1. The Role of the PMO in Enabling Effective Portfolio Management
Anthony Gayter
10 November 2015

2. A Company Can Be Seen As A Collection Of Projects
2014
2013
2012
2011
2018
2017
2016
2015
Historical
Projected
Balance Sheet
(Working Capital)
Income Statement
(Gross Assets)
The financial performance of any one year represents the combined results from project investments in preceding years.
So, we look at a company in the same manner. The company is just a portfolio of projects. So how do we calculate the performance of all of the projects in a company?
We could look at every project in the company, calculate the IRR of each and every project, perform a weighted average of all those projects, and we can get a cross-sectional rate of return.
Or, we could calculate the CFROI which gives us the same result. We start with information off of the balance sheet and income statement.
Here’s one year of projects represented in this top line. Each year we invest in a new project… the balance sheet, gives us the historical cost of every project we invested in that is still in place. The income statement… The balance sheet also gives us information of how much cash we’ll have left at the end of each project, on average.

3. Traditional Project Portfolios
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Typically, when companies undertake a specific project such as an acquisition or an expansion into a new business line, they prepare an economic profile that factors in the forecast amounts and timing of all cash outflows and inflows over the estimated project life. An internal rate of return can then be calculated, which is simply compared to the firm’s hurdle rate to decide whether or not to proceed with the project. At this point all governance/analysis/reporting is usually only “Cost”
The Role of the PMO in Enabling Effective Portfolio Management

4. Traditional Project Portfolios
A big problem for many PMOs is that all they get to talk about are costs. Many companies have no consistent, company-wide way to value what Project investments deliver.
“Every business has revenue”, but Projects typically do not … because Project/PMO owners don’t have the discipline to capture the benefit in a way that can be shown to the CEO or executive committee and have numbers that are real.
The Role of the PMO in Enabling Effective Portfolio Management

5. Traditional Project Portfolios
“ These are my 10 things, but I don’t want to do cost/Benefit” I’ve been doing this business for X years.’ I know these are the right things – Real quote
There’s no substitute for CEO support.
The next point of tension comes in forcing business unit leaders to rank the projects they want.
Often Business units stack rank 1, 1, 1, 1,
The Role of the PMO in Enabling Effective Portfolio Management

6. Strategy Delivery through Project Portfolio Management
Fund Managers
Questions
How do I influence
Share Price?
CEO/Board
Portfolio Delivery
PfMO
SBUs
What is the best way
to allocate my capital?
PgMO
Project Delivery
Business
Opportunities
How do I improve
execution?
The HOLT framework is used by over 300 money managers and nearly 3,000 individuals to select which stocks to buy. Collectively, these institutions manage over $3 trillion in capital and include 2/3 of the top 100 money managers in the US
Their job: to allocate their investors’ capital for the highest long-term return
With this broad reliance on the HOLT framework and tools, it’s not surprising that many CEOs and Boards are also looking to HOLT to better understand how their actions influence and determine their companies’ stock prices.
In effect, the CEO acts much like a money manager for the company’s portfolio of businesses, deciding where to invest the shareholders’ capital for the highest return.
These same insights apply on down through the organziation: Each level of management is charged with using the company’s resources for the greatest value creation.
Each of you are in many ways money managers, charged with getting the highest value out of the resources committed to you
From this perspecitve, the principles that determine stock prices should also be a part of your decision-making processes.

7. Business Outcome Driven Project Portfolios
PMO Seat at the Corporate Strategy Table
Portfolio Leaders ensure Projects outcome deliver to strategy
Clear standards definitions for prioritization within a portfolio
Not Everybody’s “pet” project makes the cut
Constant delivery practices
Accountability for outcomes (Revenue, Cost, Brand, M&A)
Continuous measurement (beyond Project delivery timeline)
The Role of the PMO in Enabling Effective Portfolio Management

8. The Roles within Effective Portfolio Management
CEO & CIO
Total Project Spend
Executive Council – “C” Suite
Decide on which innovation/projects will be done and in what order within pre-determined spend….
Draw the line on what is in and what is out and then hold the line!
CIO
Overall IT Strategy
Program/Portfolio Management Office
Delivery of Projects that align with the strategy
Track & Report KPIs (KISS) – Pick 6
The Role of the PMO in Enabling Effective Portfolio Management

9. PMI’s Pulse of the Profession – In-Depth Report (Portfolio Management)
5 Key Drivers of Effective Portfolio Management
78% Senior Management Receptivity
66% Competent portfolio governance
62% Standardized metrics and criteria
59% Consistency and logic of organizational strategic objectives
58% Mature PMO
The Role of the PMO in Enabling Effective Portfolio Management

10. Our Journey to Effective Portfolio Management
The Role of the PMO in Enabling Effective Portfolio Management

11. Our Journey to Effective Portfolio Management
Measurable value on the project(s) “revenue” of Projects.”
The sum of all the benefits, both hard dollar and intangibles, that a project delivers in the 12 months following full implementation.
Captured the benefit in a way that showed the CEO and executive committee numbers that are real
figures had credibility with execs because they’re based on cost-benefit analysis agreed to by business unit leaders and their controllers,
Finance numbers, not Project Manager numbers. “These groups are very comfortable acting to data.
The Role of the PMO in Enabling Effective Portfolio Management

12. Establish KPIs & continuously Measure Cost & Benefits
The Role of the PMO in Enabling Effective Portfolio Management

13. PMO driven Portfolio Management
“The Portfolio”
Below the Line
The Role of the PMO in Enabling Effective Portfolio Management

14. HP IT Transformation Fewer active projects
25 April 2017
HP IT Transformation
Portfolio Management
Before
After
Active Projects: 1240
Teams: 2 to 10 person teams
CBA Analysis: 3+ years
Project Delivery prior 3 Years: 1,200
Innovation vs. Support: 30 / 70
Active Projects: 500
Teams: 10 to 30 person teams
CBA Analysis: 6 months
Projected Project Delivery: 3,000+ over 3 years
Innovation vs. Support: 80 / 20
Fewer active projects
Reduced from ~1240 to ~500
More people on teams tackling active projects
Increased from 2–10 person teams to 10-30
Shorter delivery time with CBA analysis
3+ years with no ROI reduced to ~6 month projects
Increased number of projects delivered over time
Increased from ~1200 to ~3000 after 300 years
Reversal of Innovation vs. Support dynamic
Reversed from 20% innovation and 70% support to 80 % innovation to 20% support

15. Numbers