In our last newsletter, we stressed the importance of creating a tight alignment between vision and strategy. Say you’ve already articulated a clear vision and tied it to strategy. Now comes the hard part: execution. A lot of things can go wrong at this stage. Even your top performers can get distracted and lose sight of the vision. Worse yet, they can get wrapped up in pet projects that may steer the organization away from its goals instead of moving closer to them. As in the case of strategy, your portfolio of projects and initiatives should also be aligned with the vision. If it’s not, chances are you’re wasting valuable resources and potentially inhibiting value creation. You might even be destroying it. What we’re talking about is governance — an overused word, but in this case it’s apt. Apply active governance to the project portfolio. Codify the approval process. Set up controls. Track project contributions. Evaluate. Cull. Rebalance. And not just once a year or once a quarter — do it continuously, or as frequently as possible. Many companies haven’t yet mastered the project approval process. In a survey of executives conducted by Deloitte* with the Economist Intelligence Unit, 30% of the respondents completely agreed that project approval was given only when there was a clear connection to the company’s value-creation objectives. What on earth were the other 70% thinking? 
Some only agreed partially with the statement, others were neutral, and some disagreed. But these all have to be unacceptable responses if you’re serious about creating value. In most cases, when projects aren’t clearly linked to value creation, they’re usually linked to a different agenda. Office politics and pet projects are just two of the more common culprits. And once these projects creep into the portfolio it can be hard to get them out. Remember what we said about applying active governance to the project portfolio? The survey asked executives how their company tracked their inventory of projects. Over two-thirds either didn’t know or said that their companies maintained a list of projects, but didn’t quantify benefits (or did so inconsistently). Another 18% say that they track benefits consistently, but don’t actively manage the portfolio. 
Alternately, companies may link their projects to value creation, but lack a formal way to track their results or to quantify the benefit to the organization. In other words, management often has no idea how much a particular project contributes to the overall value creation effort. That is not good. But there are plenty of ways you can prevent this from happening in your organization. Logitech’s Checks and Balances
Logitech, a Swiss maker of computer peripherals such as wireless mice, keyboards and webcams, employs a variety of “checks and balances” to help determine that its project portfolio stays tightly aligned with the company’s vision.1 First, there’s a formal review process in which senior executives review all major initiatives. This “peer review” method helps confirm that there’s no overlap on projects and it makes it hard for pet projects to creep on to the agenda. Each of Logitech’s business units presents a “road map” for their respective project portfolios. The presentation is made in front of representatives from sales, finance, marketing and other departments.2 Logitech’s sales force is the second line of defense. As a technology company, Logitech is highly sensitive to consumer tastes. More than anyone else, the sales force knows what’s working and what’s not. Based on feedback from the sales force, the company adjusts its project portfolio accordingly.3 In the case of major initiatives, the whole senior management team gets involved. Take digital music, for example. A few years ago, Logitech had nothing to offer in this area. But management knew it was too important to ignore, so a significant initiative was launched to develop new products such as iPod speakers, which are now a top-selling item for Logitech.4 But of all the methods Logitech uses, compensation may be one of the most effective motivators to increase alignment. Project managers are compensated for the result of the product relative to the company’s initial expectations. The managers who supervise them are also rewarded when sales and profitability targets are met.5 How to Keep the Focus on Value We all get distracted at times and can lose focus. But if you have a system in place to keep your projects and initiatives in alignment, you can help prevent those lapses from destroying value. And you’ll be another step closer to creating a culture of value. Use the following framework as a guide: - Conduct an inventory of your project portfolio. Lay out all of your major initiatives and see how closely they are aligned with your vision and strategy.
- Perform a cost benefit analysis. Which projects deserve more attention? And which ones are using precious resources with little hope of adding value. Prioritize projects accordingly.
- Close the loop. Make sure your people have the right incentives to keep the portfolio in alignment. Reward them when they stay focused and execute the strategy. And hold them accountable when they don’t.
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The project portfolio is where the rubber meets the road. It’s where strategy can turn into action, and your vision can begin to take shape. You can’t afford to lose focus at this stage. The more you keep your projects and initiatives in alignment, the faster you are likely to reach your destination. 1 "Adopting the Value Habit (And Unleashing More Value for Your Stakeholders," Copyright © 2006 Deloitte Development LLC, in association with the Economist Intelligence Unit.)
2 Ibid.
3 Ibid.
4 Ibid.
5 Ibid. *As used in this document, “Deloitte” refers to Deloitte & Touche LLP, Deloitte Consulting LLP, Deloitte Tax LLP, and Deloitte Financial Advisory Services LLP. This publication contains general information only and Deloitte Consulting LLP is not, by means of this publication, rendering business, financial, investment, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte Consulting LLP, its affiliates, and related entities shall not be responsible for any loss sustained by any person who relies on this publication. Related Content:
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