Practical experiences of portfolio management

Portfolio Management Specific Interest Group

Andy InglebyEssentials, Operations, AstraZeneca 20th March 2012

Practical Experiences of Portfolio Management

“However beautiful the strategy………you should occasionally look at the

results”

Sir Winston Churchill.

2

Objective : Share the learning from our Journey to date …………so it can be applied!!

• Journey of Continuous Improvement in one part of AstraZeneca – AZ Essentials

• Focus on Portfolio Management but within the context of other P3 improvement- Governance- Project & Programme Management- Benefits Management

• Initiated in April 2009…..a Journey that has evolved……and continues

• No claim to be class leading…….typical of many organisations?

3

What is AZ Essentials?

• Global/Regional Operations Service delivery Organisation

• ~1000 employees + additional outsourced service providers

• A diverse set of capabilities including:- Facilities Management (Hard & Soft services)- Safety, Health, Environment & Wellbeing- Engineering Projects- Engineering Technology- Real Estate- Security- Operational Excellence

• Very variable P3 maturity in 2009/10

4

What were our drivers for change?

• AstraZeneca payer and government price pressures

• Increasingly more challenging regulatory environment

• At Essentials level - desire to better understand & track delivery of strategy

• Need for greater demonstration of value & visibility of project/programme delivery & performance across diverse set of functions

• Need to ensure success by ensuring we have the right skills & capabilities delivering the right change for both our customers & ourselves

• Clear Sponsorship & Functional Leadership

5 Name, Department

Essentials P3 Governance Network

Mission/Purpose:

• Create a visible Essentials Portfolio – to represent P3 delivery across the AZ Essentials organization (and any associated groups)

• Identify, agree and establish best P3 practice & Governance in the Essentials functions

• Provide assurance to the Essentials board and it’s customer groups that P3 delivery (across the entire change lifecycle) is to the highest standards

• Establish performance monitoring (KPI’s) within/across capabilities, and identify opportunities for Continuous Improvement in P3 processes

• Benefits Realisation - Ensure processes are in place to define and realise benefits from P3 management

• Support decision making - enable the Essentials board to make the best decisions on their portfolio – via the PMO

Vision:‘To ensure Essentials Projects and Programmes are delivered to industry leading

standards within all functions’

6

How did we start : Use of Results Oriented Management (ROM)

• Whole ROM process understands problems and seeks commitment - avoiding talking shop

• Driving performance improvement using KPI’s

• Governance network : One team member from each functional area

• Key problem identification and prioritised selection

• Problem analysis, identification of the current state and clear desired outcomes

• 3 month improvement plans via face to face Business Control Meetings (BCM’s)

• Intermediate progress/coaching meetings (Telecon)- On track/Medium deviation/Large deviation……actions plans

• Reflections and learning at the end of each 3 month period

• Process facilitated by ROM specialist

• Quite process intense……not everyone comfortable with it!

7

Portfolio Problem Statement

8

Problem analysis/Defining the problem – KP 3 3rd Nov 09 Problem statement: We don’t know that we’re doing the right projects & programmes

A: Roles & Responsibilities (programme & portfolio) F:Early Project Identification B: Common Language & G: Resources Definitions (People & money) C: What is the H: Portfolio Essentials Portfolio Management (Local vs Essentials) Tools (prioritization

& process) clarity on total resources, clarity on prioritization, maintain portfolio ‘flow’

D: Fit with other strategies (Customer & Internal depts.) E: The Essentials Strategy

Desired Outcome by Q2 2010:

The Essentials board knows it’s doing the

right projects & programmes

(this problem not about doing the programmes and

projects right)

The First Portfolio Data Snapshot

• 700 projects…….have we identified them all? Apples and pears?

• Little visibility of benefits expected or for whom they are delivered

• 75% projects had a Project Manager identified

• <20% projects had a Sponsor identified

• No visible identification of which projects were part of strategic programmes

• >90% projects could identify the stage they were at(aligned to the AZ Project Management Framework)

• No data on project skills levels. Little data on the costs of smaller projects.

• Data availability for capital projects generally better than for revenue ones.

