In the last 5 parts of this series, I have walked through the Portfolio Definition Cycle and how Decision Thinking – a blend of Decision Science and practical experience, can be applied in accordance with best practice Management of Portfolios (MoP®).

In this last insight I undertook to provide a practical roadmap of what this can look like and some of the things that I watch out for based on practical experience across a very diverse range of clients and contexts.

There are four principles that underpin all the work we do with clients in designing, implementing and facilitating structured decision-making processes. These are:

1. Process before content

2. Academic rigour

3. Active stakeholder participation

4. Tangible and intangible value

I always start with the end in mind. What is the purpose for which this portfolio exists, what are the outcomes that we are after, what do we want to achieve that we are currently not delivering? Getting really clear on the outcomes makes it easier to design the processes that you are going to use. And getting clear on the process, before adding the content of the decision making, makes it easier to get agreement from key stakeholders and participants without the ‘noise’ that the content will create once it is added.

I also know from practical experience that once the process is agreed you are more than half-way there. From this point on you are just executing the steps that everyone involved has signed up to.

So, what’s the process in practice? Remember back to the two original points in my first insight. I noted that good management of portfolios according to MoP® is about two processes:

      • Doing the right projects (Portfolio Definition)
      • Doing the projects right (Portfolio Delivery)

In determining the right projects to undertake I use the ‘P5 Decision Thinking Framework’ which consists of five phases:

1. Plan: Set up the decision process for success

2. Prepare: Define and develop core components of the decision process

3. Prioritise: Agree overall priority of options by evaluating them against the criteria

4. Package: Develop an optimal and coherent portfolio(s) that meets constraints (e.g. resources, time, capability etc) and considers dependencies and trade-offs

5. Present: Create clear recommendations for decision-maker commitment

We’ve talked about the first point, the planning. Time spent in planning is seldom wasted and the costs in the planning stage in terms of time, resource and actual expenditure are relatively low compared to the costs that are incurred in executing most projects. So, any time spent planning that increases the effectiveness of doing, or speeds the execution, is likely to be a good investment.

Part of this work will be getting really clear on the decision context. Corporate documents aren’t always sufficient in themselves to provide the clarity needed on the outcomes required. The outcomes might not be complete in representing all the different considerations that need to be factored into the definition of the portfolio or the outcomes may be too high-level and need more detail to make them useful in a portfolio definition process.

Preparation

In preparation I’m covering two key aspects critical to the MoP definition process. Determining the criteria that we will use for prioritisation and collecting and categorising the initiatives that we will prioritise in order to get the portfolio.

I cannot stress enough the importance of getting a good set of decision criteria. As the basis for all of the prioritisation they have a critical role in the process. If the answer you get from portfolio prioritisation doesn’t appear to make sense, two parts of the process to review are the criteria that you have used and the weights that have been assigned to the criteria.

Criteria talk to the value that the portfolio will deliver. They need to cover the different dimensions of value that matter to stakeholders. Therefore, they are best constructed in workshops with the stakeholders concerned. We look not at what appears to be the value but ask why and look for the value that underlines that.

An example I use in my workshops is leaving work early. On the face of it, that may be something I value but digging deeper we find that the actual value is the time spent with family. Getting clear on the ends or outcomes that we value, rather than the means or what presents itself at face value, is crucial if the criteria are to really help differentiate those options that will deliver the best value.

When criteria are well developed, the answer from the prioritisation will make sense and looking at the results in detail, you will be able to see that the initiatives selected deliver lots of the value that matters most to the organisations stakeholders.

It is worth putting some time into thinking about categorisation and the schema to be used. What the obvious answer is, might not be the best. The guidance I provide our clients is to think about the trade-offs that matter to you.

Trade-offs exist in multiple places and getting them explicit and built into the design of how you are thinking about the problem, will also help you get to a good outcome. I recommend creating a small number of options for the categorisation construct before you put initiatives into it and testing what works best. Does this category construct provide a more or less meaningful trade-off than another construct?

