Kloppenborg Chap One

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Strategic Leadership ofPortfolio and ProjectManagement

Timothy J. Kloppenborg and Laurence J. Laning


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Strategic Leadership of Portfolio and Project Management

Copyright Business Expert Press, 2012.

All rights reserved. No part of this publication may be reproduced,

stored in a retrieval system, or transmitted in any form or by any

meanselectronic, mechanical, photocopy, recording, or any other

except for brief quotations, not to exceed 400 words, without the prior

permission of the publisher.

First published in 2012 by

Business Expert Press, LLC

222 East 46th Street, New York, NY 10017www.businessexpertpress.com

ISBN-13: 978-1-60649-294-9 (paperback)

ISBN-13: 978-1-60649-295-6 (e-book)

DOI 10.4128/ 9781606492956

Business Expert Press Supply and Operations Management

collection

Collection ISSN: 2156-8189 (print)

Collection ISSN: 2156-8200 (electronic)

Cover design by Jonathan Pennell

Interior design by Exeter Premedia Services Private Ltd.,

Chennai, India

First edition: 2012

10 9 8 7 6 5 4 3 2 1

Printed in the United States of America.


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Abstract

Tis book is aimed at executive leaders o organizations. Leaders rom

all organizations will beneft rom this book, but especially organizations

that may have limited resources and bench strength. Tis book instructs

executive leadership teams on implementing strategy through identiying,

selecting, prioritizing, resourcing, and governing an optimal combination

o projects and other work. Tis book also tells executives who serve as

a sponsor or who have a project manager direct report what they need

to do at each project stage. Advice is given to the executive who owns

the project management competency or the company on utilizing inputrom customers, employees, and processes. Much o the organizations

work is dependent on inormation technology, and understanding and

using inormation technology as a strategic weapon helps an organization

become competitive and eectively implement their business strategies.

All o these portolio and project decisions need to be made based upon

both qualitative and quantitative data using reliable analysis methods.

Keywords

strategy, execution, portolio management, executive sponsorship,

executive leadership, project management, inormation technology,

data-based decision making, organizational assessment


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Contents

Preface..................................................................................................ix

Chapter 1 Implementing Strategy Trough

Portolios and Projects .......................................................1

Chapter 2 Managing a Portolio to Implement Strategy:

A Leadership eam Role ..................................................17

Chapter 3 Sponsoring Successul Projects .........................................43

Chapter 4 Leading Project Managers:

Te Project Executive Role...............................................75

Chapter 5 Listening to Customers, Employees, and Processes:

A Chie Projects Of cers Role .......................................109

Chapter 6 Understanding Inormation echnology

Opportunities and Challenges:

A Chie Inormation Of cers Role ................................137Chapter 7 Making Sensible Decisions Using Data:

A Responsibility o All Executives .................................177

Chapter 8 Conclusions ...................................................................215

Notes..................................................................................................221

References ...........................................................................................225

Index .................................................................................................231


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Preface

We met over 20 years ago. Laurie was midcareer at Procter & Gamble

(P&G) having other work experience and his PhD. im was untenured

at Xavier having a ew years o business and military experience. At the

time, we were part o a team redesigning the MBA program at Xavier.

Since then, Laurie has held roles o increasing responsibility during a

28-year career at P&G including introducing data management, leading

the implementation o SAP in the supply chain, applying inormationtechnology to P&Gs new product innovation process, and retiring as the

chie inormation technology enterprise architect. im fnished his U.S.

Air Force Reserve career with transportation, procurement, and quality

assurance assignments, worked his way up to distinguished proessor at

Xavier, wrote nearly 100 publications including several books, consulted

and trained with many clients, and supervised many student teams who

helped nonproft organizations.

With our combined 70 years o corporate, academic, military, con-

sulting, training, board, and volunteer experience, we have had many dis-

cussions concerning the common challenges in all o those organizations.

One central challenge is when dierent parts o the organization either

do not understand other parts or are even working at cross-purposes. We

have combined our leadership, quality, project, inormation technol-

ogy, and decision sciences backgrounds to create a short volume with

the intent o addressing challenges that are common to many organiza-

tions. Tis book applies the Pareto Principlethat is, choosing the 20%

o ideas and techniques that will provide 80% o the value to leaders.


