This document discusses strategic portfolio management. It provides an overview of how strategic portfolio management can optimize management of funds, resources, dependencies and work sequences for a portfolio of projects. This increases the probability of success for the portfolio by integrating business strategy, programs, projects and work activities while tracking performance. The document also uses a case study of a large transportation project portfolio to illustrate how strategic portfolio management was used to coordinate many interrelated projects over 20 years with varying funding sources and resource requirements.

1. [STRATEGIC
PORTFOLIO
MANAGEMENT]
2011
Performance
Based
Planning
manages
a
portfolio
of
projects
in
the
presence
of
unstable
funding,
emerging
requirements,
and
deliverables
and
resource
dependencies
to
provide
actionable
information
in
units
of
measure
meaningful
to
the
decision
makers.
The
result
is
a
measureable
increase
in
the
Probability
of
Program
Success.

2. Strategic
Portfolio
Management
June
2011
Strategic
Portfolio
Management
optimizes
the
management
of
funds,
resources,
dependencies,
and
work
sequences
producing
tangible
deliverables
that
meet
the
expectations
of
the
stakeholders.
These
activities
increase
the
probability
of
success
for
a
portfolio
of
projects
through
the
seamless
integration
of
the
four
domains
shown
in
Figure
1
–
2
Strategic
Portfolio
Management
provides
actionable
information
to
the
portfolio
owners
to
maximize
the
effectiveness
of
a
project’s
funding
and
resources.
! Program
strategy
connected
with
resource
and
funding
profiles
to
ensure
tangible
outcomes.
! Strategies
translated
into
measureable
work
efforts
connected
to
stakeholder
capabilities.
! Closed
loop
decision
making
using
project
and
program
performance
information.
! Operations
management
guided
by
portfolio
performance
information.
Strategic
Portfolio
Management,
supported
by
Performance
Based
Planning,
is
an
integrated
solution
to
deliver
value
in
the
presence
of
shifting
priorities,
variable
funding,
resource
and
technical
interdependencies.
Based
on
figure
1.3
in
The
Standard
for
Portfolio
Management,
2nd
Edition,
2008
Figure
1:
1. Executive
Management
–
Program
Governance.
2. Portfolio
Management
–
Value
Delivery.
3. Project
and
Program
Management
–
Technical
Delivery.
4. Operations
Management
–
Sustainable
Value.
The
activities
of
successful
project,
program,
and
portfolio
management,
on
the
right
of
Figure
1,
require
the
synchronization
between
the
dependencies
of
each
project,
the
funding
profiles
for
the
program
and
its
flow
down
to
projects,
the
resources
assigned
to
the
projects,
and
external
drivers
for
the
collection
of
projects.
Management
of
these
drivers
requires
an
integrated
solution
that
increases
the
probability
of
success
for
the
portfolio
and
its
projects:
! Management
Control
–
boundaries,
authorities,
responsibilities,
and
control
activities.
! Benefits
Management
–
financial
performance
matches
technical
and
operational
performance.
! Financial
Management
–
financial
plans
are
adequate
to
deliver
the
portfolio
value.
! Stakeholder
Management
–
assurance
of
stakeholder
confidence
and
support
of
objectives.
! Risk
Management
–
increasing
the
probability
of
success
through
active
risk
management.
! Resource
Management
–
balancing,
allocating,
and
assigning
resources
for
project
success.
A
CASE
STUDY
IN
COMPLEX,
HIGH
RISK,
MISSION
CRITICAL
PROJECTS