From hard learned experience, try to avoid a construct that mirrors the organisational structure. That immediately has one part of the organisation inadvertently pitted against the other. A construct that is more outcome oriented will provide opportunity for different initiatives from different parts of the organisation to be considered in the same category. This way the trade-offs between categories is less about one part of the business getting more at the expense of another.

The other trap to avoid is creating categories that mirror the criteria. That will mean that each category scores best against its relevant criteria and the result will reduce both the clarity in the trade-offs involved and mean that the trade-offs between criteria overly dominate the outcomes.

Once the categories are defined collect all of the initiatives. Often organisations can be overly concerned about the maturity of the initiative and demand more detail than is needed to be able to conduct a portfolio prioritisation. There is no point in developing all of the initiatives to business case detail if many of the initiatives won’t make it into the final portfolio.

What I have seen work well is a two-stage process. Get sufficient information so that stakeholders can evaluate the initiative to make an initial assessment against the criteria. If, having prioritised the initiative, it still makes it into the recommended portfolio we know that it is worth the effort of working up the more detailed business case. That case can then be reassessed to see if the initial promise is still there and whether, with the detail, it would perform better or worse than initially assessed and whether it should still be included in the Portfolio.

The key is having the process be requisite. Good enough for the decisions being made. Getting the process right can significantly reduce the work on the organisation by identifying at an early stage those initiatives worth more effort in development and those that frankly are never going to fly.

Prioritisation

Getting the right people into the room to conduct the prioritisation is important. Who do you want to own the outcomes of the prioritisation? See that they are there or that they are represented by their trusted lieutenants. Otherwise, you will find the outcomes being relitigated. Active stakeholder participation, one of our principles, is the best way of ensuring you get decisions that are both understood and that stick.

The earlier insights talk in detail about the process and tools we use. A few things to watch for: we recommend not weighting the criteria in advance. The trade-off between criteria (the weights) only make sense when we know what the benefits available are for each of the criteria. You may not be as interested in a criterion that matters a lot (eg safety) to the outcomes if there is little uplift in benefit to be gained from the initiatives that are being prioritised. Criteria weights should be a function of both the amount of benefit uplift that can be gained and how much stakeholders care about getting that gain in benefit. For example, we may weight sustainability greater than safety as criteria if there is a massive uplift in benefits from the initiatives compared to a tiny uplift in safety. But if there were massive uplifts from the initiatives in safety, we might have a different perspective.

Swing weighting is the rigorous way to do this; get in touch with us if you want us to explain the process in more detail.

The other trap is not to confuse value with value for money. Prioritising the Initiatives based on the value they deliver should be the focus for conversations. Value for money is taken care of later by simply dividing the total value delivered by the cost of the Initiative for the period under consideration. Scores can also be risk adjusted (see Part 3 for details). Stakeholders doing a mental assessment of value for money in their head will risk distorting the overall prioritisation and its outcomes.

Package

At the balancing stage of portfolio definition, I frequently see a lot of optimism bias. Invariably organisations think they can achieve more than they can in reality. The net result is not that everything goes that little bit slower, but that everything goes significantly slower due to the overload, or that some initiatives make little progress as they struggle to achieve organisational focus.

My advice is start with less. Jim Collins flywheel effect (see his famous book ‘Good to Great’) is pertinent here. Get the system delivering and build momentum. Getting the systems and processes working well with a smaller portfolio of initiatives will build organisational understanding and muscle. While most organisations think that the budget is the constraint, in practice I frequently see organisational capacity as the limiting constraint. It is much easier to add additional initiatives to a well-functioning portfolio than try and stop or unpick something that is already underway.

Present

My final tip is to be clear in presenting the outcomes about what you are not going to do as well as what you are going to do. Having the hard conversations about what the organisation is not going to do will help align stakeholders and get everybody clear on the trade-offs involved and why some initiatives are not going to get done. That doesn’t mean they won’t get done ever but being clear that they are not a priority now can help marshal resources on ‘the critical few’.