Why and how to create a portfolio management strategy
If you don’t already have a portfolio management strategy in place, you may be wondering what it does and why you need it.
A good portfolio management strategy can help organisations enjoy greater project success.
This is because a portfolio management strategy is the art and science of matching programmes and projects to your organisation’s strategic business objectives. It can help ensure resource allocation supports your programmes and projects, while balancing risk against performance.
Developing a portfolio management strategy should be done every time the organisation reviews and/or modifies its strategic goals – so at least once a year.
Going through a formal portfolio management strategy gives an organisation a high level, centralised view of all of the ongoing work and focusses effort on the programmes and projects that are going to contribute to the current strategic goals.
It sounds complicated – so here is a process to follow to help you create a portfolio management strategy that will help your organisation achieve better project success.
Match strategic goals
Once the organisation has set its goals for the year, the portfolio team should identify the programmes and projects that will help achieve those goals. Doing this visually using a goal/benefits map will quickly highlight any programmes and projects that do not, or will not, contribute to any goals. Unless there is a compelling business reason for them to continue, those programmes and projects should be stopped and their resources re-allocated. The mapping process should also pick up programmes and projects of minimal strategic benefit or any that claim benefits outside of their remit.
Identify any new programmes and projects
If new programmes and projects need to be identified and justified, a business case and full risk assessment should be carried out. At this point, strategic alignment and resource requirements should be factored in as both will be critical to success. The new programmes and projects should be added to the goal/benefits map to visualise how they will contribute to the organisational goals.
Balance the portfolio
This is the interesting, and also the trickiest, bit. It’s vital that the portfolio is balanced and contains a spread of programmes and projects. Metrics that can be used in the balancing process are:
- Performance to budget
- Resource requirements
- Risk profile
- Schedule performance
- Cash flow constraints/budget envelopes
- Change fatigue
Set a weighting factor for each of the metrics you are going to use. Score each of the programmes and projects against the metrics and then multiply that with the weightings to calculate an overall score for each of programme and project. This helps to remove the emotion out of picking the right programmes and project going forward.
Approve the portfolio
Once the portfolio team is happy with the balance, the full portfolio should be submitted to the senior leadership team for approval.
That should set your organisation up to ensure all project and programme work are aligned to your overall objectives. After all, why start, staff and fund a project, no matter how small, if it does not help drive the organisation in the right direction?
Psoda can help you strategically manage your portfolio to ensure better outcomes. It includes tools to visualise your goal/benefits map, to score and prioritise your portfolio and tools to level out our budget forecasts.
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