Insight # 8 : Squeezing Value Out of Portfolio Management

No, Thanks! The Five Objections You Hear about Portfolio Management (and How to Overcome Them)

by Martin B. Wolf

Selling portfolio management to senior leaders can be tough. After all, isn't that why they're paid the big bucks - to figure out what the business should be doing, and then get the initiatives going to implement their strategy? How could any methodology replace their formidable opinions and considerable experience?

I've advised for a number of years in major international companies and smaller firms, and the objections I hear to adopting portfolio management tend to take one of five forms. In this article, I share the nature of each objection and provide counterpoints that can help you persuade top management to reconsider the value portfolio management offers to the organization.

1. "I need portfolio management but not now."

Timing is a tricky matter when selling any idea. And interest in portfolio management appears to be very cyclical in nature. Organizations are frequently in one of two states: They're about to do their portfolio optimization (frequently around the end of the financial year), or they've just finished it (for the rest of the year). In the first case, the excuse is that the work is just about to begin, so there's no time to introduce a new methodology. In the second case, the work is already over, so interest is rapidly fading.

Does that mean that there's only a very short window of opportunity to introduce portfolio management? Possibly. But the more fundamental issue is that many companies mistake portfolio management with annual portfolio optimization.

Portfolio optimization is only one aspect of portfolio management, albeit the most glamorous and tangible. This is when the tough selections are made, after all. Yet, other aspects beyond optimization have even more impact on the long term success of a portfolio. Portfolio pipeline management ensures projects are created with a fighting chance during selection. Benefits management helps project business cases to focus on what is really important for the organization. Portfolio performance management monitors and controls not individual projects but the entire suite of initiatives against corporate objectives.

All of the later activities are independent of an annual cycle, and that means there's really no bad time to introduce portfolio management into the company. So don't be distracted by the "optimization thing." Just start with different aspects: maybe something as simple as creating a project list and introducing basic steering and monitoring in order to bring some transparency to the effort. That will generate data that can be useful when the financial cycle rolls around again and it's time to tackle portfolio optimization.

2. "I need portfolio management, but implementing it is too expensive, extensive, time intensive."

This objection surfaces especially among senior leaders who already have a basic understanding of portfolio management. They know just how large an undertaking it can be - especially for an organization that lacks mature processes (which is most of them). They see the entire elephant that needs to be eaten and are afraid to start.

Yet, as with all daunting change, it's best to simply start - to take that first step. And don't be discouraged by the low maturity argument either. I've found that it's often preferable to launch simple portfolio management into a still immature environment. Why? Because these organizations are still shaping their processes. And while they do, initial portfolio management can guide them in the right direction. When you try to introduce a new concept from scratch into a fairly advanced operation, the people within that organization quickly realize that they'll need to change some of their existing and established processes. That's always a much more complex effort that generates greater resistance than starting low and building up.

One thing you can do with a low maturity client is to create standard templates for setting up project or business cases, templates that include attributes that will be required for portfolio management later. Next, you can start educating project managers to think about return on investment to ensure that they don't lose sight of corporate benefits. An even more advanced step forward might be getting executives together and having them articulate the overall company strategy in a way that can be understood by the typical project manager; and then to rank these strategic objectives disseminate this information throughout the organization. This doesn't require much maturity in terms of processes, but it can have a big impact on overall corporate effectiveness.

These aren't ultra-sophisticated maneuvers. The idea is to lead the organization to adopt ever more mature practices - to eat that elephant a bite at a time. This year, the step forward is to deploy some templates. Next year, it might be adopting a tool and gaining tighter benefits realization. Step by step the roadmap for the company and its portfolio becomes real.

3. "I need something new and fast, but not this."

As consultants - whether internal or external to the organization - we often find ourselves rambling on about the marvels of portfolio management without really hearing what it is the client is telling us about his or her problems. The client may have a different idea about what portfolio management is. So every time we use the term, they're hearing something other than what we mean, and they reject the idea.

How to solve this dilemma? Frequently, the client has a very specific problem that can well be addressed by portfolio management. Currently, I hear a lot of clients talk about resource management: "We need to better manage our resources or budgets or realize efficiencies or even lay people off." Or, "We don't know who is actually working for us. We may know their names, but we don't know what projects they're supporting." Resource management is the immediate problem.

The sensible way to act in such circumstance is not to promote portfolio management, which might very well be the ultimate solution, but initially solve the immediate problem-- to create, for example, the transparency the client wants in order to provide that overview of resource allocation. Once that's done, and the client's trust is gained, we can tackle the underlying, more fundamental problems - and that's where portfolio management will come into play. After all, at the core of many resource management problems is the issue of people working on too many of the wrong projects. These are frequently projects that don't contribute to strategic objectives or that are so complex and risky, they only have a minimal chance of being concluded successfully. In either case, it burns precious resources along the way.

Instead of worrying about selling a buzzword - portfolio management - and hammering through a rigid approach, it's more important to apply the knowledge of the discipline and create a specific solution for the client.

4. "I don't need this portfolio management. I can do this differently."

Executives with a lot of experience who really know their companies believe they have the means to select their own projects - and, frequently they do, least in the smallest of organizations. Why should they bother with a complicated methodology?

Here's the counterpoint: The moment other stakeholders are involved - users, customers, other divisions, other companies, other departments or agencies - suddenly, there's a much greater need for structured portfolio management. Why? Because only a fact-based, objective process for selection and prioritized delivery of projects guarantees that these stakeholder groups will accept the choices made. And only if all these stakeholders support these decisions will they lend on-going support to the selected projects and thereby enable the successful delivery of the ultimate benefits.

The strength of portfolio management isn't in the fact that it automatically achieves results much more powerful than any other method. But when people understand why certain projects are prioritized and others aren't - that it follows a certain methodology - they're much more likely to buy into them. Ultimately, there's a greater chance that they'll stand behind those decisions and make the portfolio happen.

5. "I don't need portfolio management. No one tells me how to select and run my projects."

This is the most virulent objection you're likely to hear - and it usually comes from a very confident, apparently successful manager. Often, these managers understand what portfolio management is - or at least what it could mean - but they're not willing to let go of the control they wield over those projects.

Most top managers understand that selecting a new project or stopping an existing one are the two most important decisions that are made in a project's lifecycle (compared to delivering it and monitoring it), and some refuse any attempt to have this power curtailed.

Facing such opposition, you have two choices: First, you can walk away and abandon any attempt to implement portfolio management for the foreseeable future. There's no shame in that. Portfolio management is an advanced concept, and many organizations and managers aren't ready for it or don't see any reason for it - yet. Have faith, the time for portfolio management will come!

Which brings us to the second option: You can - with the long run in mind - start to collect evidence of project and portfolio failure. These self-confident managers resist outside influence in their decision making because they see their projects successfully delivering output. And their apparent success is proof enough that their approach is the right one. Very often though the real impact of projects on the bottom line of the wider organization looks different. The products so successfully delivered by these projects might not be the right ones, or the customers might fail to implement them in a way to helps them realize tangible corporate benefits. Only once the entire value chain is explored over time can bottom line failure be detected. And only once a problem has surfaced and is linked to the inappropriate selection of projects and inadequate prioritization throughout their delivery can some managers be convinced that they must change their approach.

This process can take a couple of years, so you really need to be determined to stick it out. But the final result can be sweet.