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What is a Portfolio Management?February 5, 2022
What is a Portfolio Management?
Portfolio management, which can be regarded as a subset of corporate management, is very similar to programme management, but the projects in the programme manager’s portfolio, though not necessarily related, are still required to meet an organization’s objectives.
Furthermore, portfolios (unlike projects or programmes) do not necessarily have a defined start and finish date. Indeed portfolios can be regarded as a rolling set of programmes monitored in a continuous life cycle from the strategic planning stage to the delivery of the programme.
In a large organization, a portfolio manager may be in charge of several programme managers, while in a smaller company he or she may be in direct control of a number of project managers.
Companies do not have unlimited resources, so the portfolio manager has to prioritize the deployment of these resources for competing projects, each of which has to be assessed in terms of:
- Profitability and cost/benefit
- Return on investment
- Cash flow
- Importance of the client
- Company strategy and objectives
Portfolio management therefore involves the identification of these project attributes and the subsequent analysis, prioritization, balancing, monitoring and reporting of progress of each project or in the case of large organizations, each programme.
As each project develops, different pressures and resource requirements appear, often as a result of contractual changes or the need to rectify errors or omissions. Unforeseen environmental issues may require immediate remedial action to comply with health and safety requirements, and there is always the danger of unexpected resignations of key members of one of the project teams.
A portfolio manager must therefore possess the ability to reassign resources, both human and material (such as office equipment, construction plant and bulk materials), in an effective and economical manner, often in emergency or other stressful situations, always taking into account the cost/benefit calculations, the performance and sustainability criteria and the overall strategic objectives of the organization.
The difference between programme management and portfolio management is that in the former the projects being managed are related in some form, while in the latter, the projects may or may not be related. For example, the projects controlled by a portfolio manager may be as diverse as an update of the company’s IT system to the development of a commercial building or shopping centre.
The portfolio manager will normally be part of the senior management team which determines which projects go ahead and which should be shelved, not started or even abandoned. Clearly the degree of detailed involvement in the individual projects by the portfolio manager must therefore be limited, as no one can be an expert in everything. Instead, the portfolio manager has to ensure that the projects under his control meet the corporate ethical and quality standards as well as the basic criteria of cost, time, performance and the last, but not the least, safety.
As with programme management, the order of priority of the various projects must be established at an early stage, but as circumstances change (often outside the control of the manager or even the organization) the priorities will have to be adjusted to suit the latest overall strategy or the resources (often financial) of the organization.