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CHAPTER 1

Implementing StrategyThrough Portfolios

and Projects

Tis book, Strategic Leadership of Portfolio and Project Management,

provides an approach to leadership by linking strategy to the action neces-

sary to successully implement it. Many companies ace varying strategic

implementation challenges as can be seen in able 1.1.

Te book guides executives through strategic implementation by

creating a ramework o key concepts and tools rom portolio manage-

ment, executive sponsorship, project management, quality, inormation

Table 1.1. Strategic Implementation Challenges Facing Companies

Company Challenge

Duke Energy is one of the largest electric

utility companies in the United States.

Duke continually faced large uncertainties

in regulatory and business conditions and

a huge pipeline of needs.

TriHealth consists of several large

hospitals, physician groups, and related

health-care facilities.

TriHealth did not have consistency in

executive leadership roles, especially for

projects.

Messer is a full-service commercial

construction company specializing in health

care, higher education, and life sciences.

Messer needed consistently successful

construction projects.

The Midland Company delivers specialized

insurance services for mobile homes,

classic cars, motorcycles, and snowmobiles.

Midland has many methodologies and

needed to decide how they can help

execute the key initiatives of its business

strategy.

YourEncore is a consulting company with

a network of veteran scientific,

engineering, and technical experts.

YourEncore needed to determine whether

its information technology systems would

be strong enough to support future growth.

Givaudan is a global leader in the

fragrance and flavor industries.

Givaudan needed to make decisions about

what development projects to undertake.


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2 STRATEGIC LEADERSHIP OF PORTFOLIO

technology (I), and decision-making. Each chapter describes how one

o these companies met its implementation challenge by using conceptsrom that chapter.

Te scope o this book encompasses both ongoing operational work

and projects. Tis is a book about holistically leading an organization

to achieve success as defned by our sets o competing objectives that

are explained below. Tis chapter starts by describing the our sets o

competing objectives aced by most organizations. Ten projects are

defned including how each proceeds through a lie cycle and how

success is determined. Te need or standards and the roles executives

perorm in leading an organizations portolio o projects are intro-

duced. Te chapter concludes with an overview o the other chapters

in this book.

Competing Objectives

In many organizations, executives determine strategy and manag-

ers implement it. Oten a gap can exist in successully accomplishing

both objectives. Organizations also requently struggle with successullyaccomplishing three other sets o competing objectives: sustainable

organizational capability and current business results, project goals and

operational goals, and competing goals o dierent organizational unc-

tions. Successul organizations consistently deliver each set o these com-

peting objectives. Tis book is aimed to help you simultaneously better

achieve each o these sets o competing objectives by describing concepts

and tools or implementing strategy through careully identifed, aligned,

selected, prioritized, resourced, and controlled projects.

Executives Set Strategy and Managers Implement It

Executives oten do not get very involved with projects. Tis may be due

to excessive demands upon their time. Lack o executive involvement

could also be due to lack o understanding o the technical nature o

some o the project work or ear that i they are seen as closely tied to

a project, they may be held responsible or any ailure. Limited execu-

tive involvement in project implementation can lead to a gap between


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IMPLEMENTING STRATEGY THROUGH PORTFOLIOS 3

the executive level that develops strategy and the management level that

is charged with implementing it.Among the reasons or the ailure o strategic plan implementations

are the leaderships imperect:

understanding o customers true needs and wants,

estimation o resource competence,

coordination o work,

ability to secure commitment rom both senior management

and employees,

creation o and adherence to logical plans,

communication with employees and other stakeholders, and

ability to identiy and manage risks.1

Organizational Capability and Business Results

In this book, we describe how companies strive to simultaneously achieve

improvements in organizational capability and desired business results as

stated by organizational objectives. Oten the pressure to achieve impres-sive short-term business results can lead to decisions that do not promote

long-term organizational capability. Organizational capability can be

expressed in terms o a companys:

human resources: its number, quality, skills, and experience;

physical and material resources: machines, land, buildings;

fnancial resources: money and credit;

inormation resources: pool o knowledge, databases; intellectual resources: copyrights, designs, patents, and so

