Portfolio Optimizer App

Overview

Clarizen Project Portfolio Optimizer (PPO) is a powerful and accessible prioritization engine that helps monitor portfolio performance in the context of real-time project data, making it simple to reevaluate projects on a regular basis and make funding decisions based on your current business priorities.

Use PPO to:

  • Build a sustainable culture of cost management with zero-based budgeting
  • Analyze your portfolio based on any type of cost and criteria that are important for you at any given time
  • Eliminate under-performing projects to focus on more productive ones

With PPO, you can optimize your portfolio of projects by aligning projects to your main investment categories (Run, Grow, Transform), as well as available financial and human resources, and collaborate with portfolio reviewers on scenarios.

The Portfolio Optimizer is based on the zero-based budgeting approach which evaluates projects request for resource on an ongoing basis without assuming funding allocation based on historic budgets. Within IT Organizations, it is increasing in popularity as it encourages smaller higher value projects that have lower risk of delivering too late.

Prioritization for optimization is done by rolling up certain key performance indicators (or KPIs). The application comes with a set of preconfigured KPIs (Remaining Budget, Work, Risk Score, Benefit, % Alignment, which you can modify based on your business preferences.

The Portfolio Highlights panel displays a portfolio (a project marked as a portfolio) and all child projects in the draft, active, or on hold state (it excludes completed or canceled projects).

When you first open your portfolio, the projects are listed according to the last stored priorities. The view can be used as a summary report of your portfolio.

The default KPIs include cost balance, risk score, expected revenue, actual revenue, and expected ROI. You can change the KPIs in Set Portfolio KPIs custom action.

Any new projects have the default priority of 500. You can modify portfolio values, create different funding scenarios and share them with reviewers.

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Installing Portfolio Optimizer App

Portfolio Optimizer can be downloaded and installed from Clarizen Apps Marketplace.

 

Configuring Portfolio Optimizer

Privileges

  • Viewing and collaborating
    You must have financial user privileges to be able to view and comment on a portfolio. If the tool is associated with a specific profile, only users assigned to the profile can access the tool.
  • Posting a new scenario
    By default, anyone with read and follow permissions can save scenarios into the discussion feed.
  • Saving a new scenario
    By default, a portfolio manager (Project manager, owner or an additional manager) with financial permissions can create a new portfolio scenario and save it, which updates the total budget of the portfolio and the prioritization of the projects.

Project-level settings

  • Mark mandatory (required) projects.
    A project can be mandatory, for example, for compliance or strategic reasons. You can label a project as mandatory either at the project-level using the Required toggle, or via a workflow rule if you have a repeatable formula that can be applied.
  • Set project’s business objective.
    You can set business objectives by clicking a project’s name and searching for the Investment Type hidden field. (Administrators can add this field to Project property cards via Settings > Profiles)

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Optimizing a portfolio

 

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To optimize a portfolio:

  1. Switch to optimization mode, by clicking the Optimization button.
  2. Create a scenario:
    Note: The priority of your projects changes dynamically on screen when you edit the values in the Optimization panel but does not save them until you save the scenario.
    • Set portfolio Budgeted Amount, or if you have already set it, you can update Proposed Portfolio Budget to model the effect of proposed reductions or increases to the budget.
    • Adjust the KPIs based on what is important for you at this time by setting the ranking higher or lower.
      For example, choosing a conservative route, you may go with the risk averse projects by setting the risk score KPI to lower is better.
    • You can set the relative weight of each KPI in the overall priority score.
      Note: For the KPI weightings, 5 is high (higher weight) and 1 is low, with 0 being no importance. For the Priority column, 1 represents top priority. You can manually set the priorities and may have multiple priority 1 projects. For more information about KPIs, refer to the Working with KPIs and Weights topic below.
    • Click the Resourcing button to view resource availability by project or for the entire portfolio.
      Note: If you are playing with different scenarios and have not saved the data yet, you may notice that the priority of projects in the Resource Load screen uses the KPI values of the new (unsaved) scenario. If you add the Priority column to the view, you may notice that projects are displayed in the order of the previously saved project priority numbering.
  3. Save the scenario to sort projects based on the priorities, projects above the blue waterline can be entirely funded.
    • If you are in budget surplus, the line is not displayed, all projects can be funded, and you may choose to add a new project to your portfolio from incoming demand.
    • If you are in deficit, you can decide which project you wish to fund. Use the include/exclude toggle to exclude projects from the portfolio altogether (this can represent proposed cancellation). Required projects cannot be excluded.
    • If a required project is under the waterline and you do not have sufficient funds, you can choose to reduce the cost of the project, increase the budget, or reevaluate whether the project is required.

 

Working with KPIs and Weights

Portfolio Optimizer allows you to set the priorities of your Portfolio projects based on 5 KPIs:

KPI Value type Field type  Description
Remaining Budget * Currency Calculated Remaining Budget = Budgeted Amount – Actual Cost
Budgeted amount and Actual cost are calculated or manually-set fields.
Work Days Calculated Required effort set for a work item, when set for a task, rolls up to parent project.
Alignment Numeric Manually-set Project field. You can update it with a workflow rule if you have created custom scoring on Project or Requests.
Risks Total Score Numeric Calculated Risks Total Score = Risks Impact x Risks Rate
Risks Impact and Risks Rate are manually set fields for a project.
Benefit Currency Manually-set Project field. Rolls-up to parent projects unless manually set.

* Remaining Budget is intended to be a constant element, whereas the other KPIs are easily configurable; currently via a custom action.

