The Essential Basics of Portfolio Management

8 min read

In mature project management organizations, project management exists in a wider context that is governed by program and portfolio management. The organization’s strategies and priorities are interrelated and have links to portfolios and programs, as well as between programs and individual projects. Organizational planning influences projects by setting project priorities based on risk, funding, and the organization’s strategic plan. Organizational planning can direct funding and support to component projects based on risk categories, specific activities, or general types of projects, such as improving infrastructure or internal processes.

A portfolio is a set of projects or programs and other work, combined with the goal of effectively managing this work, to achieve strategic goals. Portfolio projects and programs are not necessarily interdependent or directly related. The strategic goal “to increase return on investment” can build a portfolio consisting of various projects in the gas and oil industry, energy industry, water supply, and projects for road, railway facilities, and airports. From this set of diverse projects, a company can select a series of related projects and incorporate them into one program. For example, all projects for the construction of energy infrastructure facilities can be classified into a program for the development of infrastructure in the energy sector. Similarly, all projects for the construction of water supply infrastructure you can group into a program for the development of a water supply infrastructure.

Project, Program, Portfolio

Projects, programs, and portfolios have different approaches:

Goals:

• Projects have clear goals.
• Programs have wider content and bring more significant benefits.
• Portfolios have business goals and content that changes with the organization’s strategic goals.

Changes:

• Project managers expect changes and implement processes to manage and control change.
• Program managers should expect changes from both inside and outside the program and be ready to manage them.
• Portfolio managers continuously manage change in a wider environment.

Planning:

• Project managers consistently refine high-level information to detailed plans throughout the project life cycle.
• Program managers develop an overall program plan and create high-level plans to manage detailed planning at the component level.
• Portfolio managers create and manage the necessary processes and communications related to the total portfolio.

Management:

• Project managers manage the project team to complete project tasks.
• Program managers manage program staff and project managers. They define the general direction of activity and play a leading role.
• Portfolio managers can manage or coordinate the work of the staff managing the portfolio.

Success:

• The Project is estimated by the quality of the product and the project, timeliness, compliance with the budget, and the degree of customer satisfaction.
• The Program is calculated by the degree to which the program meets the needs and benefits for which it was undertaken.
• The Portfolio is measured by the cumulative performance of the portfolio components.

Monitoring:

• Project managers monitor and control the production of products, the provision of services, or the achievement of the results for which the project was undertaken.
• Program managers monitor the implementation of program components to achieve common goals, meet the schedule, implement the budget, and benefit the program.
• Portfolio managers monitor aggregated performance, benefit, and value indicators.

Operational Approach vs. Portfolio Approach

The main reason for project failures is not the use of “how-to” methodologies, but the presence of only operational management within the project. The portfolio approach for these managers ends after drawing up a project estimate.

Project management levels:

1. The operational level is the level of operations lasting several hours (usually called “tasks”) and problems that arise as these tasks are completed. At this level, a lot of “small things” accumulate; there is no time to think here — you need to perform quickly.
2. The project level is the level of work lasting various days, blocks of work, and control points. At this level, you need to analyze and predict more, rather than launch the task to work. Here, you may also solve the difficulties; and carry out additional work with risks.
3. The portfolio level is the level of a portfolio manager who is less immersed in the project, and he/she is typically interested in passing control points and solving major issues and risks. We customize the work of the conveyor. We formulate tasks, transfer them to the pipeline, and he/she then independently distributes them among the released team members. The main principle: “Do normally — it is normal and will be.”
4. Manual control. This is the simplest, but also the most influential, approach compared to others. If the “leader” has given an order, then it is mandatory for execution, no matter what is in the plans and programs. All work is based on the instructions of the manager. No orders — no work. Image – indicate with your hand what you need to do.

Horizons of Thinking

Even if you use the most advanced systems for managing tasks and projects, then your brain, again, even when prompted by a computer, is not able to manage all the tasks contained in these systems. Therefore, a limited amount of information will fall into your field of vision.

Operational level: At this level, the manager usually has a list of tasks. Having closed one task, the manager transfers the next task to the released employee. For him/herself, the manager often identifies the primary tasks and again sends them to the pipeline on which the members of the project teamwork. So, the horizon of thinking — is a set of priority operations (“task”).

Portfolio level: The portfolio approach implies control of the entire project. However, in practice, for projects lasting about a year or more, it is not always advisable to keep the entire project insight. Therefore, in such situations, the “incident wave” method is used. Initially, one stage is taken into work; it is detailed in smaller works (lasting for 2-3 months). Then, you can do the work mainly on managing this stage. And then during the transition to the next stage, “the next wave comes,” and the process repeats.

However, the Portfolio approach is not limited to managing the current stage: from time to time, you need to look into the distant future — the following stages. So, the horizon of thinking is the project stage (the project as a whole is for small projects).

Portfolio management dashboard in PPM Express

Why Should Everyone Advance to Portfolio Management?

1. To connect project execution to strategy fulfillment. A formal and disciplined portfolio management infrastructure. One that aligns projects and programs to an organization’s strategic roadmap is the way to yield better results in achieving business goals and objectives.
2. To seek simplicity. The less complicated the approach to portfolio management, the more likely an organization can sustain its success. The adage, “simple is better” is appropriate when managing a portfolio. Organizations that excel in this area include the pieces of information they need, not everything available.
3. To create a portfolio-minded culture. When portfolio management becomes part of an organization’s DNA, senior leaders devote the time, education, and resources necessary to instill the practice into how everyone (from team members to executives) thinks, believes, and acts.
4. To develop strong capabilities. Successful organizations cultivate competencies around specific portfolio management practices and portfolio decision-making capabilities in their journey to greater maturity.

