What KPI's can do for your Portfolio!

How can I manage my portfolio of projects? Is there even a need to manage it, why not just let every Project Manager do their job, the portfolio will take care of itself? Are there any leading indicators I can use to monitor my projects?

These are common questions, and the answer is as different as the organizations that host the projects, but I want to share some of my thoughts on the topic, which I think is applicable to most organizations. I will start by explaining what we did a few years ago to bring a major development program back on track. The reason this is relevant here, is that a multi-million R&D project (yearly budget) is like a portfolio of projects.

I worked at that time as Program Manager for the R&D project, and I requested a senior scheduler to be added to the team. We both had EPC project background and were well familiar with Earned-Value-Management (EVM) methods from those type of projects. I always found the use of Schedule Performance Index (SPI) and Cost Performance Index (CPI) very useful, and we decided to apply this to the R&D project, in fact we broke it down to the work-package(WP) level. In order to get this to work, you have to make some adjustments. In a construction project you can easily measure progress in tons of steel or concrete, cables pulled or connections made, but how to apply that to research activities? How do you measure where you actually are? Looking at the WP descriptions, we found that they are fairly similar, regardless if we are talking lab work, programming or simulation that are to be done. First you have to specify exactly what you plan to do, get that approved, initiate the work, report on intermediate milestones, complete the work, write the final WP report and get that approved. We assigned a %-complete to each of the milestones, and so we could measure the difference with planned %-complete and actual %-complete to get the SPI. We also asked the WP owners to plan their resources for each phase of the project, and by comparing planned vs. actual hours, expressed as $, we got the CPI (adding external cost when applicable).

After the initial negative reaction (What, you want to measure our progress??), the team came around and we had really good discussions around why we were above or below one (1) in a certain month. They all found it useful and also motivating, now you could actually SHOW that you are on time and one budget! For us running the program it was even more useful, because we could look at different clusters, say all WP’s involving a certain resource, all WP’s involving procurement etc. as well as the SPI and CPI for the entire development program. This was really powerful, and we were able to solve many issues by assigning other people or just change the order in which things were done in order to free up critical resources (something which never would have happened on a WP level).

SPI and CPI are really good parameters; however they are still lagging indicators, showing the performance of the past. To complement them, I have combined my project and my risk management experience and come up with a leading indicator, the Risk Performance Index, RPI. Currently I’m looking for a launch-customer to test this Index, it should ideally be a company which already uses CPI & SPI in order to simplify the introduction. If you are interested, or know someone who might be interested, please contact me for further discussion.

As this is my last blog before the holidays, I wish you all a relaxing time with family and friends and a healthy and happy 2019!

Staffan