Originally Published on allPM.com
Projects are the means for making all changes in the organization. They represent a significant expenditure of money and critical resources. Projects are the means to create new products and services, enhance and remove deficiencies from existing products, implement or improve business processes, do anything that requires action within a finite time frame to establish a base for continued operations.
This article describes Enterprise Project Management (EPM) and the critical importance of taking an enterprise wide view of project management as a process that is a critical factor in helping organizations meet their strategic goals.
Project management is a business process that contributes significantly to the success of any organization in reaching its highest goals – service to clients while meeting the needs of owners/shareholders, employees and other business partners.
PMI has chosen to refer to what we refer to as EPM as Organizational PM (OPM). While we recognize PMI’s reasoning we choose to retain the EPM terminology as it corresponds to usage in the wider community of those interested in the application of PM related tools and techniques, including Microsoft and many others. An enterprise may be any organization that serves internal or external clients. Regardless of the terminology, we recognize that project management goes well beyond the initiating, planning, executing, controlling and closing of individual projects and must address the multiproject environment and the relationship between projects and the organization’s strategic goals and objectives.
Why EPM
Project performance excellence gives the organization a competitive edge and enables it to continuously improve the way it serves its clients, shareholders and employees. Note that when we refer to an organization here we do not limit it to business enterprises but include the internal business units that have to compete with external sources for the opportunity to server their companies.
A recent Standish Group “Chaos Report"? described the state of PM practice in the following terms:
84% not on time & budget
94% will have at least 1 restart
188% cost overrun
222% schedule overrun
39% of projects will have significant scope change
And this doesn’t even address the alignment of projects to strategy or the success of the products and services produced by the projects!
Dr R.G.H. SIU, in his book The Craft Of Power, N.Y. John Wiley and Sons, 1979, pp. 178-9 compared what was happening in organizations to a game he referred to as Chinese Baseball.
After the ball leaves the pitcher's hand and as long as the ball is in the air, anyone can move any of the bases anywhere.
In other words, “everything is changing"? -- the events, the rules governing the events, values, measures, etc. Is this the game you are playing? How good are you and your organizations at this game? An orderly, structured and flexible approach to managing PM makes things more stable (though never completely stable) and let’s you work better in the chaos.
Managers and executives want to make decisions based on objective analysis and want to adapt to a complex and ever changing reality. An EPM solution must enable these objectives to be met in a highly practical and realistic way.
According to the Meta Group:
89% of companies are flying blind with virtually no project or portfolio metrics in place, except for finance.
84% of companies either do not do business cases for any of their IT projects or only do business cases on selected projects.
84% of companies are unable to adjust and align their budgets with business needs more than once or twice a year.
The Business Case for EPM must be made by each organization based on an analysis of the benefits and costs that are relevant to it. Following is a framework for use in determining why your organization should address its EPM issues:
Benefits:
Faster time to market
Make better decisions
Avoid late & over budget projects
Avoid runaway projects
Learn from experience more effectively
Avoid products that do not satisfy business objectives
Promote best practices
Promote harmony and reduce turn-over
Costs:
Organization change
Initial investment – tools, methodology, consulting, etc.
Training
Ongoing administration and management
Continuous improvement
What EPM is
Enterprise PM is a complex process within the complexity of organizations. There are many issues to be resolved to create a dynamic, well balanced process that is flexible enough to meet the needs of ever changing organizations in dynamic environments. A balance between flexibility and discipline is needed. Flexibility gives people the freedom needed to creatively navigate the intricacies of the organization while meeting objectives, effectively and efficiently across a wide range of project types. Discipline promotes best practices and a broader perspective and supports continuous improvement. The balance includes the use of strategic direction to promote autonomous action towards common goals as well as tactical methods that maximize effectiveness.
Managers, executives and clients want to make decisions based on objective analysis and want to adapt to a complex and ever changing reality. The EPM solution must enable these objectives to be met in a highly practical and realistic way. Black and white, either-or, and your way vs. my way thinking give rise to irresolvable conflict. The skillful manager or facilitator will recognize that complex problems are divergent; there are many right answers. There are many shades of grey. The problem space and, therefore, the solution are in continuous motion. Seek dynamic balance.