The Triple Constraint Made Easy

Basically, the Triple Constraint states that the success of the project is impacted by its budget, deadlines, and features. As a manager of that project, you can trade between these three constraints; however, changing the constraints of one means that the other two will suffer to some extent. It’s a model of the constraints inherent in managing a project. Those constraints are threefold:

Cost: the Financial Constraints of a Project, Also Known as the “Project Budget”

The financial commitment of the project is dependent on several variables. There are the resources involved, from materials to people, which include labor costs. There are other outside forces that can impact a project, which must be considered in the cost of the work.

Besides, there are several methods for estimating project cost:

• Historic Data: Using the costs of similar projects for comparison.
• Resource Costs: Determining the rate of cost for goods and labor by unit.
• Bottom-Up: Estimating from the lowest- to the highest-level work package.
• Parametric: Measure the statistical relationship between historical data and other variables.
• Vendor Bid: Average of some vendor bids on a project.
• Reserve: Aggregate cost of activities.
• Quality Analysis: Estimate the cost of the highest quality activities.

Cost management and budgeting module in PPM Express

Scope: the Tasks Required to Fulfill The Project’s Goals

Scope deals with the specific requirements or tasks necessary to complete the project. The scope is important to manage any project, whether agile software projects or well-planned waterfall projects because if you can’t control the scope of the project, you’re not likely to deliver it on time or under budget!

1. When managing scope, it’s critical that you prioritize your tasks, enabling you to plan and assign resources effectively.
2. Another key factor in managing and establishing scope is handling stakeholder expectations.

These scope management steps are all essential because the amount of time each task will require is critical to the quality of that final product. This can have a great impact on schedule and cost, especially so if the project is on a large scale.

Time: the Schedule for the Project to Reach Completion

At its basic level, the schedule is the estimated amount of time allotted to complete the project or produce the deliverable. Usually, this is figured out by first noting all the tasks necessary to move from the start to the finish of the project.

According to the Project Management Body of Knowledge (PMBOK), the schedule can be managed through a process of time management. Those steps are as follows:

1. Plan Schedule Management: Creating policies, procedures, and documentation for planning, executing, and monitoring the project schedule.
2. Define Activities: Identifying and documenting what actions must be done to produce the project deliverables.
3. Sequence Activities: Identifying and documenting the logical order of work to be the most efficient.
4. Estimate Activity Resources: What type and how many materials, people, equipment, supplies, etc. are needed to perform each activity.
5. Estimate Activity Durations: How long will it take to complete each activity with the resources estimated.
6. Develop Schedule: Analyze activity, duration, resources, and timeline to develop a schedule.
7. Control Schedule: Comparing the planned schedule to actual progress to determine if your project is on track.

Projects timelines section in PPM Express

While it’s true that the Triple Constraint is an important part of any successful project, it doesn’t determine success. Projects are made from many parts, more than the three, albeit major ones, that make up the Triple Constraint. Sometimes you can’t play around with the Triple Constraint, but those three factors are always at play in the project.

Why is the Triple Constraint Important?

Think of the Triple Constraint as the boundaries in which you can work. Just as restrictions enhance creativity, the Triple Constraint provides a framework that everyone in the project can agree on. These metrics drive the project forward while allowing for adjustments as needed when issues arise. Managing a portfolio is often a series of trade-offs and compromises to keep things moving towards successful completion. The Triple Constraint is a model that helps managers know what trade-offs are going to work and what impact they’ll have on other aspects of the portfolio and all the projects in it.

By using a project management dashboard, a manager can keep sight of the project as it progresses. Metrics such as the schedule, cost, and scope of the project are easy to track. With this information, a manager can identify issues and adjust the Triple Constraint to prevent those issues from developing into problems.

Why do You Need to Control Everything?

As the Chinese proverb says: “If you don’t know where you are going, then none of the winds will be yours!” Since the portfolio of projects is a limited activity, we must try to keep all projects within the specified framework. If this framework is not controlled, then most likely this project alone will not hold onto them. Control of operations must be carried out continuously. To do so, you should use an automation tool. Even if you’re already using a project management tool (or even a couple of those), it’s about time to grow and use a full-grown Portfolio Management Toolbox.

PPM Express is just the thing — it is light, easy to use, and helps an enterprise to operate on the Portfolio level. Before the introduction of PPM Express, executives spend a lot of time just checking that everything goes according to plan. Roughly speaking, 60% of the working time can go to checking if everyone is doing well, and there is no need to intervene. After the introduction of PPM Express, all this “manual intervention” is no longer necessary — it is done automatically. And you receive alerts for situations that require attention.

PPM Express is a SaaS platform that enables organizations with a full portfolio and project visibility by integrating all the needed project-related information across groups, portfolios, and systems. It is a lightweight portfolio management tool that suits the immediate needs of teams and business entities, starting with 20 people to the extent of large companies with hundreds to thousands of employees. It is also a convenient and very practical tool for managing exceptions.