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Introtoportfoliomanagement1 1276967502489-phpapp01
Transcript of Introtoportfoliomanagement1 1276967502489-phpapp01
Introduction toIntroduction toProject Portfolio Project Portfolio
ManagementManagement
Andrew P. Valenti,Andrew P. Valenti,
Valenti PartnersValenti Partners
What is a Portfolio?What is a Portfolio?
Terms and DefinitionsTerms and Definitions A A portfolioportfolio consists of consists of
projects or programs projects or programs and other work grouped and other work grouped together to facilitate the together to facilitate the accomplishment of accomplishment of business objectivesbusiness objectives
It consists of current It consists of current components and components and planned/future work.planned/future work.
A portfolio, unlike a A portfolio, unlike a project/program, is project/program, is not not temporarytemporary
What is a Portfolio?What is a Portfolio?
Key PointKey Point A A portfolioportfolio is a is a
snapshot of its snapshot of its components, components, reflecting the reflecting the strategic goals of strategic goals of the organizationthe organization
What is a Portfolio?What is a Portfolio?
Portfolio management Portfolio management includes processes includes processes for:for:
Identifying Identifying organizational organizational prioritiespriorities
Making investment Making investment decisionsdecisions
Allocating resourcesAllocating resources
Relationships Among Portfolio, Programs, & Relationships Among Portfolio, Programs, & ProjectsProjects
Portfolio
Portfolios Projects Programs
Programs Projects
Projects
Programs
Projects
Other WorkProjects
Projects
Figure 1.1
All portfolio components:All portfolio components: Represent investments Represent investments
made or plannedmade or planned Are aligned with org’s Are aligned with org’s
strategic goalsstrategic goals Have distinguishing Have distinguishing
features for groupingfeatures for grouping Can be measured, Can be measured,
ranked, prioritized (i.e. ranked, prioritized (i.e. quantifiable)quantifiable)
Relationships Among Portfolio, Programs, & Relationships Among Portfolio, Programs, & ProjectsProjects
Portfolio, Programs, & ProjectsPortfolio, Programs, & Projects
Key ConceptKey Concept Portfolio management ensures Portfolio management ensures
interrelationships between programs & interrelationships between programs & projects are identified and resources are projects are identified and resources are allocated according to org prioritiesallocated according to org priorities
Programs focus on achieving benefits Programs focus on achieving benefits expected from the portfolio as per expected from the portfolio as per strategic org objectivesstrategic org objectives
Projects concerned with specific Projects concerned with specific deliverables/org objectivesdeliverables/org objectives
What is Portfolio Management?What is Portfolio Management?
Portfolio Management is:Portfolio Management is: The management of components to The management of components to
achieve organizational objectivesachieve organizational objectives Using its tools to identify, select, Using its tools to identify, select,
prioritize, govern, monitor, & report a prioritize, govern, monitor, & report a component’s contribution to, and component’s contribution to, and alignment with org objectivesalignment with org objectives
Not concernedNot concerned with managing the with managing the componentscomponents
What is Portfolio Management?What is Portfolio Management?
““Doing the right work, not doing the work Doing the right work, not doing the work right.”right.”
