Outline of PPM, Project and Portfolio Management and it's use in Project Management disciplines If you would like a copy of the slides, please email me

1. Effective Portfolio
Management
March 31, 2015
PMI Austin – Chapter Meeting
David Angelow
dangelow@gmail.com

2. Agenda
• Organizational challenges
• Why do organizations need portfolio management capability?
• Portfolio Management Scope
• Which business functions are included in portfolio
management
• Portfolio Management Execution
• How is portfolio management executed
• How does portfolio management relate to Project/Program
Management and PMO

3. Personal Background
• As a consultant lead multiple projects to develop IT Portfolio
Plans and roadmaps and develop internal Portfolio
Management Capability
• As a practioner directed development of activities to
develop capability portfolio for operations functions
(Customer Ordering, Forecasting, Purchasing, Quality,
Inventory Management, Logistics, Customer Support)
• Personal Lesson learned – portfolio management is
“context-sensitive” term
• There are a wide variety of opinions on what it means, where it fits
in an organization and how best to develop a portfolio plan

4. What is Portfolio Management?
• The portfolio management is a concept used in investing and
the term has been adapted for business
• “The art and science of making decisions about investment mix and
policy, matching investments to objectives, asset allocation for
individuals and institutions, and balancing risk against performance.
Portfolio management is all about strengths, weaknesses,
opportunities and threats in the choice of debt vs. equity, domestic
vs. international, growth vs. safety, and many other tradeoffs
encountered in the attempt to maximize return at a given appetite
for risk.” www.investopedia.com/terms/p/portfoliomanagement.asp#axzz2800ZEfGB
• Portfolio Management – A strategic management function
to enable decision-making to optimize investment decisions

5. Portfolio Management lives
between strategy and operations

6. Organizationally, portfolio
management is a strategic activity
• Organizations need to continuously improve their
ability to compete and meet customer needs (deploy new
capabilities)
• How an organization competes is dependent on the
strategy that has been chosen
• Classic strategies are Cost minimization, differentiation and
focus
• Portfolio management is a process to help
organizations make investment decisions to improve
their value producing capabilities
• Aligning needs/projects with organizational strategy is an
essential element in selecting projects/investments

7. A portfolio is an aggregation of
projects and programs
Programs
Portfolios
Projects 8
2
5
B
O
T H F
Operations HRMarketing
Portfolio Management
Projects exist in different organizational functions, and may have a variety
of goals, timeframes and dependencies

8. All organizational functions provide
input to Portfolio Management
• Each function is tasked with ensuing their capabilities align with the strategy
• Functional leaders should maintain plans to ensure their capabilities align with
company goals
• Criteria for decision-making on which projects to support is based on company
strategy – NOT functional optimization
Note: Portfolio Management applies to all functions, it is not exclusive to Information
Technology
Overall
Organization
al Strategy
Marketing &
Sales
Strategy
Operations
Strategy
IT Strategy
Product
Development
Strategy
Customer
Support
Strategy
Company
Strategy
Functional
Strategies

9. An independent framework can help
understand organization capabilities
APQC is a source
for a capability
framework
APQC Process Framework

10. Portfolio management can begin
with understanding in place
Portfolio Management Process
Competitive Strategy
(Cost, Differentiation, Focus)
Organizational Capabilities
(And capability gaps)

11. Real-life scenario
• A company changed it’s strategy to compete on cost
• Manufacturing was a major component of cost, the
decision was made to off-shore manufacturing and
product development
• Multiple investment portfolios developed, as a result of
the new strategy.
• IT portfolio – New telecommunications infrastructure is
needed to enable global expansion
• Facilities portfolio - New office space is needed to global
growth
• Operations portfolio – New business processes are needed to
manage outsourced manufacturing

