How to Align Project Management with Organizational Strategic Objectives By George Bridges Introduction “Strategic planning for a business environment is the process of formulating and implementing decisions about an organization’s future direction. (See figure xxx) This process is vital to every organization’s survival because it is the process which an organization adapts to its ever-changing environment and is applicable to all levels and types of organization.” There are many steps that an organization can follow to conduct strategic planning. We describe an eight step process in this article. A strategic planning process is only as good as its implementation. According to Dr. Harold Kerzner, “Implementation translates a formulated plan into policies and procedures for achieving a grand decision and involves all levels of management in moving the organization toward its mission. The process seeks to create a fit between the organization’s formulated goals and its ongoing activities.” One method that can be used to achieve this fit is to create a performance matrix (Figure 1). “This analysis causes us to take a holistic view using a systems approach to the organization and its processes. “Using this approach we formulate performance variables within a performance framework” - refer Rummler-Brache (1990) Figure 1 – Rummeler-Brache’s Performance Matrix By developing the performance matrix, the organization is able to address the strategic, objectives and the goals at mutable levels. What is suggested here is that the strategic planning, and goals. Strategies are conducted and developed at the organizational level and the process levels. It is at the activity or performance level where we create a project plan to support the strategy. All goals, strategies and objectives are developed to support the higher levels. Overview of the problem Some companies do strategic planning once and never update those plans. Companies who do strategic planning on a regular basis will out perform those that do not plan at all. (Example) Often the strategies of organizations are determined with no clear direction on how to implement the objectives. In addition to this, a high level estimate of the cost is usually developed to carry out the strategy. However, after the high level estimates are generated and agreed upon by executive management the financial process begins to develop budgets to support the strategy and objectives. The team involved in this process will provide their best top down estimate of what it will take to accomplish the objectives of the process. A careful budgeting process must then proceed with the department experts, middle management and the finance department. The other problem is that some projects are generated that are not tied or aligned with any strategic objectives. On the other hand, the organization has many projects that are competing for the same resources. In my experience what some companies end up with at the end of a strategic planning cycle is a list of strategic objectives that must be communicated throughout the organization. Executive management and middle managers are tasked with defining the specific tactics to meet the strategic plan. How often are strategies actually communicated and not formally introduced to the various departments which determine goals and objectives that need to be meet in the strategic plan? Companies can have several projects and perhaps even hundreds of projects that have no direct linkage to the strategies of the organization. Herein lies the problem and what we will address in this article. The question becomes how can we align our projects to meet the organizational strategic objectives and how can we utilize project management to make sure that we develop projects that move the organization toward the goal of accomplishing their strategic objectives. What is the definition of project management and strategic planning? These definitions will assist us in reaching conclusions about how to align project management with strategic objectives: What is Project Management? The classical definition of projects is they are one time, unique efforts that have fixed start and end dates. The goal of project management is to complete the project work and deliver a product or service on time, within budget and at the appropriate scope for the customer. Project management is a profession that has been around since the early days of the DOD. The best practices of PM were established in the late 80’s by PMI and have seen the number of certified project management professional grow from a few hundred to over 250,000 today. Project managers have been and are still called on to manage projects in Automotive, Real Estate, Construction, Banking, Research and Development and Sales, just to name a few. We will see in this article and other articles in this months’ edition of allPM Today how project management enhances the strategic planning process of the organization. What is Strategic Planning ? In a brief informal research on the internet, I found about 18 definitions of strategic planning on the web. These definitions, as a whole describe some aspect of strategic planning. Here are the two definitions of strategic planning that I liked the most: “Strategic Planning is a top-down approach concerned with the long-term mission and objectives of an organization, the resources used in achieving those objectives, and the policies and guidelines that govern the acquisition, use, and disposition of those resources. ...” www.quantum3.co.za/CI%20Glossary.htm “Strategic Planning is a process to determine or re-assess the vision, mission, and goals of an organization and then map out objective (measurable) ways to accomplish the ...” planning.nmsu.edu/taskforce/glossary.html The strategic planning process addresses what the organization wants to do and how they want to do it. The strategic plans often include the vision, mission and the high level objectives. Once these are established the next step would be to describe a plan that will take the firm to the successful completion of those objectives. It is at this point that the project management methodology pays off during the strategic planning process. Many of the tools and techniques of project management are geared to developing a realistic plan. The value of the process for strategic development and implementation is where project management fits. Project Management will assist the strategic team in planning and defining the supporting tasks and identifying the critical resources needed to accomplish the objective from the strategic plan. So how does the organization go from where they are now and how they will reach the goals established in the early planning process. A typical set of deliverables for a strategic planning process is a reasonable set of strategic objectives that an organization wishes to support and implement. Here is a list of strategic objectives that a company can pursue. This list is compiled from stated strategic objectives taken from large U.S. companies. The objectives are as follows: A bigger market share A higher, more secure industry rank Higher product quality Lower costs relative to key competitors Broader or more attractive product line A stronger reputation with customers Superior customer service Recognition as a leader in technology and/or product