Project identification by department

Figure 2.1 on the previous page is an example of a company structure. The board oversees five directorates: operations; facilities management; technology; finance; sales and marketing. Technology is subdivided into infrastructure and applications.

How a company identifies projects usually depends on its structure. In the example, the annual business plan starts with the board and cascades through the departments. Each layer of management looks at the plan from its own perspective, identifying activity for which it will be responsible and which will help achieve the board's objectives. This is likely to be a combination of business as usual and a portfolio of several projects. The desired outcome is that by the time the plan has percolated through every layer of management, everyone knows what part they have to play in it.

Each department has a portfolio of projects to deliver, funded from a proportion of the annual budget. As the budget holder, the head of each department is often given ownership of those projects. However, their role will not be easy; as well as carrying out business as usual, they have a portfolio of projects which depend on resources and deliverables from other departments.

This traditional approach to identifying projects is spectacularly inefficient and demonstrates the importance of managing projects differently. Figure 2.2 shows that there are many interdependencies between the projects. For example, Projects 2, 8, 17, 18 and 22 must all be delivered successfully to meet Objective 2 in the business plan. However, successfully delivering those projects may require joint activity and sharing resources with other departments.

The structure is inadequate because it was designed to deliver business as usual, not change. The longer projects stay within departments, the greater is the challenge in co-ordinating them. A specific management approach is needed if the projects are to meet Objective 2.

A classic response is to create a portfolio management governance, which is empowered to oversee every project. This can work, but it may be costly and deliver little value beyond the tactical co-ordination of different activities and use of resources.

There is an alternative. The company could identify the projects

The traditional approach to identifying projects

The traditional approach to identifying projects

necessary to deliver Objective 2 and assign each its own management team. This way, identifying the portfolio of projects is separated from the constraints of the organisation's structure.

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