3. Strategic
Portfolio
Management
June
2011
A
Federal
Transportation
Project
Portfolio
spanning
20
years
with
Multiple
Funding
Sources,
Technical,
Operational,
and
Resource
Interdependencies.
Authorized
and
Funded
Projects
3
–
As
one
of
the
three
participants
in
the
TriVenture,
the
challenge
for
the
engineering
department
in
the
Northeast
corridor
connecting
Washington
DC
to
New
York
City
and
Boston
was
to
develop
an
annual
list
of
approved
projects.
These
projects
had
diverse
funding
sources,
spanning
the
three
regions,
requiring
resources
from
seven
organizations,
coordination
with
other
transportation
agencies
and
local,
state,
and
federal
regulators.
After
Funding,
Resources
Are
the
Key
–
Rail
Transportation
projects
are
dangerous
work
places.
Assuring
the
right
resources
are
available
when
needed
on
the
project
frequently
requires
long–term
resource
planning
and
development,
including
safety
and
training
before
a
resource
pool
can
accurately
reflect
the
specific
qualifications
needed
on
a
project.
Funding
Sources
–
A
wide
range
of
information
was
Figure
2
–
The
Integrated
Master
Schedule,
showing
time
phased
deliverables
for
all
projects
in
a
single
coherent
view.
required
to
evaluate
each
project
in
terms
of
the
overall
portfolio
strategic
objectives.
This
is
similar
to
the
balanced
scorecard
methodology
enabling
a
direct
comparison
of
Key
Performance
Parameters
(KPP)
despite
a
wide
variety
of
projects.
Activity
Outcome
Benefit
Project
Initiation
Process
Projects
from
diverse
funding
sources
are
integrated
into
the
total
portfolio.
Project
initiation
includes
processes
sufficient
to
identify
information
needed
to
evaluate
funding
compared
with
other
project
candidates
for
funding.
Resource
Availability
Analysis
Required
resources
are
available
to
projects
when
needed.
Availability
of
resources
supports
project
schedule
through
management
reporting
and
planning
processes.
Project
Performance
Assurance
Project
portfolio
performance
is
tracked
by
source
of
funds.
Confidence
that
work
is
being
accomplished
within
funding
limitations
is
made
visible
to
executive
management
through
reports
and
analysis.
Figure
3
–
The
TriVenture
shared
infrastructure
program
between
Amtrak,
Long
Island
Railroad,
and
New
Jersey
Transit
required
visibility
to
funding
profiles
and
impacts
from
their
changes,
resource
assignments
and
long
range
planning,
and
evaluation
of
the
project
portfolio
in
support
of
strategic
business,
technical,
and
operational
objectives.

4. Strategic
Portfolio
Management
June
2011
The
magnitude
of
the
projects
and
the
portfolio
for
the
TriVenture
program
required
an
integrated
system
to
capture
not
only
funding
and
resources,
but
details
down
to
each
work
package
and
the
day-­‐
to-­‐day
work
dependencies.
Figure
4
illustrates
the
reporting
needed
to
manage
the
projects
inside
the
portfolio.
The
activities
include:
! Measures
of
each
project’s
performance
within
the
portfolio
against
the
planned
performance
of
the
portfolio
and
the
individual
projects.
! Resource
utilization
within
work
packages
for
each
project
and
from
time
cards
on
a
weekly
basis.
! Resource
utilization
across
the
portfolio
of
project
within
a
domain,
context,
discipline,
and
other
subdivision
of
the
portfolio.
! Measures
of
physical
percent
from
the
planned
deliverables
and
work
activities.
! Continuous
risk
management
for
cost,
schedule,
and
technical
performance
measures.
These
activities
and
others
must
be
integrated
in
a
single
“document
of
record,”
where
there
are
traceable
connections
from
the
Portfolio
Strategy
to
the
actual
work
activities
of
resources.
These
connections
represent
the
operational
view
of
the
portfolio
and
include:
! The
strategy
that
defines
the
mission,
vision,
and
needed
capabilities
resulting
from
the
portfolio
of
projects
that
implement
the
strategy.
! The
work
initiatives
in
the
portfolio
the
implement
specific
elements
of
the
strategy.
! The
program
in
the
portfolio
that
implement
those
initiatives.
! The
projects
in
each
program.
! The
decomposition
of
the
work
in
the
project.
Control
Accounts
are
the
starting
point.
! The
Work
Packages
that
produce
the
deliverables.
! The
work
activities
in
those
Work
Packages.
! The
resource
loaded
Integrated
Master
Schedule.
! The
actual
resource
labor
absorption
rate
that
measures
physical
percent
complete
against
planned
percent
complete.
4
Figure
4
–
over
3,400
projects
are
in
the
TriVenture
portfolio,
covering
20
years
of
planned
work
for
Amtrak,
the
Long
Island
Railroad,
and
New
Jersey
Transit.
Strategic
Portfolio
Management
connects
business
strategy,
with
programs,
projects,
and
direct
work
with
the
measures
of
physical
percent
complete
to
provide
actionable
information
to
the
decision
makers.