Enterprise Project Management (EPM) includes the full range of issues to support and perform PM, including policy and strategy setting, the organization structure needed, the information and analysis required for decision making at various levels of the organization and the processes that are performed to manage the enterprise level portfolio, multiproject portfolios and individual projects. Figure 1, below represents the major aspects of EPM
Figure 1: Major Aspects of EPM
<img src="/images/October2004/Figure1.gif">
In Figure 2, we see that EPM is a dynamic system that combines Governance, multiproject management and individual project management. The flow chart identifies the major parts of the EPM process and their relationships to one another. Governance includes Portfolio management. Portfolio management is a critical component that relies on the effective performance of other processes and drives the performance of those processes. EPM is a mission critical business process.
The process is supported by collaboration and consultative support at every level. The numbered process steps one (1) - six (6) represent the project management steps for a single project. Step seven (7) and other items in the diagram address wider, cross-project, issues: Governance/portfolio management, the management of multiple projects and organizational, team building and communications issues. Gates are included to highlight that governance and portfolio management must be integrated into the individual PM and project life cycle processes.
Figure 2: EPM Process Model
<img src="/images/October2004/Figure2.gif">
As shown in Figure 3, PM is a field that joins many quality and performance improvement modalities into a practical suite of process to accomplish organization objectives within cost time and product quality constraints
Figure 3: EPM Combines Multiple disciplines
<img src="/images/October2004/Figure3.gif">
Figure 4 highlights that EPM is an iterative, spiral process that begins with portfolio and process creation. Portfolio management operates in the realm of business imperatives. It focuses on meeting business goals and optimizing the project portfolio that organizes the enterprise-wide initiatives. EPM encompasses the management and performance of the programs and projects that achieve strategic goals.
The organization, its environment and its programs, projects and ongoing activities are a dynamic system, requiring constant attention and update.
Figure 4: EPM as a Dynamic Process
<img src="http://www.allpm.com/images/October2004/Figure4.gif">
Almost every project is a joint effort that cuts across multiple organization units and specialty areas. Participants may be from within single organizations, but are often from several firms in supplier/client or partnering relationships. Complex people and organization relationships make even simple projects complex. Applying this same concept at the enterprise level highlights the need for a well thought out and well communicated process. Figure 5 is an example of the mix of stakeholders.
Figure 5: Key Stakeholders in the EPM process
<img src="/images/October2004/Figure5.jpg">
Given the complex mix of stakeholders the following issues must be addressed:
• Who’s in charge of what?
• Who’s accountable to whom?
• What are each player’s roles and responsibilities?
• Does everyone understand EPM?
• How will communication be carried out, using what tools and techniques?
EPM requires a well educated set of stakeholders with a high PM Quotient (PM Q). The PM Q is an informal measure of the degree to which people understand what EPM is and why it is important to them and their organization. This is related to the first level of PM maturity in Dr Harold Kerzner’s PM Maturity Model, the need for a common language that reflects the knowledge of PM.
Portfolios, Programs and Projects
Portfolios, programs and projects are the interrelated objects or components of the EPM process. It is important to have consistent definitions of the three and clarity about the work activities they represent – portfolio, program and individual project management.
The relationships among projects, portfolios, programs and projects are complex. Projects are where the action is. Thinking, strategizing, managing, deciding, coordinating, facilitating and controlling multiple projects are the principle aspects of portfolio and program management. Table 1 below provides a snapshot of our basic definitions of portfolio, program and project management.
Project Management is “The application of knowledge, skills, tools and techniques to project activities to meet project requirements.“
Program Management: is the application of marketing, strategic planning, project management, and general management to meet program objectives.
Portfolio Management: The process to proactively identify, select, prioritize, deselect and nurture a balanced mix of projects to support the organization’s objectives.
Table 1: Portfolio, Program and Project management
<img src="/images/October2004/Table1.gif">
Portfolio Management and Governance
Enterprise PM integrates portfolio management, single and multi-project management and program management with the organization’s structure and strategy. Information ties the elements together into a cohesive system that manages the organization’s use of resources to achieve its goals. The strategy, filtered through and articulated by the portfolio management process, drives which projects and programs to perform. The strategy drives the development of an organization that fully supports program and project performance. The performance of programs and projects feeds information into the portfolio management process. Up to date information regarding availability of resources and assets, the current state of projects and organization goals are the foundation for the analysis that supports decision making.
