PfM as "Shock Absorber"
As any project manager knows, there will inevitably be changes to an initiative as it proceeds, and at a portfolio level the number and complexity of changes will only be magnified. Corporate objectives will shift in response to changing conditions for the organization, the actions of competitors, new opportunities, as well as the variances between planned and actual benefits, as projects within the portfolio begin to deliver. It is critical that the PfM function manages the impact of these changes and I like to think of this as a form of shock absorption between the organization and the portfolio elements.
The shock absorber's function in a car is to absorb the bumps and dips in the road and minimize the discomfort of its occupants. The portfolio management function's role is similar in a portfolio. It is to be able to absorb the changes and shifts in the goals and objectives that the organization has, and minimize the disruption on projects. If every change is transferred directly into the projects then there will be constant changes that will drive inefficiency and ineffectiveness and cause confusion and distrust among the project execution teams. Instead, portfolio management needs to identify ways that the change can be achieved with minimum disruption.
Let us suppose that a review of economic conditions causes the organization to decide that it needs to be more cost conscious than originally planned and as a result, the target for operational costs has been reduced by 3%. The portfolio manager needs to review the full suite of projects within the portfolio to determine how that benefit can be achieved without adversely affecting the other objectives within the portfolio. That may mean:
- Changes in timing of projects to deliver cost saving projects earlier in the portfolio cycle
- Expansion of automation projects to drive efficiencies into other business functions and/or additional departments
- Changes in the implementation approach for expansion projects to reduce the costs that those initiatives drive into operations
- Initiation of new projects focused on driving operational cost reductions.
There will be any number of alternative approaches, with advantages and disadvantages to each. What the portfolio manager needs to focus on is the approach that will maximize the ability to achieve the 3% saving in the operational budget, while minimizing the likelihood that the other objectives will be negatively impacted. The objective here is absorbing as much of the shock as possible. Once again the focus is not just on the goals and objectives of the individual projects. These may have to be sacrificed in order to preserve the overall portfolio objectives. Consequently, the chances of overall success are likely to be highest when the total impact is minimized.