Driving a portfolio toward its goals and objectives can be a long and arduous process that could take years to complete and involve multiple stakeholders. To ensure that everyone is on the same page on achieving portfolio goals, it is critical that administrators establish a strong framework for launching, managing, and closing the portfolio.

With a structured portfolio framework that includes flexible contracts, standardized processes, and a system for tracking progress, portfolio administrators can weather all challenges and guide their portfolio towards achieving its goals.

Negotiate contracts that fosters success   

A portfolio administrator will oversee a broad pool of programs, each with its own individual goals. To ensure that all programs work together towards achieving the overall portfolio objectives, administrators must create a portfolio framework that connects goals to structured processes. This begins with building out independent contracts that tie program activities and outcomes to the overall portfolio outcomes and objectives. Connecting performance payment to milestone achievements is one way to ensure this connection. It is critical to define the portfolio goals and milestones upfront, so that administrators can incorporate these elements within implementers’ contracts and tie payments to performance. Of course, the definition of “performance” must also be aligned, from both the administrator’s and program implementer’s perspectives.

Contracts must also be written in a way that demonstrates the administrator will support the fixed, core costs of operating the program. This is particularly important if there are regulatory compliance or general reporting requirements to which the utility or other organization must adhere. These fixed costs do not require the same level of risk-taking as variable costs.

While incorporating performance payments tied to goals and milestones is an effective means to assure objectives as they are achieved, a major element often missing from such program contracts is that they must be mutually beneficial for both the portfolio administrator and implementer. This can sometimes be a challenge for utilities designing performance contracts, for example, that are used to writing contracts for power plants or other similar assets, which tend to be heavy with restrictive terms and conditions. Since utilities typically have contracts that are focused on buying power, they run the risk of viewing program implementers as a power resource, rather than as a key part of their customer service team. It’s important to recognize during contract writing development that programs focus on providing services, rather than assets, and so contract terms should be very different.

The most effective program contract framework typically includes both performance and fixed payments. Fixed payments will demonstrate administrator’s confidence in the implementer to perform the requisite program tasks while performance payments will provide accountability for implementers to deliver on intended goals and milestones. Utilizing hybrid payment structures will balance risks and costs more equally and create a mutually beneficial partnership between parties.  As a result, such contracts are more likely to lead to successful program results. [Text Wrapping Break][Text Wrapping Break]However, contracts should allow room for flexibility in how programs are implemented. When the portfolio framework allows little room for flexibility or adaptability in how milestones are achieved, this can set programs up for failure. If something isn’t working as anticipated, the implementer should be able to discuss with the administrator changes to realign program theory and methodology to better meet the program’s intended outcomes and the portfolio’s goals. If this discussion process is systematically included in contracts, changes can be more easily implemented, and administrators can better steer the portfolio  towards a more successful direction.

Standardize processes and procedures 

While flexibility is key for contracts, standardization is important in developing processes and procedures to launch and manage programs. A portfolio framework creates consistency that will make it easier to launch and track each program in the portfolio from implementation through completion, no matter what challenges may arise.

Standard processes should be defined for all stakeholders participating in the program, including portfolio and program staff, technical engineers, utility account managers, and customers. Ideally, these processes and procedures would be defined during contract negotiation and maintained for the duration of the contract. This ensures that all stakeholders are aligned and understand the expectations to be met. This also will help transition knowledge in the event of staff turnover, allowing work to continue smoothly with minimal interruption.

Standardized processes should detail the steps required to launch, manage and close out a program; requirements around quality control; regulations that must be observed; what series of contracts partners must sign; the types of agreements to use with customers; and the conditions that must be met for customers to receive incentives, among other requirements.

Finally, while standardization and consistency of processes and procedures are important, it is often beneficial to engage with program stakeholders collaboratively to discuss perceived bottlenecks. Such discussions can often lead to process optimizations that could not be identified ahead of implementation and which can help reduce implementation and review timelines. Keeping an eye on continuous improvement is key to avoiding unidentified program barriers.

Create a user-friendly system to track progress 

Once processes are standardized within the portfolio framework, it’s important to have a user-friendly system in place for tracking program implementation. Typically, an IT system will be used to collect user data and allow portfolio administrators to track program and project status. Unfortunately, IT integration is a critical piece of portfolio management that doesn’t receive nearly enough upfront attention from portfolio administrators. When administrators do not standardize processes into clear business requirements, IT system integrators are often left to set up a system for a process that is not clearly defined for the software. Creating a simple system with an established approach will encourage buy-in and confidence from all stakeholders.

When standardizing processes, the portfolio administrator should define all business requirements that will be utilized within the IT platform so they can be aligned with the system architecture. To support a user-friendly IT system, it’s important to define clear troubleshooting steps, system limitations, and requirements to meet if something goes wrong in the system. It is also important to assign a business lead with a comprehensive understanding of program and portfolio business requirements to IT system integration work to avoid potential discrepancies in implementation.

Keep partners aligned

Developing clear guidelines, processes, and systems upfront will help prevent many potential challenges to program implementation. As partners change, goals are updated, and other challenges threaten to derail progress, a structured framework will prove critical in guiding portfolios towards success.

For help in reaching your portfolio goals, contact Lincus today.