Portfolio Management – Managing Shared, Perishable Resources
Portfolio managers direct deployment of assigned resources across the several programs, projects, and processes they oversee in a manner that maximizes the organization’s return on investment. (See Figure 1) Complicating the portfolio manager’s work is the myriad of differing resource types; resources that are often limited and shared by the portfolio’s many components.[wcm_restrict plans=”25541, 25542, 25653″]
All work requires resources for its performance. Resource types can be generally categorized as:
- Personnel – skilled labor and knowledge resources
- Equipment – tools, software applications, and facilities resources
- Material – land, parts and components, commodity materials and supplies, data, and intellectual property resources
- Financial – cash, credit, and other financial instrument resources
Unlike many financial and non-perishable material resources, personnel and equipment resources cannot be stored or saved. Subsequently, the usable quantity of these perishable resources diminishes with the passage of time; making it imperative that the portfolio manager fully engage all available personnel and equipment resources in, what is for them and the organization, the most value adding activities at all times.
The challenge of maintaining high, value-adding utilization of perishable resources is dimensionally more complex for the portfolio manager than for his/her subordinate program, project, and/or process managers. Not only must the portfolio manager ensure the lowest cost yet qualified resource is assigned to a required activity (no busy work in our organization), he/she must assess the activity’s value against the collection of tasks comprising all of the portfolio’s programs, projects, and/or processes. As if this was not difficult enough, the portfolio manager must also be concerned with the timing of value delivery because a small gain today may far outweigh a much more significant benefit realized tomorrow. Heightening the challenge further still is the fact that the portfolio manager deals with a collection of critical paths having little or no time buffers rather than one critical path and a set of subordinate activity series with differing amounts of float. How then can the portfolio manager establish and maintain high, value-adding perishable asset utilization?
Achieving High, Value-Adding Personnel and Equipment Resource Utilization
The varying nature of portfolio complexity, the dynamic interrelationship of activity and resource dependencies as well as the differing time frames of needed value delivery, precludes the use of a step-by-step procedure for portfolio resource distribution. However, application of the following guidelines can help a portfolio manager achieve and maintain a high level of value-adding resource utilization.
Part 1: Define the value proposition of each program, project, and process
- 1. Identify program, project, and process value as a function of mission-achieving benefit
- 2. Identify the cost or value decline of each program, project, and process as a function of mission-achieving benefit associated with time delays (See Figure 2)
Part 2: Identify the activity constraints imposed by shared resources
- 3. Order the portfolio’s components as collections of activity sequences
- 4. Identify each program, project, and process’s critical path activity sequence
- 5. Identify all shared and interchangeable resources
- 6. Identify the critical chain* of activities associated with shared resources (See Figure 3)
Part 3: Resolve conflicts to maximize timely value generation
- 7. Identify and eliminate unnecessary tasks
- 8. Identify unconstrained substitute resources to alleviate activity constraints
- 9. Identify and implement acceptable activity sequence modifications
- 10. Prioritize activity performance based on overall program, project, and process value creation; considering critical path time delays and the associated impact on value creation and delivery timing
- 11. Adjust program, project, and process activity sequencing, as necessary, to accommodate the perishable resource constraints (See Figure 4)
* Concept adapted from Critical Chain by Eliyahu M. Goldratt, The North River Press Publishing Corporation, 1997.
The illustrated case presented here is highly simplified compared to the circumstances most portfolio managers will face. The guidelines provided for achieving high, value-adding utilization of the organization’s resources are fully scalable; applying in both simple and complex cases.
Maintaining High, Value-Adding Personnel and Equipment Resource Utilization
Portfolio managers recognize the validity in the anecdote that no plan can survive an engagement with reality. Subsequently, these managers must maintain a degree of flexibility; routinely evaluating and redeploying, as necessary, the organization’s resources across the portfolio’s components in order to sustain maximum value.
Ongoing evaluation and redeployment of perishable resources should be performed using the guidelines for achieving high, value-adding resource utilization. While not all plan changes will significantly impact the overall portfolio, the guidelines provide the portfolio manager with the awareness necessary to quickly identify those that do and to adjust the resource distribution accordingly. Similarly, the guidelines suggest the portfolio manager be aware of shareable resources; this being necessary to facilitate the rapid identification of alternate resource sharing to alleviate high value constraints.
Final Thought…
Managing a portfolio’s resources to maximize value is as much of an art as it is a science. The guidelines provided are not intended to usurp the knowledge, experience, and good judgment of the portfolio manager but rather to provide him/her with a logical structure on which to ground resource management decisions. In the end, business needs, framed by ethical values, should drive all resource decisions.[/wcm_restrict][wcm_nonmember plans=”25541, 25542, 25653″]
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In today’s data rich world, it is often difficult to identify the meaningful patterns and relationships that yield information decision-makers need to set the direction of their organizations. Additionally, complex market environments create a multitude of data analysis options; preventing any one person from seeing every possibility. Deriving compelling information from this sea of data and presenting it in simplistic, understandable, and actionable manner thus becomes the challenge of every business analyst. Helping solve this dilemma is the business model.[wcm_restrict plans=”40700, 25542, 25653″]
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