Tuesday, September 29, 2009

Governance of Programmes and Portfolios for Strategic Success

Project management success does not mean project success. There is an important distinction:
  • Project management success occurs when the project deliverables are on-time, within budget and according to specification;
  • Project success, on the other hand, occurs when the overriding strategic benefits are realized - after all, this is the reason projects are undertaken.
A Cranfield University study reported in 2006 that only 27% of projects deliver intended benefits, supporting earlier studies that suggested that fewer than 10-20% of projects ever deliver the expected benefits and 30-40% of projects are implemented without any discernable benefits whatsoever.

The limitations of project management must be understood to understand why so many projects do not succeed. Two key limitations are that:
  1. Many benefits cannot be realized until after the project has ended yet benefits realization must be actively managed; and
  2. Project management methods were designed to address the development of new products or assets, not "soft" initiatives, such as as organizational, business process and behavioural change.
A research paper by Raymond Young, Paul O'Conner and Simon Poon, Goverance of Programmes and Portfolios for Stategic Success - Implications from a study of the State of Victoria, demonstrates these issues very well. The paper reports on the results of a study commissioned by the Victoria Auditor General's Office (VAGO) in Australia to evaluate the role of projects within the Victorian public sector and to evaluate the appropriateness of the Victorian Investment Management frameworks:
"The Victorian public sector was expected to be at the forefront of practice but the study suggested billions of dollars are invested in projects with few of the expected strategic benefits being realized."
For example:
"A 2009 VAGO audit of literacy and numeracy found that 10 years of effort by the Victorian Education Department had only lifted literacy in the early childhood years and numeracy had actually declined. There seems to be a similar pattern for Health services where waiting times appear to have remained either static or increased...Our conclusion is that although the Victorian Investment Management frameworks focus on benefits, the emphasis is to ensure an asset is aligned to a benefit rather than the actual realization of a benefit and there is no focus on realizing higher order strategic goals...The high level strategic goals have been clearly defined and relatively stable for at least 10 years. If one of the best performers did not have the tools to help it achieve its strategic goals, what are the implications for the rest of us?"
The paper asserts that the Victorian Investment Management frameworks, though considered to be world class, are inadequate for achieving strategic goals:
"Their strength is that they emphasize a portfolio approach to choosing projects and using benefits as the selection criteria for investment rather than simply focussing on on-time on-budget delivery. Their weakness is that they are directed mainly at asset investments and do not focus on soft-projects even though the majority of project expenditure appears to be on soft-projects...The crucial deficiency seems to the absence of meaningful linkages to programme management."
Furthermore, the paper suggests that the innovations with the most potential to increase project success rates (portfolio management, programme management and project governance) are still too immature to gain widespread adoption:
  • Project governance must be closer aligned with corporate governance principles so that top management provides the level of engagement projects need to succeed and have assurance that key governance issues are being addressed.
  • Programme management has more potential to deliver strategic benefits but requires more flexibility to support strategic thinking and enable top management and programme management to engage in appropriate levels of questioning, feedback and dialogue.
  • Portfolio management must be linked to programme management because strategic outcomes can only be achieved when a whole programme of change is undertaken (the programme then selects the individual projects that will contribute to outcomes).
This has significant implications for organizations that are counting on project management or project portfolio management to achieve IT project success. They need to consider how they will address these issues.

Val IT provides helpful guidance for the governance of IT investment portfolios. It is a coherent approach that can be used to complement existing practices and provides a set of principles, processes and practices for addressing the issues discussed here.

1 comment:

PM Hut said...


I have published an article on the very topic of Project Management Success and Project Success, it consists of 3 cases studies, where the project was considered as successful from the Project Management side, but failure in real life (or vice versa).