PMO Directors Series: Program and Portfolio Management

Program and portfolio management is mostly about governance and strategic alignment as the organization’s work grows and becomes more interdependent and complex. It’s about understanding and continuously evaluating the prioritization of investment in (and throughout) the organization.

In a tech product company, one way to organize the product delivery teams is into programs aligned with the products and the investment/value streams.

Organizing by product and investment streams allows for the following benefits:

Streamlined Investment Management – Clear lines of investment allocation to each of the streams, which provide a simple way to assess the investment mix. Portfolio decisions can be made by deciding whether or not to increase or decrease investment in an existing stream and/or spin up a new stream. It’s easy to report on the level of investment and also have something to tie back at a high level on return on investment.
Program Leadership and Enablement – Product delivery teams working within a program have a unifying factor and appropriate governance for cross-team decisions, e.g. what code base to use, efficiencies in tooling, and anything else that needs to have some level of consistency. Training is another example – if training is required for the product delivery teams, the program leadership team can ensure that training needs are thought of holistically across the program. What I recommend is setting up a program leadership team made up of individuals from all the functional groups, which serve in some ways as a steering committee and enabling team. It’s this program leadership team who will decide how/when to use any additional investment and/or manage any investment changes; such as the number of teams the program needs to reach the overall program goals and outcomes.
Unifying Program Goals and Outcomes – Program goals and outcomes can be established, along with KPIs, for the program leadership team to work to achieve by enabling the individual teams. The program leadership team can also be a resource for the individual product delivery teams to leverage when they’re faced with a challenging situation, need guidance and/or need help making a decision and vice versus, the program leadership team can invite the wisdom of the teams.
Portfolio Connection and Representation – for organizations with multiple programs, the program leadership can work with the portfolio leadership on program needs, challenges, investment results, and other discussions and decisions. The program leadership can also share what the product delivery teams are learning and work with the portfolio leadership to make any changes – for example, let’s say that a product delivery team is learning that there isn’t a market for a new product by invalidating the early assumptions. The program leadership can share that back with the portfolio leadership, and that may change corporate strategy. Because the program leadership serve as representatives of the individual product delivery teams, the product delivery teams are able to continue to focus on their work. By understanding the portfolio-level goals and outcomes, the program leadership can not only set goals and outcomes for the program, but also goals and outcomes for the individual product delivery teams, and adjust as necessary. All goals and outcomes need KPIs.

Note: if the organization is small and there’s only one program, all the items in the portfolio connection section would apply to the program leadership to work with the appropriate company leadership.

You’ll notice that I started at the lowest level and worked my way back up because the emphasis needs to be on the product delivery teams, not the top-down command-and-control of the portfolio leadership. Information is flowing in both directions.

What’s most important is alignment to overall strategic goals and understanding of the investment mix.

Alignment to Strategic Goals

A company usually has a list of high-level goals for a particular timeframe, which sets the framework for how those goals and strategies cascade through the system. In the model above, the portfolio leadership would decide, together with program leadership, if the current investment mix is set up to support the achievement of those goals and outcomes, and if not, work with the company leadership to make necessary changes.

Program leadership would then work with the product delivery teams to adjust their goals and outcomes accordingly.

Throughout this, it’s important not to speak in features; that’s the “how” for the product delivery teams to figure out using Discovery and Delivery processes to meet their goals and objectives and “move the needle” on their KPIs.

In addition, there is some governance required to ensure that product delivery team goals and outcomes are aligned with the company goals and outcomes.

Understanding the Investment Mix

We’ll get into budgeting in a later post, however, as the PMO Director, one area where you can support this is by maintaining visibility of the level of investment for all the product delivery teams – at the individual level, the program level and the portfolio level. If you don’t have access to salaries, just use headcount counts to get a sense of the allocation. This is powerful information for the program and portfolio leadership to have insight of where the investment is going and you can work with them to make any adjustments/re-allocations.

When reporting investments, the lowest level to report is at the team-level. If you go down to the individual level, it will continue the mindset that individuals can be split across teams and that the goal is 100% utilization of all team members all the time.

Ideally, you’ll have a strong product person with you to be able to model some return on investment based on the value that was provided to the customer. For example, back to my example of a team working on the Sign-Up Funnel. Let’s say that the team increased conversions by X%, we can then determine that the impact was an increase of Y% subscribers, adding Z dollars to revenue – think of yourself working with them almost like an investment fund manager.

Business Cases

I used to love the simplicity of the concept of a business case. Isn’t it great that we can know up-front how much something is worth, and we can determine an ROI, which can be used to determine if we move forward with an idea? It sounds so logical and elegant!

Like most things, that’s usually not how it plays out. I’ve observed groups spending weeks and months determining the perceived value – getting their analysis down to the exact penny because they were afraid to be wrong. I appreciated their thoroughness and thoughtfulness – why wouldn’t I, I wanted an accurate estimate too, right? Eventually, months later, we’d have something, and then we’d get to work.

Then I had the opportunity to work with a business leader who would create business cases so quickly – usually within a few days. I was amazed and surprised – I thought, wow, this person must really get it, and I had to know their secret! One day I asked her, and her response was: “Oh, I’m just guessing, no one really knows for sure until we start testing and getting feedback from the market, but I feel confident enough to start testing my ideas. Plus, no one ever goes back and looks at those estimates once the work is done – and even if they do, the estimates are going to be wrong.”

That was another “aha” moment for me because there’s a mindset associated with ROI assumptions and budgets. Let me explain:

If, accordingly to a (likely incorrect) business case, a certain piece of work can bring in an exact $XMM, then the team is going to work with the assumption that it must be right, and if they’re finding that this outcome is not necessarily likely (based on their knowledge and learnings), they will probably be afraid to raise it and everything will be deemed a failure, instead of just calling off the work after the initial learnings and investing in the next opportunity. So much waste and opportunity cost is generated.
On the flip side is the mindset that happens with budgeting for projects. When a project is initiated, a budget is established. Let’s say it’s $YMM, well, the team is going to work to spend all of the $YMM (most likely unnecessarily, which usually results in a Death March project). The product delivery team model allows for a continuous investment toward outcomes. The “budget” mentality doesn’t exist – the team is continuously working to achieve their goals and outcomes. The mindset of investments into validating/invalidity hypothesis can be much more beneficial when making this shift.

Just like estimates, determination of ROI is a best guess, so the sooner those guesses can be tested, the faster the organization better understands how to adapt and adjust any investments.

As the PMO Director, you can work with the organization to create these lightweight governance frameworks, establish expectations and provide clarity of how all the various groups work together as part of the whole.

As always, would love any feedback and of your own “aha” stories.

Next, let’s get into Budgeting and Capitalization.

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