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So why doesn't portfolio management stick?

At one of the earliest APM Portfolio Management Steering Committee meetings we decided to take our own medicine and adopt project management best practice!

We did this by spending some agenda time thinking before doing........What is our vision? What are our measurable outcomes (benefits) and what should be or are our strategic undertakings? Are there lessons that could be learned from other APM Specific Interest Groups in terms of quick wins?  We also asked what has drawn each of us to volunteer to be part of the SIG committee.

In true workshop fashion, out came the large charts which were promptly stuck to the wall, and post-it notes were handed round. Each of us wrote down what we thought the issues and challenges are with regards to portfolio management. These have been grouped into themes and are shown below. What do you think? Whats missing from our list? Why not have your say?!

1. Delivering Strategy

  • Portfolio management should connect the Chief Executive Officer to the outcomes, but there is lack of linkage and understanding between the board and project managers. Portfolio management is that missing link.
  • Organisations do not deliver their strategy effectively through programmes and projects.
  • At the moment, organisations fail to take a long term perspective. They do not link programmes and projects and fail to learn or share lessons learnt.
  • Organisations adopt a knee jerk and piecemeal approach to delivering transformational change.  
  • Organisations frequently do the wrong projects or the right ones badly the first is about doing Portfolio management right.

2. Effective resource allocation 

  • Portfolio management is a means of avoiding conflict in discretionary spending, as it avoids decision making based upon: "Who shouts loudest", "Whose face fits", "How do we feel?" Replacing subjectivity with objectivity
  • Portfolio management should contribute to maximising the use of resources to achieve corporate objectives
  • Projects and programmes fail to deliver resulting in wasted costs and resources to organisations - Portfolio management will help enable organisations to deliver more effectively

3. Lack of understanding of portfolio management

  • Portfolio management, rather confusingly, has no one agreed definition.
  • Thus the understanding and performance of portfolio management is highly variable and sub-optimal.
  • Too many programmes and projects fail which probably should not have begun in the first place, if portfolio management had been functioning properly.
  • We need to be intolerant of failure.
  • We need to become good at influencing senior management to do portfolio management.
  • Not enough organisations understand portfolio management and so the realised benefits are not being shared.
  • Organisations fail to manage their set of programmes and projects.
  • How to measure success of portfolio management?
  • It is not obvious how portfolio management provides value added.
  • The Chief Executive Officer often does not get it there should be evidence of how well portfolio management works.
  • Based on the above, portfolio management can be seen as an overhead and not a mechanism for adding value.
  • There are lots of reasons why the establishment of portfolio management can fail.
  • Too many portfolio management initiatives fail simply because people dont understand it.

11 comments

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  1. David Lynch
    David Lynch 28 February 2011, 05:02 PM

    Splendid discussion but as a minnow as compared to you guys in this area, I would like to comment back on Geoff's words "...where the answer to 'why are we building this' was generally 'because we are being paid to do it'".There seems to me to be confusion between the corporate portfolio, where the business systems and implementation thereof to increase shareholder value requires all the spendid ideas and approaches discussed in this thread and, the products being delivered to the customer (in this case the building).The corporate portfolio may set guidelines/approaches as to how to produce the building but it, imho, should be more concerned about how the overall business is run and grown for the shareholders. This then generates internal programmes and projects that are generally separate from the delivery of the products (be they buildings, widgets or services) that in turn bring in the revenue.Perhaps if this "definition" was adopted there would be less confusion and Portfolio Management would stick as it clearly can add real value.So, what do you think and should this minnow swim away into the weeds?BTW, I think a similar confusion  also applies between project management and programme management; is producing a building for a client a programme (in that it has one real major benefit to the supplier - revenue) or a project with lots of sub-projects and workpackages? From the customer side there is clearly a programme in that the physical building needs all the other elements to be delivered to realise the benefits; the building supplier is though just delivering a product.

  2. Bernard Marshall
    Bernard Marshall 17 February 2011, 04:16 PM

    A very useful lever, as usual, is money.Building the portfolio management process onto the back of the fund allocation/prioritisation process is often one of the way to get people to play attention. Getting your investment board to pick up the portfolio agenda is particularly valuable because it focuses on the high cost, high risk, high revenue or high savings change items and ties investments down to tangible benefits that are hardwired in the business plans.The challenge is where to ring-fence the investment/step change portfolio against expenditure on strategic analysis at one end and incremental performance improvment on the other. It is not an exact science but Portfolio, programme and project management will bring most value to manage the core investment. Strategy and operations have their own valuable management tools.The next challenge is your portfolio design but I will share my views on that on my next message.

