What is Lean Portfolio Management?

Lean Portfolio Management Summarised

In a traditional PMO, focus is primarily on the performance of individual projects. A common artifact produced is the traffic light report, a table of all the projects, with critical original and adjusted dates, and a red/orange/green status for each one.

Project managers are held accountable for the status of their projects, and the PMO acts as an auditor, ensuring reporting is honest, and seeking a ‘please explain’ when a project is not green.

There are a few problems with this way of managing a portfolio of projects, but the foremost of them is that it doesn’t recognise the interconnectedness of the portfolio.

Many projects, for example, will rely on the same key critical people to progress their work. In some cases these people, including project managers, may be split across multiple projects. Even with clear prioritisation across the portfolio, the expectation is still that all work ‘progresses’ in some way. People are pressured to spin too many plates and predictably, errors are made.

Secondly, key dates are often rebaselined, which makes the previous delays and challenges invisible. This can make learning opportunities impossible as the original intentions of the project (date, cost, schedule) are hidden under a palimpsest. Finally, this ‘cop with a clipboard’ approach can lead to a lack of transparency, as PM’s are incentivised to hide delays, to avoid the overhead of additional work that amber or red statuses often incur.

The insight needed here is that the individual projects are not discrete and in fact form part of a larger order system. In order to effectively manage the portfolio we must raise out level of thinking and understand the larger system and it’s behavior.

Delivering Pizzas

An analogy I like to use is that of traffic control. Lets say our portfolio is actually pizza delivery. We have cars that drive to various places and have to deliver pizzas according to a certain schedule. A late pizza causes dispatch to contact the driver and demand they pick up their performance. In some cases dispatch contacts the customer and resets their expectations on delivery, perhaps offering them a discount or a side as compensation (adjustment of time, scope or cost). The customer is rarely happy about this.

We cannot be successful in this situation unless we realise that the pizza delivery is actually part of a larger system - the traffic system. This system has peaks and troughs. Multiple deliveries require a drive to deliver, and without clear priorities they will not know which order to deliver first. Accepting more deliveries than we can fulfil will lead to delays, especially at peak times. Drivers will quit when facing unhappy customers. Revenue will plummet. Even adding more drivers might not solve the issue if we do not manage them effectively, or we do not have the supporting infrastructure to manage this additional capacity.

If the pizza company starts to reward or punish drives according to their time in delivering pizzas you will start to see strange behaviours - fewer drivers will want to work at peak times, drivers will attempt to conceal true delivery times, drivers will break traffic rules to deliver on time.

This is true of the traffic system as a whole as well.

So what is the solution?

First the PMO must recognise that their responsibility is to manage a higher order system.

Secondly, the PMO must gather information that enables it to understand and manage this system. This will take the form of aggregate statistical information. The PMO will require specific data on an individual project when it is required to illuminate this aggregate data.

Mik Kersten outlines five key flow metrics to measure - these are a good start for any PMO seeking to understand the behaviour of project delivery in a portfolio;

1. Flow time. The time taken from idea to implementation.

2. Flow velocity. Overall thriughput of completed projects.

3. Flow efficiency. The ratio of time a project is actively worked on, to its total duration

4. Flow load. The total amount of work in progress at any point in time

5. Flow distribution. The types of work in process.

Tools such as portfolio kanbans can also be useful to visualise the portfolio to help understand the nature of the portfolio system.

Thirdly, the PMO will use these metrics to accelerate delivery and predictability. Primarily they will do this by;

1. Identifying and neutralising (removing or bypassing) bottlenecks

2. Eliminating waste in processes

3. Limiting the total work-in-process to reduce waste by context switching

4. Matching capacity to demand

Conclusion

There is a great opportunity for PMO’s to eliminate waste and accelerate delivery by actively managing the system of the portfolio. Waste and time to deliver can be reduced significantly by taking this approach. Transparency and predictability can be increased, which will improve the quality of forecasting and long term strategic and resource planning. Additionally, faster delivery coupled with predictable delivery will lead to delighted business stakeholders.

Reach out via russell@flowspring.nz for a conversation about how a Lean approach to Portfolio Management can help you.