How To Make It Happen

The CPMA member survey revealed that more than 60 percent of companies feel their resource allocation processes could be improved significantly to boost company performance. It also found that nearly 80 percent of decisions are made without a view into where the organization overall is spending its money -- hence, such decisions are not informed by a holistic strategic plan. Furthermore, once a company commits resources to a project, few organizations actually manage the performance of the investment (see exhibit 1).

Considering these results, it's hardly surprising that CPM tends to turn the heads of finance managers. A portfolio management approach to OpEx can dramatically reshape internal spending decisions. But implementing it requires effort and care. For managers wanting to lead their companies on this journey, the following iterative, four-phase process can serve as a guide (see exhibit 2).

Phase 1: Analyze. Simply stated, you cannot know where you are going if you don't know where you are or where you have been. The purpose of the analyze phase is to understand what your organization is good at across three dimensions related to resource allocation: process and discipline, organizational behavior, and attitude and readiness.

Process and discipline. Within this realm, you must answer several key questions in determining whether your company is ready for CPM. First is: What does the organization consider to be a discretionary investment? This question is sure to engender significant debate. Individuals inherently want to believe that what they do is not discretionary; everyone wants their domain to be core to corporate operations.

At this point, you are just taking stock of what people across the organization view as discretionary OpEx. Try to take an expansive view, with the expectation that other stakeholders will try to narrow your definition down the road. The more you consider discretionary, the more room you will have to negotiate when you move to the standardize phase of the CPM initiative.

Second, you must select a credible "nerve center" to manage the CPM effort. No function is always the best place, in every organization, to house CPM, but the initiative needs a central body that can manage its development and, ultimately, the processes that result from it. This central body needs to be viewed as credible and impartial.

In terms of skills, the team needs to be able to assess the financial, strategic, and risk attributes of an investment, so members of the team need corporate finance and strategic planning skills. Putting your CPM ambitions in the hands of a project management team is generally not advisable.

One more question that can help determine whether a company's processes are ready for CPM is: Are core metrics widely accepted throughout the organization? CPM is about a data-driven mind-set, so agreement on what information is most important in investment decisions will be critical as the project moves forward. If there is widespread consensus in your company about which metrics are key in evaluating investments, your company will have a head start.