“Vision without execution is hallucination” – Thomas Alva Edison
Organisation struggles to bridge the gap between strategy and execution. Despite huge resources committed to strategic planning, most organisations fail not necessarily because their strategies are bad but because there is a disconnect between strategy and implementation.
In 70 percent of failures, the real problem isn’t bad strategy, it’s bad execution” Source: Charan, R. and Colvin, G. “Why CEOs Fail”, Fortune, June 21, 1999. The truth is your organisation is not alone. 61 percent of C-Suite Executives say that their organisation struggles to close the gap between strategy formulation and implementation. Source: Economist Intelligence Unit study, sponsored by the Project Management Institute (PMI).
Regardless of where you sit in an organisation, everyone has faced this issue. On one side you have strategy – the decisions that come down from management about how we should succeed in the market. On the other side you have execution, the day-to-day activities that all of us participate in every day to ensure that the organisation can move forward.
But why does this gap happen? There are lots of reasons, but part of it is the fact that employees or team members often don’t understand how the strategy affects them or how their decisions impact others. In other cases, the systems we have in place for management often don’t adequately empower employees to make their own decisions. And even when they do empower employees, there is no mechanism in place to ensure that the decisions that are being made are in agreement with the strategy. And probably one of the most often overlooked reasons – too often strategy is managed using inadequate tools.
“Less than 10 percent of strategies effectively formulated are effectively executed” – Fortune Magazine
What are the signs of the execution gap?
There’s no formal mechanism for tactics to influence strategy or to share best practices; There’s no link between the budgeting process and strategy; Incentive systems aren’t linked to strategy, so individual goals are not aligned with the company’s and often inadequate consequences and rewards exist; Team members don’t understand how the strategy affects them, and how their decisions impact others; It’s unclear as to who is accountable for ensuring execution of initiatives, projects, and tasks, and Plus … there needs to be Executive Commitment and a culture of performance management
So, what is the solution?
Portfolio management is the link (bridge) between organisational strategy and projects, programmes and operations carried out by the organisation. Portfolio Management supports the achievement of organisational strategy and objectives by selecting the Right Work.
For an organisation to meet its strategic goals and objectives, it is important that it does the right work. This is achieved by evaluating, selecting, prioritising, and allocating its limited internal resources to best accomplish organisational strategies consistent with its vision, mission, and values. Portfolio management helps to align projects, programs, or operations to the organizational strategy, organized into portfolios or sub portfolios to optimize project or program objectives, dependencies, costs, timelines, benefits, resources, and risks.
Five benefits of project portfolio management
Project Portfolio Management (PPM) relies on the overarching strategy and direction set for the future of the organisation. This strategy will usually outline the goals and actions to be taken. Actualising these goals requires resource management, quick responses to opportunities, and improving performance. Projects and programmes are then used to contribute to these larger goals and add value to the organisation.
PPM goes beyond managing and organising projects; it is more advanced with focus on doing the right projects at the right time, and doing them right. One of the numerous benefits of project portfolio management is that it reduces waste and redundancy, ensures less risk on projects and that they have greater chances at being successful. The PMI 2020 Pulse of the Profession® report claims that an average 11.4 % of investment is wasted due to poor project performance. Good portfolio management reduces excesses such as this and builds synergies between projects.
Organizations, its executives and project leaders need to understand the benefits of portfolio management, so it can be implemented for change. Here’s our list of 5 benefits your organization stands to gain from effective project portfolio management:
1. Alignment with organisational strategy
Project portfolio management prioritizes alignment with organizational strategy, this way the organisation hardly gets side-tracked or distracted. It implements a set of clearly defined goals/objectives, marking important milestones to measure progress and ensure (a) all the portfolios of projects reflect the organisation’s strategy; (b) all projects are on strategy, support the strategy, or are critical components of the strategy; and (c) spending allocations are tied to the business strategy.
2. Right project selection
This involves a lot of evaluation and risk assessment to arrive at the right number of projects within the portfolio that will deliver maximum benefit and value to the organisation. Decisions to select the right projects are based on categories of risks including financial, governance, resource utilisation, right level of compliance. Ensuring that projects are based on value, and according to the overarching goals of the organisation is one of the benefits of project portfolio management.
3. Informed decision making
Portfolio management provides the opportunity to make the right decisions within an organisation. As these decisions cannot be made in isolation, there needs to be objective data to rely on. Measuring past and current project data in a quantitative and objective manner makes it easier to discover bogus projects or those delivering less value.
Effective portfolio management collects information from high value projects that performed well in the past and successfully delivered business value. It explores the probability of similar projects flowing in the pipeline. It also allows for a reporting and monitoring strategy that will help uncover needed insights.
4. Positive returns on investment
At the end of the day, the goal of organisations is to achieve profitability. Project portfolio management ensures that projects within a portfolio deliver on the expected benefits irrespective of operations, resources or other factors. As a result of the techniques, training and expertise portfolio managers are equipped with, they are better positioned to make predictions, reduce risk, making it possible to improve projects’ success, and record positive returns of investment.
5. Risk management
Organisations with portfolio managers or/and PMO’s are better equipped to prepare for emergencies and handle risks. One of the benefits of project portfolio management is that it employs risk management processes to detect risks, evaluate and decide which risks are severe, mitigate threats that may arise and properly manage risks within the portfolio. It also ensures that these risks do not pose a negative impact or slow down the organisation in achieving its strategic objectives.
Risk in portfolio management comes in various categories; high risk vs low risk and it encompasses – internal (operations, financial standing, leadership etc.), external business risks (economic, political, regulatory, governance etc.) and project execution related risks (limited resourcing).
The benefits of project portfolio management are always worth it. Organisations have the ability to fast track their projects with project portfolio management, see correct data and trends, and also point to projects that are not profitable so they can course correct.