Introtoportfoliomanagement1 1276967502489-phpapp01


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  • Organizations that do not link portfolio management to governance increase the risk that misaligned or lower priority initiatives will consume critical resources
  • In this figure, the controls that comprise organizational governance cascade to the domains of portfolio, program and project management. These controls maximize the likelihood of success of the organization’s strategy.
  • The goal of linking portfolio management to the strategy is to balance the use of resources to maximize value in executing strategic and operational activities
  • The goal of linking portfolio management to the strategy is to balance the use of resources to maximize value in executing strategic and operational activities
  • To guide the “Management of Authorized Programs & Projects”, a project portfolio is created, linking the organizational strategy to a set of prioritized programs and projects.
  • The ultimate goal of linking portfolio management with organizational strategy is to establish a balanced, executable plan that will help the organization achieve its goals.
  • It is important that the portfolio management team manage relationships and interfaces with operations effectively, for the full value of each component to be realized.
  • As the components move into initiation, their respective areas use their management processes to manage deliveries. During execution, portfolio management maintains relationships among the components to monitor progress and maintain alignment with strategic goals. At the highest level, strategic and ops portfolios are managed as a single comprehensive portfolio.
  • Total Quality Management, Continuous Quality Improvement. Six Sigma, introduced by Motorola in 1981, seeks to improve the quality of process outputs by identifying and removing the causes of defects (errors) and minimizing variability in manufacturing and business processes
  • Risks and opportunities are managed at the composite level, considering portfolio dynamics, fiscal constraints, windows of opportunity, component constraints, and stakeholder dynamics.
  • Managers, as defined in the last bullet, are those individuals responsible for executing portfolio components.
  • PMO is the Project Management Office. Alternative terms include Project Center of Excellence (COE), Program Office.
  • Portfolio metrics are less concerned with lifecycles and more focused on monitoring progress toward achieving an organization’s goals. Project management metrics illustrates the health at a given point in time and progress toward meeting deliverables. Program metrics consolidate and summarize performance of constituent projects, still maintaining a focus on the life cycle.
  • Introtoportfoliomanagement1 1276967502489-phpapp01

    1. 1. Introduction toIntroduction to Project PortfolioProject Portfolio ManagementManagement Andrew P. Valenti,Andrew P. Valenti, Valenti PartnersValenti Partners
    2. 2. What is a Portfolio?What is a Portfolio? Terms and DefinitionsTerms and Definitions  AA portfolioportfolio consists ofconsists of projects or programsprojects or programs and other work groupedand other work grouped together to facilitate thetogether to facilitate the accomplishment ofaccomplishment of business objectivesbusiness objectives  It consists of currentIt consists of current components andcomponents and planned/future work.planned/future work.  A portfolio, unlike aA portfolio, unlike a project/program, isproject/program, is notnot temporarytemporary
    3. 3. What is a Portfolio?What is a Portfolio? Key PointKey Point  AA portfolioportfolio is ais a snapshot of itssnapshot of its components,components, reflecting thereflecting the strategic goals ofstrategic goals of the organizationthe organization
    4. 4. What is a Portfolio?What is a Portfolio? Portfolio managementPortfolio management includes processesincludes processes for:for:  IdentifyingIdentifying organizationalorganizational prioritiespriorities  Making investmentMaking investment decisionsdecisions  Allocating resourcesAllocating resources
    5. 5. Relationships Among Portfolio, Programs, &Relationships Among Portfolio, Programs, & ProjectsProjects Portfolio Portfolios Projects Programs Programs Projects Projects Programs Projects Other WorkProjects Projects Figure 1.1
    6. 6. All portfolio components:All portfolio components:  Represent investmentsRepresent investments made or plannedmade or planned  Are aligned with org’sAre aligned with org’s strategic goalsstrategic goals  Have distinguishingHave distinguishing features for groupingfeatures for grouping  Can be measured, ranked,Can be measured, ranked, prioritized (i.e.prioritized (i.e. quantifiable)quantifiable) Relationships Among Portfolio, Programs, &Relationships Among Portfolio, Programs, & ProjectsProjects
    7. 7. Portfolio, Programs, & ProjectsPortfolio, Programs, & Projects Key ConceptKey Concept  Portfolio management ensuresPortfolio management ensures interrelationships between programs &interrelationships between programs & projects are identified and resources areprojects are identified and resources are allocated according to org prioritiesallocated according to org priorities  Programs focus on achieving benefitsPrograms focus on achieving benefits expected from the portfolio as per strategicexpected from the portfolio as per strategic org objectivesorg objectives  Projects concerned with specificProjects concerned with specific deliverables/org objectivesdeliverables/org objectives
    8. 8. What is Portfolio Management?What is Portfolio Management? Portfolio Management is:Portfolio Management is:  The management of components toThe management of components to achieve organizational objectivesachieve organizational objectives  Using its tools to identify, select,Using its tools to identify, select, prioritize, govern, monitor, & report aprioritize, govern, monitor, & report a component’s contribution to, andcomponent’s contribution to, and alignment with org objectivesalignment with org objectives  Not concernedNot concerned with managing thewith managing the componentscomponents
    9. 9. What is Portfolio Management?What is Portfolio Management? ““Doing the right work, not doing the workDoing the right work, not doing the work right.”right.”
