What is portfolio management?

by admin on January 16, 2012

Unsure as to what portfolio management is? If so then read on. (If you want to dive into the detail and learn about some of the techniques used in portfolio management take a look here instead).

First off, let’s clarify a quick point. You will often hear people referring to portfolio management, project portfolio management and even PPM. In reality they are all the same discipline. So to keep things simple, we will use the term portfolio management in this post!

When trying to get a handle on portfolio management, it may help by thinking about something you are probably a little more familiar with – project management.

Project management – “doing projects right”

Project management is concerned with “doing projects right”. Project management is all about the tools and techniques to run projects to achieve a desired end result.

Portfolio management – “doing the right projects”

Whereas portfolio management is concerned with ensuring we do the right projects. This implies a couple of things:

  • Portfolio management helps us select the right projects to do.
  • Portfolio management also helps us decide if we are still running the right projects.

This last point is often overlooked. A portfolio management approach to running projects means you periodically assess the projects you have already approved and check you should still be running them. Furthermore, a portfolio management approach is always trying to balance the projects in the portfolio to maximise return and reduce risk. Which means looking collectively across the projects and not just looking at projects in isolation.

Portfolio management is not merely running multiple projects!

The need for portfolio management

Firstly, many organisations don’t have any process in place for reviewing project proposals or requests. Often the decision for which projects to proceed with is based on “who shouts loudest”. Combined with poor knowledge of what other projects they are already doing, it is then easy for organisations to take on more projects than they can handle. Inevitably scarce resources get diluted and good projects get squeezed out for bad projects.

A portfolio management approach seeks to address these issues by providing a framework within which projects can be requested and fairly evaluated. It seeks to balance the mix of projects across different levels of risk, focus and spend and tie project selection back to the organisation’s fundamental strategy. Finally a portfolio management approach means that projects are constantly re-evaluated to check they are are on track and either close down or help projects that are failing.

project_portfolio_management_explained

What is project portfolio management?


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