• Data robustness a concern

• Belief that better data was available..….we hadn’t collected it.9

Early P3GN Roadmap

2010

Define Implement Govern

2011 2012Feb Dec

‘as-is’ Portfolio

Develop Essentials & Functional level Portfolio

Decision making & Management Process

EssentialsBoard

sanction

Define minimum High level requirements for Projects &

Programmes across Essentials

= Quarterly BCM’s& Key decision

points

EssentialsBoardUpdate

High level P3

Operational Model

Define & Agree process for Benefits data collection x-

Essentials (KPI 1)

Port

folio

‘Doi

ng th

e rig

ht th

ings

’

Proj

ects

& P

rogr

amm

es‘D

oing

thin

gs ri

ght’

Roll out and Embed new Portfolio processes into

Essentialswith level of dashboard

confidence clear

Use and application of new Portfolio processes to aid Essentials board decision making

May Sept

Establish process to measure 100% of External customer P3 satisfaction (KPI 2)

Roll out and Embed Benefits Management into Essentials

Ongoing KPI measure and Improvement plans

Roll out and Embed P3 Customer satisfaction into Essentials

Develop detailed processes & tools for Programme

management

Ongoing measure and Improvement through KPI 4

Establish process to measure KPI’s 3 (P3 Skills, capability profiling ) & KPI4

(Use of P3 Framework measures)

Roll out and Embed practices for KPI’s 3 & 4 measurement

-Use of frameworks-P3 Skills & capability



Develop Benefits tools or templates

Roll out and Embed Programme Management process & tools

across Essentials

EssentialsBoard

sanction






Phase of understanding definitions/requirements into existing, or new processes

Phase of embedding into existing/ new processes

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Measuring P3 Improvement with Key Performance IndicatorsKPI Measure 2009

(actual)2010 (Q1)

2010(target)

2011 (target)

2012(target)

2012 (BBT)

Customer Impact

(Customers)

1 % external customers satisfied with quality, cost & timing of Essentials 3P delivery

? ? 75% have satisfactory

records

90% (for 75% projects)

95%(for 90% projects)

100%(for 100% projects)

Portfolio Value(Financial )

2 % Project & programmes with tangible Benefits identified ? ? Obtain existing

data & new >$1M

projects

100% for new >$1M

projects

75% of all projects

100% of all projects

P3 Processes(Internal Process)

3 % 3P activities completed using agreed P3GN framework /best practice

? ? Establish baseline

60% of projects

90% of projects

100% of projects

P3 Learning & Growth (Culture

& Behaviors)

4 % Project and programme managers who have appropriate skills profile for role within 20% of ideal capability

? ? Establish baseline

75% 90% 100%

•KPI’s refined – Targets set with Sponsor

•General information eg $’s cost/benefits etc in Dashboard view (Control measures)

11

Portfolio Management – The Basic Principles

Demand• New Demand on Essentials and it’s

Functions via Business Engagement, or Internal/External Strategic Change

Prioritise• Assess Value (Benefit, Cost &

Risks*), Demand vs Capacity

Manage• Status, Risks, Strategy

Impacts/changes, Stop/maintain/must-win quicker

decisions

Demonstrate• Clearly demonstrate planned &

delivered benefits via Functions and Essentials

‘Dashboard

The Basic principles of Portfolio Management at both the Functionaland single Essentials Portfolio levels

* See value prioritisation slide12

Data Collection Challenges

• Early data collection time consuming based on spreadsheets- Need for clarity about minimum needs- Need for clear definitions- Risk of disengaging Project Managers with onerous & changing data

requirements

• Recognition of the need for a more efficient data management tool- Project in its own right

• Important the basic processes were established before looking at tools

• Need for consistency at project/programme level - key to understanding portfolio value- common language for benefits

13

14

All Essentials Programmes, Projects and Change Activities realise their

planned benefits.

Benefits Management Vision

Assessing the Value of what we plan to deliver will allow for clear understanding and Prioritisation of all projects and programmes within and across Essentials functions (Capital, Revenue, Business Change, IT, Technology)

Business Value

of projectprogramme or

change

RiskCost

Benefit

Tangible $’s

Resources, capital, revenue

($’s)

Probabilityof success

(%)

Business Investment Options, Value and Benefits

F(n) and

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What are the Benefits of my Project or Programme…..? Examples to help understanding of the different types of benefit

June 16, 200916

Name, Department

Benefits are the advantageous outcomes from Projects and Programmes that will be delivered to the business and by which success of the investment will be measured.

FINANCIAL - Cost Reduction / SavingReduction in future operating budget vs. a current cost resulting in $ savings. Includes reduction in headcount or operating cost removed from a cost centre and should be described in terms of

a measure e.g. %, FTEs and $ cost saving.

Financial benefits are measurable and directly impact operating budgets

Qualitative benefits are difficult to substantiate and measure.

INDIRECT FINANCIAL - Cost AvoidanceAn indirect benefit that can be measured. Avoidance of capital spend ($) that is budgeted for or future spend not budgeted .

Include savings in capital investment, avoidance of expenditure on assets or fines. and should be described in both terms of a

measure (e.g.) $ saving.