    10. 10. Portfolio Management andPortfolio Management and GovernanceGovernance GovernanceGovernance  Guides theGuides the execution ofexecution of organizationalorganizational activitiesactivities  MaximizesMaximizes delivery ofdelivery of valuevalue  Minimizes riskMinimizes risk
    11. 11. Portfolio Management andPortfolio Management and GovernanceGovernance Organizational GovernanceOrganizational Governance is theis the process that:process that:  Directs and controls operations andDirects and controls operations and strategic activitiesstrategic activities  Responds to the rights,Responds to the rights, expectations and desires ofexpectations and desires of stakeholdersstakeholders
    12. 12. Portfolio Management andPortfolio Management and GovernanceGovernance Project Portfolio GovernanceProject Portfolio Governance is theis the set of processes by which:set of processes by which:  An organization prioritizes, selects,An organization prioritizes, selects, and allocates resources toand allocates resources to accomplish its activitiesaccomplish its activities
    13. 13. Management by Projects Organizational Governance Portfolio Management and GovernancePortfolio Management and Governance Strategic Planning Portfolio Management Program Management Project Management Process Tools Metrics Management of Operations Relationships among Organizational Governance, Operations, and Portfolio Management Figure 1.2
    14. 14. Portfolio Management and OrganizationalPortfolio Management and Organizational StrategyStrategy Organizational StrategyOrganizational Strategy  Capitalizes onCapitalizes on opportunitiesopportunities  Minimizes the impact ofMinimizes the impact of threatsthreats  Responds to marketResponds to market changeschanges  Reinforces focus onReinforces focus on critical ops activitiescritical ops activities
    15. 15. Portfolio Management and OrganizationalPortfolio Management and Organizational StrategyStrategy Organizational StrategyOrganizational Strategy  Is the result of theIs the result of the strategic planning cyclestrategic planning cycle  Translates vision andTranslates vision and mission into strategicmission into strategic planplan  Consists of initiativesConsists of initiatives influenced by marketinfluenced by market dynamics, customers,dynamics, customers, shareholders,shareholders, regulations, competitorsregulations, competitors
    16. 16. Relationship between Strategic and OperationalRelationship between Strategic and Operational ProcessesProcesses Vision Mission Organizational Strategy and Objectives High-Level Operations Planning and Management Project Portfolio Planning and Management Management of On-Going Operations (recurring activities) (producing value) Management of Authorized Programs and Projects (projectized activities) (increasing value production capacity) Organizational Resources Sets Performance Targets Establishes Initiatives Executes Activities Figure 1.3
    17. 17. Portfolio Management and OrganizationalPortfolio Management and Organizational StrategyStrategy Impact of portfolio plan onImpact of portfolio plan on strategy is achieved by:strategy is achieved by: 1.1. Maintaining portfolioMaintaining portfolio alignmentalignment 2.2. Allocating financial resourcesAllocating financial resources 3.3. Allocating human resourcesAllocating human resources 4.4. Measuring componentMeasuring component contributionscontributions 5.5. Strategic risk managementStrategic risk management
    18. 18. Figure 1.4
    19. 19. Portfolio and OperationsPortfolio and Operations Management LinkManagement Link  Functional groups can beFunctional groups can be stakeholders in the portfolio orstakeholders in the portfolio or sponsors of componentssponsors of components  ““Operations” includes: production,Operations” includes: production, manufacturing, finance, marketing,manufacturing, finance, marketing, IT, HR, etc.IT, HR, etc.  Processes/deliverables used by opsProcesses/deliverables used by ops management are outputs of themanagement are outputs of the portfolio componentsportfolio components
    20. 20. Operational ProjectsOperational Projects Ops Projects (ref figure 1.3):Ops Projects (ref figure 1.3):  Are groups of operational, recurringAre groups of operational, recurring activities managed as projectsactivities managed as projects  Form a portfolio in “high-level operationsForm a portfolio in “high-level operations planning and management”,planning and management”, encompassing the work in “managementencompassing the work in “management of ongoing operations”of ongoing operations”  Are linked to the organizational strategyAre linked to the organizational strategy by the portfolioby the portfolio
    21. 21. Building a Comprehensive Project PortfolioBuilding a Comprehensive Project Portfolio Organizational Strategy & ObjectivesOrganizational Strategy & Objectives (communicated through a strategic plan) Project PortfolioProject Portfolio (consisting of prioritized strategic and operational programs and projects) InitiativesInitiatives (defined to accomplish strategic and operational objectives) Operations PlanningOperations Planning (continuing to run the business) Strategic PlanningStrategic Planning (responding to environmental changes) Organizational ResourcesOrganizational Resources
    22. 22. Operational StakeholdersOperational Stakeholders Typical StakeholdersTypical Stakeholders  FinanceFinance  MarketingMarketing  Human ResourcesHuman Resources  InformationInformation TechnologyTechnologyFrom Wikipedia: A corporate stakeholder is a party that can affect or be affected by the actions of the business as a whole. The stakeholder concept was first used in a 1963 internal memorandum at the Stanford Research institute. It defined stakeholders as "those groups without whose support the organization would cease to exist”