5. Strategic
Portfolio
Management
June
2011
Executive
Management
of
a
Portfolio
of
Projects
Delivering
value
from
a
portfolio
of
projects
begins
with
defining
the
high–level
outcomes
before
a
program
is
approved
and
continues
through
the
identification,
profiling,
tracking,
and
embedding
of
benefits
from
these
deliverables.
This
approach
is
different
from
the
simple
measures
of
cost
and
schedule
performance.
With
the
defined
and
measured
5
value
portfolio
trade
space,
decisions
can
be
made
in
the
best
interest
of
Successful
Project
Portfolio
Management
requires
day-­‐to-­‐day
visibility
to
cost,
schedule,
and
technical
performance
of
each
project
and
their
interdependencies
! Allocation
of
resources
starts
with
understanding
the
resource
demand
management
profiles
for
the
portfolio.
! Defining
the
dependencies
between
projects
is
the
basis
for
making
decisions
about
projects
during
funding
profile
changes.
the
stakeholders
as
well
as
compliance
with
the
contract’s
cost
and
schedule
measures.
This
involves
assessing
risk
against
the
proposed
outcome
of
each
project’s
deliverables
to
confirm
how
this
value
can
best
be
achieved.
Effective
management
of
the
benefits,
across
several
programs
or
projects,
allows
management
to
make
strategic
adjustments
in
resources
and
ensures
that
the
programs
continue
to
contribute
to
strategic
objectives
in
a
changing
environment
in
the
presence
of
constraints.
This
will
lead
to
reprioritizing
or
revising
the
scope
of
some
projects,
replanning
or
postponing
them.
It
also
provides
an
opportunity
to
re–deploy
resources
freed
up
through
the
efficiencies
being
delivered,
to
derive
new
benefits
while
work
is
underway
and
to
minimize
unwanted
side
effects
from
these
disruptions.
Figure
5
-­‐
Strategic
portfolio
management
ensures
projects
are
aligned
to
business
and
technical
strategies
and
these
strategies
are
being
executed
according
to
plan.
The
result
of
this
alignment
optimizes
the
strategic
throughput,
using
the
available
resources
and
funding.

6. Strategic
Portfolio
Management
June
2011
Portfolio
Management
The
Project
Portfolio
Management
(PPM)
process
provides
information
to
the
organizations
that
acquire
and
deliver
data
about
its
projects.
This
information
becomes
the
basis
of
decision
making
in
the
presence
of
changing
funding
sources,
conflicting
resource
demands,
emerging
technical
and
operational
requirements,
and
other
program
constraints.
Portfolio
management
provides
five
Critical
Success
Factors
that:
1. Maintain
alignment
between
the
portfolio’s
collection
of
projects
and
the
dependencies
between
these
projects
and
the
mission
and
vision
of
the
organization.
2. Allocate
financial
resources,
assess
of
the
impact
of
changes
in
those
resources,
and
the
forecasting
of
needed
financial
resources
needed
to
maintain
technical
and
programmatic
performance
of
the
portfolio
of
projects.
3. Allocate
human
resources,
the
dependencies
and
availability
of
these
resources,
forecast
of
the
demand
for
existing
and
future
human
resources,
and
the
impact
on
project
and
portfolio
performance.
4. Provide
Measures
of
Effectiveness
(MoE)
and
Measures
of
Performance
(MoP)
for
projects,
collections
of
projects,
and
the
Portfolio
as
a
whole. †
5. Establish
a
risk
based
decision
making
process
based
on
probabilistic
models
of
cost,
schedule,
and
technical
performance,
connected
with
Risk
Retirement
plans
to
handle
identified
and
emerging
technical
and
programmatic
risks.
Figure
6
6
Portfolio
Management
closes
the
gaps
between
project
management
strategies
and
results.
! Overall
portfolio
performance
reported
in
units
meaningful
to
the
decision
makers.
! Transparent
risk
profiles
and
their
impacts
on
portfolio
performance.
! Resource
demand
and
capacity
used
to
optimize
resources
within
and
across
projects
in
the
portfolio.
–
Strategic
Portfolio
Management
ensures
projects
are
aligned
with
the
program’s
strategy
and
this
strategy
is
executed
to
the
Integrated
Master
Plan.
Optimizing
the
deliverables
of
each
project,
using
available
resources
and
funding
is
the
measureable
outcome
of
this
approach.
†
Measures
of
Effectiveness
are
operational
measures
of
success
that
are
closely
related
to
the
achievements
of
the
mission
or
operational
objectives
evaluated
in
the
operational
environment,
under
a
specific
set
of
conditions.
Measures
of
Performance
characterize
physical
or
functional
attributes
relating
to
the
system
operation,
measured
or
estimated
under
specific
conditions.