Portfolio Management and Portfolio Management and GovernanceGovernance
GovernanceGovernance Guides the Guides the
execution of execution of organizational organizational activitiesactivities
Maximizes Maximizes delivery of delivery of valuevalue
Minimizes riskMinimizes risk
Portfolio Management and Portfolio Management and GovernanceGovernance
Organizational GovernanceOrganizational Governance is the is the process that:process that:
Directs and controls operations and Directs and controls operations and strategic activitiesstrategic activities
Responds to the rights, Responds to the rights, expectations and desires of expectations and desires of stakeholdersstakeholders
Portfolio Management and Portfolio Management and GovernanceGovernance
Project Portfolio GovernanceProject Portfolio Governance is the is the set of processes by which:set of processes by which:
An organization prioritizes, selects, An organization prioritizes, selects, and allocates resources to and allocates resources to accomplish its activitiesaccomplish its activities
Management by Projects
Organizational Governance
Portfolio Management and GovernancePortfolio Management and Governance
Strategic Planning
Portfolio Management
Program Management
Project Management
Process Tools Metrics
Management of Operations
Relationships among Organizational Governance, Operations, and Portfolio Management
Figure 1.2
Portfolio Management and Organizational Portfolio Management and Organizational StrategyStrategy
Organizational StrategyOrganizational Strategy Capitalizes on Capitalizes on
opportunitiesopportunities Minimizes the impact of Minimizes the impact of
threatsthreats Responds to market Responds to market
changeschanges Reinforces focus on Reinforces focus on
critical ops activitiescritical ops activities
Portfolio Management and Organizational Portfolio Management and Organizational StrategyStrategy
Organizational StrategyOrganizational Strategy Is the result of the Is the result of the
strategic planning cyclestrategic planning cycle Translates vision and Translates vision and
mission into strategic mission into strategic planplan
Consists of initiatives Consists of initiatives influenced by market influenced by market dynamics, customers, dynamics, customers, shareholders, shareholders, regulations, competitorsregulations, competitors
Relationship between Strategic and Operational Relationship between Strategic and Operational ProcessesProcesses
Vision
Mission
Organizational Strategy and Objectives
High-Level Operations Planning and Management
Project Portfolio Planning and Management
Management of On-Going Operations
(recurring activities)(producing value)
Management of Authorized Programs and Projects
(projectized activities)(increasing value production capacity)
Organizational Resources
Sets Performance Targets
EstablishesInitiatives
ExecutesActivities
Figure 1.3
Portfolio Management and Organizational Portfolio Management and Organizational StrategyStrategy
Impact of portfolio plan on Impact of portfolio plan on strategy is achieved by:strategy is achieved by:
1.1. Maintaining portfolio Maintaining portfolio alignmentalignment
2.2. Allocating financial resourcesAllocating financial resources3.3. Allocating human resourcesAllocating human resources4.4. Measuring component Measuring component
contributionscontributions5.5. Strategic risk managementStrategic risk management
Cross-Company Portfolio Management ProcessP
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M
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Pro
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Exe
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Vision Mission Strategic PlanStrategic
Objectives
Identify Components
Operations
Project Program
Management
Performance Measurements
Project Program Closeout
Develop Portfolio Risk
Response
Categorize Components
Balance Portfolio
Communicate Portfolio
Adjustment
Authorize Components
Evaluate Components
Select Components
Identify Portfolio
Risks
Monitor & Control
Portfolio Risks
Analyze Portfolio
Risks
Review & Report
Portfolio Performance
Prioritize Components
Monitor Business Strategy Changes
Figure 1.4
Portfolio and Operations Portfolio and Operations Management LinkManagement Link
Functional groups can be Functional groups can be stakeholders in the portfolio or stakeholders in the portfolio or sponsors of componentssponsors of components
““Operations” includes: production, Operations” includes: production, manufacturing, finance, marketing, manufacturing, finance, marketing, IT, HR, etc.IT, HR, etc.
Processes/deliverables used by opsProcesses/deliverables used by ops management are outputs of the management are outputs of the portfolio componentsportfolio components
Operational ProjectsOperational Projects
Ops Projects (ref figure 1.3):Ops Projects (ref figure 1.3): Are groups of operational, recurring Are groups of operational, recurring
activities managed as projectsactivities managed as projects Form a portfolio in “high-level operations Form a portfolio in “high-level operations
planning and management”, planning and management”, encompassing the work in “management encompassing the work in “management of ongoing operations”of ongoing operations”
Are linked to the organizational strategy Are linked to the organizational strategy by the portfolioby the portfolio
Building a Comprehensive Project PortfolioBuilding a Comprehensive Project Portfolio
Organizational Strategy & ObjectivesOrganizational Strategy & Objectives(communicated through a strategic plan)
Project PortfolioProject Portfolio(consisting of prioritized strategic and operational programs and projects)
InitiativesInitiatives(defined to accomplish strategic and operational objectives)
Operations PlanningOperations Planning(continuing to run the business)
Strategic PlanningStrategic Planning(responding to environmental changes)
Organizational ResourcesOrganizational Resources
Operational StakeholdersOperational Stakeholders
Typical StakeholdersTypical Stakeholders FinanceFinance MarketingMarketing Human ResourcesHuman Resources Information Information
TechnologyTechnologyFrom Wikipedia:A corporate stakeholder is a party that can affect or be affected by the actions of the business as a whole. The stakeholder concept was first used in a 1963 internal memorandum at the Stanford Research institute. It defined stakeholders as "those groups without whose support the organization would cease to exist”
Role of the Portfolio ManagerRole of the Portfolio Manager Establishes/maintains a framework, Establishes/maintains a framework,
methodology for portfolio management in methodology for portfolio management in the orgthe org
Establishes/maintains relevant processesEstablishes/maintains relevant processes Guides selection, prioritization, balancing Guides selection, prioritization, balancing
of the portfolio and component alignment of the portfolio and component alignment with strategic goalswith strategic goals
Establishes/maintains relevant Establishes/maintains relevant infrastructure and systemsinfrastructure and systems
Ensures ongoing compliance with evolving Ensures ongoing compliance with evolving organizational goalsorganizational goals
Role of the Portfolio Manager, cont.Role of the Portfolio Manager, cont.
