Effective Portfolio Management Depends on Your People

“All men make mistakes, but a good man yields when he knows his course is wrong, and repairs the evil. The only crime is pride.”  Sophocles, Antigone 

“So many people live within unhappy circumstances and yet will not take the initiative to change their situation because they are conditioned to a life of security, conformity, and conservatism, all of which may appear to give one peace of mind, but in reality nothing is more dangerous to the adventurous spirit within a man than a secure future. The very basic core of a man’s living spirit is his passion for adventure. The joy of life comes from our encounters with new experiences, and hence there is no greater joy than to have an endlessly changing horizon, for each day to have a new and different sun.” Jon Krakauer, Into the Wild 

I have been thinking about the challenges of effective portfolio management and recently attended a related webinar by Don Creswell (www.smartorg.com). As he points out, portfolio management requires decisions involving issues of economics (strategy and priorities) and resources (budget, staffing), as well as executing on and tracking the process (timelines and milestones). Done well, portfolio management aligns the activities of the company with what is best for the company technically, commercially, financially and operationally in both the short-term and longer-term.

The biggest impediment to good portfolio management is found at the intersection of the inherent self-interests of individual project leaders and the company’s reward system. This is especially apparent when trying to terminate projects, but also arises in the selection and resourcing projects. As Creswell points out, it’s rare that a project leader and the team accepts a termination decision as the result of a fair and accurate analysis and even rarer that they come to the same conclusion themselves. The underlying question haunting and holding back these project leaders and team members is, “What will I do now?” and frequently companies don’t provide sufficient answers.

Michael LeBoeuf’s insights in his 1985 book the “Greatest Management Principle in the World” include: “What gets rewarded gets done” and “If things are not getting done, ask yourself - What is being rewarded?” If the “reward” for terminating a large project, is the risk of being declared excess and being laid off, or being seen as a failure and having your reputation as well as your leadership position jeopardized, then it’s little wonder that there is resistance to cancelling projects. We have all witnessed that most projects once started take on a life of their own. Indeed, honest evaluations and reassigning of resources from the weakest projects to the strongest and most strategic ones is rare. Weaker projects maintain an incredible survival inertia even when senior management have demanded termination. This, like the majority of business problems, is a people problem and Michael LeBoeuf directs us to the solution.

For a portfolio management system to thrive, the company’s culture must embrace failure, reward actions that are in the company’s best interest, and have a strong retention process. I won’t go into embracing failure, except to say that failure needs to be celebrated and used as a learning tool in organizations. This was the subject of a previous blog, “‘It’s time to re-evaluate failure’ - Implications for School and Work.”

The corporate reward system has to likewise recognize project failures, not from poor management, poor effort or avoidable errors, but from solid work on a risky endeavour that after some experimentation is deemed unfeasible. After all with no risk-taking there is little likelihood of significant improvements and returns. Salary, bonuses, promotions and even pats on the back need to thus be aligned with strong efforts and learning, and not just success, or very soon only incremental projects will be undertaken.  

Significant efforts and costs are required to find, hire, train, compensate and supervise employees. Once hired, it is in a company’s interest to ensure that employees are fully engaged, and that they receive the additional training and support (budget, staff, information) to achieve their objectives. In the case of project leaders and teams who are impacted by a project termination, they should be allowed to select, be recruited to or be assigned to another ongoing project to which they can contribute, or even be given time to develop a new project proposal. Knowing that they will be guaranteed reassignment removes much of the fear and encourages the desired behaviours. In one progressive instance, three of the project leaders including myself were sent to see an Industrial psychologist near the completion of a major project. We were then each given  a new assignment that was the best fit for the company and our career progression based on this evaluation. 

Embracing failure, rewarding pro-company behaviours and supporting your existing employees can go a long way to reducing the apprehensions project leaders and teams have about their own security and reputation in the face of risky projects. This is the foundation of an effective portfolio management system that is able to undertake risky projects, re-allocate resources as required and terminate projects in the face of better alternatives or a shifting competitive and market landscape.