This is a subject am passionate about. I am currently working on a parallel project trying to link the same two topics in an organization context. I will post the results of this project later in early November.
Mature organizations with well managed portfolios have one thing in common; greater focus on strategic initiatives through risk and investment decisions which lead to strategies implementation and consequently benefits realization. This is not to mean that organizations that do not have portfolio management do not succeed, but they are greatly exposed to risks and the chances of success diminish significantly in the face of adversity. Fierce competition, dynamic market trends, economic tremors and many other external factors may force a company to undergo dramatic challenges. However, to withstand the storm, there is need to have effective project portfolio management through which programs and projects are managed. It is through this framework that strategy development and strategy implementation are effected.
So what is project portfolio management? PMI defines it as the “centralized management of one or more portfolios that enable executive management to meet organizational goals and objectives through efficient decision making on portfolios, projects, programs and operations.”
That was a mouthful. Let’s break it down to and make it easier to understand. Centralized management…….Portfolios…….executive management……..goals and objectives …….decision making …..initiatives and operations. When the statement is not made to be too wordy, then it starts to make sense.
- It involves effective decision making by the portfolio manager.
- The decision is intended to meet the strategic goals for the organization.
- The decision is made with consideration on the programs, projects and portfolios, which it manages.
It is in this environment where the executive take an organization-wide view to ensure correct allocation of resources and time and ensure corrective decision making steps are undertaken across their initiatives.
This eventually maximizes value delivery and benefits realization in a company making it a vital component of success. Through this, projects are prioritized, overall objectives are confirmed and projects are initiated at the correct timing. As most organizations realized after the financial crisis in 2010, they are putting more efforts now in streamlining their operations under project portfolio management through which decisions are made. It is still not unusual to find businesses where the management does not understand why particular branches are performing exceedingly well while others are struggling. though there may be other reasons, most of the time it is because they are not under the same portfolio management. This means critical components of decision making are not effected in the same manner, though they share the same strategy and values. There is no way to identify the needed resources and make the trade-offs when capacity constraints arise, so that team resources are optimized and talent is properly aligned with the strategies. This is quite often the leading cause in the management “missing the point”.
Having a portfolio management in itself is a defeatist idea if it is not agile. The executive need to understand the dynamic environment and which they operate in and follow along the pace of change to avoid obsoletion. there is need to frequently update and adapt the organization’s strategy so that the projects within the portfolio are in tandem with the strategic goals. It would be dumb, to invest heavily in a costly project whose benefits are no longer tenable, simply because the portfolio was static. To ensure dynamism, sound and mature decisions have to be made to support, prioritize, adapt and potentially put a stop to non-tenable projects. Interestingly, it is not a brainer that organizations with stronger portfolio management also enjoy organizational and market success. They stand out from their peers in three key areas;
Strng processes: They have better processes that have been put in place to structure discussions and decision making within the right framework, which strengthens portfolio, program and project processes based on objective, quantifiable facts instead of gut feelings.
Leadership, sponsorship and support: The executive and general leadership do not preach water and drink wine. They understand the power of portfolio management and its effectiveness. They champion it’s presence and processes which sustains improvement in an organization.
Enabling culture – cultural support for portfolio management is both intellectual and emotional. The executive in these mature organizations understand this and addresses both dimensions, to ensure there is no stigma of failure when a project is terminated due to inviability.
In an increasingly complex business environment, it is important that organizations capture the benefits of superior portfolio management and optimize the ability to view, allocate and adjust resources and time across a portfolio of critical, strategic projects.
Don’t miss out on part two of this post as I delve deeper on how portfolio management wins strategies in organizations.
Project Management 