By Todd McGregor
Forrester's Todd McGregor outlines how organisations can use its new portfolio management maturity model to determine if internal processes need to be reviewed.
The benefit or ROI of portfolio management is correlated with the level of process maturity that is practised; therefore, organisations should strive to increase their portfolio management maturity. Forrester has developed a maturity model for portfolio management based upon the Software Engineering Institute's (SEI) CMMI maturity model concepts.
IT organisations can use this maturity model to assess their own portfolio management processes and determine whether the organisation needs to mature its own processes.
Following the CMMI concepts, the Forrester portfolio management maturity model consists of six levels ranging from level zero through to level five, which corresponds to having no recognisable portfolio management process up through a completely optimised process. Each of the six levels is described in more detail below.
Level 0:Non-existent stage. Projects are managed independent of one another without regard to strategic fit or risk. Projects may employ business cases, but there is no attempt to look at them holistically, and project prioritisation and resource allocation is FIFO based.
Level 1:Initial stage. The organisation has recognised that issues exist that need to be addressed with respect to portfolio management; however, no standardised processes exist. Whatever approach does exist tends to be ad hoc and fragmented. Some benefit begins to accrue here, which can serve as an incentive to try to move to the next level.
Level 2:Repeatable stage. Portfolio management processes have been developed to the point that similar practices are implemented by different people across the organisation; however, the expertise is typically limited to only a few individuals so inconsistencies exist. A standard business case format is introduced but is not yet used by everyone.
Level 3:Defined stage. Portfolio management processes have now been defined and documented, and formal training exists to communicate these processes across the organisation. These processes are not sophisticated but the result of formalising existing processes. Portfolio management is now mandated across the organisation; however, there is no mechanism to enforce compliance.
Level 4:Managed stage. Portfolio management processes are now monitored and measured by management to ensure compliance, and action is taken when processes are not working effectively. There is an effort at continuous improvement to refine existing processes, and limited automated portfolio management tools are introduced.
An effective IT steering committee is now functioning at the business-unit and enterprise level and actively involved in both the project selection and prioritisation process and the formal review of the active portfolio process. Poorly performing investments are terminated early in their life cycles, freeing up resources to be applied to higher-return opportunities. Portfolio performance is measured and reported using a balanced scorecard.
Level 5:Optimised stage. Portfolio management processes have evolved, and the organisation is considered as using best practices. Automated tools have been implemented and institutionalised to automate workflow and provide quantitative analytical support. Portfolio management is an integral component of IT governance, and an IT steering committee actively and regularly reviews the existing portfolio and makes appropriate decisions.
The portfolio itself has been optimised to maximise the business value of the active projects while managing the overall risk to acceptable levels. An enterprisewide PMO functions at a high level, ensuring that process improvements are institutionalised. It provides training and consultative expertise to the organization when it is required.
Todd McGregor is managing director of Forrester Middle East