Reputational / EthicalMay result in an enhanced corporate image, but not directly contributable to shareprice. For example,

Media coverage, Environmental, Corporate Governance.

Legal / PoliticalA benefit that ensure AZ are compliant with

legislative changes, but not directly contributable to shareprice.

Strategic / Competitive AdvantageBringing new advantages and opportunity to the

future AZ business/Operation, but there is uncertainly in the measurable impact at an early

stage.

FINANCIAL – Income generationOpportunity for potential income generation for AZ resulting in $

savings. Includes disposal of property or surplus equipment/assets and should be described in terms of a

measure e.g. $ income to AZ.

Other Quantitative benefits

INDIRECT – Efficiency / SavingMeasurable, but not possible to calculate impact on bottom line

costs. Improved efficiency or productivity in future operating processes vs. a current process resulting in some measurable

benefit Includes improved Productivity, Quality, Speed, KPI measures and should be described in terms of a measure (e.g.) time, an increase in staff motivation/feeling/Focus measures.

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• Individuals may strive for outcomes that favour their own endeavours

• Tendency for over optimism about the planned benefits & underestimate costs and timing – optimism bias

• Risk of “benefits being overforcast in order to justify tenuous programmes for self serving ends and in the worst cases, to satisfy over-zealous egos” –2009 Financial Times/Moorhouse Benefits Management Survey……....Could it happen here?

• Cultural pressures to deliver financial hurdle rates of return, even when business circumstances change – rather than stop the project/change

• Do we have the right climate to allow the necessary constructively challenging conversations to happen and do we have the courage to have those conversations………?

Recognise the behaviours – external learning

P3MT Solution components

Project Server

Portfolio Analytics & Selection

Resource Management

Schedule Management

Issue & Risk Management

Team Collaboration

Time Reporting

Business Intelligence &

Reporting

Program Management

Demand Management

Executives Resource Managers

Team Members

Project Managers / Planners

Line of Business Systems

Corporate Project Solutions Microsoft Project Server, SharePoint, P3M Consulting

Unify Project and Portfolio Management

Corporate Project Solutions Microsoft Project Server, SharePoint, P3M Consulting

Transitioning to Business as Usual

• Organisational change prompting move to BAU- Recognition of Portfolio managers roles in each function- Governance of P3

• Further focused improvement still needed

• Training delivered across the organisation - 200 people- Practitioner Training- Awareness Training - Significant effort

• External consultant health check to identify any significant gaps

• Learning review

20

Transition to BAU – Initial P3 Operational Model

Functional level

(Managed within own Leadership

team) Global Engineering

Projects

Engineering Technology

FM Real Estate SHE Operational Excellence

Security

Proprietary and Confidential © AstraZeneca 2008FOR INTERNAL USE ONLYDelivered (Closed) – Year to Date

Total # Projects 20

Total $ cost Portfolio 1,800,000

Total $ Benefits of Portfolio 3,000,000

No Projects at Stage

Justify 20 Initiate 4 Plan 35 Execute 156 Close 20

No projects at Status

RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600

Example of Customer Portfolio DashboardForecast (Initiate, Plan, Execute stages) to Year End

Total # Projects 195



Current Portfolio Status for Customer

Portfolio OverviewFor Customer

Portfolio Shape(Execute & closed projects)

Portfolio by Function

0200400600

Customer

Financial

Process

Capability & Learning

Customer Portfolio shape(Execute & closed projects)

ideal projectsNo. projects

Caution! Fictional data only for illustration purposes

020406080

100120140

Number projects

CNSP

CVGIRIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGI

RIRA

CIRA0

20406080

100120140

Total Benefits ($000's)

CNSP

CVGIRIRA

CIRA


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600









0200400600

Customer

Financial

Process





020406080

100120140

Number projects

CNSP

CVGIRIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGI

RIRA

CIRA0

20406080

100120140


CNSP

CVGIRIRA

CIRA


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600









0200400600

Customer

Financial

Process





020406080

100120140

Number projects

CNSP

CVGIRIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGI

RIRA

CIRA0

20406080

100120140


CNSP

CVGIRIRA

CIRA


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600









0200400600

Customer

Financial

Process





020406080

100120140

Number projects

CNSP

CVGIRIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGI

RIRA

CIRA0

20406080

100120140


CNSP

CVGIRIRA

CIRA


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600









0200400600

Customer

Financial

Process





020406080

100120140

Number projects

CNSP

CVGIRIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGI

RIRA

CIRA0

20406080

100120140


CNSP

CVGIRIRA

CIRA


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600









0200400600

Customer

Financial

Process



ideal projects

No. projects


020406080

100120140

Number projects

CNSPCVGI

RIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGI

RIRACIRA

020406080

100120140


CNSP

CVGI

RIRACIRA


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

10025

RedAmberGreen

15600









0200400600

Customer

Financial

Process



ideal projects

No. projects


020406080

100120140

Number projects

CNSP

CVGI

RIRA

CIRA0

20406080

100120140

Cost of Portfolio

CNSP

CVGIRIRA

CIRA0

20406080

100120140


CNSP

CVGI

RIRA

CIRA

Dashboard views may be tailored to show Customer/Stakeholder specific functional projects/programmes

