Portfolio management processes

Portfolio management is a process of selecting, prioritizing, authorizing, managing, and controlling projects and programs to meet organizational objectives. It involves identifying, analyzing, and balancing the risks and benefits of each project, as well as allocating resources, including capital and personnel, to ensure the portfolio is optimized for success. It also involves monitoring, controlling, and adjusting the portfolio of projects over time to ensure that the most important objectives are achieved.

Example of portfolio management processes

• Selecting: Portfolio management begins with selecting projects to prioritize and invest in. This involves assessing the value of each project, considering the organization’s current and future needs and goals, and weighing any risks associated with the project. For example, a company might select a new product launch as a priority project because it aligns with their current and future goals, and because the associated risks are manageable.
• Prioritizing: Once projects are selected, they must be prioritized. This involves weighing the value of each project against the resources required, and determining the order in which they should be completed. For example, a company might prioritize a project to upgrade their IT systems, given that it is essential for the success of their business and the resources required are available.
• Authorizing: After projects have been selected and prioritized, they must be authorized. This involves obtaining the necessary approvals and resources, such as financial resources and personnel, to ensure the project can be successfully completed. For example, a company might authorize a project to create a mobile application by obtaining the necessary approvals and allocating the appropriate resources.
• Managing: Once projects are authorized, they must be managed. This involves creating a detailed plan for the completion of the project, as well as monitoring and adjusting the project as needed. For example, a company might manage a project to create a new website by creating a timeline for completion, tracking progress, and adjusting the plan as needed.
• Controlling: Finally, projects must be controlled. This involves monitoring progress, reviewing results, and taking corrective action as needed to ensure the project is completed on time and within budget. For example, a company might control a project to expand their production facility by regularly tracking progress, reviewing results, and making adjustments as needed.

Best practices of portfolio management processes

1. Establish and communicate a clear portfolio management strategy: A portfolio management strategy should be established and communicated to all stakeholders to ensure consistency and alignment of expectations. This strategy should include a clear definition of the goals and objectives of the portfolio, the process for selecting and prioritizing projects, and the criteria for determining success.
2. Set measurable objectives and success criteria: Establishing clear, measurable objectives and success criteria for each project and program is essential for effective portfolio management. These should be communicated to all stakeholders to ensure expectations are aligned.
3. Monitor and review portfolio performance: Establishing and monitoring metrics to measure portfolio performance is essential for successful portfolio management. This should include regular reviews of project progress, budget, and resource utilization.
4. Develop a systematic approach to risk management: Risk management is essential for effective portfolio management. This should include identifying, analyzing, and managing risks to ensure projects are completed successfully.
5. Utilize agile and iterative methodologies: Utilizing agile and iterative development methodologies is essential for successful portfolio management. This helps to ensure projects are delivered on time and on budget, while minimizing risk and maximizing value.
6. Utilize portfolio optimization tools: Utilizing portfolio optimization tools is essential for effective portfolio management. These tools can help to identify and prioritize projects, manage resources, and maximize portfolio performance.
7. Foster collaboration and communication: Effective collaboration and communication is essential for successful portfolio management. This should include regular meetings and clear communication of goals, objectives, and expectations.

When to use portfolio management processes

Portfolio management processes should be used whenever an organization needs to make decisions about how to allocate resources and prioritize projects in order to meet its strategic objectives. Examples of when portfolio management processes should be used include:

• When an organization is launching a new product or service: portfolio management can help to identify the resources required, determine the potential costs and benefits of the project, and prioritize the project compared to other initiatives.
• When an organization is making decisions about investments: portfolio management can help to identify the most promising investments and ensure that the organization’s capital is allocated in the most effective way.
• When an organization is assessing the progress of current projects: portfolio management can help to track the progress of projects and ensure that resources are being allocated in the best way to maximize returns.
• When an organization is making decisions about resource allocation: portfolio management can help to align resources with the organization’s goals and ensure that the right resources are available for each project.
• When an organization is making decisions about strategic objectives: portfolio management can help to ensure that the organization’s objectives are achieved in the most efficient and effective way.

