The new PMI Program management standard and Portfolio management standard--impact on the profession--a preview

Introduction

Since 1996, project managers and organizations have recognized the standard for one project: Project Management Insititue's (PMI®) A Guide to the Project Management Body of Knowledge (PMBOK® Guide). Then in 2003, PMI introduced its first standard for organizations called the Organizational Project Management Maturity Model (OPM3®). Overlapping the publication of OPM3®, the Program and Portfolio Management Standard (PPMS) program was chartered, followed by the development of two separate standards.

Building a PMI standard embraces open participation of the project management profession. More than 400 volunteers worldwide devoted their time and energy to the development of these standards. PMI posted the exposure drafts of both standards in the spring of 2005, with publication of the final standards scheduled for early 2006. As of the writing of this paper, both standards are not final.

Background

Early in 2003, recognizing that the project management profession encompasses a much broader field, including managing multiple projects through programs and portfolios, PMI's Standards Program Team (the Manager of Standards plus the Member Advisory Group) chartered the development of “a standard, or standards,” for program management and portfolio management.

The purpose of the PPMS program was to develop and deliver processes that can be adopted as PMI Standards for Program Management and Portfolio Management.

The primary purpose of the PMBOK® Guide is to identify that subset of the Project Management Body of Knowledge that is generally recognized as good practice. Similar to the PMBOK® Guide, the charter for the PPMS Program focused on processes that are generally recognized as good practice and apply to “most programs” and “most portfolios” most of the time. Of course, the connotation of program and portfolio is the commonality of project inclusion. Moreover, the team was chartered to emulate the first three chapters of the PMBOK® Guide— Third Edition, and was not include Knowledge Areas information such as tools and techniques. Those exclusions from the standard will be addressed either in an appendix to the standard or as a separate publication, as appropriate. It was recognized at the outset that a common agreement on the following definitions to be used within the standard was essential: “program,” “program management,” “portfolio,” and “portfolio management.” Since the PPMS effort was starting at the same time the content of the new PMBOK® Guide—Third Edition was being finalized, the PMI Standards Manager brought together all of the active standards teams to achieve consensus on these definitions. Consensus was achieved in time to be included in OPM3 and the PMBOK® Guide—Third Edition and formed the foundation for the Program Management and Portfolio Management standards. These definitions are:

Program: A group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may include elements of related work outside of the scope of the discrete projects in the program.

Portfolio: A collection of projects and/or programs and other work that are grouped together to facilitate effective management of that work to meet strategic business objectives. The projects or programs of the portfolio may not necessarily be interdependent or directly related.

Program Management: The centralized coordinated management of a program to achieve the program's strategic objectives and benefits.

Portfolio Management: The centralized management of one or more portfolios, which includes identifying, prioritizing, authorizing, managing, and controlling projects, programs, and other related work, to achieve specific strategic business objectives.

After the definitions were finalized, the PPMS Team looked at whether the two subjects should be combined as one standard or required two stand alone standards. A sub-team was formed to perform an industry and literature survey, and the PM community was polled to determine the differences and similarities between program and portfolio management processes. The research confirmed that while program management processes provide for the management of a group of interdependent projects, portfolio management comprises continuous, repeatable, and sustainable processes designed to map business requirements to projects and programs. As a result of this investigation, the PPMS Team concluded that the profession would be best served with two standards.

Despite the differences in these processes, the PPMS Team believed that because of the synergies between the two subjects, it would be best to manage the development of the two standards under one program. This was proposed to the Standards Program Team (SPT), which approved the recommendation and approach. Development of both standards commenced in early 2004, and the final drafts were completed by the end of that year. After thorough internal team and SPT reviews, the documents were released as exposure drafts in the spring of 2005.

Exhibit 1 illustrates the relationships between portfolios, programs and projects. The portfolio represents the organization's set of active programs, projects, sub-portfolios, and other work at a specific point in time.

Program and Portfolio Relationships

Exhibit 1 Program and Portfolio Relationships

The next two sections highlight the currently proposed standards.

Program Management Standard

The Program Management Standard describes generally accepted processes for managing multiple projects and nonproject activities within a program environment. The terms “program” and “program management” have been in widespread use for some time and have come to mean many different things. Some organizations and industries refer to ongoing or cyclical streams of operational or functional work as programs. The recognized disciplines of operational or functional management address this type of work; therefore, the standard does not apply to these programs.