orth.2

Project Goals and Operational Goals

Yet another gap may exist between the project and the operational types

o work in an organization, as shown in Figure 1.1. Operations (shown

as processes in Figure 1.1) typically are the mechanism by which knowl-

edge is turned into revenue. Tus, it is very important to keep this work


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moving eectively as the cash generated by these processes is the lieblood

that sustains an organization. Te frm needs knowledge to successully

capitalize upon and this is where projects come in handy. Projects o vari-

ous types create knowledge ranging rom early stage research to specifcally

applied process improvements. Without the knowledge an organization

gains rom such work, it would quickly become obsolete.3

Competing Goals of Different Organizational Functions

Another set o competing objectives occurs between unctional silos o

organizations. Each unctional area o an organization has work to accom-

plish. An overemphasis on one department can shortchange another.

Coordination between departments needs to be consciously developed

through eective communication and cultural change.

In this book, we describe how leaders strive to accomplish all our

sets o competing objectives. Leaders can coordinate eorts at both the

executive and the managerial levels. When leaders bridge the execu-

tivemanager gap, they better deliver both current business results and

organizational capability improvements. Tey also develop and capital-

ize upon knowledge with projects and processes, and coordinate vari-

ous department goals. All these things can be enhanced by eectively

Knowledge

building

projects

Options

development

projects

Implementation

projects

Processes

Keeping the lights on

Examples:

Basic R&D;

Customer research;

M&A due diligence

Examples:

Competitive strategy;

Product development;

Market entry;

Channel strategy

Inbound logistics

Operations

Incrementalprocessimprovements

Sales and marketing

Customer service

Manufacturing

Procurement

Human resources

Option

execution

projects

Radical

process

improvements

Reliable knowledge

Knowledge continuum

Little knowledge

Knowledge to $

Projects portfolio Current knowledgeNew

knowledge

Figure 1.1. Intertwining of projects and processes to create

sustainable value.


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identiying, aligning, selecting, prioritizing, resourcing, and controlling

a best portolio o project and operational work to achieve all o theorganizational objectives.

Projects

A project is a temporary endeavor undertaken to create a unique prod-

uct, service, or result.4 Because it is temporary, each project goes through

a predictable series o stages called a lie cycle. Because it is an endeavor,

each project requires resources to complete. Because it is unique, each

project requires planning and control in a variety o areas such as scope

(the amount o work), risk, budgeting, and so orth. Because projects

create products, services, or results, stakeholders exist who are counting

on those deliverables. Tose stakeholders must be identifed, understood,

prioritized, communicated with, and satisfed.

Universality of Projects

In many ways, the world is changing aster than ever due to globalization,I, and knowledge creation. Project management can be a great way to

plan and manage changes proactively. Project management skills enable

people to quickly and exibly plan and deliver a wide variety o projects.

A ew o the most useul skills are:

initiating the eort with a charter,

developing communication plans and dealing eectively with

stakeholders,

dividing work into manageable portions,

scheduling complex interrelated work,

managing risks and change, and

reporting progress.

Work in any unctional arena can be modeled and managed as a pro-

ject. Project Management Institute (PMI) is the leading global proessional

group that deals with project management. With over 370,000 members,

PMI has communities o interest in dozens o industries, plus various


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unctional groups including fnancial services, human resources, inorma-

tion systems, leadership, retail, and transportation.5

Project management techniques can be applied to an endeavor o any

size, rom a very simple endeavor to a highly involved one. Even or the

simplest projects, it is important to be able to state what will be accom-

plished and why it is important to the organization. Te largest and most

complicated projects share the need o starting with what will be accom-

plished and why, but the level o detail in planning and managing them

should be commensurate with the challenge.

Project Leadership Roles

A variety o executive leadership responsibilities concerning projects need

to be ulflled i a company is to optimally implement its strategy. Who

handles each o these responsibilities and what their titles are varies con-

siderably rom one company to another. For clarity, we will use consistent

titles or the roles we describe.

We need to clariy a ew things about these roles. Some o the respon-

sibilities can be delegated rom an executive to a manager, whereas oth-ers should be retained. In larger organizations, sometimes several people

each have a portion o the duties we describe in a given role. In smaller

organizations, one person may have more than one o these roles and

other responsibilities also.

