Change portfolio management office - Julia Hodkin

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Change Portfolio Management Office CREATING AND MANAGING A CHANGE PORTFOLIO

Public Use

21st April 2015

Julia Hodkin

Background to YBS Group

Change Landscape

Structuring the Change Plan

Understanding the Risk Profile of the Portfolio

Risk Based Change Management

Governance

Assurance

Contingency Planning

Resource Allocation

Understanding the Value Profile of the Portfolio

Prioritising and Re-prioritising the in flight Portfolio

The “Air Traffic Control” Function

Contents

In 1864 the Huddersfield Equitable Permanent Benefit Building Society was founded in Huddersfield, and

expansion through a series of agreed mergers, predominantly with the Bradford Permanent Building

Society in 1975, has seen Yorkshire Building Society evolve into the national building society that it is

today.

In 1992 YBS took over the Sussex-based Haywards Heath Building Society

In 2001, YBS merged with the Gainsborough Building Society

In 2008, YBS merged with the Barnsley Building

In 2010, YBS completed the merger with Chelsea Building Society

In 2011, YBS merged with what was then the ninth largest building society at the time, Norwich and

Peterborough

Also in 2011, YBS announced it was buying the Egg savings and mortgage business from Citi in a deal

worth £2.5 billion

Accord Mortgages is also part of the YBS Group

Ambition to grow from £37bn of assets to £50bn by 2019

Background to YBS Group

Whilst change has always been a constant requirement in business the pace at

which it must be executed has escalated dramatically in the last 5 years.

Some facts:

Volatility of business margins has more than doubled since the 1980s, with more than half of the

most turbulent fiscal quarters over the last 30 years occurring in the last decade

The formally strong correlation between market share and profitability has faded sharply

Those able to react rapidly and effectively to threats and opportunities are the ones able to exploit

the windows of opportunity for profitability whilst less agile competitors play catch up

What this meant for YBS:

Companies are either growing or dying, so:

YBS needed to act immediately to mitigate existing risk

YBS wanted to act immediately to enable achievement of it’s growth ambitions

If YBS can respond more quickly and effectively to threats and opportunities - without destabilising its

BAU activities - it could gain significant competitive advantage in the current business climate

…Competitive Advantage Through Change Excellence

Change Landscape

Change Landscape

…Competitive Advantage Through Change Excellence

5 Year Plan:

1. Articulated the Business Outcomes that were required – e.g. Customer offerings such as new product

launches, Regulatory/Legal position etc.

2. Articulated the Business Capabilities that would need to have been established in order to enable the

business outcomes – e.g. Strategic technologies, Organisation structure, Staff competencies etc.

3. Defined the projects and programmes that would be needed to deliver the capabilities.

Structuring the 5 Year Change Plan

The Annual Portfolio Plan:

1. Categorised by type – Regulatory, Infrastructure, Productivity, Growth

2. Grouped by ‘Theme’ – Customer experience, Financial performance etc.

We needed to understand:

1. The complexity of what we wanted to do

2. The risks associated with it

3. The inter dependencies

4. How we would prioritise the work

Understanding the Annual Portfolio Plan

Value Parameters

- Financial

- Benefit confidence

- Strategic Importance

- Customer Impact

- Enabling/Capability

Weighted by Category

High Low Feasibility

Feasibility Parameters

- Complexity

- Robustness of Solution

- Business Capability

- Delivery Capability

- Customer Impact

Can be used:

- During the Portfolio Planning round to:

- Perform a coarse first cut of the most/least desirable projects

- Determine whether we are selecting a portfolio that carries a

level of risk that is outside our appetite

- During the year at Change Board to:

- Determine whether NEW projects are worth starting

- Determine when new projects can start dependent on what

skill level resource they require

- During the year at Change Board to determine whether

resources should be reallocated from a low value project to a

higher value project

High

Low

Value

Risk Profiling

Lower Than

Average Risk Average

Risk Higher Than

Average Risk

25% of

Portfolio

25% of

Portfolio 50% of

Portfolio

Feasibility

Low High Risk

Low High

Assume that in general

terms a portfolio of change

has the following ‘bell’

profile:

• c. 25% are Higher than

average risk

• c. 50% are Average risk

• c. 25% are Lower than

average risk

High Risk Average

Risk

Low Risk

High

Low

Value

2015 Portfolio Risk Profile

Lower Than

Average Risk

Average

Risk

Higher Than

Average Risk

Feasibility

Low High Risk

Low High

High

Low

Value

What is the Company’s risk

appetite?