    23. 23. Role of the Portfolio ManagerRole of the Portfolio Manager  Establishes/maintains a framework,Establishes/maintains a framework, methodology for portfolio management inmethodology for portfolio management in the orgthe org  Establishes/maintains relevant processesEstablishes/maintains relevant processes  Guides selection, prioritization, balancingGuides selection, prioritization, balancing of the portfolio and component alignmentof the portfolio and component alignment with strategic goalswith strategic goals  Establishes/maintains relevantEstablishes/maintains relevant infrastructure and systemsinfrastructure and systems  Ensures ongoing compliance with evolvingEnsures ongoing compliance with evolving organizational goalsorganizational goals
    24. 24. Role of the Portfolio Manager, cont.Role of the Portfolio Manager, cont.  Provides stakeholders with timelyProvides stakeholders with timely assessments of component selection,assessments of component selection, prioritization, performance and earlyprioritization, performance and early identification of risks and issuesidentification of risks and issues  Measures and monitors value to the orgMeasures and monitors value to the org via KPIsvia KPIs  Communicates portfolio componentCommunicates portfolio component progress, changes, etc.progress, changes, etc.  Participates in program/project reviewsParticipates in program/project reviews  Adhering to ethical standardsAdhering to ethical standards
    25. 25. Portfolio Manager SkillsPortfolio Manager Skills  Strategic AlignmentStrategic Alignment • Participates in corporate strategy developmentParticipates in corporate strategy development • Monitors execution of initiatives in support ofMonitors execution of initiatives in support of strategystrategy  Portfolio Management MethodsPortfolio Management Methods • Project selection methodsProject selection methods • Decision support tools, e.g ROI, IRR,Decision support tools, e.g ROI, IRR, simulation techniques, etc.simulation techniques, etc. • Prioritization algorithmsPrioritization algorithms • Capability/capacity modeling toolsCapability/capacity modeling tools • Project/program auditing techniquesProject/program auditing techniques • Organizational & Portfolio risk managementOrganizational & Portfolio risk management
    26. 26. Portfolio Manager Skills, cont.Portfolio Manager Skills, cont.  Program and Project ManagementProgram and Project Management MethodsMethods  Process Development & ContinuousProcess Development & Continuous Improvement, e.g Six Sigma, TQM, CQIImprovement, e.g Six Sigma, TQM, CQI  General business skillsGeneral business skills • Understand key financial principlesUnderstand key financial principles • Use KPIs in portfolio performanceUse KPIs in portfolio performance measurementmeasurement • Analyze financial info and trendsAnalyze financial info and trends • Analyze business cases for portfolio selectionAnalyze business cases for portfolio selection
    27. 27. Portfolio Manager Skills, cont.Portfolio Manager Skills, cont.  Stakeholder managementStakeholder management  General management skillsGeneral management skills • Goal settingGoal setting • Performance managementPerformance management • RecruitmentRecruitment • Employee development, mentoring,Employee development, mentoring, coaching, trainingcoaching, training  Risk and opportunity managementRisk and opportunity management
    28. 28. Portfolio Management and MetricsPortfolio Management and Metrics Portfolio ReportingPortfolio Reporting  Strives to understand portfolio content andStrives to understand portfolio content and measure component performancemeasure component performance  Facilitates effective communicationFacilitates effective communication between portfolio sponsor andbetween portfolio sponsor and stakeholdersstakeholders  Primary purpose to supply sponsors withPrimary purpose to supply sponsors with performance metricsperformance metrics  Should also provide managers with statusShould also provide managers with status of their components in the context of otherof their components in the context of other portfolio components, to optimize resourceportfolio components, to optimize resource utilizationutilization
    29. 29. Portfolio Reporting and the PMOPortfolio Reporting and the PMO The PMO may report effectiveness ofThe PMO may report effectiveness of components via dashboards, e.g.components via dashboards, e.g.  Portfolio Overall HealthPortfolio Overall Health  Strategic Goal AchievementStrategic Goal Achievement  Organization Risk ProfileOrganization Risk Profile  Resource capabilityResource capability  Financial informationFinancial information
    30. 30. Portfolio Management MetricsPortfolio Management Metrics Quantitative measuresQuantitative measures  Increase in revenueIncrease in revenue  Development of new marketsDevelopment of new markets  Cost reductionsCost reductions  Change in NPV of the portfolioChange in NPV of the portfolio  ROI from the portfolioROI from the portfolio  IRR of the portfolioIRR of the portfolio  Risk reduction degreeRisk reduction degree  Resource AvailabilityResource Availability  Change in quality improvementChange in quality improvement scoresscores Qualitative benefits include degree of strategic alignment and recognition of legal and regulatory compliance
    31. 31. ReferencesReferences 1. The Standard for Portfolio Management, Second Edition,, Project Management Institute, ISBN 978-1-933890-53-1 2. Wikipedia