Project Portfolio Management - Overview
Organisations are increasingly turning to project portfolio management to enable them to realise better returns on project investments. Portfolio management helps ensure that the portfolios of projects and programmes within an organisation help the organisations meet its strategic goals.
What is a portfolio?
When discussing a portfolio, we mean all the investments made by an organisation in change programmes and projects required to achieve its strategic objectives.
Do more with less
No organisation has unlimited finances or resources. Increasingly, business managers are expected to do more with less.
When developing a portfolio, decisions must be taken about the best use of scarce resources. Also thought must be given to whether these resources are deployed at the operational level or the strategic level to enable changes.
Terminating projects or programmes
When considering the best use of resources, decisions might sometimes be taken which result in the premature closure of project(s) and/or programme(s) if these are not aligned with corporate strategy.
What is portfolio management?
Portfolio management is the delivery of the organisation’s strategy. It achieves this by ensuring that:
- Operational changes are agreed at the appropriate level and contribute to at least one strategic objective;
- Strategic decisions are based upon a favourable balance between strategic benefits on the one hand, and the costs, risks and impacts on business as usual on the other hand;
- Resources and changes initiatives are prioritized to ensure they contribute to strategic objectives;
- All change initiatives are frequently reviewed to ensure they remain strategically aligned.
Portfolio management must ensure that the delivery of projects and programmes is aligned with some key aspects of the organisation. These are:
- Its strategic objectives;
- Its business requirements;
- Its capability;
- Its capacity for change;
- Its maturity in terms of portfolio, programme and project management (PPM).
Portfolio management requires centralised, up to date information about the organisation’s investments so that effective decisions can be taken. This requires that data is regularly collected, updated and reported on in a timely manner.
Consider the wider picture
When taking investment decisions an organisation must consider the impact on business as usual – i.e. its everyday operational activities. By understanding the needs of business as usual, its lifecycles and key events, the organisation can take investment decisions which minimize the impact on business as usual.
Considering business as usual therefore is a vital part of understanding how the organisation’s portfolio of programmes and projects fits into the bigger picture.
Changing vs running the business
Business as usual is about running the business, whereas project portfolio management is about changing the business.
These changes are changes to the operational environment. Therefore, they must deliver what business operations needs and wants in terms of strategy, planning and scoping. Changes must occur with as little disruption to business as usual as possible.
There are numerous ways in which an organisation can structure its project portfolio. The structuring can be done by:
- Business unit;
Relationship with programme and project management
Since project portfolio management is concerned with the totality of the change investments within an organisation, there is an inevitable relationship with both programme management and project management.
A project is a temporary organisation set up to deliver changes into business as usual. A project may sometimes be part of a programme. A programme is a collection of related projects which contribute benefits to the organisation.
All programmes and projects must be considered when prioritising the allocation of investment and resources. Some will be judged to not contribute sufficiently to the strategic objectives and therefore might be stopped so that resources can be re-allocated to more strategically important projects or programmes.
Portfolio, programme and project (PPM) office
In larger organisations in recent years, the setting up of dedicated portfolio, programme and project (PPM) offices to support the management of these investments has become more common. One popular PPM office framework is known as P3O®, which is owned by AXELOS, the owner of the management best practice suite of products such as PRINCE2®, MSP® and ITIL®.
PRINCE2®, P3O®, MSP® and ITIL® are registered trademarks of AXELOS Limited, used under permission of AXELOS Limited. All rights reserved.