12. How to execute portfolio
management ….
…an exercise in evaluating and screening projects/investments

13. Portfolio Management processes
enable decision-making
• The starting point is understanding an organizations
strategy to compete
• Understanding the organizations current capabilities
provides and understanding of needs
• Comparing capabilities with those of competitors highlights
“capability gaps”
• A key challenge is understanding capability gaps 18-36
months into the future
• Rule of thumb is to identify needs far enough in the future to
be able to deploy new capabilities

14. Three stages of portfolio
management
Initiate
1. Understand and confirm
organizational strategy and intent
2. Understand funding levels and
capacity (determine the size of the
funnel)
3. Obtain project request inputs from
all organizational functions
The project input should include
information needed to “screen”
requests – typically funds needed,
resources needed, dependencies,
critical start/finish dates, etc.
Execute
1. Screen/evaluate projects
determine priorities
2. Develop the portfolio based on
capacity
3. Screen for redundant and
incomplete/unjustified projects
4. Develop trial portfolio
Close-out
1. Confirm trial portfolio
2. Validate alignment with
strategic and functional goals
3. Communicate the final
portfolio
4. Refine and evolve portfolio
process and governance
(continuous improvement)

15. Begin the portfolio management
process
Marketing
Operations
Product
Dev
Service &
Support
IT Infrastructure
• Understand and confirm organizational strategy and intent
• Understand funding levels and capacity (determine the size of the funnel)
• Obtain project request inputs from all organizational functions
• The project input should include information needed to “screen” requests –
typically funds needed, resources needed, dependencies, critical start/finish
dates, etc.

16. Execute Portfolio Management
Screen/evaluate projects based on pre-established
criteria
Marketing
Operations
Product
Dev
Service &
Support
IT
Infrastructure
General screening/prioritization criteria include ROI, project duration,
project risk profile (H/M/L), dependencies on other projects, alignment
with strategy, competitor capabilities, critical-to-customer analysis, etc.
Typically iterative screening is needed – 1st pass rough-cut, 2nd refined prioritization

17. Close Portfolio Management
process
• Confirm trial portfolio
• Validate alignment with strategic and functional goals
• Communicate the final portfolio
• Refine and evolve portfolio process and governance (continuous
improvement)
Marketing
Operations
Product
Dev
Service &
Support
IT
Infrastructure
Note: Size of the pipe
represents Project
Capacity
(People and $$)

18. Key outcome a roadmap of
programs/projects
Finance
Operations
Marketing
HR/Compliance
Q1 Q2 Q3 Q4 Q1 Q2 Q3
25 50 125 125 75 50 25
20 20 100 100 100 50 20
Functional
Technical

19. Effective Portfolio Management
practices
Lagging Business Practices
• Portfolio management governance part of
PMO activities
• Portfolio management is conducted
annually with limited status review
• All projects included in portfolio
management review, no discretionary
projects
• Project tracking and reporting is ad-hoc,
little awareness of failed projects (duck and
cover)
• Squeaky wheel or persuasive managers
given inordinate capacity/projects
Leading Business Practices
• Portfolio Management governed as strategic
function; PMO focus on project effectiveness
and efficiency
• Portfolio status is reviewed and updated as
needed (at least quarterly)
• Functional managers may have discretionary
projects (aligned with strategy) that do not
need portfolio management (low capacity,
no dependency, short duration)
• Executive leadership team actively reviews
programs and makes allocation decisions
• Disciplined approach managed by leadership
team with focus on capability gaps and
strategic alignment

20. Governance scope for Portfolio,
Project and PMO
Project Execution
Project Management Office (PMO) Support
Portfolio Management
Executive Leadership Functional Leadership and
execution
Capability
Governance
Responsibility

21. Recap
• Portfolio Management is part of the strategic function
within an organization
• Link between current operations and new capabilities
• Portfolio Management focuses on selecting the right
projects to execute
• PMO focuses on efficient project execution
• Leading practice is Agile Portfolio Management
• Develop processes enabling portfolio reviews to match
organizational needs (more frequent than annual process)