Currently, governance is a widely discussed topic in many areas. This is the case especially in the area of safeguarding the future, and is thus absolutely necessary in the product development sector. Establishing a portfolio management system as part of company-wide governance is the usual advice both given in consulting and used in practice. But what is the reality? What is the status quo amongst Germany’s leading manufacturing companies? The following chapter deals with these questions.
Widespread acceptance of portfolio governance
In order to learn the primary consensus, each company was asked to answer the open question of what portfolio management governance in product development means to them. The responses show that a wide range of topics falls into this category.
The answers were first sorted into three general categories, in order to provide a better grasp of the subject matter. Our participants understand “portfolio management governance” as follows:
Understanding: operative process control
• Cross-departmental coordination and guidance
• Budget and project approval
• Permanent monitoring according to decision criteria
• Testing and quality assurance
• Top-down and bottom-up planning
• Monthly project reviews and portfolio result control
• Avoidance of “sleeper” projects
• Optimal allocation of internal resources
• Clear decision-making processes in committees
Understanding: organizational role
• Management attention, based in management, executive responsibilities
• Mandatory unit, necessary for centralized voting
• Respective department responsible for content
• Adaptation of corporate strategy two to three times a year
• PPM as an area of marketing / sales for planning and controlling
• Company-wide role also for project management themes
Comprehension: support – consulting – training
• Implementation of portfolio workshops
• Service team for the project leader
• Supply of assessment criteria and controlling
• Derivation from corporate strategic goals to PPM goals
• Definition of processes, roles, policies, structures, and corporate elements
The domination of centralized and interdisciplinary placement of PMO in the corporate hierarchy.
The centrally important organizational role during the implementation of portfolio management is the institution of the PMO (Project / Portfolio Management Office). According to general consensus, and specifically the PMI (Portfolio Management Institute), the PMO plays a crucial role in the implementation of portfolio management processes. We wanted to ascertain where exactly the PMO stands in relation to project development portfolios, and which activities and responsibilities are allocated to it. Interestingly enough, evaluation shows that a highly ranked position, high levels of activity and a large responsibility coincide very strongly with high maturity in the entire project portfolio management.
Approximately two thirds of the companies name PMO as a centrally and interdisciplinary aligned function. Seen from the perspective of total maturity, condition for a good or very good ranking of the participant is the highly ranked position of the PMO. In other words, all top ten participants have a highly ranked PMO.
Controlling instead of service – Activities and responsibilities of the PMO
Foremost amongst the activities and responsibilities of the PMO are the organization of processes and the definition of project categories. When categorizing the answers of the participants, functions relating to an understanding of controlling within the companies dominate, whereas aspects relating to a service team for project leaders are mentioned less often. The controlling relationship applies to two fields: on the one hand, the creation and communication of basics, such as consistent definitions, and on the other hand, the practical implementation of portfolio processes in their respective rhythms.
A look at the best
In this context, it is interesting to observe the best performer in this discipline, who is ahead of the competition not only in terms of governance. Our best performer states that a company-wide, accepted, and centralized PMO has long since been established. As well as concerning itself with organizational assignments, such as project harmonization and the definition of consistent project criteria, it supports the communication of strategy, secured quality standards, and sees itself operatively responsible as a controlling function and portfolio process owner. A continuous improvement process takes place in a structured and disciplined manner, in accordance to international quality standards (ISO 9001), guided by internal and external benchmarking, targeted analyses and studies, as well as with “lessons learned” and feedback processes, especially after completion of highly strategic projects.
Strategic Buckets? Classic product line sight most widespread
The view upon the essential strategic fields of development should lead to a clear alignment of attention, budget allocation, and risk management. While the “strategic buckets” system suggested by Robert Cooper, in which money is consciously put into “pockets”, can be found in practice, it seems to be executed in a very conservative manner. Product category-based perspective dominates, such as production series, platform, or module, and project types, such as new product, further developed product, or fundamental research.
However, categories common amongst all companies are not to be found. The standard concepts of strategic consulting does not seem to have found their way into portfolio practice yet. Conversely, no extraordinary or multidimensional perspectives, which supply analytically exciting and inspiring insights, were named.