In this lesson, we will learn about business portfolio management and how it enables organizations to make better choices about prioritizing projects and managing risk. When you are through, you can take a short quiz.
What Is Business Portfolio Management?
When baking a cake, many good cooks follow a recipe with precise measurements, cooking times, and list of ingredients. Simply collecting good raw components does not guarantee success. We need to follow proven processes to achieve the best possible results. That’s the idea behind business portfolio management.
Business portfolio management is a process that enables organizations to manage multiple projects or individual projects for optimal results. The business portfolio management process works by identifying an organization’s best project managers and using best management practices, strategic priorities, and valuable lessons learned in a project management office. Business portfolio management allows the organization to evaluate and balance conflicting demands for project resources. By aligning with organizational strategies and prioritizing the work, business portfolio management helps manage risk and provides cost-effective allocation of resources to the most deserving projects.
In this lesson, we will look at:
- The functions and goals of business process management
- The difference between business portfolio management and project management
- How business portfolio management compares to project management
- How organizational culture affects business portfolio management
Functions and Goals
Business portfolio management provides an opportunity for an organization to:
- Prioritize which projects should be done first and receive adequate funding
- Assure that scopes of work and work breakdown structures are clearly written
- Track that timelines and budgets remain on schedule
- Validate that all milestones and deliverables are completed on time and within budget to meet their sponsors’ quality requirements
That is much easier said than done. It’s also why so many companies are turning to business portfolio management to meet these goals and objectives. It is tough enough to assure one or two projects are completed on time. Now imagine how difficult that problem becomes when dozens of projects must be managed well, including those with crucial new product or operations deadlines, very large budgets, or long timelines that span multiple years. Business portfolio management can manage high priority projects or all of the projects at their designated organizational level. More often than not, it also provides other support as a center of excellence for project management.
Typical goals for business portfolio management include:
- Establishing a communications project management policy
- Providing project management training from basic through advanced levels
- Mentoring project managers and team members
- Assuring that documentation – including scopes of work, work breakdown structures, risk matrices, GANTT charts, meeting notes, and budget records – are kept current and follow standard practices
The value of this work is crucial for any project, but it becomes tremendously more valuable when multiple projects and large budgets are involved. For the company or organizational unit, portfolio management manages current operational and budget data on all projects and ensures adherence to organizational project management best management practices. For the project sponsor, he or she also is able to track that a particular project is moving ahead according to the project plan. For the project team and project manager, they also have access to the portfolio management ‘dream team’ to help them recognize and overcome any potential stumbling blocks that they might encounter.
Comaprison to Project Management
The idea behind business portfolio management is not new. Project management offices have been around for years. However, there are specific differences between project management and business portfolio management.
Project management focuses on achieving specific deliverables that support specific organizational objectives. Project managers keep their eye on doing the work right, while business portfolio managers focus first on doing the right work and then doing the work right.
Business portfolio management provides the means for the organization’s most important projects to be done first. In the more focused and sometimes insulated view of project management, a single sponsor may decide to pursue a specific project that is not a high priority for the organization. As a result, risk management and resource efficiency may be compromised.
Why don’t all organizations employ business portfolio management? That depends on the culture of your organization. Some companies have strong functional lines of authority and do not cross organizational boundaries, even if access to valuable project management resources lie elsewhere in the organization. Other companies have a more project-centered culture and are more comfortable using matrix organizations where project teams cross functional boundaries.
There is a fast growing trend of using virtual project teams that are more compatible with the resource and cost efficiency offered by business portfolio management. Technology now enables project teams to be comprised of members separated by great geographical distances. Cultural differences provide valuable diversity in outlook, management, and technical skills, but these differences also can lead to misunderstandings regarding communications, balancing project team vs. functional responsibilities, and other issues exaggerated when working together in the same place are impossible. Whatever an organization’s culture, it is crucial for project team members and sponsors to work in harmony with business portfolio management. That’s a proven recipe for success.
Business portfolio management enables organizations to manage multiple projects or individual projects for optimal results. It allows the organization to evaluate and balance conflicting demands for project resources. By aligning with organizational strategies and prioritizing the work, business portfolio management helps manage risk and provides cost-effective allocation of resources to the most deserving projects. Business portfolio management provides the means for the organization’s most important projects to be done first.