Alternatively, some organizations refer to large projects as programs. The management of large individual projects remains within the discipline of project management, and as such, is already covered in the PMBOK® Guide—Third Edition. If a large project is split into multiple related projects with explicit management of the benefits, then the effort becomes a program, and the Program Management Standard applies.

Programs, like projects, are a means of achieving organizational goals and objectives, often in the context of a strategic plan. Although a group of projects within a program can have discrete benefits, they often also contribute to a common set of benefits as defined by the program. Managing multiple projects via a program may optimize schedules across the program, deliver incremental benefits, as well as enable staffing to be optimized in the context of the overall program's needs. Projects may be interdependent because of the collective capability they deliver, or they may share a common attribute such as client, customer, vendor, technology or resource. Program management focuses on these project interdependencies and determines the optimal pacing for the program. This enables appropriate planning and scheduling of the projects within the program. In essence, all of these considerations of strategic benefits, coordinated planning, shared resources and optimized pacing contribute to determining whether multiple projects should be managed as a program.

Organizations initiate programs to deliver benefits and accomplish agreed outcomes that often affect the entire organization. The program organization must take this into account and balance stakeholder expectations, requirements, resources and timing conflicts across competing projects. Throughout its life cycle, an effective program manages many areas; however, there are three broad management themes that are key to the success of a program:

Benefits Management - Program benefits management assesses the value and organizational impact of the program, identifies the interdependencies of benefits being delivered among various projects within the program, ensures that targeted benefits are realistic, analyzes the potential impact of planned program changes on benefits and assigns responsibilities and accountability for the actual benefits realization resulting from the program.

Stakeholder Management - Program stakeholder management identifies how the program will affect stakeholders (e.g., the organization's culture, current major issues, resistance or barriers to change) and then develops a communication strategy to engage the affected stakeholders, manage their expectations and improve their acceptance of the objectives of the program. Program stakeholder management extends beyond project stakeholder management to consider additional levels of stakeholders and broader interdependencies among projects.

Program Governance - Program governance is concerned with providing control of the organization's investment as well as monitoring the delivery of benefits as the program progresses. This control is achieved via monitoring progress reports and reviews at each of the different phases in the program's life cycle. These reviews are an opportunity for senior management or their representatives to assess the performance of the program before allowing the program to move to the next phase or before the initiation of another project.

There are five program management process groups required for any program. These process groups are aligned to those defined in the PMBOK® Guide — Third Edition, and are independent of application areas or industry focus.

In practice, within the program, these process groups are not linear, can overlap and are sometimes iterative. Interaction occurs both within a process group and between process groups. As with projects, these process groups do not bear any direct relationship to phases of a program's life cycle. In fact, one or more process from each group will normally be executed at least once in every phase of a program life cycle. The five process groups are:

  • Initiating Process Group - defines and authorizes the program or a project within the program, and produces the program benefits statement and benefits realization plan for the program.
  • Planning Process Group - plans the best alternative courses of action to deliver the benefits and scope that the program was undertaken to address.
  • Executing Process Group - integrates people and other resources to carry out the plan for the program and deliver the program's benefits.
  • Monitoring and Controlling Process Group - requires that progress is regularly measured and monitored to identify variances from the program management plan, and coordinates corrective actions to be taken when necessary to achieve program benefits.
  • Closing Process Group - formalizes acceptance of a product, service or result, brings the program or program component (i.e., project) to an orderly end.

Portfolio Management Standard

The primary purpose of the Portfolio Management Standard is to describe generally accepted processes associated with portfolio management as it relates to programs and projects, and applies to all types of organizations (for profit, non-profit, and government).

Portfolio Management includes processes to collect, identify, categorize, evaluate, select, prioritize, balance, authorize, and review components within the portfolio (projects, programs, sub-portfolios) to determine how well they are performing relative to organizational expectations and strategic plans.

A portfolio reflects a continuous business process marked by phases, or stages, with defining processes and activities. The timing of this repeatable cycle is determined by the organization and can occur as frequently as quarterly, or as long as annually. Overall planning horizons for portfolios may extend many years.

