Why Porfolio Management Matters
Focusing on the Strategic Side of Projects, Portfolio Management, and Those Skilled in This Discipline, are Quickly Becoming an Organizational “Must Have”
Why do people undertake projects? It's to implement change in their organizations right? Well, why do organizations constantly seek to implement changes? The biggest reason is because organizations have to constantly improve. If they don't then they will be surpassed by competitors, they will lose customers, see rising costs, increasing risks, and any number of other problems that ultimately lead to failure.
That's why it is so important for organizations to develop a long term strategy that will allow them to consistently improve in multiple areas while continuing to innovate and grow. This strategy is then executed through the annual planning cycle that will determine the specific initiatives that the organization will invest in for the coming year. Those initiatives are, of course, the projects that we know so well.
In recent years organizations have recognized that project and program management alone is not maximizing the organization's ability to deliver on its strategic goals. Project execution was focused on constraints such as scope, schedule, budget, quality and risk, while the “currency of success” for the organization is the ability to achieve the expected business benefits. That disconnect has led to an increasing emphasis on portfolio management as a way to manage change with a focus on benefits instead of deliverables.
That started with a shift from doing projects right, to doing the right projects. As portfolio management has matured, it has expanded to look at the full lifecycle of the portfolio—from idea generation through business casing and project selection, and including project execution plus benefits realization. It now represents a comprehensive discipline for how organizations plan, select and deliver change, as well as how they validate that the changes have achieved the expected results. The implication of this evolution is that portfolio management is becoming a strategically important discipline. It truly is management of the organization's ability to succeed in the future.
Executives are looking for portfolio leaders who have the skills and experience to deliver success, which is creating new opportunities for individuals who want to make a difference. Although portfolio management is a strategic extension of project management, the skills required are different, which means that successful portfolio managers may come from many different backgrounds.
Portfolio management is first and foremost a business skill that requires an understanding of how an organization operates. Portfolio managers should have an understanding of the organizational strengths and opportunities, the competititve differentiators and the industry framework. It also requires an understanding of the organization's strategy and how the organization can consolidate, grow and succeed.
Individuals who have that understanding—and can lead and make smart business decisions driven by that understanding—can thrive in a portfolio management capacity. That makes portfolio management a good career choice for any experienced manager or leader who has demonstrated an understanding of his or her industry and/or organization. Even if they have never managed a project in their career, they have the fundamental foundation to succeed as a portfolio manager. Individuals can learn project management skills. It's much harder to learn good judgment and business acumen.
I know of some organizations that see portfolio management as an incubator for some of their high-potential future leaders. They provide those candidates with the opportunity to work in portfolio support functions for a year or so to gain insight into the entire organization as part of a structured management development program. Those individuals won't have the experience to manage the portfolio directly, but they will learn far more about the business, and will develop stronger relationships, supporting portfolio managers than would be achieved in a single functional silo in the same period.
Portfolio managers need to be able to develop strong, collaborative relationships with all business areas to facilitate a single, enterprise-wide portfolio planning and execution process. This is the glue that holds the different functional areas together and encourages the development of an organization-first culture rather than a department-first culture. Those relationships also need to extend deep into the organization, helping to provide strategic focus to project managers and their teams. Portfolio management is as relevant to frontline employees as it is for the decision-making executives at the top of the organization.
This was especially true for a multi-national, mid-sized organization that asked me to help them implement portfolio management around three years ago. They understood the value in reaching every corner of the organization with these practices and, in fact, measured their success against it. In a survey after the first year of implementation they asked staff to name a number of executives including the portfolio manager. When the results were analyzed, only the CEO had higher recognition ratings than the portfolio manager – a sure sign of the reach of the portfolio. While this is just one anecdotal measure, it does demonstrate the deep impact portfolio management can have.
Portfolio managers must also be flexible and adaptable in their approach, recognizing that success comes from being able to manage multiple shifting priorities. Organizational goals and objectives will evolve in response to changing needs and opportunities, and project execution variances will require creative solutions to ensure that those goals are still being met. This requires not only business acumen and confident decision making, but also the ability to build trust based relationships that allow portfolio managers to drive decisive action in response to their decisions. Of course it also requires complete trust from organizational leadership to allow portfolio managers to make those decisions.
Department heads have always had a role to play in the portfolio lifecycle—involvement in planning and project selection, delivery of benefits—but these have not always been viewed as elements of the same discipline. As organizations consider portfolios more holistically, as a continuum from idea generation through benefits realization, the ability to manage these elements as part of that connected whole becomes much more important. Department heads will also find that their key performance indicators (KPIs) become increasingly aligned with their ability to meet their expected contribution to the organizational goals by successfully executing their subset of the portfolio. Department heads are effectively becoming portfolio sponsors, or at least partial portfolio sponsors, and their ability to fulfil that sponsorship role successfully depends on their understanding of the context of that role. A number of organizations are now shifting departmental goal setting later in the planning cycle to ensure that goals align with organizational goals and conflicts between departmental and organizational goals are avoided.
Making a Difference
Portfolio management is rapidly becoming a must-have discipline for organizations. The demand for experienced, trained and qualified portfolio managers far outstrips the supply of those individuals. As a result, organizations are forced to appoint portfolio managers who learn the discipline as they work, increasing organizational risk and leaving the organization with no development or succession plan for the portfolio management role.
Portfolio management is a wonderful opportunity for business and/or project leaders who want to make a difference, and there has never been a better time to take advantage of that opportunity.
Beijing | Bengaluru | Brussels | Buenos Aires | Dubai | Lelystad | Mumbai | New Delhi
Philadelphia | Porto Alegre | Rio de Janeiro | Shenzhen | Singapore | Washington, DC
Project Management Institute
Global Operations Center
14 Campus Blvd
Newtown Square, PA 19073-3299 USA
Tel: +1 610 356 4600
©2015 Project Management Institute. All rights reserved. “PMI”, the PMI logo, “Making
project management indispensable for business results” and “Pulse of the Profession”
are marks of Project Management Institute, Inc. BRA-100-2015 (01/15)
Making project management indispensable for business results.®