Project Portfolio Management

Portfolio management is about managing investments effectively, so that strategic objectives are achieved. Projects and programmes ensure successful delivery and achievement of benefits (“doing things right”) at an individual level. Portfolio management’s scope is to make right investments (“doing the right thing”) and “doing things right” at a collective level.

Definition of Portfolio Management

Portfolio management is a coordinated collection of strategic processes and decisions that enable the most effective balance of organizational change and business as usual (BAU).

The “strategic processes and decisions” in the above definition, broadly covers the following:

• Every project or programme is assessed and measured for its contribution to the organization’s strategic objectives.
• Every project or programme is allocated a priority level, based on factors including cost, risk, capability of resources and the ability for the organization to use its benefits.
• Every project or programme is reviewed regularly for its ability to upkeep with the desired business benefits, strategic contribution, and risks.

Benefits of Portfolio Management

Managing an organization’s projects as a portfolio can create many benefits. The main aim of portfolio management is to ensure organizational change initiatives are aligned with its higher strategy.

Some benefits of portfolio management are:

• Investments are made for the right programmes and projects: A strategic overview of the organization’s goals and aims will ensure all change initiatives (projects and programmes) contribute to the strategy of the business. If there are any change initiatives that are redundant or do not contribute to the growth and establishment of the business, they are not undertaken.
• Right projects and programmes are given the right priority: In this changing world, business aims, and goals rarely remain constant. A strategy that appeared to give a competitive edge to the business some time ago, may no longer be a priority to the senior management of the company. But a project team which was working on a project initiated at that point of time, may only focus on the benefits that were planned for that specific project. Portfolio management constantly evaluates changing business priorities and manages the portfolio of projects, from pipeline to completion in strategy-conscious manner.
• Supports and encourages informed and bold decision-making: What would you do if you know that a project is doomed? Kill it or try to give a last-ditch effort to recover it? A natural human instinct is to attempt to recover failing projects, even after realising that it may no longer be viable. This only results in the wastage of organizational resources. Portfolio management encourages bold decision-making to prematurely close projects if the need arises.
• Conscious management of interdependencies: It is not uncommon to see two business units with the same organization doing projects which may eventually achieve the same benefit. This often happens because one team is unaware of what the other team is doing. When all the strategic change initiatives in an organization fall under the same umbrella, it becomes easier to remove redundant projects, manage interdependencies between projects and build organization-wide transparency of change initiatives that take place, thus optimizing resource utilization.
• Enhanced Engagement: Sporadic engagement from senior management in projects, is a common problem in many organizations. Portfolio management will ensure that organization-level decision makers are engaged in understanding the ongoing initiatives and are synchronized with how these initiatives are in line with corporate strategy. This reduces surprises. Enhanced engagement will also ensure senior management commitment remains constant throughout a project’s life.
• Effective Corporate Governance: In many organizations, there is a lack of visibility between investments in projects and programmes, and benefits that are achieved from them. Portfolio management attempts to prevent this by creating a clarity from the point of investment to the final benefits. This is done by creating transparency in the way investments for change initiatives are linked together with the way organization’s strategic objectives are delivered. This creates accountability for investment decisions.

Myths about Portfolio Management

Project portfolio management has its roots in financial investment portfolio management. Its origin and lack of understanding has paved way to some myths about this practice.

Some of them are:

• Portfolio management is an additional overhead to the organization: Portfolio management does not require an additional set of processes that lie on top of existing ones. Portfolio management is designed for streamlining existing processes and improving coordination between them. For example, portfolio management requires projects to be allocated priority levels and encourages compromising low priority projects in favour of more strategically aligned and more beneficial ones. Therefore, it can be argued that portfolio management actually reduces the organizational overhead, by optimizing value.
• Portfolio management is complicated: There is no one-size-fits-all solution in portfolio management. Portfolio management processes and practices can be customized according to the organization’s capacity, size and strategic needs. Sophisticated techniques and approaches are not superior to simpler techniques.
• Portfolio management is expensive: Establishing a project portfolio management process and operating it in an ongoing basis requires an investment. However, like any investment, it is a balance between costs and benefits. Frequently, the value generated by establishing a portfolio and managing it, outweighs the costs associated with it.
• Portfolio management requires an IT system: Portfolio management principles and processes are not aligned with any particular software. If an organization uses basic productivity tools such as word processors, spreadsheets and shared folders, these can be used for maintaining and presenting information. Complex information systems are not necessary for portfolio management.
• Portfolio management is an isolated function that dictates how projects should be managed: Portfolio management does not dictate anything, unless it is badly implemented, or wrong people are involved in it. It is a function that supports and coordinates activities with cognizance to the organization’s strategic goals and aims.
• Portfolio management is merely a function that reports on the ongoing projects: Information plays an important role in portfolio management. However, portfolio management is not simply presentation of information alone. Value addition lies in enabling effective decision-making through information and continuously scrutinising projects against strategic objectives of the organization.

Written by Inham Hassen

This wiki is developed and managed by an accredited trainer, independent of AXELOS. While aligned with their guidelines, it’s not an official resource.