Essentials Board-Ownership of Essentials Portfolio and alignment decisions to fit

Essentials and Customers Strategies-x-Essentials issue resolution that cannot be resolved by PMG

Awareness of all Projects, Programmes and issues that cannotbe resolved within the function are escalated to PMG

Awareness of One Essentials Portfolio& it’s performance, issues that cannot be resolved within PMG are escalated

Essentials Portfolio Management Group (PMG)

-Ensure x-Essentials P3 Governance & Assurance-Drive P3 Continuous Improvement & Performance through KPI’s

-Access to the ‘right’ P3 & Change Skills at the ‘right’ time-Demonstrate Essentials Value Proposition for Capital & Revenue portfolios through

support & challenge-Drive realisation of Benefits

-Drive success of x-Essentials projects/programmes


Total # Projects 20






RedAmberGreen

1055

RedAmberGreen

004

RedAmberGreen

100

25

RedAmberGreen

15600

Full Portfolio DashboardForecast (Initiate, Plan, Execute stages) to Year End




Current Portfolio Status

Portfolio Overview


0

50000

100000

150000

200000

250000

Cos

t USD

($00

0's)

Essentials function

Project Cost by Function

Cap ab ility & Lea rnin g

Pro ces s

Finan cial

Cus tomer

No . p roje cts

id eal p ro jects


0

20000

40000

60000

80000

100000

120000

Ben

efits

($'s

)

Essentials Function

Project benefits by Function

Capability & Learni ng

Process

Financial

Customer

020406080

100120140

No.

proj

ects

Projects by Function

Customer Financial

Process Capabili ty & Learning

0200400600

Customer

Financial

Process


Essentials Portfolio shape(Execute & closed projects)

ideal projects

No. projects


Board Decision makingAllocation &/or re-allocation

of revenue budget & resources across Essentials

functions

PMG Decision making -Actions to address

Governance issues, KPIs as required

-Access to the right skills and resources

-Stop, Hold, Go, Action Decisions for Prioritised x-

Essentials Projects and Programmes

Demand

Prioritise

Manage

Demonstrate

Demand

Prioritise

Manage

Demonstrate

X-Essentials Strategy

& Direction

GE Project

s

Chaired by Head of Operational Excellence

OpeX

Portfolio manger

Tech

FM

RE

SHE

Security

Portfolio manger

Portfolio manger

Portfolio manger

Portfolio manger

Portfolio manger

Portfolio manger

Portfolio manger

Portfolio manger

Portfolio manger

Critical Success Factors

Progress % along the journey after 15 months:

• Portfolio visibility & establishment of best practice – 60%

• Benefits realisation, processes in place to define and realise benefits – 50%

• Develop the skills and capability to enable professional P3 – 10%

• Establish KPI based performance monitoring – 45%

• Enable effective portfolio decision making – 20%

• Overall 30% complete on a long journey of continuous improvement.

22 Name, Department

Current Status

• Population of the portfolio tool and training to use it underway

• Sponsor training underway

• Project Management capability assessment completed

• Increased focus on prioritisation at company level has put us in a good position to use our learning for broader benefit

• Key components of project/change Governance best practice* are now being addressed

* Directing Change : A guide to governance of Project Management

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Learning from our journey• Successes

- Significant improvements have been made- Active Sponsorship and leadership commitment were vital to the delivery of

improvement- ROM enabled focused progress & improvement- We’ve used external best practice and our lessons learned have been/are being

applied elsewhere- We’ve adapted & evolved the approach to changing needs and when things

didn’t work well- Empowering workstream sub teams- Have a sense/sanity check from experts – consultant was helpful to us- Recognition that things have moved on and we can empower others to own

future P3 change

• Challenges- Getting basic data is difficult- Having clear definitions prior to collecting any data- Original remit was unrealistic – Portfolio management decision making is

impossible without the data and the right organisational maturity- Ensuring roles very clear from the outset – it’s clear when recommendations

made as to whose role it is to make decisions- We had a learning journey for the ROM process – early energy in - took some

time find how the process worked well for this team.- To ensure continued support for future decision making

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