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We all know a healthy project portfolio is aligned with an organization's overall strategy. But how do we get there?
First, define "project portfolio." A bunch of independent projects does not make up a portfolio — it is simply a group of projects. A portfolio is composed of multiple projects aligned to help the organization execute its strategy.
Second, define "portfolio management." Portfolio management enables organizations to identify, select and prioritize the investments that will maximize business value. The major components of portfolio management include supporting strategic objectives, ensuring value creation, prioritizing projects based on their relative importance, managing the flow of benefits and integrating stakeholders around business objectives. Here are a few questions to help determine how well your organization is managing its portfolio:
Does the portfolio reflect and support the organization's business strategy?
Is every project clearly aligned with the organization's strategic goals and objectives?
Does resource and investment allocation reflect strategic priorities and consider objective criteria?
Is the economic value of the organization's portfolio greater than the investment made?
Are projects efficient in terms of scope, time and cost?
Are the portfolio's indicators meeting stakeholders' expectations, especially regarding value and benefits?
If some of your answers were "no," don't worry — you are not alone. But implementing good portfolio management can be a great challenge. Enterprise project management professionals usually joke that it is a "simple" three-step process:
Define all your projects and proposals.
Identify your resources and categorize them.
Figure out your decision-making structure regarding selection and prioritization, and map it using a spreadsheet or enterprise project management software.
Step three, in particular, is very difficult — yet it is the core of portfolio management. Portfolio management is the art of getting more than the sum of its projects' results.
To do so, corporate strategies must be laid out clearly. This helps portfolio managers to measure value that would not be generated by any individual project.
While software tools make it easier to simulate portfolios to help in decision-making, portfolio management ultimately depends more on governance and appropriate processes than on calculations.
The portfolio also needs to be flexible enough to cope with changes in strategy and environment, which is why portfolio managers must perform regular check-ups — a portfolio that fits your organization needs to link to its strategy at all times.
How healthy is your organization's portfolio? How do you monitor it?
Share your thoughts below, and Voices on Project Management will publish the best response as a blog post.
I enjoyed reading your post. It describes what a real project portfolio should be, specially the alignment with the organizationâ€™s strategy.
Several articles published recently discuss the importance of having a strategic plan and how important is the execution of that plan. One way to make the execution happen is to have a well-defined roadmap that is linked with the project portfolio.
Nowadays, organizations are considering projects as enablers and agents of change that will help them to fulfill their strategy.
Trends and studies are showing the importance of a healthy project portfolio and its alignment with the strategic plan.
Hello Conrado, thanks for your comment. I totally agree with you. Companies are focusing on building strong portfolio management practices and governance. Good portfolios provide direction to projects by selection, prioritization and balance, which increases chances of success. Our challenge today is to choose the right projects and manage them well.
Mario H Trentim
Conrado, thanks for you comment.
Usually, I hear people complaining that their organisations invested huge amounts of money in project management training, software and so on, but the results are not so good as expected. The reason, in my opinion, is that we are doing better (project management) the wrong projects. If we can't select and prioritize good projects tied to a roadmap leading to strategic fulfillment of organisations objectives, then it doesn't matter if we have good processes, people and tools to manage projects. Bad portfolio governance and structuring give birth to dead projects. They are already in trouble when they are conceived, but people will discover this too late. When organisations have the dynamic capability of choosing the right projects, they can thrive even if they are not experts in managing projects. On the other hand, extremely good organisations at project management can't succeed if they are not doing the right projects.