Provides stakeholders with timely Provides stakeholders with timely assessments of component selection, assessments of component selection, prioritization, performance and early prioritization, performance and early identification of risks and issuesidentification of risks and issues
Measures and monitors value to the org Measures and monitors value to the org via KPIsvia KPIs
Communicates portfolio component Communicates portfolio component progress, changes, etc.progress, changes, etc.
Participates in program/project reviewsParticipates in program/project reviews Adhering to ethical standardsAdhering to ethical standards
Portfolio Manager SkillsPortfolio Manager Skills Strategic AlignmentStrategic Alignment
• Participates in corporate strategy developmentParticipates in corporate strategy development• Monitors execution of initiatives in support of Monitors execution of initiatives in support of
strategystrategy Portfolio Management MethodsPortfolio Management Methods
• Project selection methodsProject selection methods• Decision support tools, e.g ROI, IRR, simulation Decision support tools, e.g ROI, IRR, simulation
techniques, etc.techniques, etc.• Prioritization algorithmsPrioritization algorithms• Capability/capacity modeling toolsCapability/capacity modeling tools• Project/program auditing techniquesProject/program auditing techniques• Organizational & Portfolio risk managementOrganizational & Portfolio risk management
Portfolio Manager Skills, cont.Portfolio Manager Skills, cont.
Program and Project Management Program and Project Management MethodsMethods
Process Development & Continuous Process Development & Continuous Improvement, e.g Six Sigma, TQM, CQIImprovement, e.g Six Sigma, TQM, CQI
General business skillsGeneral business skills• Understand key financial principlesUnderstand key financial principles• Use KPIs in portfolio performance Use KPIs in portfolio performance
measurementmeasurement• Analyze financial info and trendsAnalyze financial info and trends• Analyze business cases for portfolio selectionAnalyze business cases for portfolio selection
Portfolio Manager Skills, cont.Portfolio Manager Skills, cont.
Stakeholder managementStakeholder management General management skillsGeneral management skills
• Goal settingGoal setting• Performance managementPerformance management• RecruitmentRecruitment• Employee development, mentoring, Employee development, mentoring,
coaching, trainingcoaching, training Risk and opportunity managementRisk and opportunity management
Portfolio Management and MetricsPortfolio Management and Metrics
Portfolio ReportingPortfolio Reporting Strives to understand portfolio content and Strives to understand portfolio content and
measure component performancemeasure component performance Facilitates effective communication Facilitates effective communication
between portfolio sponsor and between portfolio sponsor and stakeholdersstakeholders
Primary purpose to supply sponsors with Primary purpose to supply sponsors with performance metricsperformance metrics
Should also provide managers with status Should also provide managers with status of their components in the context of other of their components in the context of other portfolio components, to optimize resource portfolio components, to optimize resource utilizationutilization
Portfolio Reporting and the PMOPortfolio Reporting and the PMO
The PMO may report effectiveness of The PMO may report effectiveness of components via dashboards, e.g.components via dashboards, e.g.
Portfolio Overall HealthPortfolio Overall Health Strategic Goal AchievementStrategic Goal Achievement Organization Risk ProfileOrganization Risk Profile Resource capabilityResource capability Financial informationFinancial information
Portfolio Management MetricsPortfolio Management Metrics
Quantitative measuresQuantitative measures Increase in revenueIncrease in revenue Development of new marketsDevelopment of new markets Cost reductionsCost reductions Change in NPV of the portfolioChange in NPV of the portfolio ROI from the portfolioROI from the portfolio IRR of the portfolioIRR of the portfolio Risk reduction degreeRisk reduction degree Resource AvailabilityResource Availability Change in quality improvement Change in quality improvement
scoresscores
Qualitative benefits include degree of strategic alignment and recognition of legal and regulatory compliance
ReferencesReferences
1. The Standard for Portfolio Management, Second
Edition,, Project Management Institute, ISBN 978-1-933890-53-1
2. Wikipedia