Tema individuala AIMI 2013-2014 Improving management of change projects in times of crisis1

The financial and economic crises have caused fundamental questions to be raised regarding proven business and organizational models. According to one study, last year some 40% of managers surveyed still said they expected their company to be extensively restructured. In order to undertake these kind of measures, companies need to be able to answer complex questions quickly and with a high degree of flexibility, efficiency and effectiveness, all against a background of rapidly changing environmental factors. To do this, however, companies must ensure effective management of all change processes and programs (project management organization). Sustainable portfolio monitoring, strategic positioning of projects and tailored management tools provide the foundation for developing different solutions. Change projects of this kind are an important, strategic, core competency and never more so than today. In the current climate, only companies capable of optimizing their project portfolio in a targeted manner, implementing change projects and programs effectively and efficiently, will be able to make a significant contribution to organizational change. Portfolio monitoring: the basis for effective integrated planning In an attempt to overcome the effects of the crisis, companies often initiate ad hoc projects that ultimately do not deliver the desired results. One reason for this is that there is no coordinated project portfolio management. If individual projects and programs are to help the company move forward, they must be aligned with strategic corporate goals. But this is not simply a case of putting the right framework in place for comprehensive project portfolio management. It is also about initiating, planning and managing the right programs and projects in a targeted fashion.

The difference between projects and programs is that projects have defined goals specific to the project. Success is measured in terms of the quality of the outcome, compliance with timelines and budgets, and customer satisfaction. By contrast, aprogram is a group of projects with common results or potential. Program management places special emphasis on the interrelationships between the individual projects. Figure 1 shows the relationship between the projects, program and portfolio in the context of project management organization.

http://rbd.doingbusiness.ro/ro/8/articole-ultima-editie/2/647/improving-management-of-change-projects-in-times-of-crisis; Noiembrie 2011, ERNST & YOUNG S.R.L.

Tema individuala AIMI 2013-2014

The challenges facing the program managers mainly relate to evaluating the projects in their program and to prioritizing planned and ongoing projects in terms of their compliance with the companys strategic goals. Program requirements with respect to strategic compliance have increased greatly in the past five years. As a result, 82% of companies believe that strategic change programs contribute significantly to future competitiveness. Program management is an integral part of end-to end project portfolio management. The project portfolio is a collection of projects or programs that, when grouped together, enable strategic corporate goals to be achieved as efficiently as possible. Projects and programs in the project portfolio do not necessarily have to be linked to each other. Monitoring of the existing project portfolio focuses less on individual projects and more on the totality of ongoing and planned change projects and programs. In addition, it is not confined to financial aspects but also includes scheduling, content and strategy. In this way, any monitoring is aimed at enabling effective optimization and integration of all projects and programs within the company. Timely provision of information for decision makers is therefore an important deliverable of project portfolio management.

Studies have shown that project portfolios often have considerable potential for optimization. This is reflected in the fact that half of companies surveyed report that project costs account for more than 10% of their total costs. Only one in three companies completes 80% or more of its projects on time and within budget. Large-scale projects, in particular, lead to massive cost and scheduling overruns. Four steps are required to optimize the project portfolio and identify projects and programs that make a significant value contribution to organizational restructuring during (or after) periods of crisis: Stocktaking Analyzing constraints and dependencies Evaluating and prioritizing Status tracking. 2

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This process is accompanied by ongoing monitoring and controlling.

Stocktaking (step one) involves regularly taking stock of all projects and programs in the project portfolio. It includes classifying projects and programs in terms of defined criteria (e.g., project type, goal, strategic value contribution, possible courses of action). This classification helps determine the initial focus of optimization efforts. Figure three presents an illustrative classification of existing projects and programs in the project portfolio, showing their strategic value contribution to defined change goals within the company. In the second step, potential dependencies and constraints within the project portfolio are identified and analyzed. In order to analyze the alignment of projects and programs adequately, it is essential to take into consideration all the complex interactions involved. For example, some projects use or depend on the results of other projects or programs. The analysis also includes external dependencies (e.g., obligatory third-party quality checks when new products are launched). Once the dependencies and constraints have been comprehensively analyzed, the projects and programs are evaluated and prioritized.

Evaluating and prioritizing (step three) is an important foundation for managing the project portfolio in line with the strategic change goals. Scoring methods have proven useful when evaluating the level of suitability of the projects and programs for organizational transformation in a transparent and 3

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quantifiable manner. These methods can also be used to prioritize projects and programs. This prioritization, which includes both the position of the projects and programs within the project portfolio and resource allocation, is performed by senior management and the portfolio manager. The result is a qualified classification within the project portfolio and a decision on whether to implement or reject projects and programs. During the fourth and final step (status tracking), the portfolio manager continuously monitors existing projects and programs in order to identify any potential for optimizing their strategic value contribution to organizational transformation. Figure 4 shows one way of representing projects and programs, using the dimensions strategic influence and required implementation effort. Circles of different sizes can be used to represent additional dimensions, e.g., decision-making effort or effects on individual aspects of the organizational model.

This categorization clearly reflects which projects and programs will give the greatest value contribution to organizational restructuring. When identifying where action or optimization might be needed, the portfolio manager can develop and simulate alternative scenarios in order to realign the projects and programs if necessary. Projects and programs can be canceled, modified, postponed or implemented as planned. Implications for the management tools of project management organization A key benefit of portfolio, program and project management is the ability to manage change projects effectively in times of crisis. It is not enough to focus solely on initiating the right programs and projects. Instead, what is needed is effectivemanagement of all projects and programs in the project portfolio in order to achieve the overall transformation goal, thereby strengthening the companys long-term competitive position. Although many companies have developed a systematic approach to portfolio, program and project management, they run into difficultieswhen it comes to managing the highly complex projects and programs. To avoid these problems and position project management organization within the company in a way that enables projects and programs to be managed effectively in times ofcrisis, it is necessary to comprehensively adjust the management systems for all parts of project management organization.

Tema individuala AIMI 2013-2014

In addition to adapting the management systems, a company-wide monitoring and management structure has to be established (project governance). Implementing project governance establishes a set of guidelines, standards, roles and responsibilities for projects, programs and portfolios. These have a decisive influence on the success of project and program management and the achievement of transformation goals. All measures within the scope of project governance should be viewed as being part of a process of continuous improvement aimed at the effective, strategic, alignment of project management organization, particularly when it comes to: o Clearly defining responsibilities for monitoring and coordinating interrelations, dependencies, resources, constraints and multidisciplinary requirements of the projects, programs and portfolios; o Aligning project and program activities with their future value contribution to the defined transformation goal; o Clearly defining parameters, and monitoring projects and programs on the basis of an approved business case; o Establishing top-down risk management processes as a sensitive early warning system throughout the company; o Openly and honestly communicating the (positive and negative) value contributions of the projects and programs to achieving the transformation goals.

Conclusions The effects of the financial and economic crises have shown that companies have to be able to adapt to market challenges quickly and flexibly. Never before has the pace of change been so fast, nor has 5

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this speed been so essential. Effective project management organization, and the strategic alignment and effective management of programs and projects, enable companies to respond to a rapidly changing environment. The methods and model presented in this article can be used to firmly embed management of program and projects into the project portfolio. End-to-end project portfolio monitoring is an effective tool when it comes to delivering timely support for decision-making processes in different business units. From the point of view of decision makers, portfolio management is an important instrument for aligning programs and projects with the companys strategic goals. Against the current background of rising demands in the wake of the economic crisis, this alignment is becoming increasingly significant. Our experience has shown that a large number of companies using this tool to manage their programs and projects, are seeing more significant, higher-value contributions to organizational change.