Executive portfolio reviews

One of the most common frustrations I hear from executives about their organization’s portfolio management process is the dreaded “full review”. Twice a year or even quarterly the executives in the leadership team are locked up in a conference room to review the entire portfolio. The preparations have been done by the various analysts and management teams, and now it is up to the executives to perform their task: the “decision-making”.

The frustrations are about executive added value

Why would this be frustrating? After all, it is the portfolio management process that links the strategy to execution, and what could be more important for the executives than that? In my experience, the executive attendance (or attention) is not the issue; they agree on their pivotal role. However, it is the typical process of these reviews that makes them uncomfortable about their added value.

A typical executive portfolio review  would be set up to go through the entire list of projects in the portfolio one by one, and to discuss their key properties. Now, if all is well prepared, the executives do not have a lot of content to add to each project individually, so this is more to inform them than to challenge the project. Most organizations have come to prepare these meetings well enough not to present “bad projects” at all. Towards the end of the meeting, some sort of forced ranking on a weighted score is then presented where the projects “above the line” (the available budget) are selected and the remainder is put on hold. Now, this is even more frustrating than listening to a hundred project outlines, since apparently the decision-making process is a very simplistic algorithm. Boring…

I have seen several attempts to break out of this boredom and get real executive value-added. One way out is to have the execs focus on the precise algorithm for force-ranking, so they can influence the portfolio by tweaking the weights of the various scoring components. Now this may be fun for the mathematicians in the room, but for the rest it is … boring. Another escape is to present and discuss only a handful of projects. This makes the review shorter but does it create buy-in for the entire portfolio? Or wait, who decides about the rest?

The way out: ask for a portfolio decision, not for project selection

The preferred way out of this deadlock is to set up an executive portfolio review as the choice between a few (3-4) alternative portfolio’s. The preparation for the meeting is to develop these alternative portfolio compositions (in terms of projects selected), according to different strategic goals. This process will focus the executives on their core responsibility to choose among alternative strategies and align the execution.

As an example, I often suggest to prepare the following alternatives:

  • the maximum growth portfolio (optimizing for profit or revenue growth)
  • the maximum return portfolio (optimizing for return on investment)
  • the maximum strategic portfolio (all projects with a high contribution to strategy)

and then to consider alternative portfolios with increased and decreased budgets. Executives are pleasantly surprised by the typical conclusion that these portfolio alternatives are different (though usually significantly overlapping). They can now debate the merits of these alternatives att he strategic level: “what is more important, growth or return?” and at the operational level: “why is this specific project X important to growth and less important to strategy?”

With this approach, there is no need to painfully go through all projects; the projects that make the difference between alternative portfolio compositions will be zoomed in on anyway.

In short, portfolio reviews do not need to be boring for executives. What do you think about this approach?