Okay, a quick refresher lesson: project portfolio management (PPM) is about “doing the right things”, while project management is “doing things right.”
Even with good project management disciplines in place a company can (and probably does) have big problems delivering IT projects. We’ve all heard the horrific facts about the percentage of IT projects that run way over budget, deliver much less functionality than promised, miss scheduled deadlines by months and years, as well as the huge number of projects that get cancelled.
The goal of today’s article is to explain how good governance over the small projects can aid with the delivery of the large ones. At first glance, this connection between the small projects and the large projects isn’t clear, but let me paint the picture for you.
As I’ve stated before, one of the most value benefits of PPM is that the process gets CEOs, CFOs, and CIOs to speak the same language, share risk, and collaborate in the investment decision-making process. When executed correctly, this collaboration demystifies the complexity of the IT function and improves the communication and the relationship between the CIO and other business leaders.
Appetizers
You might be saying to yourself “what does any of this collaboration have to do with managing small projects?” Picture yourself in a five-star restaurant where you’ve ordered one of the most expensive meals off the menu. You’ve been waiting, what seems like an hour, for your meal. You’ve drank two glasses of water and eaten thirty-two crackers.
As your patience begins to run out, you ask the waiter to check on how much longer it will be before your meal is delivered. The waiter disappears into the kitchen, only to return and tell you he is not sure when your meal will be ready because the kitchen is very busy and orders are backed up.
This story illustrates how many business executives feel when they have to deal with their company’s IT department. They’re spending large amounts of money, most times in the tens of millions of dollars, on a software project that has already been delayed twice and now the IT department is saying its going to be delayed again for an unknown amount of time because the hardware vendor is behind on production and can’t deliver the hardware as promised … Aaargh!
Now, let’s approach this same situation with a different perspective. You’re sitting in a five-star restaurant and you’re waiting on your very expensive meal to be delivered.
The waiter sees that the kitchen is very busy and knows that your meal will most likely be late. He approaches your table and explains that your meal will be delayed and asks if you would like a basket of rolls. Ten minutes pass, you’ve eaten two rolls and the waiter approaches and explains that its going to be another 15 to 20 minutes before your meal is ready and asks if you would like a glass of wine or an appetizer “on the house” as you wait. You gladly choose the wine and are enjoying sipping it when your meal arrives.
The appetizers and glass of wine in our story are analogous to a small system enhancement or new report being asked for by the business. If IT consistently delivers the small projects time-after-time then, when needed, the business will be more patient when issues arise on the large projects.
The excellent management of small IT projects is similar to the differences between these two restaurant scenarios. By proactively managing the small IT projects being requested by business units you can grow a healthy reputation of delivery what you said you would deliver, as well as a strong relationship with business executives that is valuable when patience is asked for on a large project that is in trouble.
PPM and Small Projects
An effective PPM process for small projects must outline the steps needed to secure funding for projects that will not be evaluated by the formal PPM process. That process, by design, should only be for larger projects requiring review by the IT investment council, which is comprised of a company’s senior management.
The goal of this small projects “prioritization” process is to ensure that:
Defining a Small Project
The first step is to get clarity and agreement on the characteristics of a project that classifies it as a small project. One such definition that I’ve successfully used in several companies is as follows: IT labor costs must be below $100,000; capital and external labor costs must be less than $50,000; and, the complexity level of the project must be considered low or moderate.
I have a company’s IT governance team develop an “IT sizing worksheet” stipulating how a project is evaluated in these three areas of IT labor, hard dollar expense, and complexity. If the project does not satisfy the defined requirements of a small project it must be evaluated by the formal PPM process and move into the Preliminary Analysis activities of that process.
My experience working with companies to establish their PPM processes draws me to the conclusion that approximately three percent to five percent of overall annual IT spend should be budgeted for delivering small projects. So, if you have an annual IT budget of $50 million, plan on using between $2 million and $2.5 million on small projects.
Once you have established a budget for small projects the next step is allocating appropriate portions of the budget to the different areas of the business. This provides divisional executives the ability to have the tactical and enhancement projects, of their choice, worked on according to their business priorities.
I recommend allocating the IT dollars to business units based on the combination of historical and anticipated amounts of small project work required by that area of the business.
One approach to determine this is by looking at the overall chargeback amounts being applied to each business unit. For example, if the chargeback amount being assigned to the customer service department is equal to 12% of the overall IT chargeback, than I would start by allocating 12% of IT dollars for small projects to customer service as well.
This allocation structure should be reviewed annually by the IT Investment Council and adjusted appropriately, based on their direction.
Resource Allocation
Maybe the most difficult part of this entire process is securing resources to work on these small projects. For most companies, an estimated annual IT spend of $2.5 million for small projects can translate into 10 or 20 full time resources dedicated to working on small IT projects. Dedicating this amount of resources to small projects, as well as comprising all the necessary skills for such a diverse set of projects is impossible.
Instead, I advise companies to dedicate a single resource as a “small projects program director” or other similar title. This program director, working in conjunction with the IT relationship managers (see last months article “Succeeding with PPM Requires Follow Through” works from a prioritized list of small projects and continually scours the availability of IT resources.
The director’s objective is to match the pockets of available IT resources with the highest prioritized small projects. A primary responsibility of the small projects program director is to provide solid project management oversight to this portfolio of tiny gems and ensure project status and communication to business executives.
A primary measure of success is the fact that $2.5 million of small projects were delivered through the year as planned and the overall utilization rate of the IT staff increased from previous years without this discipline.
While formal PPM is overkill for evaluating the small, tactical IT projects that an IT department has to work on; an appropriately structured investment process can ensure that your organization works on and delivers the small projects that are most important to your business leaders.
Jeff Monteforte is president of Exential, a Cleveland, OH.-based information strategy consulting firm, which specializes in IT governance, information security and business intelligence solutions. He can be reached at [email protected].