The sequence of phases of a portfolio business process cycle is typically planning, authorizing, and monitoring and controlling. Once established, this process does not end except when the organization chooses to abandon the portfolio management approach, or the organization ceases to exist. However, it should be recognized that sub-portfolios may be eliminated because the work of that portfolio is completed or is no longer in alignment with the organizations strategy/goals.

Portfolio management processes aggregate into two groups:

  • Aligning Process Group – Defined as what will be managed in the portfolio and how elements will be evaluated and chosen for inclusion or exclusion.
  • Monitoring and Controlling Process Group – Defined as reviewing performance indicators periodically to assess the alignment of the portfolio with strategic objectives.

The Aligning Process Group ensures that there is current information regarding the strategic goals the portfolio is to support, as well as current operational rules for evaluating elements and managing the portfolio. In addition, this process group establishes a structured, agreed-to method, for introducing and classifying candidate elements. These processes are applied when the organization refreshes its strategic goals and formulates near term budgets and plans.

The Monitoring and Controlling Process Group includes the activities necessary to ensure that the portfolio is aligned to the organizations strategy/goals and performing to organizationally determined metrics. These metrics, such as total return on investment or net present value thresholds, may be monitored at a summary performance level. In some instances, individual elements of the portfolio may be tracked.

Exhibit 2 captures the essential process groups and process flows for portfolio management.

Portfolio Management Processes and Process Groups

Exhibit 2 Portfolio Management Processes and Process Groups

These nine proposed portfolio management processes can be summarized as follows:

  • Identification – The purpose of this process is to create an up-to-date list, with sufficient information, of ongoing and new components that will be managed.
  • Categorization – This process is to categorize identified components into relevant business groups.
  • Evaluation – Pertinent information to evaluate components is identified and components are evaluated.
  • Selection – Evaluated components are formally rejected or selected for further consideration based primarily on their value.
  • Prioritization – Components are ranked within each strategic or funding category according to established criteria.
  • Portfolio Balancing – In this process, the purpose is to include the portfolio component mix with the greatest potential to collectively support the organization's strategic initiatives and achieve strategic objectives.
  • Authorization – This process formally communicates portfolio-balancing decisions and formally allocates financial and people resources required to work on selected components.
  • Portfolio Periodic Reporting and Review – The purpose of this process is to gather performance indicators, provide periodic reporting on them, and review the portfolio periodically for continued alignment.
  • Strategic Change – This process enables the portfolio management process to respond to changes in strategy.

Impact on the Profession

Assuming these proposed standards go forward as planned, the project management profession needs to be prepared to handle the positive and not so positive risks associated with stepping beyond the ‘single-project’ standard. Some of the critical questions the PPMS Team encountered during development of the standards include these examples:

(1) By the year 2006, how might having the Program Management Standard and the Program Management Standard change the profession?

(2) What are the implications for project management practitioners, particularly regarding the Portfolio Management Standard?

(3) What are the implications for the project management office?

(4) How should PMI integrate Project Management, Program Management, and Portfolio Management Standards?

(5) Is certification related to either new standard necessary?

Feedback in various open working sessions among project managers produced some recurring messages:

(1) There will be challenges in integrating these new standards with existing perceptions and existing usage of project management in the organization.

(2) Project managers could have new possibilities with career paths, which would mean new skills, training and changes in roles and responsibilities.

(3) Standards will help integrate program and project management closer to general management, which should help strengthen PMO and corporate-level efficacy, yet help will be needed in convincing upper-level management of this value.

These are issues that remain to be explored, as these two new standards are unveiled to the project management community. We urge your participation and constructive contribution to this on-going dialogue.

References

Project Management Institute. (2004) A Guide to the Project Management Body of Knowledge (PMBOK®Guide), Third Edition. Newtown Square, PA: Project Management Institute.

Project Management Institute. (2005) Program Management Draft Standard. Newtown Square, PA: Project Management Institute.

Project Management Institute. (2005) Portfolio Management Draft Standard. Newtown Square, PA: Project Management Institute.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

©2005, David W. Ross & Paul E. Shaltry
Originally published as a part of 2005 PMI Global Congress Proceedings – Toronto, Canada

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