Constrain first or constrain last when populating a project portfolio?

WhichCameFirstThe essence of portfolio management is deriving the best possible outcome for the organization given that there are finite resources such as funding, time or capacity of skilled staff. These constraints will limit how much value can be realized hence the criticality of identifying the right set of projects to optimally consume resources such that there is neither over nor underutilization.

While there are many ways in which a project portfolio can be constructed (including accidental), once a leadership team institutes some standard practices for portfolio management, a decision needs to be made whether to constrain first or constrain last.

Constrain first approaches limit the usage of constrained resources either at an organization-wide level or at a lower level such as functional area (e.g. marketing, HR, IT) or portfolio classification (e.g. new business development vs. regulatory). A number of project proposals are developed and submitted taking one or more constraints into consideration – once a constraint has been reached, no further proposals are developed.

A benefit of this approach is that it cuts your coat according to the cloth by reducing the likelihood of the organization over-extending itself or by letting expectations get set that more can be accomplished than is possible. While the latter might not seem to be that big a deal, it is often a root cause of stealth projects – if an executive gets their hopes high that one of their pet projects can be funded, when the rug gets pulled out from underneath them once a finalized portfolio plan is approved they might still attempt its execution which could divert scarce resources away from higher value projects.

The downside of this method is that it assumes that constraints are static. When economic or other internal or environmental conditions change, there is a scramble to address the change which causes delay and incurs opportunity costs.

Using the constraint last approach, a full slate of projects for the planning horizon (e.g. three to five years) is developed and refreshed frequently. Based on high-level estimates of benefits, resource requirements and other criteria, a constrained optimization model can be created.

A key benefit of this method is that it supports a dynamic approach to portfolio management. Should a particular constraint becomes less of a limiting factor a quarter or two down the road, there is already awareness of which projects are on deck and little time is lost in being able to exploit the additional resources. It can also helps the organization evolve beyond a short term shopping within a budget mindset to one of developing project roadmaps aimed at delivering more strategic outcomes.

Neither approach is always correct – organization context and culture has to be taken into account. However, it is a key decision to be made when developing portfolio management practices.

 

 

 

 

Categories: IT Governance, Project Portfolio Management | Tags: , , , , | 2 Comments

Post navigation

2 thoughts on “Constrain first or constrain last when populating a project portfolio?

  1. Pingback: Constrain first or constrain last when populating a project portfolio? – Better Time Management

  2. Pingback: Constrain first or constrain last when populating a project portfolio? – Kolejna strona oparta na WordPressie

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Blog at WordPress.com.

%d bloggers like this: