Gaining Financial Visibility & Control

PMOs traditionally focused on execution must now become CFO of all portfolios

Becoming CFO of Project & Program Portfolios to optimize cost and maximize value

Progressive PMOs are moving away from a strictly execution-oriented mindset toward one focused on orchestrating business transformation. In addition to managing execution, they also need to treat all projects and programs as the strategic business investments they are, and take responsibility for maximizing value and optimizing project and program spend.

It's critical to make cost data a first-class citizen

Cost controls must be integrated across the governance lifecycle to ensure that the right cost data is captured at each step in the process. This includes standardizing cost structures and cost centers and defining the interaction and integration with the ERP system. If the goal is to effectively connect the PPM and Finance teams, then tit’s critical to ensure that product, program and portfolio managers have financial data they need at their fingertips.

Improve Cost Estimating / Budgeting

The dirty secret when it comes to cost estimates is that they are usually not worth the paper they are written on. This is primarily because at the early stages of an investment’s life, high level ROM estimates are all that’s asked for. But if financial estimates can be progressively expanded and become more detailed throughout a project’s planning lifecycle, the accuracy of estimates can improve over time. Which is why organizations need to provide support for both top-down and bottom-up budgeting that is aligned with the composition of their portfolio model (e.g. Portfolio -> Program -> project) and execution styles (e.g. Agile / Product based approaches with block funding).

Cost Performance & Tracking

For most organizations, cost tracking and variance analysis is an area that is ripe for improvement. Areas of focus include better integration with ERP systems to pull in actuals, and a more effective interface between PPM and business systems that makes it easier to reforecast costs and streamline / automate the month-end financial reconciliation process. Armed with real-time variance metrics, organizations can visualize cost performance, quickly identify and gain insight into areas of concern and take the appropriate corrective action. The ability to more effectively manage change requests is also key to rebalancing the portfolio with redirects, releases and takebacks.

Moving from Annual Planning to Dynamic / Continuous Planning

Taking an annual view of investments (based on fiscal year) is an approach that might work well for the finance team. But PPM stakeholders require a more dynamic approach which enables them to continuously optimize spend and maximize value across their project portfolio and near + long term roadmaps. Ideally, project managers provide full lifecycle estimates and forecasts so the organization can effectively manage the value / cost (Yield) of all investments. Portfolio managers – armed with the full lifecycle costs and variance analysis – can then effectively rebalance the portfolio at a regular cadence. Maintaining a multi-year roadmap streamlines the annual planning process, enabling the PMO provide to provide the finance team with annual spend projections while still maintaining a multi-year / full lifecycle view.