  3. Syed Abbas
    Syed Abbas 17 February 2011, 01:38 PM

    I posted a comment on another forum about if the application of PPM in practice is according to what literature says, and i got the answer that PPM theories are altered according to the context in organization.It means there might be an issue of altering the theories according to context. Now question is if this is the trend then Is there any standard for practice ? because then every professional will start altering the theory according to their own needs. How the existing theories can ensure success. Do we really need PPM for success. Is there any measure

  4. Gordon Dewar-McKay
    Gordon Dewar-McKay 17 February 2011, 12:01 PM

    Matt, Interesting post, coming at it from a resourcing perspective in these times of austerity, I believe resource allocation is a critical component of PPM. Once it is determined that one or many projects meet defined objectives, the available resources of an organisation must be evaluated for its ability to meet project demand. To be effective resource allocation typically requires an understanding of existing workforce or funding resource commitments (in either business operations or other projects) as well as the skills available in the resource pool. Project investment should only be made in projects where the necessary resources are available during a specified period of time.

  5. Paul Naybour
    Paul Naybour 16 February 2011, 10:13 PM

    Yes I agree the organisations I work in have been doing portfolio management as part of the business planning and investment appraisal process for many years, even before they realised they they were doing project management.Maybe the APM is the wrong place to own portfolio management, it has more to do with strategic and business planning and the alignment of the capability of the organisation with the market demand. These are general business issues have very little in common with project management. They are more about strategic options, choice and responding to dynamic emergent strategies, with maybe a bit of investment prioritisation.What if anything do the APM know about these topics, we should go and ask the business schools they have been leading in this areas for years.   Lets stick to the successful delivery of projects, we have still much to learn and deliver.

  6. Chris Beach
    Chris Beach 24 February 2011, 08:24 PM

    To chip in on the discussion on PfM as part of strategy / business planning or project and programme management for me there is a linkage to both but it is more closely part of the PPM domain.Yes business planning is a key part as it defines the overall strategy and allocation of resources, particulalry between BAU and change projects.  But in my experience, business planning generally stops at the point the portfolio is defined and doesn't often act as an ongoing process to ensure that the entire portfolio continues to deliver the business strategy as originally intended.For me this is where the PPM link kicks in.  The management of the portfolio of programmes and projects is the key part the ensures the aspirations of the business planning process are realised in practice.It's interesting that the TfL Investment Programme is cited.  I lead the Investment Programme Management Office which is part of the business planning and performance directorate.  Within the directorate there is a separate business planning team and between us we provide the range of portfolio management activities as prescribed in academic literature.So PfM can't be successful without the strategy / business planning to define the direction of the organisation and any changes needed, but also PfM can't succeed without the change projects and programmes necessary to deliver the change activities.  The two go hand in hand and therefore PfM needs to be understood by both the strategy community and the PPM community.

  7. Paul Naybour
    Paul Naybour 18 February 2011, 10:06 PM

    MattWhich sort of "leading business school people" are amazed to see projects and programmes as part of the implementation of strategy. It has been common practice for many years as part of a normal business and investment planning process in many capital intensive organisations. Portfolio management is nothing new  and has been the link between strategy, resources (in the widest sense of the word) and implementation for years as part of an mature business planning process. For example I would look at the TfL business plan http://www.tfl.gov.uk/assets/downloads/corporate/tfl-investment-programme-introduction.pdfIt clearly links the strategic objectives the the resources and investment programmes. You may question the success in project and benefit delivery but the plan it clearly shows the linkage between strategy, projects and programmes.We were doing this sort of investment portfolio planning in the power generation sector in the 1990 and its been common practice in oil and gas since the 1970s.   May be other sectors are less well developed compared to those who commissioned major capital programmes, energy and transport.  I still think this has more to do with strategic and business planning which is a board responsibility.  I expect the next challenge for me is to find someone who has published these approaches already.I still don't see project management as the natural home for portfolio management because it is the responsibility of an organisations Directors to decide what the portfolio should be for the organisations and they do this as part of agreeing the business plan (explicit or implied) for the organisation. That is the purpose of the business plan.  You could have an investment portfolio but is only one small part of the overall business plan for the organisation.

