Those of us that have been concerned with improving companies’ returns on their investments in technology have advocated portfolio management disciplines for years.
The track record for these, where the approach has been tried, has been excellent. Companies have come to learn the core lesson: invest in those who deliver on time and on budget, even if the stated return on investment (ROI) in their business case is lower than for other activities.
The principle that underlies this thinking is simple: a delayed result, or an over-budget result, hasn’t delivered the stated business case in any event.
In many cases, even 10% slippage and/or a 10% cost overrun can undo any benefits expected.
In the typical company, I observe that most efforts miss their targets by at least this amount, I are not surprised that bottom lines repeatedly fail to show anything resembling the results the project plans of the organization would suggest. (Incidentally, this is as true of non-technology projects as of technology ones.)
What CIOs who have made portfolio management work learned was that the words “no” and “stop” are key parts of the vocabulary — and that you have to be prepared to use them.
Not to analyse further, not to accept the excuses and pledges to do better: simply stop pouring more money down the same hole and use the funds to do something else.
The person in charge of an effort who knows that a hour’s discomfort in the reporting session is all that will really happen to them is not prepared, before the crisis occurs, to do what is needed to avoid it.
The person who knows that the game will stop and they will left with nothing — and no immediate way to “save their game” — will be far more diligent about (a) thinking through what they’re doing before they propose it and (b) executing once they’re underway.
That, by the way, is as true for the sponsoring business executive as it is for the project manager.
At no time more so than when times are harder to predict and more likely to throw up unwanted obstacles is there a premium on delivering results.
But the discipline to do this does not come automatically. Company leadership must make it happen, by raising the stakes, in precisely the way portfolio approaches drove real results from technology investments in those cases where CIOs put everything on the line with the business and made things happen — or stopped the spending.
There are some rules of action you should take into account in making the transition:
An item delayed is an item that cannot deliver as per the original expectations.
Returns on Investment (ROIs) do not float freely in the world; they are tied to the company’s quarters.
If you expected cash to flow in at a certain point, cash must start flowing out into the project on schedule or it simply can’t happen.
Your overall portfolio of activities must therefore reflect reality: all the 20%+ ROIs in the world are meaningless if you delay starting execution to the point where no return can actually be obtained.
Any activity which has seen its projected return this year fall below your clip level (the minimum return required to be considered) is suspect.
Its leader must be expected to explain how to get it back on track, and without delay.
The activity could be as easily below the return mark because of delays (so spending has been low, but so has action), as because of unanticipated expenses, extra overtime or other cost issues.
The review’s purpose is to determine whether to stop the activity for being poorly planned, or to crack the whip on execution. (I had the opportunity to see 11 different situations one year recently where the key players in the business for the top priority activity wouldn’t make the time to meet more frequently than once/month, with little happening between meetings. Such behaviour is intolerable when returns are on the line.)
Any activity that has moved into a loss-making position (i.e. the projected first year return following delivery has been wiped out, or the point of positive payback has been deferred by a full year) is a candidate for immediate termination.
Only under exceptional circumstances should something continue at this point. (I note that many of the $100 million range consulting and integration projects that are taken on would fail this test — which from the point of view of business health suggests the firm in question should be cashiered early, when the warning signs are first visible.)
In general, if the organization (yours or theirs) cannot execute, it should not be entrusted with project monies that, essentially, will be wasted.
What this will end up meaning for many firms is a very rude culture shock.
Meanwhile a few managers will excel: they will deliver.
Deploy your investment funds toward them, and toward “sure things”: infrastructure refresh within the firm, for instance, with a known cost reduction attached, may not be exciting or worth more than a few percentage points’ ROI, but it is highly likely to be achieved — and +5% is better than 0% (or, if you’re not stopping failing efforts, -10%, -15% or more).
We have, over the past decade, found innumerable reasons to delay, ranging from “no time to meet” to “wait a few weeks until we see how the quarter is shaping up”.
Turbulence calls for decisive execution: when it is time to move, you move.
Breaking these cautious and accepting-of-failure attitudes will take several rude, sharp shocks.
You’re the one in charge. Who else is going to deliver them?