We have two general pieces o advice regarding these executive roles.

First, since their duties are so dierent, do not use the same person in

the role o a sponsor and a project manager on the same project. Second,

ensure you understand each role and the reason or it. Make the conscious

decision to have someone perorm each duty.

Identiying these leadership roles in your company is helpul in

assigning the right person to perorm each duty, thereby ensuring all

responsibilities are perormed and helping executives understand where

they can improve. Te executive roles we use in this book are leadership

team, sponsor, project executive, chie projects o cer (CPO), and chie

inormation o cer (CIO).

Aleadership team is responsible or the results o all work in the port-

olio. Tis team is oten composed o the top person in the organization


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and the people who report to them. Te people described in some or all o

the other roles may be members o the leadership team. Tey collectivelymake portolio decisions o identiying, selecting, prioritizing, resourcing,

and governing projects.

A sponsor wants the project results and is jointly responsible or

achieving them along with the project executive and the project man-

ager. She is the key decision-maker or the project. Te sponsor provides

overall project resources, oversees stakeholders, and delivers project results

according to the business case. Te sponsor has specifc responsibilities

during each stage o the project lie cycle. I the project manager normally

reports to the sponsor, she will also serve as the project executive.

Aproject executive supervises one or more project managers who report

directly to them and is jointly responsible or delivering project results with

the sponsor and the project manager. He provides unctional resources, gov-

erns methods used on the project, helps the project manager develop leader-

ship competency, and delivers project results according to plan. Te project

executive has specifc task and coaching responsibilities at each stage in the

project lie cycle. Te project executive may also be the sponsor.

ACPO responsible or developing project management competencyand acilitating the leadership team as they make portolio decisions. Te

CPO has ongoing responsibilities in developing the project management

system and competence along with specifc acilitating duties at key port-

olio decision points.

ACIO is responsible or all the I needs o the company. Te CIO

works with senior management to defne a strategic I master plan that

implements business strategy. Te CIO deals extensively with internal

resources along with I consultants and I vendor companies.

We describe each o these roles in more detail in the ollowing

chapters. Te role o the sponsor is the only executive role that is

clearly defned in proessional standards. We use those standards and

add to them based upon our research over the last fve years concerning

specifc duties and the impact each has on various measures o project

success.

While this book is written or executives, we will reer to the ol-

lowing three project management roles. First, the project manager is the

ocal point and is responsible or project planning, communications, and


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implementation. Te second role is the project core team. Tis team is

comprised o members who are involved in the project or the entireduration and who help the project manager make decisions and carry out

tasks. Te third role is that o subject matter experts who are extra hands

brought on the project as needed.

Project Success

Project success has been widely studied and many researchers have pro-

posed overlapping suggestions o how to measure it. At one time, many

people viewed project success narrowly as delivering to specifcation, on

time, and within budget. During the 21st century, many people have dra-

matically expanded their views on project success. One way o incorpo-

rating the many suggestions o project success into a useul ramework is

to group the measures into (1) project management success, (2) business

results achieved, and (3) operational capability improvements.

Project Success Measurements

1. Project management success

Specifcations

Cost

Schedule.

2. Business results achieved

Proft

Market share

Increased sales New product

Customer satisaction.

3. Organizational capability improvements

Improved customer capability

Sustainable results

eam member loyalty

eam member development

eam member satisaction


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Organizational learning

New technology and methods.6

Project management success means delivering exactly what you prom-

ised on time and within budget. Tis is important, but ar rom the total

understanding o project success. Projects also contribute toward current

business results with sales, profts, products, and satisfed customers. Pro-

jects can urther be envisioned as a means o improving the organizational

capabilities o the customers and the parent organizations technologies

and people.

Current research rom various industries and project types consist-

ently shows satisying customers is the most important success criterion

and i that is accomplished, many o the other business results and organi-

zational capability improvement measures will be realized.7 However, sat-

isying the customer completely and achieving the project management

success measures o on time, within budget, and to specifcation do not

always go together without good project planning and execution.

