Dec 15, 2010

What Is Portfolio Management?

Posted by Jeannette Cabanis-Brewin in Project & Program Management, Portfolio Management, Project Management Office (PMO) | 3 Comments

I recently reviewed a manuscript for my publisher, who wanted an opinion on its value. It was an interesting experience, because it made me realize that a lot of what we assume everyone agrees on about project management is in fact floating in that No-Man's Land called the "grey area."

This is especially true of the more sophisticated functions that play out at the level of the PMO, I believe, because those are not covered in detail by the PMI standard in the way that the mechanics of a single project are. Portfolio management, PMO management, multiple project management, the ins and outs of programs ... all these, while of course sharing a basis in project management, develop and are defined and managed very differently from company to company. (The newer standards for programs and portfolios will, in time, even out some of these differences, I'm sure, but for now there still seems to be a broad interpretation.)

For example, I was surprised to see a fellow PM writer list "operational work" as an element of the portfolio. Asking my colleagues about this, I found that they agreed this was almost never true except in the very smallest companies. If you are going to list the work of operations in your project portfolio, you might as well call it "the company" instead of the portfolio. And operational work, unlike projects, can rarely be juggled, stopped, or re-prioritized. It's project work that brings the breakthroughs ... and projects where the agility resides, allowing companies to respond to changing conditions. Meanwhile, someone needs to keep answering the phones, shipping the orders, and sweeping the floors.

Then too, I realized my definition of a "portfolio manager" was quite different from my fellow author's when he opined that portfolio managers "manage multiple projects." In our definition (based on substantial research into strategic PMO job roles) the portfolio manager resides above the management of projects - singly or in groups. In my book (literally), the portfolio is like a cookbook, its manager a cookbook editor. Meanwhile, off in the kitchens, the chefs (project managers) are turning out the test recipes (projects).

Mmmm. That reminds me: I have some Christmas cookies to bake. Have a wonderful holiday, and don't forget: when communicating about projects, always spell out your assumptions, and define your terms. Even fellow experts may have a notion quite at odds with your own.


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    3 Comments on What Is Portfolio Management?

    Bernie Hill says:

    Unfortunately, the PMI Standard for Portfolio Management (2nd Edition) claims that an organization can have a portfolio of operational projects.  That erroneous claim runs counter to the most published materials on portfolio management.  Furthermore, the term ‘operational projects’ is an oxymoron.  A project, by PMI’s definition, is unique endeavor and has a definite beginning and ending.  Hence, PMI’s definition of project portfolios is incongruous with their own definition of project.  We’ll have to exert our influence on the writers of the 3rd edition of the Portfolio Management Standard to correct this misperception on their part.

    Posted on December 18, 2010 at 10:12 pm

    Paul Lombard says:

      Some great thoughts.
      I believe I agree with the school of thought that says that portfolios are a collection of the programs, projects and ongoing work that has been identified as “key” (i.e. key investments, key products, key initiatives, etc)platforms through which change will be deployed. For example; assume that an educational organization has three key strategic goals. Goal 1 - Create a web based hand held app that would enable students to stay connected to college events and classes by end of year 2011. Goal 2 - Reduce student on student physical altercations by 50% and lastly - Goal 3 - Create a 21st Century student living experience. I believe that the goals above would best be deployed (planned and managed) through different platforms. Goal number one is a specific product which would best be accomplished as a stand alone PROJECT within the IT function because it has a clearly defined start and end point, and it is breakthrough. GOAL 3 is about upgrading or improving the student housing accommodations. It is probably a continuing and ongoing effort within which there will be many projects (e.g fiber optic upgrades, improved winter insulation, more secure room access systems, etc. and no specific end date. These projects are related and thus are probably will be managed as part of a PROGRAM. Lastly, Goal 2 which speaks to student safety is a very narrow goal that clearly resides in one function; the Campus Police. It is not cross-functional and is probably best deployed through the normal campus police functions. It is something they are working on every day, so it is part of the ongoing OPERATION of the Campus Police. In this case, however, Leadership has defined a specific goal, that represents part of that function that they want to improve. There is no need to start this as a new project, the data may spur some security upgrade projects, or they may not. If there are several projects that result from this effort, and they are all related in some way to the issue of student safety, then perhaps it will become a broader program involving groups other than just campus police.  None the less, the father of Portfolio Management concepts, Harry Markowitz intended that people diversify their personal investments in order to accomplish their goals while managing risk. The same can be said for the concepts of deploying goals in PPM; manage the risk and the investment by selecting the most effective deployment approach-Programs, projects or Operations.

      Just my thoughts


    Posted on December 20, 2010 at 5:42 pm

    Karen RJ White, PMP, PMI Fellow says:

    Jeannette, a number of organizations have recognized that to be totally effective in resource allocation, they require one place where they can see “all work” performed by the organization, be it project or operations. In my experience, it is a common practice to include an entry in their portfolio labeled “Operations” and to indicate the resource consumption (budget, headcount, facilities) assigned to keep the lights on. Then when reviewing projects for prioritization, they can actually consider something more important than “operations” and reallocate resources.

    Posted on December 22, 2010 at 11:17 pm

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