  8. Martin Samphire
    Martin Samphire 23 February 2011, 08:43 PM

    I agree and disagree:Portfolio Management is absolutely to do with strategic and business planning - in part - which is a board responsibility.  It is also to do with delivery of outcomes that go toward meeting the strategic objectives.  I find that boards do engage in the business change / transformation portfolio definition process, but less so in the portfolio delivery process.  Few boards are able to grasp the landscape, interactions and progress toward meeting strategic outcomes without a structured approach and insight.  Also when it comes to optimising the portfolio where, say resources and finances are constrained, there needs to be an analytical approach.  Also there has been, in many organisations, a massive gap between the strategic objectives of the business and alignment with projects delivering outputs - that are exploited to deliver business benefits. I also agree that "project management" is not the natural home for portfolio management.  Project management and programme management are layers of management that sit beneath portfolio management.  The Board is responsible for definition and ensuring delivery of the portfolio - but also for ensuring that competent portfolio, programme and project management capabilities are in place.  In the Portfolio Management SIG terms of reference, we identify that Board Directors are the key stakeholders in terms of influencing best practice.You state that "an investment portfolio is only one small part of the overall business plan for the organisation".  Agreed, however it does depend on the type of organisation as to how significant is the investment portfolio.  However the organisational transformation / change portfolio is a crucial part of the business plan.  

  9. Geoff Reiss
    Geoff Reiss 16 February 2011, 05:07 PM

    It is strange that Portfolio Management (my definition is: the identification, investigation, evaluation and authorisation of programmes and projects) is developing quite late in the general evolution of project management.  I believe the reason for this stems from the long history of project management within the engineering contracting industries where the answer to 'why are we building this' was generally 'because we are being paid to do it'. As project management has spread from contracting to change, portfolio management has become a vital ingredient.A key challenge to successful portfolio management is the enormous egos of senior managers in a very wide range of organisations. They may support portfolio thinking in general but genuinely believe that it need not appply to them personally. If their egos were smaller they probably would not hold their senior position. They believe themselves to be visionaries.It is the stakeholders who should kick up a fuss - company shareholders, public sector tax payers and other stakeholders should demand to be shown that a sensible process preceeded the decision to commit to any initiative.Such a process must compare the proposal with other way of achieving the same or very similar benefits and should show that the selected intiatives were the best possible way of delivering the organisation's strategy.Finally, whilst complaining about bad practice, can we promote best practice through great examples? Can we celebrate those organisations who keep their portfolio in shape? Can we hold up great organisations that do know how to do it? I'm told that some pharmaceutical developers and TfL seem to get it right. Are there others? Can we highlight them? Maybe a new APM award is called for. Are there any nominations for Portfolio Management Organisation of the Year?  

  10. Doug Peck
    Doug Peck 16 February 2011, 04:53 PM

    Hi MattSome very valid points here, particularly regarding the confusion around the definition of PfM. Further to your thoughts I recently wrote a one page guide to Portfolio Management that might be of interest - I'd welcome the  feedback of other members?Best wishes,Doug

  11. Keith Holmes
    Keith Holmes 16 February 2011, 04:30 PM

    Congratulations, Matt, on raising such a rich and significant topic for discussion.  The workshop has raised a great many valid points.  I'd just like to add a few thoughts in no particular order:1. Organisations need to decide what problem they are trying to solve with portfolio management.  Some will need to keep a lot of inter-dependent initiatives aligned.  Others will be looking to optimise risk/return across a set of reasonably independent investment opportunities.  Yet others might want an organisation-level 'control room'.  The portfolio management solution needs to be designed from an agreed initial requirement.2. Portfolio management might be regarded as a form of systems thinking.  Plenty of organisations struggle to apply that. Presumably organisation, skills and culture are important factors. 3. Portfolio management might have the effect of centralising decisions if each individual investment has to be viewed as part of a whole picture. 4. There's a political dimension (big or small 'p').  For example, does portfolio management inhibit radical change by demonstrating the inter-connectedness of everything? Best wishes for this work.  It'll be interesting to see what conclusions your group comes to.