Strategy for the IT department is either identical to the company’s overall strategy, as in the case of a software development firm, or it is directly in line with the company’s goals. IT’s spending practices also need direct ties to these global strategies.
However, IS or IT shops most often spend money on specific projects or other directed efforts, which do not always line up with strategic documents. If your organization is not sure of how its resource allocation is stacking up against stated strategic aims, you need to take a hard look at your spending practices.
The first step in evaluating the strategic viability of your IT spending is getting a solid inventory of your projects. I don’t mean just the ones that you can name off the top of your head; I mean all the projects underway in your organization. I’ve worked with dozens of companies, and I can say with some confidence that if your organization has more than 20 people, you don’t know about all ongoing projects—unless of course you already have a strong PMO (Project Management Office) or project portfolio process in place.
Some projects always seem to sneak under the radar of managers at the top. These skunk works can be too small to be thought of as “real” projects, and so they glide along, taking up resources here and there but never having official sanction. These allegedly small efforts can often add up to large amounts of time, effort, and money when viewed as a whole. In more than one case, I’ve seen a company take stock of these projects for the first time and discover that the level of effort being expended on these “invisible” projects was roughly equal to the amount of effort on serious projects in the organization, which—not surprisingly—were short of resources.
If you don’t have an enterprise project management system, making an inventory of all your projects can be as simple as using an Excel spreadsheet that captures the project name and its cost. Gather project info from your suborganizations. Make this inventory an agenda item at every staff meeting until you are confident that you have the complete list. Medium- to large-size companies can often spend weeks gathering such lists, depending upon the complexity of the organizational structure, so don’t be surprised if this is not an overnight process.
Once this key inventory is complete, you’ll need to tackle these next steps in the strategy alignment analysis.
Put your projects into strategic "buckets"
Your company’s strategic objectives are usually expressed in bulleted points. Use each of these bulleted points as a “bucket” and put your team’s distilled objectives into each one. Now place each of your projects into one of your team’s strategic buckets. It’s perfectly valid if some of your projects don’t fall into any of the buckets. Don’t force projects to fit. Remember, the value of this exercise is to get an honest accounting of where your project money goes in relation to the stated objectives of the organization.
Let’s assume a company has three main strategic goals:
- · Increase customer satisfaction
- · Increase product market share
- · Increase employee satisfaction
To complete an alignment project, the company would decide which goal was being served by each of its projects. If it finds that 85 percent of its project dollars are being spent on increasing market share, while only 5 percent are being spent on customer satisfaction, then a realignment of project priorities may be in order. A common outcome of such an exercise is finding that a significant portion of project dollars is being spent outside the stated goal areas.
If you’ve stepped through an inventory process, you’re likely wiser for it. You have either confirmed that your spending on projects is in pretty good alignment with the organization’s strategic goals, or you’re trying to figure out why you’re off target. Either way, the job is far from over.
If you’re out of alignment, you obviously have some continuing work to do. Even if you found that you’re in good shape, this shouldn’t be the last time you do this exercise. Strategic alignment of your project portfolio is a continuous process that should start at the very earliest stages of the project lifecycle.
A key next step will be examining projects that are out of alignment and deciding what to do with them. Here are a few factors you’ll need to consider for each of these projects:
- · What will this project produce?
- · Will this project provide a useful benefit for the company, even though it is not in strategic alignment?
- · What is the ROI for the project?
- · How far is the project from being complete?
Based on these factors and others, you may decide to continue the project or you may choose to cancel it. But be careful with trying to balance your portfolio of projects too quickly. Even if your mix of projects is out of alignment, that does not mean you need to cancel all misaligned projects.
Getting your portfolio in balance is not something you want to do all at once. Many of the projects you find to be out of alignment with your strategy may still provide plenty of value—that value just happens to be in a different area than your company’s strategic objectives. You may even decide to continue all current projects but move to modify the process by which projects get approved, so that each initiative gets a closer look before it gets started.
This is the true long-term value of portfolio management: making sure that only the right mix of projects make it through the evaluation process and actually launch. Not every project needs to fall into one of the strategic areas you define. But how the projects line up against this strategic yardstick can be an important measurement of how you are spending project dollars to further your company’s strategy.
This brings us to the other side of the portfolio balance issue. The exercise of inventorying your projects may bring projects to light that fit strategically, but are now deemed to be too unimportant to continue. This heightened awareness of projects is the biggest benefit of this exercise. You have to be open to the possibility that just because a project lines up with your strategy, the project doesn’t necessarily need to continue. It’s perfectly valid to kill a well-aligned project in favor of continuing a project that is not as well aligned but will provide a bigger benefit or ROI for the company.
Remember also that the inventory-analysis-action cycle for your project portfolio is not a one-time process. Many companies make sure it happens monthly or quarterly. However, many other organizations are starting to use software such as Microsoft Project Server 2002 to fold inventory evaluation into the everyday process of project management. Such software also provides great reporting tools for examining how projects line up against strategy, business priorities, and other important criteria. However you decide to work this process, it’s important to start it up and keep it going.