Portfolio management

Definition

Portfolio management is the selection, prioritisation and control of an organisation’s projects and programmes in line with its strategic objectives and capacity to deliver. The goal is to balance change initiatives and business-as-usual while optimising return on investment.

 General

Portfolios can be managed at an organisational or functional level and address three questions:

  • Are these the projects and programmes needed to deliver the strategic objectives, subject to risk, resource constraints and affordability?
  • Is the organisation delivering them effectively and efficiently?
  • Are the full potential benefits from the organisation’s investment being realised?

As a result, portfolio management integrates the disciplines of:

  • strategic planning;
  • change management;
  • project and programme management.

The portfolio life cycle encompasses techniques such as:

  • segmenting the portfolio into categories and tailoring the investment criteria accordingly;
  • portfolio prioritisation based on assessments of risk and return;
  • assessments of progress via stage gates;
  • periodic portfolio-level reviews and regular portfolio reporting;
  • consistent portfolio-wide approaches to benefits management.

The portfolio management process must constantly review the balance of investment and benefit, creating and closing projects and programmes as necessary. This will include prematurely closing projects or programmes where they are no longer viable.

The benefits of applying a portfolio approach include:

  • maintaining a balanced and strategically aligned portfolio in the context of changing conditions;
  • improved delivery of projects and programmes through a portfolio-wide view of risk, dependencies, and scheduling to reflect the capacity of different parts of the organisation to absorb change;
  • reduced costs by removing overlapping, poorly performing and non-strategically aligned projects and programmes;
  • more efficient and effective use of limited resources, by matching demand and supply, and optimising allocation of available resources;
  • increased realisation of forecast benefits and the identification and realisation of unplanned benefits to create additional value.

Achieving these benefits is dependent on repeatable processes supported by:

  • a clearly articulated strategy;
  • senior management commitment to, and active championing of, the portfolio management processes to ensure that stakeholders collaborate in pursuit of shared goals;
  • a clear governance structure that is understood by stakeholders;
  • a portfolio management office function to provide impartial and credible analysis and decision-making support to the portfolio management team, along with support to projects and programmes.

Good governance of an organisation’s portfolio provides an opportunity to improve the management of projects and programmes consistently. A well-managed portfolio provides the structure and commitment needed to improve an organisation or function’s maturity.

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