This month on ProjectManagement.com we’re talking about portfolio management. Portfolios are ways to organise the business of change so that companies can achieve their strategic objectives. You are probably most familiar with portfolios made up of projects and programmes. The OGC, the group behind the PRINCE2 standard, defines portfolio management like this:
“Portfolio management is a coordinated collection of strategic processes and decisions that together enable the most effective balance of organisational change and business as usual.”
But portfolios can do more than just manage change as a result of projects. Portfolios can also be used to make investment decisions, and managing work by portfolio is one way to get a view of financial data.
Pat Durbin and Terry Doerscher, in their book, Taming Change with Portfolio Management, write this:
“No matter how you characterise your portfolio objectives, almost all portfolios include some form of financial data as one or more of the parameters used for analysis. Aligning financial information to the demand-related information structures offers you a way to improve the quality and visibility of information about money, the most ubiquitous portfolio characteristic.”
They go on to say:
“As a basic accounting practice, every organisation has a mechanism to allocate and track money based on how it is distributed to the organisation. While this organisational view of financial expenditures shows you how money is spent, it does not show you why.”
For most project managers, what happens at portfolio level is a bit of a mystery. We get on a do our jobs, delivering the stuff that is required for the project, and let other people work out how it all joins together into an organisational and business strategy. As a result, portfolios can seem a bit remote from what we do day-to-day.
However, you have to realise that whatever you do as a project manager automatically feeds in to the bigger picture. If you don’t know what that bigger picture is, you can’t be sure that you are achieving it in any way. That doesn’t mean that you have to have an intimate understanding of what is going on ‘way up there’ but I do think you should have some understanding of how what you do contributes to the organisational strategy.
This does work both ways. After all, as Durbin and Doerscher say, there is no way that portfolio managers can tell why money is being spent just by looking at a corporate balance sheet. The story behind the expenditure is your story. It’s project business cases and project budgets that explain why money is being spent. They can’t get to the bottom of where the money is going without your input. It is the project manager and the project team members who play a critical role in making all this happen. It’s your tracking that shows how the budget is being spent, if it is realistic and whether or not the project will meet its goals. It’s your evaluation and recommendations that may lead to a project being sped up so the company gets the benefits earlier, or slowed down if something else takes priority for the resources, or stopped completely. Numbers are just numbers – without the narrative, there is no way of telling whether the project, programme or portfolio is performing as you would expect.
Of course, those in charge of corporate financial portfolios may not agree with how the money is being spent. If that’s the case, there are routes to redeploy those funds and resources using the standard corporate governance channels like project steering groups and boards. It could result in your project getting shut down, and if that does happen you should ask why. It could simply be that the company has a higher priority project elsewhere and your project has drawn the short straw. Don’t take it personally.
Management by portfolio is becoming more and more common. As businesses shift towards managing knowledge work, portfolios become the sensible way to get things done. Project managers have a huge part to play in making sure that portfolio managers have the information they need to make the right decisions. Just make sure that when you tell your story it’s a good one!