Intro To Portfolio Management 1


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An introduction to Project Portfolio Management based on material from the PMI Standard for Portfolio Management.

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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.
  • Intro To Portfolio Management 1

    1. 1. Introduction to Project Portfolio Management Andrew P. Valenti, Valenti Partners
    2. 2. What is a Portfolio? <ul><li>Terms and Definitions </li></ul><ul><li>A portfolio consists of projects or programs and other work grouped together to facilitate the accomplishment of business objectives </li></ul><ul><li>It consists of current components and planned/future work. </li></ul><ul><li>A portfolio, unlike a project/program, is not temporary </li></ul>
    3. 3. What is a Portfolio? <ul><li>Key Point </li></ul><ul><li>A portfolio is a snapshot of its components, reflecting the strategic goals of the organization </li></ul>
    4. 4. What is a Portfolio? <ul><li>Portfolio management includes processes for: </li></ul><ul><li>Identifying organizational priorities </li></ul><ul><li>Making investment decisions </li></ul><ul><li>Allocating resources </li></ul>
    5. 5. Relationships Among Portfolio, Programs, & Projects Figure 1.1 Portfolio Portfolios Projects Programs Programs Projects Projects Programs Projects Other Work Projects Projects
    6. 6. Relationships Among Portfolio, Programs, & Projects <ul><li>All portfolio components: </li></ul><ul><li>Represent investments made or planned </li></ul><ul><li>Are aligned with org’s strategic goals </li></ul><ul><li>Have distinguishing features for grouping </li></ul><ul><li>Can be measured, ranked, prioritized (i.e. quantifiable) </li></ul>
    7. 7. Portfolio, Programs, & Projects <ul><li>Key Concept </li></ul><ul><li>Portfolio management ensures interrelationships between programs & projects are identified and resources are allocated according to org priorities </li></ul><ul><li>Programs focus on achieving benefits expected from the portfolio as per strategic org objectives </li></ul><ul><li>Projects concerned with specific deliverables/org objectives </li></ul>
    8. 8. What is Portfolio Management? <ul><li>Portfolio Management is: </li></ul><ul><li>The management of components to achieve organizational objectives </li></ul><ul><li>Using its tools to identify, select, prioritize, govern, monitor, & report a component’s contribution to, and alignment with org objectives </li></ul><ul><li>Not concerned with managing the components </li></ul>
    9. 9. What is Portfolio Management? “ Doing the right work, not doing the work right.”
    10. 10. Portfolio Management and Governance <ul><li>Governance </li></ul><ul><li>Guides the execution of organizational activities </li></ul><ul><li>Maximizes delivery of value </li></ul><ul><li>Minimizes risk </li></ul>
    11. 11. Portfolio Management and Governance <ul><li>Organizational Governance is the process that: </li></ul><ul><li>Directs and controls operations and strategic activities </li></ul><ul><li>Responds to the rights, expectations and desires of stakeholders </li></ul>
    12. 12. Portfolio Management and Governance <ul><li>Project Portfolio Governance is the set of processes by which: </li></ul><ul><li>An organization prioritizes, selects, and allocates resources to accomplish its activities </li></ul>
    13. 13. Portfolio Management and Governance Management by Projects Organizational 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 Organizational Strategy <ul><li>Organizational Strategy </li></ul><ul><li>Capitalizes on opportunities </li></ul><ul><li>Minimizes the impact of threats </li></ul><ul><li>Responds to market changes </li></ul><ul><li>Reinforces focus on critical ops activities </li></ul>
    15. 15. Portfolio Management and Organizational Strategy <ul><li>Organizational Strategy </li></ul><ul><li>Is the result of the strategic planning cycle </li></ul><ul><li>Translates vision and mission into strategic plan </li></ul><ul><li>Consists of initiatives influenced by market dynamics, customers, shareholders, regulations, competitors </li></ul>
    16. 16. Relationship between Strategic and Operational Processes 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 Organizational Strategy <ul><li>Impact of portfolio plan on strategy is achieved by: </li></ul><ul><li>Maintaining portfolio alignment </li></ul><ul><li>Allocating financial resources </li></ul><ul><li>Allocating human resources </li></ul><ul><li>Measuring component contributions </li></ul><ul><li>Strategic risk management </li></ul>
    18. 18. Figure 1.4
    19. 19. Portfolio and Operations Management Link <ul><li>Functional groups can be stakeholders in the portfolio or sponsors of components </li></ul><ul><li>“Operations” includes: production, manufacturing, finance, marketing, IT, HR, etc. </li></ul><ul><li>Processes/deliverables used by ops management are outputs of the portfolio components </li></ul>
