk assessment processes
Reassess project portfolio and resource optimization as a result of project
changes
Decision making on the basis of perceived importance instead of the strategic
importance.
Implement measurements that are automatically maintained and independently
verifiable
Allow for management overrides of automated project optimization techniques
and tools and capture the reasons for this as part of the project selection process
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Revisiting The Problem …
Lack of visibility of the project portfolio in terms of strategic objectives (i.e., no clear link between the data shown in the balanced scorecard and the portfolio management data)
Automate the creation of reports at the project level that include the raw data fed to dashboards and scorecards
Eliminate Excel as the basis for project selection or optimization (or implement rigorously consistent, auditable methods)
Creating evaluation criteria with the preferred outcomes in mind
Separate the development of project selection criteria from the weighting of the criteria (if weighted criteria are used)
Validate the selection criteria
Use a proven method such as Analytic Hierarchy Process
1/13/2012 31 © 2012 SoftwareMatters.com, Inc.
Tips to Help PMs Focus on Strategy
Tip #1: Identify the specific, measureable, attainable, responsible person, and time specific attributes of your organization’s strategic objectives.
Tip #2: Learn your organization’s strategic planning process, the cycle, and the methods used to select and monitor projects.
Tip #3: Map the relationship of your project to the organization’s strategic objectives including the measurements necessary to ensure ongoing alignment.
Tip #4: When setting up the project repository a new project / program or configuring a PPM system, include strategic plan attributes and measures as fields and ensure processes are in place that result in ongoing maintenance of this information.
Jim Peters Bio: Jim is President of SoftwareMatters.com, Inc., lives in Ventura (Los Angeles area), and delivers PM/PPM
training & consulting, Microsoft Project mentoring, project start-up consulting and software development
services in LA and Silicon Valley. He partners with Forté Systems (www.fortesys.com) of Alexandria, VA, to
provide Project Portfolio Management solutions using Microsoft Project Server and Portfolio Engine (EPM
Live) for clients nationwide. He has over thirty years of experience in project management consulting,
software development, and training. He designs and implements project and project portfolio management
software solutions. He has worked with multiple enterprise project management software products. He
served as Technical Editor for books on Microsoft Project from Wiley, Microsoft Press, and McGraw-Hill.
He is one of the developers of RAS 5.0 a project portfolio management reporting solution, and Provision
BI, a business intelligence framework for SQL Server Reporting Services (www.ras-reporting.com).
Questions? Contact me at [email protected]