7. Strategic
Portfolio
Management
June
2011
7
Figure
7
–
Strategic
Portfolio
Management,
supported
by
Performance
Based
Planning,
is
an
integrated
solution
delivering
value
in
the
presence
of
shifting
priorities,
variable
funding,
resource
and
technical
interdependencies.
PROJECT
AND
PROGRAM
MANAGEMENT
WITHIN
A
PORTFOLIO
Performance
Based
Planning’s
5
core
processes
provide
the
mechanisms
to
increase
the
Probability
of
Project
Success
(PoPS)
for
projects,
programs,
and
portfolios.
The
plans
resulting
from
these
efforts
describe
the
increasing
maturity
of
the
product
or
services
are
delivered
by
the
program.
In
order
to
develop
and
execute
this
plan,
a
set
of
requirements
is
needed.
Before
these
requirements
can
be
developed,
an
understanding
of
the
system
capabilities
must
be
in
place
that
describes
the
Concept
of
Operations
for
the
resulting
deliverables
and
their
Measures
of
Effectiveness
and
Measures
of
Performance.
1. Identify
Needed
Capabilities
to
achieve
program
objectives
or
the
particular
end
state.
Define
these
capabilities
through
scenarios
from
the
customer
point
of
view
in
units
of
Measure
of
Effectiveness
(MoE)
meaningful
to
the
customer.
2. Define
the
Technical
and
Operational
Requirements
that
must
be
fulfilled
for
the
system
capabilities
to
be
available
to
the
customer
at
the
planned
time.
Define
these
requirements
in
terms
that
are
isolated
from
any
implementation
technical
products
or
processes.
Only
then
bind
the
requirements
with
technology.
3. Establish
the
Performance
Measurement
Baseline
describing
the
work
to
be
performed,
the
budgeted
cost
for
this
work,
the
organizational
elements
that
produce
the
deliverables
from
this
work,
and
the
Measures
of
Performance
(MoP)
showing
this
work
is
proceeding
according
to
cost,
schedule,
and
technical
performance.
4. Execute
the
PMB’s
Work
Packages
in
the
planned
order,
assuring
all
performance
assessments
are
0%/100%
complete
before
proceeding.
No
rework,
no
forward
transfer
of
activities
to
the
future.
Assure
every
requirement
is
traceable
to
work
and
all
work
is
traceable
to
requirements.
5. Perform
Continuous
Risk
Management
for
each
Performance
Based
Planning
process
area
to
Identify,
Analyze,
Plan,
Track,
Control,
and
Communicate
programmatic
and
technical
risk.
Connect
these
risk
handling
activities
to
work
in
the
Performance
Measurement
Baseline.
Performance
Based
Planning
is
key
to
Program
and
Project
Management
success.
! Integrating
cost,
schedule,
and
technical
performance
measures
is
the
basis
of
a
credible
Master
Plan.
! Each
activity
in
the
Master
Plan
is
risk
adjusted
for
cost,
schedule,
and
performance.
! Deliverables
fulfill
requirements
that
meet
the
system
performance
criteria.

