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266 DEFINING AND IMPLEMENTING PPM

Misconceptions and Conceptual Gaps

While the overall concept of Project Portfolio Management makes a lot of sense,
there remains a tremendous gap between perceived applications and practical re-
alities. I know of at least one instance where senior management expressed a de-
sire to implement a Project Portfolio Management capability (and backed it up
with funding). Yet they had little interest in project management itself. It was as if
the firm’s project mix could be managed and manipulated without management
of the projects themselves. Is this possible?

There is an increasing interest in knowing where the firm’s resources are
committed and what the firm is getting for their resource investment. Again, I
have to ask How can this be satisfied without knowing to what work the re-
sources have been assigned and how well that work is going? We might, at the
higher level, have built a plan that models resource allocation versus time. But
if 40 percent of the way into the project, only 20 percent of the work has been
accomplished, then that situation has to be factored into the portfolio analysis.
Wouldn’t it be absurd to assume that all the work in the portfolio is proceeding
exactly as planned?

One of the ways to do this is to use the Earned Value Analysis (EVA) capabili-
ties of our project management software. This simple and effective protocol can
provide important schedule and cost variance data. This is important not only as a
way of remodeling the resource demand for the project(s), but also as a measure-
ment of how well the project is meeting its objectives. Yet, when we mention EVA
to the very people who are asking for Project Portfolio Management, they shud-
der at the mention of that subject. It is assumed to be too technical for the high-
level view that they seek.

Nothing can be further from the truth. I don’t see how a Project Portfolio
Management system can be put in place without using EVA as part of the perfor-
mance analysis approach. The resource and cost commitments may have been
reasonable (as measured against the expected gains) but there has to be a point
where deteriorating performance (increasing investment or time-to-market)
crosses the profitability line. More on this in Chapter 9.3.

What Is the Value of a Project?

Another thing that puzzles me, about the emerging concepts of Project Portfolio
Management, is how to fix a value on the project. For instance, I have seen re-
quests for the following types of information, under the concept of Project Port-
folio Management: