5 Common Portfolio Management Mistakes and How to Avoid Them

Project portfolio management is not a simple task, particularly for organizations located in the field of engineering, procurement, and construction (EPC), where there should be equalization of timelines, budgets, risks, and expectations of the involved stakeholders. Such a minor slip can easily cause the cost to run over, a shortage of resources, or wrong project priorities. Nevertheless, despite the development of technology and approaches, numerous companies continue to have a problem with regular and strategic management of their portfolios. 

In the management of large-scale capital projects, or managing a series of turnkey EPC solutions, knowing the most frequent errors will allow you to prevent expensive mistakes. We will discuss the five most common portfolio management errors—and, more to the point, ways of avoiding them—below. 

1. Lack of Strategic Alignment Across the Portfolio 

Lack of alignment of projects with the strategic goals of the organization is one of the biggest pitfalls in portfolio management.  Most companies take on projects without thinking about long-term value, impact, resources, or strategic fit; it just appears to be useful at that point in time. This is a contributor to disjointed portfolios, squandered investment, and lost opportunities. 

Why It Happens 

• Decisions made in silos 

• Bad interdepartmental communication 

• Lack of a uniform project selection model 

How to Avoid It 

Establish a clear and organization-wide system of prioritization that appraises every project based on:

• ROI and business value 

• Risk profile 

• Workforce availability 

• Consistency with the long-term strategy 

The advantages of integrating EPC project lifecycle management models that assist business leaders to assess the alignment of every initiative to organizational objectives are also significant to EPC companies that are running several capital projects. 

2. Inadequate Risk Management and Diversification 

A well-balanced portfolio finds a balance between risky and high-paying projects and predictable low-risk projects. Regrettably, most organizations do not value the risk spread in the portfolio. Consequently, they end up focusing excessively on risky ventures at a single point or under-investing in risk-free, yet stable ventures. 

Why It Happens 

• Lack of risk assessment in the planning process 

• Too much confidence in the success of the past 

• Underestimating EPC projects 

How to Avoid It 

Perform an effective risk analysis throughout each lifecycle phase of the portfolio. Rather than assessing projects in isolation, the interaction of projects as a larger system is important. 

Employment of EPC project management consultants may also enhance the concept of risk planning through the offer of impartial analysis, scenario modelling, and risk-weighted marking approaches. 

Also, add measures of mitigating downtime and regularly perform health checks of the portfolio to ensure balance throughout the year. 

3. Poor Resource Allocation and Capacity Planning 

The best portfolio will not work without the appropriate resources that the organization can offer to support it. Excessive commitment of projects, not considering the workload or not factoring into account specialized labor, usually results in project slipping, burnout, and quality problems. 

Why It Happens 

• Wishful thinking in the absence of actual data 

• No unified perspective of the resources used 

• Uneven interdepartmental planning 

How to Avoid It 

• Install centralized resource management tools where real-time data of: 

• Workforce availability 

• Skills needed for each project. 

• Usage of equipment and materials 

• Contractor utilization 

In the case of the EPC organizations, efficient resource deployment is very important during the engineering, procurement, and construction stages. The inclusion of project management in the best practices of EPC aids in making sure that the right resources are provided at the right time—particularly when the procurement-intensive milestones are taking place and time wastage can be very expensive. 

It can also be done with the help of professional consultants who can be used to optimize manpower planning and avoid overloading resources. 

4. Ignoring Data and Relying on Gut-Based Decisions 

In the fast-moving world today, baseless decisions made on the basis of experience or with a feeling of whim can put organizations at risk of unethical risks.  Managerial intuition is a useful thing, but ignoring fact-based predictions, particularly in a complicated industry such as EPC, results in inaccurate forecasting, unrealistic schedules, and mismanaged expectations. 

Why It Happens 

• Weakness in the use of analytics. 

• Old systems that fail to measure performance 

• The deficiency in training of data interpretation 

How to Avoid It 

Change to a data-driven model of decision-making that includes: 

• Performance metrics 

• Cost forecasting 

• Earned value analysis 

• Scenario planning tools 

• Historical project data 

This method will give leaders the right image of portfolio performance and reinforce predictability throughout the EPC project lifecycle management workflow. 

When selecting the consultants to do your analytics-based portfolio optimization, it is crucial to ensure that your team uses credible data rather than assumptions to make multimillion-dollar decisions. 

5. Ineffective Communication and Poor Stakeholder Engagement 

The silent killer in portfolio management is miscommunication. Lack of visibility on project updates, mismatches in expectations, lack of responsibilities, and late reporting can bring confusion and misdirection. The bigger the portfolio of projects, the higher the communication risk. 

Why It Happens 

• Disjointed reporting systems 

• No agreed upon communication protocols 

• Leaders with no real-time portfolio visibility 

How to Avoid It 

Expand a centralized communication plan, which involves 

• Normal reporting templates 

• Periodic review of the portfolio. 

• Real-time dashboards 

• Proper avenues of escalation 

This gives full visibility of performance, risks, and progress to the stakeholders who are executives and to the project managers. EPC organizations dealing with turnkey EPCs must invest in robust communication, which must take into consideration engineering, procurement, supply chain, and construction updates and have them incorporated into one platform that can be tracked. 

The Value of Expert Consultation in Portfolio Management 

Inasmuch as organizations can indeed apply these strategies in-house, most of them fail to execute them due to their inability to acquire specialized tools, staff, or objective knowledge. Professional consultants come in very handy at this stage. 

Alga Processing LLC provides services to companies that would like to enhance or reorganize their portfolio of projects, particularly in the EPC, capital project, and industrial spheres. Their crew is experienced in decades in: 

• Consulting services for EPC project management 

• Optimization of EPC project lifecycle management 

• EPC workflow project management 

• Efficiency planning and redesigning portfolios 

• Technical control and risk management 

• Turnkey EPC services and support 

Consulting experienced professionals can save a lot of time, money, and operational stress in case your organization requires assistance in realigning its portfolio, eliminating inefficiencies, or developing a more foreseeable project environment. 

Final Thoughts: Build a Portfolio That Supports Growth 

It is not merely project tracking but proper portfolio management, which involves selecting the appropriate projects and making sure that they cooperate to support your strategic objectives. Organizations can create value-maximizing portfolios, reduce risk, and realize long-term success by circumventing the most common errors and enhancing planning, communication, and execution. 

In case you are willing to get rid of inefficiencies and get professional advice on how to conduct your EPC projects in a more strategic way, book a session now. 

Schedule a business meeting with Alga Processing LLC: https://www.algaprocessing.com/book-appointment

Alga Processing LLC is an organization that helps your business in operations and management. Its people come from various backgrounds of knowledge and experience that promote a healthy environment for your personnel. Your organization will benefit from ensuring you and your team members are there every day to give the time and talent to yield productivity to its maximum. Contact us for more information on how to help your business grow.