innovation Increased ability to compete in international markets Expanded growth opportunities Source: A.A Thompson Jr. and A.J. Strickland III, Crating and implementing strategy (Chicago: Irwin, 1995), p. 31 These objectives define a high level direction for the firm. They provide the overview, motivation and summary of where the firm is going. To accomplish these objectives it may require the firm to engage in one or several projects to support the objectives. A number of projects may be adopted to meet the strategic objectives. As an example the table below shows two strategic objectives and a set of projects that support each of these objectives. Strategic Objective: A bigger market share Strategic Objective: Superior customer service Project A: Introduce New Product Project E: Install new CRM Software Project B: Sale products online Project F: Implement Supply Change Management Project C: Open Office in Asia Project G: Implement 24/7 Call Center Project D: Increase advertising Project H: Train Support Staff Assuming each of the projects have been approved through some form of project portfolio management process, these projects will go through the corporate project management methodology that will provide for successful implementation of each project. Each project listed above should support and be aligned with the strategic objectives. This alignment alone is still not complete in evaluating potential projects and the overall value of the project to the organization. Much of the value of each project has to be realized through the planning phase. Why are portfolio management and program management now essential components of the strategic planning process? “One of the roles of the PMO is to make sure that all projects approved for the pipeline are aligned with strategic objectives. First Energy Corporation created a PMO and the first responsibility for the PMO was to make sure that all IT requests were aligned with strategic objectives. In the first year of using the template for this, one third of all IT projects, or $80 million, was filtered out because of nonalignment.” States Dr. Kerzner, Advance Project Management. Why is alignment of project management with business planning a natural formula for success? We all have heard that the goal of successful project management is to have our projects come in on time, within budget and at the intended scope. These three objectives are expected to be met and also include that we deliver our project to meet the customer’s expectations. Business planning provides a systematic way to accomplish the objectives of the organization. Business planning involves determining our deliverables and providing a roadmap to take us from our current position to a desired level of success. Here are some parallels between the two: Strategic Planning Process Project Management Process Short and Long Term Fix Length Organization Direction Plan to Get to the Direction Mission Budget Values Resource Assignment Prioritize Projects Scope Definitions Governance Risk Management Capital Scheduling What is the value of project management tools and processes in the development and management of strategic objectives? There are many areas where project management can assist in the strategic planning, lets look at two of them: Identifying strategic resources and strategic selection of projects. Identifying strategic resources: “All businesses have corporate competencies and resources that distinguish them from their competitors. These competencies and resources are usually identified in terms of a company’s strengths and/or weaknesses. Deciding upon what a company ”should do” can only be achieved after assessing the strength and weaknesses to determine what the company “can do”. Strengths and weaknesses can be identified at all levels of management” Strategic selection of projects: “What a company wants to do is not always what it can do. The critical constraint is normally the availability and quality of the critical resources. Companies normally have an abundance of projects they would like to work on but, because of resource limitations, have to develop a prioritization system for the selection of project.” A company needs to develop a process to select the best projects. Many organizations will use a type of portfolio selection process. See example: How has project management become a factor in setting and managing strategic objectives? Let’s look at an eight step strategic management process that was taken from the book called Management, by Stephen P. Robbins and Mary Coutler, Sixth Edition, 1999. Identify the organization’s current mission, objectives, and strategies Analyze the environment Identity the opportunities and threats Analyze the organization’s resources Identify strength and weaknesses Formulate strategies Implement strategies Evaluate results Many of the above steps will and can utilize the best practices of project management to accomplish them. Of the nine knowledge areas within the PMBOK, the area of risk management addresses the issues of step 3 and 5. We evaluate the risk of the organization to determine the opportunities, threats, strengths and weakness of the organization. A risk management technique of SWOT analysis (Strengths Weakness Opportunities and Threats) can assist the planners in these phases of the strategic planning process. Clearly the PMBOK® knowledge area of Human Resource Management and Scope Management will be used in evaluating the company resources. Lastly, all the knowledge areas of the PMBOK® will be an asset to us in planning and implementing the strategies of the organization. The areas where project management can be a factor are in steps 4, 5, 7, 8. Using PM we can analyze the resource for step 4. Using PM skills we can identify SWOT in our scope analysis to support steps 3 and 5. And finally the project scheduling would support the implementation of the strategies in step 7. Summary The strategic and project management planning efforts are subsets of overall good planning. As stated earlier the strategic plan defines what needs to be done and why. The project management process defines how the objectives will be accomplished and what resources will be needed to accomplish the objectives. There are some misconceptions regarding any planning process. Planning that proves to be inaccurate is a waste of time. This is not true because the end result is only one of its purposes. Planning can eliminate change. This is not true, because planning does not eliminate change. Change will happen, no matter what and no matter what managers do. Planning reduces flexibility. This is not true because planning implies commitment, but this is a constraint only if manager stop planning after doing it once. Planning is an ongoing activity. From the book called “Management”, Robbins, p. 213 © 2009 allPM.com George Bridges, PMP is a senior Consultant for International Institute for Learning. He is a trainer and Senior Consultant for the Business Analysis Certification Program and the Project Management Certification Program for IIL. George has an extensive background in Systems Development and Operations Research. He has participated in analyzing and developing business systems for Major corporations such as Ford Motor Company, Unisys Corporations and later for a large Mid-West Church in the Detroit Area.