Align the governance and

controls to the risk appetite

of the company


On projects of ‘average’ risk there is a balance point between the amount of risk they carry

and the amount of controls applied to the project to reduce the risk of failure.

To apply more control would potentially reduce the likelihood of failure but the costs of the

controls may outweigh the additional benefit they bring.

Similarly too little control would expose the project to a greater chance of failure.

High Risk

Low Risk

Too much control…

Cost of control > Cost of failure

Too little control…

Cost of failure > Cost of control


High risk projects demand

greater control to balance the

cost of failure against the cost

of control

High

Risk

Low

Risk

Low risk projects demand less

control to balance the cost of

failure against the cost of

control

High

Risk

Low

Risk


High

Low

Value

Gold Standard

- Risk reduction Profiling implemented

- Full Communications plan required

- Weekly status reporting

- PM capability level – Senior Project

Manager

- Governance compliance must be 100%

Hig

h R

isk

Risk Based Governance

Bronze

Standard

Silver

Standard

Gold

Standard

Silver Standard

- Risks – will include contingency plans

should the risk become an issue

- Fortnightly status reporting

- PM capability level – “intermediate”

Project Manager

- Governance compliance >80%

Bronze Standard

- Risks, Issues, Dependencies,

Assumptions and Lessons management

- Monthly status reporting

- Key mandatory documents such as

Project Definition & Architecture

Definition Documents

- Basic Comms plan

- PM capability level – “Junior” Project

Manager


High

Low

Value

Gold Standard

- Scheduled Health Checks

- Attend All Stage Gates

- Mandatory Quarterly Self Assessments

- Scheduled Deep-dive assessments

Hig

h R

isk

Risk Based Assurance

Bronze Standard

- Event driven Health Checks

- Pass stage gates by self certification

and validation from CPMO Hub

managers

- Voluntary self assessments

Silver Standard

- Event driven Health Checks

- Attend key stage gates only

- Quarterly self assessments

recommended

- Event driven Deep-dive assessments

Additional scrutiny

via ‘spot checks’

Silver

Standard

Gold

Standard

Bronze

Standard


High

Low

Value

Gold Standard

- 45% Starting provision??

Hig

h R

isk

Risk Based Contingency Management

Bronze Standard


Silver Standard


Silver

Standard

Gold

Standard

Bronze

Standard

Initial Contingency determined from position on graph. As the project moves through it’s lifecycle the more secure the

financials become and the need for contingency reduces. Therefore as a project presents to Change Board at specific

funding gates, then the contingency provision can be reduced and be made available for other projects

For the High Value and Medium-High Risk Projects you need to use the most highly skilled change resources available

For the High Value but Low Risk Projects any surplus highly skilled PMs can be used, or if they adhere fully to the required

Governance and Assurance frameworks, then a fully trained BAU resource could lead these projects.

For the Lower Value but Low Risk projects a BAU resource could run these without having to follow the Governance or

Assurance frameworks as the cost of enforcing them may negate the relatively low value the project is delivering

For the Low Value and High Risk projects no resources should be allocated


High

Low

Value

Risk Based Skill Allocation

DO NOT DO

Highly Skilled

Project &

Programme

Managers

Skilled

Project &

Programme

Managers or

Trained BAU

Resources

BAU

Resources

The Value Profile


High

Low

Value

High Value

Average Value

Low Value

The Value Profile is specific to each individual Company. It can include fiscal measures such as scale of investment cost,

payback period, ongoing cash flow, certainty of benefit, scale of external expense etc. but it can also include non-fiscal

benefits such as risk avoidance, customer impact, reputational enhancement, etc.

In FS clearly compliance with FSA and PRA requirements is a hygiene factor which has value. This is not relevant for a

media-based company or a component manufacturer.

