Why portfolio monitoring goes wrong
(and how to do it right)
There is a perception that implementing portfolio monitoring solutions is ‘easy’. Whilst in practice it should be, the reality is often different.
Having worked on countless software implementations for clients across the private capital markets, we know that so many previous implementations have simply failed to generate meaningful value for investment teams. Here, we explore some of the main reasons why these implementations are unsuccessful. And then, as you would expect, offer some suggestions on how to ensure they succeed.
The problems
Whilst poor implementation can lead to many different issues, we think that the biggest issues can be broken down into three distinct categories.
Metrics
When it comes to collection metrics, there is a trend to try and boil the ocean. Firms often decide to try to collect every metric they can think of, taking a ‘just in case’ approach, rather than trying to precisely define what they need up front. Being indiscriminate in the metrics collected can cause confusion, as it is often unclear what the data item means. This causes data collected to be inconsistent, and difficult to compare across entities and time periods. Data is often badly structured. It doesn’t harness inbuilt calculations, or uses too many calculations, which reduces the flexibility of input.
Portfolio Company Engagement
Typically, reporting to investors is perceived as an inconvenience by portfolio companies, with no upside for them. This can be further enhanced by having to collect a high-level number of metrics, in a complex collection form. Metrics which are not well defined can cause confusion and can be difficult for the company to report. So, they simply don’t bother.
Business as usual
Portfolio monitoring solutions are designed to be simple to implement, so that everyday business users can maintain and use them on an ongoing basis. However, business users may not have a wide knowledge of software implementation and project methods, so may not have the required skills to implement them correctly. This can cause issues and frustration for the business users, who are expected to implement the systems alongside their usual work, typically with no resource to backfill the time.
The solutions
(great news, it can be easy)
The previously highlighted challenges are all easy to fix with proper planning and early engagement from stakeholders, and we suggest taking the following essential steps prior to initiating any portfolio monitoring solution.
Metrics
Before you begin, review your metrics, understand what you are collecting (and the use case for these metrics) and try not to be excessive in data volume. Confirm that clear, precise data item definitions are provided, to ensure that the values are exactly as required. This helps to significantly reduce the continual back and forth of pesistent clarifications.
Portfolio Company Engagement
Seek engagement from the portfolio companies early on, and ensure they provide training and information for how to complete any template request. As well as this, ensure the requests themselves are simple to complete, and that data items are well defined and clear. And always offer an upside for portfolio companies. For example, allow them to log into a system, and use it to derive their own insights from the data. Consider creating access to anonymised wider portfolio data to allow benchmarking against similar opportunities.
Business as usual
It is critical to ensure that project leads have sufficient support and time. If they need extra time, can someone else handle portions of their BAU? And consider seeking an implementation partner to give external assistance, providing the advantages of enhanced bandwidth, as well as wider domain knowledge and best practice techniques. It just so happens, we know one.
In conclusion
Portfolio monitoring implementation can be as easy or as challenging as you make it. The key is to approach it with a clear strategy, stay informed, use available tools, and be disciplined in your decision-making. If you’d like to find out how we can support you to get it right then we’d love to hear from you.
Contact Us
Our team of experts is ready and waiting to discuss your unique needs.
- +44 (0) 20 4551 9191
- info@itventure.com
