Portfolio Management – A practical guide

Association for Project Management (APM)

• Publisher: Association for Project Management (APM)
• Year: 2019
• Print ISBN: 9781903494868
• eBook ISBN: 9781903494875
• Topic: Business
• Subtopic: Project Management
• Index: Business

This guide illustrates how portfolio management is a key mechanism in enabling an organisation to optimise delivery of its strategic goals, maximising value, and do so in the required time frame.The guide is designed to serve three main aims:to promote awareness of, and outline good practice in, portfolio management for the practising or developing portfolio manager or portfolio office manager. All organisations can learn from each other, but ultimately each needs to build its own version of portfolio management practice that addresses their own business need;to provide a benchmark for portfolio managers and the portfolio management community to assess their own organisation's maturity in the discipline;to stimulate new thinking and contribute to the development of portfolio management practice.

1

Introduction to portfolio management

1.1 Fundamentals of portfolio management

The seventh edition of the APM Body of Knowledge defines portfolio manage- ment as: “the selection, prioritisation and control of an organisation’s projects and programmes in line with its strategic objectives and capacity to deliver.”

Other definitions incorporate the same themes of prioritisation, control and organisation. The key message is that portfolio management has to be fully integrated into the business planning and management cycle; it should be considered part of routine, regular governance.

There are many different approaches to portfolio management, and the one adopted will depend on the needs and context of the organisation. No two portfolios are the same, every organisation’s culture is different, and maturity levels vary.

The one thing all the approaches have in common is the importance of engaging stakeholders, and particularly the senior executives who are by definition the sponsors of the strategic portfolio. Portfolio management operates at the strategic level of an organisation, and without strategic stakeholder support it will not work as well as it could.

Against this backdrop, there are a number of key threads that help ensure that maximum value is delivered for the organisation through portfolio management. Think of these as ‘golden rules’ for successful portfolio management.

For the purpose of this guide an initiative can be a project, programme or portfolio. It is a set of activities or work packages that needs to be completed to achieve a business objective or goal.

Portfolio management can be implemented in a business area, business unit or at a functional level. However, to achieve maximum benefit, it should ideally be implemented at an enterprise level. Many organisations go through a maturation of portfolio management practices with functions or divisions, e.g. IT might use it within their domain and, once the benefits are recognised, it then becomes easier to implement at an organisational level.

In the public sector, portfolio management can be used across multiple organisations to support systems. A typical example is in health and social care, where there has been the need to find cost savings as well as provide more integrated services to the public:

Some of the more advanced health and social care systems are now using a form of portfolio management to deliver transformation across multiple organisations. A board is established with the CEOs of the organisations that make up the agreed geographical area; this would typically include the hospital trusts, primary care organisations, local authorities and mental health trusts. They establish a portfolio of programmes and projects, supported by business-as-usual, to bring improvements in the outcomes for patients, clients and communities. These types of portfolio usually have an element of cost saving attached to them, ensuring that they are prioritising those projects and programmes that bring about better outcomes at lower cost. This can be achieved by removing duplication, creating efficiencies from economies of scale, being more able to afford and embrace new technologies and facilitating the establishment of specific patient pathways.

1.2 How portfolio management contributes to organisations

Portfolio management helps guide the board to invest money and resources in the ‘right’ projects and programmes in the context of their strategic goals. This enables organisations to better react to changes within the marketplace, as well as achieve the goals set by the executives.

It also takes into account the constraints of opportunity, threat, resource availability, affordability, customer impact and the organisation’s capacity to absorb and manage change through application of key, consistent processes.

Finally, it enables the managing of projects and programmes at a collective level, through effective governance, engagement of key stakeholders, adherence to key processes and the optimisation of limited resources and dependencies.

As identified through the portfolio management specific interest group conferences, there are multiple values, added benefits and improved outcomes when portfolio management is implemented and properly executed. Some of those are explained in the executive summary.

Figure 1.1 How portfolio management contributes to business success

Case studies of portfolio management across multiple organisations have identified a number of ways in which portfolio management contributes to the project management context and success – summarised in Figure 1.1.

1.3 Signs your organisation might benefit from portfolio management

It often takes a ‘burning platform’ to focus minds and draw enough senior stakeholder interest and resources to make an organisation fully adopt portfolio management. The APM thought leadership publication, Recognising the Need to Change: Six telling signs has identified six ‘classic symptoms’ that organisations exhibit, which tend to drive these challenging moments. When building a case for portfolio management, it is helpful to look out for these.

Ultimately, the question to answer is: given the resources and capabilities available and the inherent uncertainty in the projects and programmes, can the organisation meet its strategic objectives with the portfolio it currently has? If not, effective portfolio management may be the answer.

Table 1.1 Factors suggesting portfolio management might be beneficial

	Sign	Impact
1	Lack of coordination or alignment to business strategy	Individual behaviours, organisational ways of working and external drivers are factors preventing the ability to align change to the organisation’s overall priorities
2	Scope of programmes not clear or overlapping	Individual programmes are not clear or are overlapping in scope and require a holistic review and restructure to minimise critical interdependencies. Vested interest, along with overly possessive executive ownership of programmes and a lack of a strong chief executive or equivalent senior leader, are preventing this
3	Behaviours that ‘tell a story’	Senior leaders are ignoring the impact of executive stress and negative behaviours during periods of intense or imposed change
4	Inability to quickly reprioritise in response to changing circumstances	The organisation cannot easily reprioritise its change. This is a primary signal highlighting the need for effective portfolio management
5	Inability to balance resources with projects and programmes	The organisation has far more opportunities than resources to deliver them – and is incapable of making choices. There are disparate/competing views of project priorities, leading to very different allocations of resource across functions in an organisation
6	Ineffective communication on change and organisational priorities	There are often conflicting or mixed messages within change communications, leading to a reliance on hearsay and rumour. Communication failures are leading to reputational damage both inside and outside the organisation

1.4 Where does portfolio management fit within the organisation?

Portfolio management should not be considered in isolation, but as a core part of the business planning and delivery process. Figure 1.2 shows the business cycle of processes from vision through to achievement of the goals and delivery to the strategy. It will be ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• List of figures and tables
• Preface
• About this guide
• The authors
• Acknowledgements
• Executive summary
• 1 Introduction to portfolio management
• 2 Adopting portfolio management and the organisational context
• 3 Portfolio management core processes
• 4 Implementing portfolio management
• 5 Recommended focus areas
• Appendix Summary roles and responsibilities
• Glossary