Project Life Cycle

Most researchers and practicing managers use a stage-gate or lie cycle

model (Figure 1.2) to understand how projects vary rom one point in

time to another. Te concept o a project lie cycle is that during a given

stage certain requirements must be met or the project is not allowed to

pass to the next stage. Many industries have their own specifc lie cycle

models due to the specifc characteristics projects encounter. For exam-

ple, construction projects have very dierent demands than research and

development projects.

Despite the uniqueness o specifc industries, many people use

a generic project lie cycle model as a starting point. Te most basic model

oten includes some sort o initiation to make the project o cial ollowed

by other stages to plan, execute, and close the project. Project responsi-

bilities start even beore the initiation stage with selection o the project.

Responsibilities also extend ater project completion to ensure the prom-

ised benefts are realized. For this book, we use the model in Figure 1.2


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to describe how responsibilities change rom one stage to the next. I all o

the work is not accomplished, the ow o the project work either returns

to planning or continues to the execution stage. For many projects, it isimpractical to plan the entire project at the outset; it makes more sense to

plan and accomplish some work to being with and use the results o the

early work to help plan uture work.

The Need for Standards

Troughout this book, you will see the topic o standards dealt with in

specifc examples. Here, we talk about the topic o standards in general as

it applies across the board.

Te simple question is, why should we have standards and what ben-

efts do they provide? Clearly, there are processes in your organization

where you want creativity and innovation to prevail. But there are also

many processes where doing things dierently or not in the same man-

ner each time provides no benefts and simply costs you money. Having

a standard way o doing things in these types o processes makes a lot

o sense.

Select project

Initiate project

Plan project

No

Yes

Execute project

Close project

Leverage benefits

Are all

requirements

planned and

satisfied?

Figure 1.2. The project life cycle model.


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Example processes or which organizations would preer to have

a standard way o doing things consistently across the entire organiza-tion are:

preparing and approving expense reports or business travel,

processing fnancial transactions,

taking orders rom customers,

a stage-gate process or new product and service development,

reserving conerence rooms, and

having a common methodology or managing projects, and so

orth.

Te above list could go on. Note there are both internally and exter-

nally developed standards. An internally developed standard involves

adopting your best practice to how a common process is best executed

and then reapplying that approach as your standard or this process.

Te expense report example above could be such an internal standard.

Adopting an externally developed standard, as the name implies, involves

researching and selecting a standard that has been developed by a proes-

sional organization or a vendor. A common example is adopting the PMI

project management methodology or managing projects.

Te primary benefts o adopting standards are:

Standards allow you to leverage scale. I you have operations

in multiple locations, your people only have to learn one way

to implement the process.

Standards also provide a common vocabulary and experienceor your people as they relate to the standardized processes.

For processes where you use automated/computerized tools,

using standards means you can have a single tool to buy and

support.

In the case o adopting externally developed standards, you

clearly beneft rom the experience o many peoples use o

this standard in many dierent types o organizations.


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One Size May Not Fit All

While in many situations standardizing to a single approach may be

beneicial, there are instances where having one standard will not

meet the needs o the widely varying work processes in varying busi-

nesses, markets, or cultures. An example one o the authors (Laning)

is in the 1990s when Procter & Gamble (P&G) chose to implement

the Systems, Applications, and Products (SAP) sotware in its global

supply chains. he initial rollout o global SAP solutions oten had a

single coniguration/version. We ound that having only one stand-

ard process or supply chain processes was too restrictive and addedunnecessary costs due to the adoption o a single solution that pro-

vided much more unctionality than needed in small, simple manu-

acturing plants. Subsequently, many supply chain processes at P&G

moved to have three types o solutions (e.g., small, medium, and

large) versus having only one solution. his allowed the establish-

ment o standards and the realization o cost beneits in addition to

enabling the option o having solutions that were appropriate or the

dierent business situations based on the dierences in their com-

plexity. his allowed the standards to take into consideration actors

such as size and complexity o a manuacturing plant, whether the

business was regulated or nonregulated, and how many SAP modules

were being implemented in that business. hereore, in some situa-

tions that vary widely in terms o size and complexity, having a ew

clearly deined standards versus having only one standard may pro-

vide great beneits.