Governance is the process of establishing the infrastructure for project management. Governance is a subset of Enterprise Project Management (EPM) and includes the decision making, organizational and process aspects that set the stage for effective project management. As shown in Figure 6, below, EPM recognizes the elements of governance and insures they are completely integrated into a holistic process that fully supports multiproject and individual project management processes.
Portfolio management is made up of three sub-processes: budget management, project authorization and resource management. Portfolio management should address all the projects, programs and operational activities for the entire enterprise.
Figure 6: Governance and the components of Portfolio Management
<img src="/images/October2004/Figure6.gif">
Portfolio management consists of the dynamic interplay among budgeting, program and project authorization and resource management. Budgeting sets a baseline for performance in a plan period, based on expected resource capacity and high-level estimates. Projects are authorized during the plan period as part of the gating process. Authorization decisions are based on budget constraints, resource capacity, and up-to-date actual performance on multiple projects. As projects are performed and new project requirements arise, there are often changes to the budget plan.
Multi-project Management
Individual projects are rarely performed in isolation. The diagram in Figure 7 shows the interplay between portfolio management, individual project management and multiproject management.
Portfolio management provides the basic input to the multiproject management process.
Multiproject management provides the data needed for dynamic portfolio management.
Multiproject management creates a healthy environment for individual project management and performance. Individual project plans and control information feeds into the higher level processes.
Figure 7: The Multi-project Management Process
<img src="/images/October2004/Figure7.gif">
Maturity and Organizational Change
Maturity in project management translates into the presence of a continuously improving defined methodology that addresses every aspect of EPM. How do you know when you are there? Richard Bauhaus gives us this checklist – easily mapped to PM maturity models. These seven characteristics represent the major deliverables of any EPM improvement program.
Seven Characteristics of Maturity (Richard Bauhaus (Knutson 2001, 304-5))
• Consistent processes
• Everyone knows and follows the PM process
• Clearly defined roles and responsibilities
• Common principles, language and expectations
• Portfolio management
• Projects linked to business strategy
• Continuous change, including education, improvement projects, measurement, etc.
Implementing and maturing EPM impacts the way people work and relate with one another. This impact may change the culture of the organization. Organization change is complex, because of the way it affects people and the way the people respond over time.
All of the following may change:
• Culture & values
• Reward systems, including executive compensation
• Corporate policy
• Roles and relationships
• Project selection methods
• Planning & control techniques
• Tools for project planning, portfolio management and collaboration.
To ensure the success of EPM the critical success factors are:
• Management Support & Commitment
• Project/Program Management of the implementation and improvement effort
• Clarity about the difference between project management and vs. performance methodologies
• Flexibility, scalability and discipline, including compliance monitoring
• Performance measurement against a baseline to show results and promote continuous improvement
• Ongoing support, including coaching, education, training and appropriate tools.
Where to start?
The next steps to implement or improve EPM depend on what the state of your organization is with regard to EPM performance and improvement planning. As with any organizational change initiative it is necessary to begin with a Gap Analysis. The Gap is the difference between a desired state and the current state. Assessing the Gap requires that there is an analysis of best practices in the field of project management both in and outside of your industry. This analysis should result in the articulation of a baseline desired state.
The definition of the current state requires that the organization candidly assess its current way of managing projects and the problems and costs that are currently faced. Establish a performance baseline at this stage by identifying key performance indicators and the current performance levels. Indicators would include but not be limited to the number of on time projects, cost overruns and problems in the early stages of product life in the post project time frame. While quantification is very useful, anecdotal evidence of the need for change is often sufficient to get started.
Then, using Gap and performance analysis results, identify what needs to be done and justify it by estimating the degree to which existing performance improvements can positively effect the bottom line. Now you are ready to plan the improvement program, which may take several years to fully complete.
EPM is a critical business process that supports the organizations ability to provide products and services, adapt to its dynamic environment and to continuously improve itself. Making EPM excellent is the only viable option!
