The Waste Caused by Disconnected Processes
Many many years ago, when we were reviewing an airline’s operations, we found that the people who scheduled the aircraft - of various types - did not talk to the people who scheduled the aircraft crew - who had skills relevant only to a specific type of aircraft. As a result there was massive over-manning as staff were rostered on ‘in case’ their aircraft was to fly that day.
-Jed Simms
The example above illustrates how massively wasteful information and process disconnects can be.
Similarly, in the project portfolio management space, any gaps between the portfolio management processes and other key processes can cause massive frustration and waste.
Note while The Portfolio Management Office has control over only part of the end-to-end project and value delivery processes and so is exposed to being seen as accountable for the failings of others, if it fails to focus on integrating these processes.
So what are the possible disconnects?
The project investment management process is disconnected from the portfolio management processes.
In some organisations we have worked with, we have found up to 80%of a project portfolio to be strategically irrelevant. That is, it is not contributing to the future direction of the organization.
Why?
Because the investment and portfolio management processes are disconnected. The Investment Committee is accountable for approving investment in projects and programs. However, organisation-wide, the business case-validation-prioritization-approval processes are often the worst performed set of processes.
Project prioritization is too often focused on each individual project’s costs, risks and likely benefits; whereas it should be focused on each project’s strategic contribution, net value and ability to be delivered.
Poor investment prioritization processes allow poor projects to be approved, which once approved are too often ‘condemned to completion’.
Poor project investment decision criteria and processes allow:
- Strategically irrelevant projects to be approved;
- Projects to ‘bury’ available benefits so as to ‘save’ them for another project, sub-optimizing the returns on the immediate investment;
- Projects to underestimate the project’s true cost with the belief that they can always “Go back for more money later” as no one wants to cancel an ongoing project;
- Projects that are set up to fail to be approved anyway, which then waste further funds and then finally fail.
The Portfolio Management Office therefore needs to take hold of the organization’s investment appraisal process so that it ensures that:
All projects that are approved are relevant, optimized, accurately costed and set up to succeed.
And this can be simple, as we explain in our Primer on prioristisation below.