Types of portfolio management processes

Portfolio management processes are a key part of managing a successful organization. These processes help to ensure that resources are allocated properly, that projects are prioritized, and that objectives are achieved. There are several types of portfolio management processes, including:

• Strategic portfolio management: This process focuses on the long-term goals of the organization, including setting objectives for the portfolio, prioritizing projects based on strategic objectives, and selecting projects to be included in the portfolio.
• Financial portfolio management: This process focuses on budgeting, forecasting, and cost estimation for the portfolio. It also involves analyzing the financial impact of projects and programs, and allocating resources accordingly.
• Risk portfolio management: This process focuses on mitigating risk associated with projects and programs. It involves analyzing the risks associated with each project, developing strategies to manage those risks, and ensuring that resources are allocated to projects that have the potential to generate the greatest return.
• Resource portfolio management: This process focuses on the allocation of resources to projects and programs. This includes analyzing resource availability and capacity, determining the optimal use of resources, and allocating resources to ensure the portfolio is optimized.
• Delivery portfolio management: This process focuses on the execution of projects and programs. It involves tracking progress, ensuring deadlines are met, and managing changes to ensure the objectives are achieved.

Steps of portfolio management processes

• Portfolio Identification: The first step in the portfolio management process is to identify the projects that are to be included in the portfolio. This involves collecting data on the projects and analyzing their potential for success in order to determine which ones should be included and which ones should be excluded.
• Portfolio Prioritization: After the projects have been identified, the next step is to prioritize them. This involves assessing the projects based on various criteria such as risk, return, impact, and complexity. This process helps to focus resources on the most important projects.
• Portfolio Authorization: Once the projects have been prioritized, the next step is to authorize them. This involves obtaining the necessary approvals from all stakeholders and ensuring that the projects are adequately funded.
• Portfolio Management: After authorization, the next step is to manage the portfolio. This involves developing and implementing plans for each project, monitoring progress, and making adjustments as necessary.
• Portfolio Control: Finally, the last step in the portfolio management process is to control the portfolio. This involves regularly reviewing the performance of the projects and taking corrective action if necessary. It also involves managing the risks associated with the projects and ensuring that resources are distributed in an optimal manner.

Advantages of portfolio management processes

Portfolio management processes can be highly beneficial for organizations, as they provide a comprehensive view of the organization's resources and allow for better allocation of resources, more efficient decision-making, and improved overall performance. The following are some of the advantages associated with portfolio management processes:

• Improved resource allocation: Portfolio management ensures that resources are allocated more efficiently and effectively to the most important projects and initiatives. This can help organizations achieve their desired goals and objectives more quickly and effectively.
• Improved decision-making: Portfolio management processes provide clear and comprehensive views of the organization’s projects and initiatives, which can help with more informed decision-making. This can help organizations achieve better results and stay on track with their strategic objectives.
• Improved visibility and control: By utilizing portfolio management processes, organizations can gain better visibility and control of their projects and initiatives. This can help organizations identify and address potential issues early on and mitigate risks.
• Improved project execution: Portfolio management processes provide organizations with the tools to effectively plan and execute projects. This can help improve project execution, reduce costs, and maximize the value of investments.

Limitations of portfolio management processes

Portfolio management processes have a number of limitations that can hinder an organization’s success. These include:

• Lack of Flexibility: The portfolio management process can be rigid and inflexible, making it difficult to quickly adapt to changes in the market or to quickly respond to customer demands.
• Resource Allocation: Allocating resources within the portfolio can be difficult due to limited resources and competing demands.
• Complexity: Creating and managing a portfolio of projects can be time consuming and complex.
• Overlap: Projects can overlap and compete for resources, resulting in lower overall performance and delays.
• Risk Management: Managing the risks associated with projects can be difficult, and there can be a lack of visibility into the potential risks.
• Performance Evaluation: Performance evaluation of individual projects can be difficult and subjective.
• Communication: Lack of effective communication can lead to misunderstandings between stakeholders and can make it difficult to align objectives and expectations.

Portfolio management processes — recommended articles

Strategic project management — Portfolio of projects — Value creation process — Evaluation of the project — Strategic importance — Applications of project management — Cost management plan — Measures of project success — Implementation of decisions

References

• Rad, P. F., & Levin, G. (2006). Project portfolio management tools and techniques. www. iil. com/publishing.
• Pennypacker, J. S. (2005). Project portfolio management maturity model. Pennsylvania, USA: Center for Business Practices.