Decision-Making (and why it is the most important element of Project Portfolio Management)
Business is all about making choices. We all make some good ones and almost all of us, although we may never publicly admit it, make some bad ones. In the world or project portfolios, many projects fail to deliver the intended business outcomes or derive the business benefits which were expected. By definition, this means that somewhere along the line, at least one, and more often many, bad decisions are being made.
None of us like to be wrong – but let us hypothesise for a moment: you only have to spend 10 minutes on Google to work out that project failure rates have stuck stubbornly between 50-70% for the last two decades. That is over half of all projects are deemed to have ‘failed’ or faced significant challenges, therefore something must be going wrong a significant percentage of the time. Whilst there are many studies which attribute many, varied causes of project failure our experience shows that the fundamental, underlying root cause is that people make bad decisions. Therefore, how can we all make better ones about the projects in our portfolio?
Decision Making Characteristics Which Breed Success
Organisations which typically succeed with their Portfolio of change display five key decision-making characteristics:
They make the right, informed decisions on a commercial basis
They make the right decisions early
They make tough decisions when priority calls are required
If a decision is proven to be poor, they will take another tough decision to correct it
When a decision is made, the whole company gets behind it
Making the right choices starts at the strategic level. Companies with clearly articulated strategies normally display strong linkages between those strategies and the composition of their project portfolio. In addition, they recognise that demonstrating strategic alignment between their Portfolio and their strategic choices is a continuous process which requires constant attention and communication.
The result is that business leaders understand the decision-making culture of the organisation and how strategy directs the work it does.
Shaping A Project Portfolio
Once clear, strategic guidance has been provided, successful organisations will set strategic priorities for their portfolio, employing a set of transparent criteria. In so doing, everyone can understand the choices which lead to certain initiatives being prioritised ahead of others. In turn, this removes a great deal of the tension and politicking which constrains many organisations as they select which projects to undertake.
Furthermore, when organisations encounter typical constraints, e.g., resources, regulation or legislation, they can forecast when capacity will be reached and avoid a common affliction - attempting to do too much without sufficient information to prevent overcommitting. Defining criteria which ensure that you make the right investment choices and manage your constraints will help you make the right decisions from the outset, transparently and objectively. This, in turn, will help to more easily build and maintain an achievable successful project portfolio.
The result is a company which displays clarity of purpose, strategy and how it makes its investment choices.
Managing Complexity and Risk
In addition to the pressures of simply running a company, project portfolios are often inherently complex and risky to deliver. Whether you are running major programmes, many smaller projects or a combination every year, it is easy to get lost in the sheer complexity of delivery – and many organisations do. Here are a few simple techniques to help with the ongoing need to make good portfolio management decisions:
Be transparent: use transparent selection criteria and governance processes to create an open culture, enabling the free flow of information about project choices and progress
Make the right choices: by applying consistent, methodical checks to each initiative as you launch. Making good decisions at the beginning of a project mean that you are likely to continue to make them throughout the project lifecycle
Use risk management to drive proactive decision-making: as a predictive mechanism to identify risks well in advance of their crystallisation into issues - and actively manage them out of the equation before the create a problem
Periodically reevaluate: each project to ensure that it is still delivering the intended value, to reaffirm its place in the priorities - and change the priorities if you need to
Remove dependencies between projects: as frequently as you possibly can. Every dependency is a form of risk and therefore attempts should be made to manage these out. For dependencies which cannot be removed, assign clear ownership of the dependency to the providing project manager, and set them a target of finishing their work well ahead of time
Apply Occam’s Razor : identify areas of perceived complexity within the project portfolio and undertake swift assessments to formulate simplification plans
Design-in contingency: make sure you have an adequate level of contingency (both time and cost) to enable the management of risks and complexity where they cannot be reliably managed
The result is a project portfolio which is proactively managed and controlled. Maintaining adequate contingency is a critical component of project, programme and portfolio management. If individual business cases are inviable because you need contingency, then there is an extremely high probability that they are not viable at all.
Decision Creep
Many organisations wrestle with the problem of gaining and maintaining control over the composition and costs of their portfolio. One of the first key tasks in order to do so is to tackle ‘decision creep’, a phenomenon which indicates that although you started with the right choices, subsequent activities eroded the results of the original decision-making process and your portfolio is infected with entropy. This trend towards disorder is a natural part of business life; things change, people’s perceptions shift, individuals leave and are replaced, good decisions at a point in time turn out to be not so good with hindsight. As change is a constant in most organisations your portfolio needs to be flexible enough to cope.
You cannot always combat decision creep. However, you can accept it as a natural part of business life - another good decision! When things change, a strong governance process will allow its assessment and provide the information required to make rapid, robust decisions in response, irrespective of whether the change is at project, programme, portfolio or strategic level.
The result is that, although you may still get surprises, they happen in a culture where they are accepted and reacted to with the intent to create positive outcomes.
Making Tough Calls on Failing Initiatives
As we stated earlier, initiatives get into trouble for reasons too numerous to list here but whether this occurs because of poor decision-making or entropy, the fact remains that you must make decision and act. Typically, there are only a few choices when confronted by a faltering Programme:
Carry on regardless: this happens more often than not and increases the number of failures which result, simply because nobody likes to admit mistakes! Politically, in the short-term this is often the path of least resistance and in many organisations it is career-preserving, for a while at least. However, tread carefully as even when projects are de-scoped, delayed, over budget, etc., you may be making a bad decision, even if the one to trigger the original initiative was a good one
Pause and take stock: although this can feel uncomfortable, it may prove less career-limiting than simply carrying on and hitting a major problem later. Taking a timeout has the benefit of re-focusing everyone on the intended objectives, their continued viability faced with changing circumstances, and what it will take to achieve them. Utilising independent experts to facilitate the time out can be highly beneficial as they have no vested interests in a particular course of action - merely in helping you be successful
Kill the programme: this sounds drastic and it takes a great deal of political courage. Organisations which are capable of displaying great maturity and taking this toughest of decisions early can reinvest. A failure to kill when the need requires can tie an organisation up in knots and result in political, financial, reputation and other damage, as well as preventing investing in alternative opportunities. As Al Capone famously said, ‘You can get more with a kind word and a gun than you can with a kind word.’
The result is a sense of purpose and conviction behind active portfolio initiatives. Being prepared to make tough calls and adjust, or even terminate, struggling projects is merely advocating the survival of the fittest, something all organisations should seek with the expectation of top performance from their portfolio of project investments.
Conclusion
Most people would agree that there is little point doing something efficiently if you needn’t be doing it at all. Sound decision-making is the mechanism by which businesses make the right investment choices to build a project portfolio, and then maintain the strong governance which enables ongoing, high quality decision making. Organisations which manage change effectively are largely successful at engineering good decision-making characteristics into their company DNA.
The outcomes of good decisions will cascade from your business strategy down through your project portfolio, resulting in high performing projects, individually and collectively. Nobody wants to find themselves in the 50-70% of projects which fail every year, so make the best decision, to examine and optimise how your organization makes its decisions.
To find out how Claverton can support you in your Transformation agenda, particularly around your decision making processes, visit us at www.clavertonconsulting.co.uk or contact us at info@clavertonconsulting.co.uk
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