8. Strategic
Portfolio
Management
June
2011
Operational
Management
of
the
Portfolio
of
Projects
Ongoing
management
of
the
portfolio
of
projects
realizes
the
benefits
only
if
the
integrity
of
the
data,
the
decisions
made
from
this
data,
and
the
management
accountability
for
these
decisions
are
tightly
integrated
in
a
single
process.
All
successful
portfolios
of
projects
follow
two
critical
guidelines:
8
Best
practices
of
portfolio
management
! Focus
on
data
integrity.
! Use
systematic
assessment
processes.
! Define
tangible
success
criteria
for
all
deliverables.
! Build
periodic
portfolio
reviews
of
physical
progress
to
plan.
! Regulation
of
capacity
utilization.
! Prioritization
of
the
assignment
of
resources,
dependencies,
and
funding
to
the
projects
in
the
portfolio.
For
a
portfolio
strategy
to
be
valid,
the
capacity
for
work
must
be
well
understood.
This
understanding
starts
with
knowing
what
productivity
the
resources
are
capable
of
generating.
When
the
projects
in
the
portfolio
are
operating
at
a
high
utilization,
small
abnormalities
cause
major
delays.
This
delay
may
continue
long
after
the
triggering
event
has
been
remedied.
These
triggering
events
include
changes
in
funding,
unanticipated
conflicts
in
resources.
All
projects
in
the
portfolio
must
be
prioritized.
These
priorities
must
be
developed
using
units
of
measure
meaningful
to
the
decision
makers.
The
approach
must
define
the
value
flow
of
the
outcomes
of
the
portfolio’s
projects
that
reveal
dependencies,
conflicts,
resource
utilization,
and
the
value
to
the
portfolio
produced
by
each
project.
To
successfully
prioritize
the
projects
in
the
portfolio,
three
categories
of
measurement
must
be
captured:
! Assessing
where
the
projects
have
been.
! Understanding
where
each
project
is
today.
! Driving
the
projects
to
the
desired
performance
in
the
future.
Figure
8
-­‐
This
graphic
focuses
on
the
bottom
half
of
Figure
1
to
emphasize
the
impact
on
the
management
of
ongoing
programs
and
projects,
and
organizational
resources.
All
projects
have
a
beginning
and
an
end.
However
some
projects
are
handed-­‐off
to,
and
impact,
on-­‐going
operations.
This
figure
illustrates
that
projects
and
on-­‐going
operations
frequently
compete
for
the
same
scarce
resources.
The
operational
demand
on
resources
must
be
taken
into
account
before
resource
availability
for
projects
can
be
determined.

9. Strategic
Portfolio
Management
June
2011
9
Figure
9
-­‐
Strategic
Portfolio
Management,
supported
by
Performance
Based
Planning®,
is
an
integrated
solution
delivering
value
in
the
presence
of
shifting
priorities,
variable
funding,
resource
and
technical
interdependencies.

10. Strategic
Portfolio
Management
June
2011
Mr.
Alleman
leads
the
Program
Planning
and
Controls
practices.
In
this
position
Glen
brings
his
30
years’
experience
in
program
management,
systems
engineering,
product
development,
and
general
management
to
bear
on
the
problems
of
performance
based
program
management
and
risk
reduction.
Mr.
Alleman’s
experience
ranges
from
real
time
process
control
in
a
variety
of
technical
domains
to
product
development
management
and
program
management
in
defense,
aerospace,
and
federal
contractors
including
Logicon,
TRW,
CH2M
Hill,
SM&A,
and
several
consulting
firms.
Mr.
Alleman
earned
a
BS
in
Physics
from
University
of
California,
Irvine
(UCI),
and
an
MS
in
Systems
Management
from
the
University
of
Southern
California
(USC).
Mr.
Garfein
is
the
Chairman
and
founder
(1979)
of
RPM
Systems
Corporation.
He
has
assisted
a
wide
spectrum
of
organizations
in
pharmaceuticals,
medical
devices,
railroads,
logistics
companies,
banks,
aerospace
and
defense,
software
development,
telecommunications,
city
and
federal
governments,
and
architectural
and
construction
management
firms.
He
was
a
member
of
the
management
team
that
developed
the
Apache
helicopter
where
he
led
the
effort
to
validate
its
cost
/
schedule
control
system
with
the
US
Department
of
Defense.
Mr.
Garfein
earned
a
BS
in
Business
from
UCLA
and
an
MBA
from
the
University
of
Southern
California
(USC).
10
Glen
B.
Alleman,
Program
Performance
Management
Steve
Garfein,
PMP®,
Chairman,
RPM
Systems
Corporation
Materials
in
this
document
are
Copyright
2011,
Glen
B.
Alleman
and
Steve
Garfein
Materials
in
this
document
are
Copyright
2011,
RPM
Systems
Corporation.
Strategic
Portfolio
Management®
is
a
registered
trademark
of
RPM
Systems,
Poulsbo,
Washington
98370.