    20. 20. Operational Projects <ul><li>Ops Projects (ref figure 1.3): </li></ul><ul><li>Are groups of operational, recurring activities managed as projects </li></ul><ul><li>Form a portfolio in “high-level operations planning and management”, encompassing the work in “management of ongoing operations” </li></ul><ul><li>Are linked to the organizational strategy by the portfolio </li></ul>
    21. 21. Building a Comprehensive Project Portfolio Organizational Strategy & Objectives (communicated through a strategic plan) Project Portfolio (consisting of prioritized strategic and operational programs and projects) Initiatives (defined to accomplish strategic and operational objectives) Operations Planning (continuing to run the business) Strategic Planning (responding to environmental changes) Organizational Resources
    22. 22. Operational Stakeholders <ul><li>Typical Stakeholders </li></ul><ul><li>Finance </li></ul><ul><li>Marketing </li></ul><ul><li>Human Resources </li></ul><ul><li>Information Technology </li></ul>From 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 &quot;those groups without whose support the organization would cease to exist”
    23. 23. Role of the Portfolio Manager <ul><li>Establishes/maintains a framework, methodology for portfolio management in the org </li></ul><ul><li>Establishes/maintains relevant processes </li></ul><ul><li>Guides selection, prioritization, balancing of the portfolio and component alignment with strategic goals </li></ul><ul><li>Establishes/maintains relevant infrastructure and systems </li></ul><ul><li>Ensures ongoing compliance with evolving organizational goals </li></ul>
    24. 24. Role of the Portfolio Manager, cont. <ul><li>Provides stakeholders with timely assessments of component selection, prioritization, performance and early identification of risks and issues </li></ul><ul><li>Measures and monitors value to the org via KPIs </li></ul><ul><li>Communicates portfolio component progress, changes, etc. </li></ul><ul><li>Participates in program/project reviews </li></ul><ul><li>Adhering to ethical standards </li></ul>
    25. 25. Portfolio Manager Skills <ul><li>Strategic Alignment </li></ul><ul><ul><li>Participates in corporate strategy development </li></ul></ul><ul><ul><li>Monitors execution of initiatives in support of strategy </li></ul></ul><ul><li>Portfolio Management Methods </li></ul><ul><ul><li>Project selection methods </li></ul></ul><ul><ul><li>Decision support tools, e.g ROI, IRR, simulation techniques, etc. </li></ul></ul><ul><ul><li>Prioritization algorithms </li></ul></ul><ul><ul><li>Capability/capacity modeling tools </li></ul></ul><ul><ul><li>Project/program auditing techniques </li></ul></ul><ul><ul><li>Organizational & Portfolio risk management </li></ul></ul>
    26. 26. Portfolio Manager Skills, cont. <ul><li>Program and Project Management Methods </li></ul><ul><li>Process Development & Continuous Improvement, e.g Six Sigma, TQM, CQI </li></ul><ul><li>General business skills </li></ul><ul><ul><li>Understand key financial principles </li></ul></ul><ul><ul><li>Use KPIs in portfolio performance measurement </li></ul></ul><ul><ul><li>Analyze financial info and trends </li></ul></ul><ul><ul><li>Analyze business cases for portfolio selection </li></ul></ul>
    27. 27. Portfolio Manager Skills, cont. <ul><li>Stakeholder management </li></ul><ul><li>General management skills </li></ul><ul><ul><li>Goal setting </li></ul></ul><ul><ul><li>Performance management </li></ul></ul><ul><ul><li>Recruitment </li></ul></ul><ul><ul><li>Employee development, mentoring, coaching, training </li></ul></ul><ul><li>Risk and opportunity management </li></ul>
    28. 28. Portfolio Management and Metrics <ul><li>Portfolio Reporting </li></ul><ul><li>Strives to understand portfolio content and measure component performance </li></ul><ul><li>Facilitates effective communication between portfolio sponsor and stakeholders </li></ul><ul><li>Primary purpose to supply sponsors with performance metrics </li></ul><ul><li>Should also provide managers with status of their components in the context of other portfolio components, to optimize resource utilization </li></ul>
    29. 29. Portfolio Reporting and the PMO <ul><li>The PMO may report effectiveness of components via dashboards, e.g. </li></ul><ul><li>Portfolio Overall Health </li></ul><ul><li>Strategic Goal Achievement </li></ul><ul><li>Organization Risk Profile </li></ul><ul><li>Resource capability </li></ul><ul><li>Financial information </li></ul>
    30. 30. Portfolio Management Metrics <ul><li>Quantitative measures </li></ul><ul><li>Increase in revenue </li></ul><ul><li>Development of new markets </li></ul><ul><li>Cost reductions </li></ul><ul><li>Change in NPV of the portfolio </li></ul><ul><li>ROI from the portfolio </li></ul><ul><li>IRR of the portfolio </li></ul><ul><li>Risk reduction degree </li></ul><ul><li>Resource Availability </li></ul><ul><li>Change in quality improvement scores </li></ul>Qualitative benefits include degree of strategic alignment and recognition of legal and regulatory compliance
    31. 31. References <ul><li>The Standard for Portfolio Management, Second Edition , Project Management Institute, ISBN 978-1-933890-53-1 </li></ul><ul><li>Wikipedia </li></ul>