Published here November 2003.

PART I | Reason 2 | Project-by-Project Decision Making
Lack of Clear Priorities | Combine Projects into a Portfolio Database
Establish a Portfolio Management Office | Typical Portfolio Management Process
Project Release | Improving the Prioritization Process | PART III

This is the second of a six-part paper explaining the reasons organizations tend to make poor project choices. Part 1 described the common errors and biases in human judgment that distort decision-making. This part offers Reason 2 why organizations choose the wrong projects, and presents recommendations for establishing a project portfolio management function.

Reason 2: Failure to See the Forest for the Trees

Most organizations put ample effort into making individual projects successful, but not enough effort into making the entire portfolio of conducted projects as successful as it could be. The fault does not lie with project managers. Project managers are typically highly motivated. They view their value to the organization based on the successful completion of their projects. But, project managers are focused on their individual projects, not on the success of all projects.

For example, the typical project manager, does not look for opportunities to redirect his or her resources toward the projects of other project managers who may need them more. Once they obtain the necessary approvals, project managers focus on achieving the costs, schedules, and performance mandates of their own specific projects.

Just because an organization may have a portfolio of mostly on-time, on-budget projects does not mean that it has the best possible project portfolio, nor that it is effectively allocating resources among the projects that it is doing. Unlike project managers, senior executives should not judge success on a project-by-project basis. They should care about the aggregate costs, risks, and value of the overall project portfolio. Likewise, the chief executive's concerns are mainly about meeting investor expectations, not whether or not individual projects succeed.

Although it should be obvious that it is the performance of the project portfolio as a whole that really matters, many organizations do not manage the aggregate cost, value and risk of their whole project portfolio. Either no one has responsibility for managing the project portfolio, or the efforts to do so are not as effective as they could be. Project managers tend to the individual "trees", but no one is caring for the "forest". Thus, failure to see the forest for the trees is the second reason organizations choose the wrong projects.


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