I was recently asked to present on Portfolio Management and had the opportunity to review and discuss what I have done previously and revisit material from the past. What I found was some summaries on the benefits of Portfolio Management and the comparison with a financial portfolio of investments which I wanted to share. Driving this discipline into an organization takes time but can be accelerated by the understanding and communication of the benefits.
The Benefits of Project Portfolio Management
Many organizations will focus their efforts on the management of each individual projects, but fail to spend time looking and managing the project portfolio itself. The result is losing sight of the larger investment and the ‘return’ on it and narrowly looking at one investment at a time. Project portfolio management attempts to change that attention to ensure the whole investment landscape is seen and make sure that:
The right mix of projects are in the portfolio to maximize overall returns
The project portfolio is comprised of projects that offer widely differing value. Projects vary by their short and long-term benefit, their synergy with corporate goals, and their level of investment and anticipated payback. Taking these factors into account, project portfolio management seeks to optimize the returns of the entire portfolio. It selects the most value-producing projects for execution, ensuring that funds are directed toward deserving initiatives. It also eliminates overlaps and redundancies between projects, saving time and costs.
The risks posed by the projects in the portfolio are balanced
Just as an investor attempts to minimize risk and maximize returns by diversifying portfolio holdings, companies should assess and balance the risks of the projects in their portfolios. A conservative portfolio, like an investment portfolio skewed towards bonds, may minimize risk and preserve principal but it also limits the potential returns of the portfolio. Conversely, an aggressive project portfolio may have greater odds of hitting a “big win,” but at a substantially higher risk of failure or loss. Project portfolio management diversifies the company’s project portfolio, balancing risks with potential returns.
Resources are allocated optimally across those projects
With a limited number of people, all projects must compete for resources. Project portfolio management quantifies, compares and prioritizes projects to help companies identify and staff the most valuable ones instead of unwittingly wasting resources on other, less useful efforts. Through high-level executive oversight, it resolves resource conflicts between ongoing projects. It also incorporates formal sourcing strategies to determine the skill sets needed for each project and the best source of resources.
Performance problems are corrected before they become major issues
Project portfolio management is not the magic answer to eliminate project performance issues but it can give the hope that they will be seen earlier. This saves time and money by having them addressed sooner and keeping the projects on course. In turn that ensures that any dependent projects stay on track as well.
Projects remain aligned with business goals throughout their execution
Project portfolio management provides continuous management oversight, regular communication and coordination, and constant course correction to minimize project drift, re-direct projects when business objectives change and maintain alignment.
Projects receive the support and oversight needed to complete successfully
By elevating the prioritization and oversight responsibilities to the executive level, project portfolio management ensures that projects receive the backing they need to succeed. Executives have the authority and business knowledge to ensure alignment between projects and business strategies; to fine tune the timing and order of projects to exploit synergies, avoid re-works and eliminate redundancies; to optimally assign resources; to direct funds to the most valuable initiatives; and to help resolve critical performance issues.