A company which is on the point of a merger, flotation or which has significant cost base challenges will not want to

spend money on external fees which create a direct impact on the P&L. Therefore type of expenditure required could

be a key parameter.

What does “Value”

mean to your

Company??

Speed of payback??

Scale of payback??

FSA Compliance??

Net Promoter Score??

Technical risk

avoidance??

Internal only

expense??

Re-prioritising In Flight Projects


High

Low

Value

This High Value project

is Amber and

forecasting Red. It

utilises some of the

same resources as a

lower value project

Delay or put on hold

the lower value project

in order to redirect

resources to the higher

value project

We can look to prop up ‘at risk’

High Value outcomes by seeking

out lower value projects to defer

or put on hold in order to re-

allocate resources to key projects.

Prioritising New Projects


High

Low

Value

New project coming to

Change Board –

indicating its of high

value and of medium

feasibility.

Implications are you

would need a very

skilled PM or

Programme Manager,

and Gold standard

governance and

assurance


Change Board –

indicating its of high

value and of medium-

high feasibility.


would need a skilled

PM, and Silver standard

governance and

assurance


Change Board –

indicating its of low

value and of medium

feasibility.


would want to question

whether this project is

something you would

want to invest in.

We can also make better

investment decisions and prioritise

the order in which projects are

started dependent on the value

they drive, and the type of

resource they require.

For example we may choose not to

start a valuable project for 2 or 3

months in order to allow one of

our most skilled PMs to roll off a

project they are finishing and be

available to run the new project.

We may also choose not to start a

project if it does not drive enough

value, especially is resources are

already stretched AND/OR we have

a significant amount of risk still in

undelivered projects which may

require contingent resourcing.

Implementing tools and processes which increase objectivity and transparency brings with it challenges:

Gaining Stakeholder buy in and input to:

The principles

The parameters

The weighting

The ‘moderated’ final model

Resistance from Sponsors to having to justify the drivers for ‘pet’ projects

Conflicting priorities and values of Stakeholders

Effort required to complete:

The initial modelling exercise

The refreshes each time a project raises a Change Request or Funding Request

Modelling Challenges

Take-off “Defining the flight path and

launching the planes with a safe

flight plan and everyone on board”

Flight “Making sure the planes reach

their destination intact and on

time whilst optimising capacity;

managing turbulence and shocks

Landing “Controlling descent and making sure

the runway is clear, the terminal is

ready and people disembark safely”

The Air Traffic Control Analogy

Delivering a transformation requires control analogous to air traffic control: reputations are dependent on

successful outcomes; you have to know where you are going and when you need to arrive, with a plan to get

there; there are several stages - take-off, flight and landing – and all have to be done well for a successful

outcome; each stage is fraught with risk, so everyone has to work together in harmony and with discipline

towards a successful outcome; you need to be in control at all times (and know you’re in control); and you need

a clear runway to land.

Done well ATC will allow the Change Board to effectively govern the Portfolio resulting in improved

decision making and increased confidence in delivery – we will be in control

What is ATC?

The Change Plan

Sets out the journey to 2019, reflecting business strategic priorities with a clear view on dependencies &

outcomes

The Portfolio Plan

Sets out the schedule of projects and programmes to manage and control

the delivery of change

The Business Impact Plan

Shows the aggregate change from a Business perspective, including

readiness and release scheduling

The Benefits Plan

Shows how the benefits anticipated at the start of the journey will be

delivered in practice

The change journey to achieve 2019 outcomes is complex and difficult. Understanding and

navigating that journey can be much easier if we focus on 4 key components to ATC. Getting this

focus and sustaining it will substantially increase our chances of success

The 4 Components of ATC

The Key Steps YBS Group has taken in structuring and controlling it’s Change Portfolio are:

Understand the Business Outcomes required

Determine the capabilities needed and the projects to deliver them

Understand the risk and value profile of the portfolio

Align governance and assurance with the Business’s risk appetite

Understand what Value means to the Business

Constantly re-assess the value and risk of projects as they move through their lifecycle to ensure

focus remains on the most valuable ones and that controls are proportionate to risk.

Use the ATC function to constantly review the threats and opportunities for the Portfolio

Summary

Questions?

Education

Change portfolio management office - Julia Hodkin