investiledysfunction

The November 3, 2008 issue of Newsweek contained a letter from Mayor Michael Bloomberg to the President-Elect (and now Barack Obama).  This blog is strictly non-political and will remain that way, but Mr. Bloomberg offers a great commercial for portfolio management applied at the public sector level.

In his letter to the president, Bloomberg writes,

“In exchange for legislation creating an infrastructure bank that funds projects based strictly on merit, agree to invest more money on the infrastructure our country needs most.  And you should also demand more from the states and cities that get federal money: hold them accountable for building on time and on budget.  Call it a “New New Deal”: investing more, more wisely and getting bigger returns.”

I’m not sure there has been a better encapsulation of what portfolio management is all about.  I am pretty sure that government and citizens ultimately would benefit significantly from the approach Mayor Bloomberg is advocating.  Competition for funding and holding people accountable for results always yields good results.

The July-August 2008 issue of the Harvard Business Review has an article entitled “Employee Motivation: A Powerful New Model” authored by Nitin Nohria, Boris Groysberg, and Linda-Eling Lee which talks about, as the title implies, motivating employees and the drivers behind motivation.  In it, the authors argue that there are four drives that underlie motivation and those are (directly quoted below):

1. The drive to acquire  - obtain scarce goods including intangibles such as social status
2. The drive to bond - form connections with individuals and groups
3. The drive to comprehend - satisfy our curiosity and master the world around us
4. The drive to defend - protect against external threats and promote justice

One of the organizational dimensions that drives motivation and specifically the drive to defend is what the authors detail as “fair, trustworthy and transparent processes for performance management and resource allocation”.  They cite some corporate examples but the overarching theme is that their should be transparency in the resource allocation process and that while pet projects may get killed, employees need to understand the rationale behind the decision.  Employees reporting that funding criteria and process are fair and transparent leads them to be motivated and to view the organization as a “just one.”

Corporate portfolio management which is a discipline to more rigorously manage and optimize resource allocation is often discussed in terms of the financial and strategic outcomes it enables.  The authors of the article hit upon an employee dimension which is often ignored or misunderstood in discussions of corporate portfolio management.  When we work with clients, we often talk about creating “an internal marketplace for project and investment funding” and in some instances, this idea of competing for funding scares organizations because they worry that this will demotivate employees who are the project/investment originators or who may be working on such projects.

In actuality, this marketplace concept is empowering.  Generally, resource allocation as it relates to project and investment selection is a game where people don’t know the rules.  And so people see projects/investment selections predicated on dubious, incomplete business cases or on the basis of relationships and decibel-driven (vs data driven) criteria.  Imagine for a second that you are playing a game where the rules were unknown or always changing.  It doesn’t sound like a very fun game does it?

When employees know the “rules of the game” around resource allocation, this makes the process and the organization stronger and is motivating for employees.  People come with their best ideas because they know those ideas are actually valued and have a shot at receiving funding.  By knowing the rules of the resource allocation process, they understand what is considered an investment, what is needed for an investment to be considered for funding and they also understand the methods by which their projects will be evaluated and funded.  Yes, there will be times when their projects don’t get the funding they desire but at least they can feel comfortable that the process underlying the selection was fair.

Corporate portfolio management (or it’s children in the form of IT portfolio management, project portfolio management) often fail to consider the organizational behavior that is required to make them happen.  More often than not, they also fail to consider the beneficial behavioral outcomes which they can enable foremost amongst them is more motivated employees.

We’re pleased to announce the launch of an education and training offering called the Portfolio Management Game (www.portfoliomanagementgame.com). 

We created the Portfolio Management Game in response to feedback from clients and practitioners who often said it was difficult to get senior leaders, their peers and employees to fully understand and committed to the idea of portfolio management.  To build this understanding and commitment, The Game uses role-playing, brainstorming, collaboration and some healthy competition to illustrate the challenges of project and investment selection.  It also fosters creative thinking about how to solve these challenges.  It is an engaging, entertaining and interactive way to ensure people really understand the importance of resource allocation and the power of portfolio management. 

We built the Game to answer these challenges and based on research that indicated that employee learning is accelerated when you conduct education using games and competition.  The Portfolio Management Game leverages and builds upon this research. 

You can learn more about the game at the site but below is a quick high-level overview:

It is a role playing game that focuses on a fictitious company, Qaio, Inc which has 4 business units and within each unit, there are several functional groups, e.g. ,marketing, IT, R&D, etc

As part of the Game, each participant is assigned a functional role and a business unit and is given several investments (given out on Game playing cards).  Each investment has details supporting why it should receive funding including strategic rationale, financial projections and risk factors.

During the Game, people take on different roles (functional and business unit roles) and are given various scenarios where there are funding constraints.  Participants must work with their peers from other units and/or functional areas to determine which project and investments should get funding and why.  Doing this requires influencing and collaborating others, and ultimately working together to identify issues and develop solutions.

Expected discussion/outcomes from The Game include:

• Participants will understand and see firsthand the dysfunction that exists when it comes to investment/project selection
• Participants will develop ideas on how project & investment selection, e.g., resource allocation can be improved
• Participants will leave with a greater understanding of the fundamentals and the power of corporate portfolio management (this applies just as well to IT portfolio management, project portfolio management, etc)

Again, please check out the website at www.portfoliomanagementgame.com. 

If you have any questions or would like to learn more, please contact us via email by clicking here.