Defining your change portfolio and plan

Let’s face it, we’ve all been there. You’ve got to the end of your annual planning round (OK, it took you to the end of Q1, but no-one seems to have noticed!) and you have a budget and a list of change initiatives, but the outcome still feels rather unsatisfactory. Even more irritatingly, it feels just like last year! Why is that? What is the problem?

• Priorities being determined, not on any judgment of value, but by whoever shouts the loudest
• No clear change plan that demonstrates that the overall portfolio is ‘doable’ and that defined programmes can be delivered in line with expectations
• An overly detailed approach, so the real ‘shape’ of the portfolio becomes difficult to envisage
• Ineffective governance meetings that the key stakeholders consequently avoid.

These examples reflect just some of the common issues, but there are plenty more. So, if these frustrations come up year-in-year-out, how do you break out of this vicious cycle?

The first thing to do is to break the problem down, allowing you to take a more measured view of how the planning process needs to work.

Planning components

We need to start by recognising an underlying fact: A budget is not a change plan.

Knowing money is set aside is one thing, but a plan needs to reflect priorities, estimates, schedules and ‘do-ability’. Ultimately, portfolio planning is about doing two things:

• Defining the unconstrained portfolio, namely, the prioritised change initiatives that you want to fund and deliver in an ideal world, i.e., determining the right investments
• Building on this to determine the constrained plan, namely, how the portfolio needs to be finessed to create a demonstrably deliverable change plan, i.e., ensuring the right investments can be delivered in the right way.

Throughout the planning process, ask a few key questions: How can I reduce the number of moving parts being planned? If I only had a single page of analysis, what would it look like? And so on…

The unconstrained portfolio 

So, let’s consider some of the key points to think about when creating the unconstrained portfolio.

First up is to think about the factors that drive the priority of the portfolio. Typically there are four:

1. Non-discretionary change: there will be some changes where there is no choice – you have to do them. Typically these might include regulatory change, or “keeping the lights on” spend
2. Strategic fit: the degree to which a change fulfils a defined strategic imperative – e.g. cost reduction, product or channel strategy
3. Financial value: the strength of the business case
4. Risk: the delivery and implementation risk of the change.

It is not unusual for organisations to undertake laborious prioritisation scoring along these lines, attempting to ascertain the relative merits of each and every change against these factors. These exercises can pretty quickly fall foul of the law of diminishing returns; there is often a simpler approach, achieved by categorising changes and aggregating them where appropriate:

• Assess strategic programmes individually – and maximise available budget for strategic spend by scrutinising other areas
• Assess regulatory changes individually, if only to ensure they are truly non-discretionary – and not being used as a “cloaking device” for discretionary items
• Aggregate “keeping the lights on” changes into “hopper” line items; in effect you are buying and prioritising capacity, but there is no need to be concerned with the detail at this stage
• Similarly create “hoppers” for discretionary projects and enhancements – again, you are buying capacity, but need not be concerned with individual changes
• Set aside spend for advisory-type work — typically analyst time to shape future investments.

In this way you can significantly reduce the line items being prioritised, making the process more straightforward and the outputs more meaningful. There are other tactics to consider too:

• The last person to ask to prioritise a change is its sponsor. Instead, create a bit of objectivity by identifying owners for each factor (regulatory compliance, cost reduction targets) and ask them to assess each change as to how it helps them deliver their agenda
• Ensure that the rules of prioritisation resemble the measures being used to incentivise the executives involved. You would think they would be the same, but they often aren’t
• Finally, only use prioritisation scoring for discretionary items. You know you have to do the non-discretionary items, so don’t waste time analysing them.

Using this process, you can come up with the unconstrained portfolio. In effect a validated list of non-discretionary change and a prioritised “squash ladder” of discretionary initiatives.

So, now you know what you want to do, but can you do it? This is where the constrained plan comes in.

The constrained plan 

There are four essential elements of the constrained plan:

• The estimation of effort comes in two forms:
  a) Resource forecasts for in-flight projects, programmes and hoppers: these need to be assured as being both complete and accurate
  b) Demand modelling to create a top-down resource forecast for the entire spend. Inevitably this may be rather high level, but the key is to ensure that the entire spend is estimated to some degree
• The resource strategy indicates those skills that should be sourced internally or externally via consultancies, contractors or outsource providers. The right approach is typically driven by the pattern of demand levels (sustained vs. volatile) and nature of the skills (critical to the business vs. commoditised)
• The supply plan is the net effect of the resourcing strategy – the overall resource capacity created given the budget available
• The change plan is a where the planned change initiatives are scheduled, phasing them over time in line with priorities, dependencies and recognising resource constraints.

Normally, there is a given sequence to how the plan is laid out:

1. In-flight initiatives first, especially those late in the delivery cycle
2. Then add in any deadline-driven regulatory changes
3. Then plan in all major regulatory and strategic programmes
4. Finally add in all other items, including “hopper” items, smoothing their resource profiles around any apparent resource peaks already in the plan.

Inevitably, after the first attempt the initial plan profile may exceed available resource capacity. The plan can usually be rendered ‘doable’ through two combined actions:

• Increasing resource capacity through use of external resources whilst working within budget
• Re-phasing the plan to work within resource capacity constraints.

The overall plan 

Finally, the overall plan needs to be tested to ensure it is appropriately balanced. These balancing tests come in many forms:

• Are the identified priorities still reflected?
• Is there an appropriate blend of projects and programmes in terms of scale? You may want to spread big programmes around, not attempt too many of them concurrently
• Make sure the plan is not seasonal. It is amazing how many businesses operate with a change plan where design happens in Q1, build in Q2, testing in Q3 and implementation in Q4
• Are implementation events spread throughout the year? Avoid too many implementation events hitting individual functions at the same time.

Keeping control 

Once the plan is balanced you are done! You will have an optimal change plan that feels more like what you hoped for; prioritised, executable, balanced and with a fighting chance of meeting expectations.

Now before you get carried away, you need to make sure the change plan you have created is appropriately controlled. This topic will be covered in a future article, but some key points to get right are:

• Baseline the plan – agree the budget drawdown approach and measure projects forecasts against the baseline position
• Establish an appropriate governance regime, driven by a fit-for-purpose ‘Master PMO’ at portfolio level
• Implement meaningful management information that can be trusted to drive rational decision making
• Implement delegated governance at lower levels, within a clear framework set out and enforced by the PMO
• Ensure you have a culture of holding programme sponsors and managers to account for their programmes.

So, if some of these themes resonate with you, but aren’t reflected in the way your organisation plans change, you should do something about it.