Planning strategy in connection with a project portfolio - latest Hadrone article

Introduction

Strategy and the project portfolio are closely linked. The strategy influences the shape of the portfolio, while the project portfolio allows monitoring the progress of strategic goal implementation in the part that results from ongoing projects.

In this article, I will describe how to approach structuring a strategy and linking it with projects. In the next article, I will show how to report and monitor the status of goal implementation, especially considering the progress of projects associated with specific goals.

The role of strategy in the project portfolio

Strategy is crucial for effective project portfolio management. It helps identify projects that will be most valuable for the organization and assign them priority. The degree of support for strategic goals is also used in resolving resource conflicts - projects that support more important strategic goals will be given funding and the necessary team involvement first.

However, the relationship between strategy and the project portfolio is bidirectional. Achieving most strategic goals (though not all) depends on introducing specific changes in the organization, which can be implemented through projects. Such a change could be an investment in new production capacity, equipment and installation overhauls that reduce CO₂ emissions, conducting employee training programs, or implementing IT systems. In such cases, the state of projects, their progress, and delivered outcomes will form the basis for determining the degree of completion of related strategic goals.

If an organization does not practice linking projects with strategic goals, the project portfolio can still function, but in a limited capacity. In such cases, it will be possible to monitor whether projects are completed on time and within budget, and even whether they deliver the expected outcomes - but there will be no certainty as to whether these projects are important from the perspective of the organization’s overarching goals.

The figure below shows an example of a strategy structure in the Hadrone PPM software.

Figure 1. Example of a strategy structure in Hadrone PPM software.

Figure 1. Strategy structure in Hadrone PPM software.
Source: Hadrone PPM software (www.hadrone.com)

Indicators for achieving strategic goals

Indicators (so-called KPIs – Key Performance Indicators) are a well-known concept widely used in organizations. They also apply to strategic goals - in such cases, they allow measuring goal achievement progress based on the attained indicator values.

Strategic goals do not have to have indicators - one can imagine a strategy based solely on goals with names and descriptions. However, in such cases, the ability to track goal progress will be very limited - we would have to rely solely on the subjective assessment of the person responsible for the goal.

Indicators can be created for both goals and sub-goals. They can be numerical or descriptive. For example, if the strategic goal is to conduct an analysis of foreign markets, numerical indicators could be „Number of analyzed foreign markets” and „Number of identified potential partners in foreign markets,” while a descriptive indicator could be „Degree of identification of market entry barriers.” Each indicator will have a target value to be achieved within the strategy - for numerical goals, these will be specific numbers with units (e.g., pcs., km, kg), while for descriptive goals - a description of the target state.

In addition to the target value, an initial value of the indicator is sometimes set, which shows the scope/size of the expected change (e.g., the current level of CO₂ emissions, which should be reduced to a defined target level through the strategy’s implementation).

Additionally, if a goal has more than one indicator, it is worth introducing weights for each indicator to determine its importance in assessing goal achievement.

The figure below shows an example of assigning indicators to a strategic goal in Hadrone PPM software.

Figure 2. Example of assigning indicators to a strategic goal in Hadrone PPM software.

Figure 2. Assigning indicators to a strategic goal in Hadrone PPM software.
Source: Hadrone PPM software (www.hadrone.com)

Assigning projects to goals

Similar to indicators, assigning projects to strategic goals is not mandatory, but it is highly recommended. This way, we can check whether the organization has ideas for achieving its goals (these ideas will be initiatives, projects, and other operational activities) and assess whether it focuses on the right projects (especially identifying projects that do not support any strategic goals).

Projects are assigned to strategic goals also to allow inferring goal achievement based on the progress of related projects. As with indicators, if a goal has more than one project assigned, it is worth introducing weights for each project to determine its importance in evaluating the goal’s completion.

Projects will be assigned to strategic goals both during strategy planning (projects already underway or planned) and later during its implementation. Strategies are developed for a longer term, from several to over a dozen years, so at the beginning, not all projects that will support the strategy are known. In such cases, some organizations introduce the concept of a strategic initiative - an intermediate object between the strategic goal and the specific project that is to achieve it. In this way, all strategic goals can be covered by strategic initiatives, and projects can be assigned directly to strategic goals or through initiatives.

In organizations that practice program management, strategic initiatives can be replaced by programs.

Ultimately, the assessment of a strategic goal’s completion may be based on tracking both achieved and forecasted indicator values, as well as tracking the progress of related projects.

The figure below shows an example of assigning projects to a strategic goal in Hadrone PPM software.

Figure 3. Example of assigning projects to a strategic goal in Hadrone PPM software.

Figure 3. Assigned projects to a strategic goal in Hadrone PPM software.
Source: Hadrone PPM software (www.hadrone.com)

Summary

The process of developing a strategy is often long and highly conceptual. Ultimately, a strategy - consisting of strategic goals, their groups, and sub-goals - should be in a very concrete, structured form that allows tracking the progress of its implementation. This can be achieved through indicators (KPIs) and linking strategic goals with projects and other operational activities required to achieve them.

In this article, I have shown how to structure a strategy so that it can be later monitored. In the next article, I will describe how to report and monitor the progress of strategy implementation.