The default KPIs can be replaced (currently using a Custom Action on the portfolio) with any field that can be numerically sorted:

  • Number
  • Percentage
  • Duration
  • Currency
  • Picklist (which contains only number values)

 

How PPO prioritization scoring works

Rule 1: Priority is the inverse of Score Points

Projects in Clarizen have a default Priority of 500 (where 1 is the highest priority). By default, Clarizen does not calculate relative rankings for projects since each organization will have business priorities that change over time in response to their business environment. Portfolio Optimization helps calculate these priorities.

For Portfolio Optimization, Projects with Priority 500 can be considered as pipeline or candidates for cancellation.

A combined Score is a calculated from a combination of the KPI values and the relative weights of the KPIs. The higher the score, the higher the priority. The score is then inverted so that Priority 1 projects are top priority and have the highest Score points. Priority 500 projects are lowest priority with the fewest Score points.

Example:

You have 3 projects:

  • New Website (score:16)
  • New Office (score:34)
  • New Strategy (score:50).

Since New Strategy (score:50) has the highest score, it is Priority 1. New Office (score:34) is Priority 2 and New Website (score:16) is Priority 3. Score points are rounded to 0 decimal places.

 

Rule 2: Score Points are generated by KPIs

Now we understand that Priority is driven by the Score, let’s look at how those score points are calculated to generate the overall score.

Point scores can be anywhere between 0-100. Portfolio Optimization helps you calculate the relative importance of the projects in the portfolio – so both the overall score and the relative distribution of the scores are important. You may decide that your lower priority projects can be cancelled if, for example, high ranking ones require additional budget.

To handle the ranges of different numbers, we use weighted average. For example, if there are risk scores of 1, 2 and 5, and the corresponding projects have profitability of $10,000, $20,000 and $10, we don’t compare the profitability $10,000 against risk score of 2. Rather, we want to compare like with like (i.e. the risk scores of each project against the risk scores of the other projects). In order to do this, the values of the KPI fields generate an overall “intra-KPI” score. This is the reason that Dates, URLs, Text, Text Area, Multi-select picklists, Reference to Object and Toggle (on/off) fields cannot be used for this purpose.

Using the values of the KPI fields, we can understand:

  1. Ranking of the projects (best –> worst)
  2. Relative distribution of those ranked projects (e.g. if there are a maximum of 100 points and 3 projects, are the projects scoring 99, 98 and 97, or are they more like 99, 50, 8?)

Intra-KPI scores use the relative distribution of the values on a scale of 1-100.

The combined Intra-KPI rank score always equals 100, so that the score each project receives will be its relative rank based on distance from the highest and lowest values. It is also possible that multiple projects have the same score.

In the example shown below we have 3 projects, and because only the Remaining Budget KPI has weight defined, the other KPIs are not used in the calculation of the score and priority.

 

Rule 3: Not All KPIs are “good”

The default setting for KPIs is “Higher is better”; however, projects with lower values may be preferable for certain KPIs. Toggle the “Higher is better/ Lower is better” option to reflect your preference. Some examples where “Lower is better” might be appropriate are:

Example #1: Promote projects which have almost finished
You might want to promote those projects with low Remaining Budget

Example #2: Promote lower risk projects
You might prefer to have projects with lower Total Risk Scores

Toggling to Lower is better causes the ranking and the distribution of the projects to be reversed, so that more score points (higher priority) are awarded to projects with lower KPI values.

If you have a negative (e.g. -10) or null (empty) value in a KPI and it’s ordering is reversed as Lower is Better, the relative distances between that value and the upper and lower values of the other projects are considered.

 

Rule 4: Not All KPIs are created equal

Using the Weight selectors, it is possible to set the relative weight (1-5) of one KPI vs the other KPIs. The weights act as an accelerator on the KPI values.

If all KPIs have the same weight, they will all have an equal 20% impact on the final Score.

The relative weights are equivalent (20%:10% = 2:1); therefore, if you wanted to weight your five KPIs at 10%, 20%, 30%, 30%, 10%, your KPI values would be weighted as 1,2,3,3,1.

In order to ignore a certain KPI, set the weight to 0. One reason for doing this might be to work in the table for reference, but not use it for prioritization.

The scoring calculation can be summarized:

Score = (Intra-KPI rank score * KPI weight)/ sum of all weights

The Overall Score is driven by a combination of:

  1. KPI ranking (position of the Project in the overall order of projects 1-n)
  2. KPI values (e.g. value of Alignment is 22%, vs 55%, 56% and 98%)
  3. KPI ranking (including the weight direction: higher/lower is better)

And the final score is:

((intra-KPI rank score #1 * KPI #1 weight) +

 (intra-KPI rank score #2 * KPI #2 weight) +

 (intra-KPI rank score #3 * KPI #3 weight) +

 (intra-KPI rank score #4 * KPI #4 weight) +

 (intra-KPI rank score #5 * KPI #5 weight))

/ sum of all weighted scores

Example KPI scenario

In the example below:

  • Alignment is the most important score factor. Projects with a high Alignment value will get the most points in this KPI category
  • Benefit is the second most important score factor. Projects with high Benefit scores will get the most points in this KPI category.
  • Risks Total Score and Work are of minor, but equal, importance. Higher values in the Risks Total Score is better, but lower values are preferable for the Work KPI.
  • Remaining Budget is still a factor in the overall score, but the least important one. Projects with a lower Remaining Budget will be prioritized.

 

Rule 5: Your knowledge can be used to override priorities

Sometimes there may be additional information or considerations that were not captured as KPIs in Clarizen (e.g. there may be a mandatory governance project). In these cases the Priority value can be overridden; however, the calculated score will not change since it is always calculated from the KPIs, weightings and ordering.

 

Sharing a saved scenario with reviewers

Before a portfolio is saved, you can share it to review with others by clicking the Add Scenario button.

The scenario is posted in the Social feed.

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