Fostering Creativity Through Control

A standard approach is like rules and boundaries in a game. All teams

play on the same court and ollow the same rules. Understanding the

limits these rules and boundaries impose allows a coach to develop di-

erent strategies based on the skills o his players and the challenges

posed by a given opponent. Likewise, standards are like rules and

boundaries that help everyone understand the normal limits and grant

thoughtul leaders the chance to use innovative approaches within those

limits.


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Chapter Overviews

Te next six chapters describe conceptual knowledge and demonstrate

skills executives will fnd useul in simultaneously achieving each o

the our sets o competing objectives. Each chapter introduction will

include the purpose o the chapter, a dilemma aced by the company

chosen to demonstrate the chapter concepts, and the key question the

chapter answers. Te body o each chapter varies considerably with

some including more concepts and others including more techniques.

Each chapter ends with what the chosen company did to solve its

dilemma, a summary o how the chapter contributes to enhancing theachievement o the dual sets o objectives, and a set o the top 10

assessment questions executives can use to determine how well their

company is currently perorming.

Te assessment questions in each chapter are a unique eature o this

book. Teir intent is to highlight the key areas the authors believe you

need to think about and evaluate or your organization. I this book is

used in an academic setting, the assessment questions can be used to

assess a students knowledge o an area.

Figure 1.3 summarizes the book at a glance.

Chapter 2 describes a work portolio as the entire body o work an

organization is doing to best accomplish its goals, subject to the limits

o resources and its tolerance or risk. Ten the components o porto-

lio management are described and a method or accomplishing them

Managing a portfolio

to implement

strategy (chapter 2)

Sponsoring

successful projects

(chapter 3)

Making data-based

decisions (chapter 7)

Leading project

managers

(chapter 4)

Understanding IT

opportunities and

challenges (chapter 6)

Listening to customers,

employees, and

processes (chapter 5)

Competingobjectives to

achieve:

1. Executive vs.

Manager

2. Capability vs.

Results

3. Projects vs.

Operations

4. Function vs.

Function

Figure 1.3. Overview of the book.


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is detailed. Te components include identiying, selecting, prioritizing,

resourcing, and governing the organizations work. Te leadership teamoten collectively makes the portolio decisions.

Chapter 3 defnes the role an executive serving as a sponsor when

she wants a manager and a team to lead a project that will create some-

thing she values. Te overarching responsibilities o a sponsor are to

provide resources, oversee stakeholders, and deliver results. Te chapter

also details the ew select behaviors busy executive sponsors can per-

orm at each stage o a project to enhance the probability o project

success.

Chapter 4 describes the role o the project executivethat is, directly

supervising a project manager. Te responsibilities o a project manager are

described so that an executive can understand the dierent roles a project

manager plays compared with the roles played by a unctional manager.

Te remainder o the chapter deals with specifc task and coaching respon-

sibilities o a project executive at each stage o the project lie cycle.

Chapter 5 describes how the CPO can use quality approaches when

implementing strategy through projects. Tese concepts guide an execu-

tive who is responsible or developing project management competencyand acilitate the leadership team as they make portolio decisions.

Tis executive needs to incorporate input rom customers, employees,

and processes.

Chapter 6 explains the basics o what I is and what it makes pos-

sible. Te chapter also shows how the CIO works with other executives

to defne a strategic I master plan that implements the business strategy.

Te chapter concludes with best practices on when and how to use I

consultants and I vendor companies.

Chapter 7 makes the case or the analysis o both quantitative and

qualitative data in making decisions within your organization. Te chap-

ter provides guidance to all executives regarding how to defne and col-

lect clean and useul data. Te chapter then concisely takes you through a

careul selection o simple yet powerul analysis techniques to use within

your organization to make better decisions that have more impact.

Chapter 8 highlights the key learnings we want you to take away

rom each chapter. We then give you specifc ideas o how to apply what

you have learned in a call to action or your organization.


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Te appendixes in this book are intended or readers who need to

master the undamentals o an area and do not have su cient knowledgeor experience in the area. For example, Appendix B is intended or read-

ers who have little understanding o the basics o I and need to get up

to speed on topics such as hardware, sotware, telecommunications, and

databases. Appendixes are included in chapters 5, 6, and 7.


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Documents

Kloppenborg Chap One