Portfolio management enables you to align every person in your organisation with your strategic objectives, ensuring overall business success, vitality and sustainability.
Portfolio management puts the focus on doing the right change initiatives at the most appropriate time by providing valid information to senior management so that they can make informed decisions. To achieve this portfolio management must be coordinated and aligned with strategic business planning, business as usual, budgeting, performance management, and corporate governance.
Portfolio management is not rocket science, it is the framework of best management practices used to create structure, focus and coordination for projects and programmes to ensure they are delivered effectively and cost efficiently as well as being aligned with strategic objectives.
Example of portfolio management including a work steam for implementing continuous enhancements along with projects and programmes
Why do we need portfolio management?
Portfolio management has evolved to address the situation where, programmes and projects may well have been completed within budget, on time and deliver the planned outputs, outcomes and benefits, but organisations failed to get the required ROI. Portfolio management is a form of systems management, it takes into consideration all that needs to be done within an organisation and then prioritises those efforts that will result in the best contribution to achieving the organisations goal, or optimise the ROI.
How does portfolio management address the issue of selecting the right projects and programmes?
From the portfolio perspective we need to understand what the organisations strategic objectives are. Then we can identify what is constraining the organisation from fulfilling its strategic objectives.
With this information we can identify what mix of change initiatives will give us the required capability that is currently missing. By using tools such as benefits mapping we can ensure that there is no overlap in the capability delivered by individual projects. As we have an overview of the whole system it is also possible to prioritise the projects and programmes in order to deliver the most value to the organisation as a whole.
If you do not have a portfolio/systems perspective then it is very likely that you will end up
1: Initiating projects that duplicate effort and outputs
2: Initiating projects that on the surface are a good idea at the individual or sub-organisation level, but with further investigation are actually counterproductive to achieving the organisations objective.
Answers to the following questions will inform us about the appropriateness of the selected projects and programmes:
1: Are the selected projects and programmes together with the normal operational work sufficient to achieve the strategic objectives of the organisation?
2: Are the selected projects and programmes necessary in the context of the strategic objectives we want to fulfil?
Portfolio management is not only about selecting the right projects and programmes it is also about preventing the wrong projects and programmes from continuing.
How can you use portfolio management to help with your strategic planning today?
Make an inventory of all your current projects and programmes and map them to your current strategic objectives. You may find that you have some projects that you cannot match to a strategic objective. This can mean one of two things, either you need to adjust your strategic objectives or the project in not necessary in the context of your strategic objectives. So here you are using the portfolio management structure to determine if all the projects are necessary to achieve the strategic or business objectives. You also want to establish that you have not missed out on an important project.
Let’s look at some other benefits derived from a portfolio approach:
What are the dependencies and constraints between projects and programmes in the portfolio?
We can determine what resources are needed and if they are available. By identifying constrained resources across the system we can plan the flow of work through those constrained resources to get the most out of them. By identifying dependencies we can ensure that work is done in the right order.
The benefit is: More efficient resource utilisation.
Is the portfolio of projects and programmes affordable?
By aggregating the budgets for all the projects and programmes you can determine if they are affordable.
If funding is a constraint then we will be in a position to prioritise those initiatives that will give the most value. This will give us the opportunity to generate the funding for less critical initiatives at a later stage.
The benefit is: More efficient use of available finance and resources.
What is the overall level of risk and is it acceptable?
Overall risk exposure and dependencies between projects and programmes must also be taken into consideration; by aggregating the risk at portfolio level senior management can get a better understanding how the aggregated risk may affect the strategic objectives, therefor be in a better position to make informed decisions about the future direction of the organisation.
The benefits are:
Improved awareness of the combined risks.
By being aware and taking a systems approach to risk, it is more likely that individual risks will be handled at the right level.
I believe any organisation that pro-actively adopts the systems thinking and portfolio management perspective will benefit. It improves engagement and communication between relevant stakeholders, at the same time enhancing transparency, accountability and corporate governance.
I will be very happy to bounce ideas with anyone who is interested in this topic, my contact details are at the bottom of the page.