Organizations across the globe plan, manage, and execute projects as a necessity for business enablement or as a service for third-party customers to realize revenue.
By Karthik Trichur Sundaram, B. Tech, MBA Pleasanton, CA, US, ([email protected])
Though the concept of project management has existed for many years, organizations are embarking and investing in Portfolio Management which is related to managing a portfolio for planning multiple projects and programs. Though a project is temporary, in that it has a defined beginning and end time and a defined scope and resources, Portfolio Management deals with identifying the work which will be executed as a project, funding, prioritizing, and tracking the work-progress related to the project. Portfolio Management can be integrated with organization objectives to promote a culture of innovation by combining it with the concept of idea management for promoting ideas that can be beneficial for the organization. Though large organizations already plan and manage their portfolio using different tools, systems, and documents, a structured portfolio management and planning approach with some key aspects can be incorporated to realize the benefits of portfolio and project management for any organization.
Portfolio Management is the selection, prioritization, and control of an organization’s programs and projects, in line with its strategic objectives and capacity to deliver the desired outcome. Most large corporations worldwide always plan and identify capital-intensive projects many months or years in advance. The identification and planning of project work much in advance with portfolio management ensures:
- Required funding before the project is started.
- Required critical resources are identified and planned.
- Identified project work can be prioritized.
- Required legal approval, as well as stakeholder approval, is in place.
- Hardware and software components can be planned.
- Issues and risks can be identified, and mitigation measures can be implemented.
- Identify innovative ideas and implement them.
Projects usually are planned and executed for either a new capital investment, upgrade of an existing product or capability, replacement, maintenance, or repair of critical assets. Apart from this, organizations are also promoting an idea or innovation culture, where any person or department within an organization can submit an idea, which can be evaluated as a possible project and included in a portfolio for execution as a project. To structure, plan, manage, track and report portfolios and project successfully, the following vital elements are a prerequisite for any organization.
To realize the benefits of Portfolio Management organization, the portfolio needs to be structured to distribute the projects based on an organizational, functional hierarchy or any other important factors like product line, research, and development areas. An example of this can be an electrical transmission for a utility company as one of the portfolio identifiers at the top, followed by many different sub-areas within the portfolio hierarchy like substation, transformer yard, etc.
Once the portfolio is structured correctly, the next step is to identify the possible tasks which can be executed as a project. These tasks can also be innovative ideas that can be implemented to realize a saving or address a health or safety hazard. Sometimes we can quantify or predict the approximate savings or return on investment with such ideas. Good ideas can be promoted and rewarded, and one can involve the idea owner to champion the cause, promoting a culture of transparency and innovation. The concept of incorporating idea management with portfolio management not only aids in innovation but also helps better foster a culture of inclusiveness amongst the resources within an organization. To leverage many ideas which can culminate into a possible project, a mechanism to review the arguments based on return on investment and other benefits like improvement in overall safety and health can be reviewed by a review board—based on recommendations from review board executives or sponsors can approve and fund the idea, to a project which can be executed to realize the benefits associated with the concept. Initially identified work or assignments at an inception level can be hierarchically arranged at a portfolio level. Based on feasibility, these initially identified works or ideas can be planned further with the following aspects in mind once the project is labeled as an executable project after relevant review and approval from stakeholders. The approximate cost of the project can be listed as an estimate at a high level; the estimate can further be refined by considering the high-level tasks, and a closer cost liability can be arrived at by including a planned value. Another advantage of planning is to arrive at a possible timeline for the execution of the project. Once the scheduled value is reached, the review board or stakeholder can approve the deal and specific conditions and reductions. From the compliance perspective, all the approvals can be automated for efficiency through a workflow, and approval records can be stored along with details, including date and time stamp, for future analysis and regulatory needs.
Once the planned value is arrived at, the review board or stakeholder can approve the value and can agree with certain conditions and reductions. In most large organizations, portfolio planning can be done five years or more in advance. Once there is approval for the portfolio list of tasks, the next step is to prioritize the most crucial work for immediate execution, possibly in the following year, and moving the less critical work to later years. Thus, final approval or funding of an executable work as a project is followed by the equally important task of prioritizing the essential and critical work. The importance of a task or project can be based on several factors, including the benefits realized, scoring based on different attributes like risk impact based assessment or safety, health, and environmental impact. The above planning snapshot shows an example planning and approval rating based on which the portfolio managers can prioritize some projects for execution ahead of others in a queue.
The advantage of using structured portfolio management by the organization not only helps with better identification and planning of work but also can be leveraged to identify the risk and issues associated with work. So instead of recognizing the risk and issues while executing the project, one can document and record all the possible dangers identified or from experience while managing similar projects in advance to ensure that risk is appropriately identified and mitigated with proper planning, even before the execution of the project starts. Portfolio financials and reporting portfolio managers who manage the portfolio have access to the financial performance of many projects within their portfolio and can balance the funding by allocating the funds for critical projects that need more funding from other projects that consume less of the budget. Also, such funds transfer from one project to another within a portfolio can be tracked manually or automatically in the system from a compliance perspective. Also, structured portfolio management provides a holistic view of multiple projects within a portfolio from a cost, schedule, and budget perspective. It allows one to compare planned and actual values for the entire portfolio as the project progresses.
Organizations of any size can benefit from adequately having a mechanism to manage their portfolio, which would help identify and plan the work and help the organization efficiently execute projects. Furthermore, all the compliance and regulatory requirements can be designed and adhered to efficiently without delay, thus adding to the cost savings. Also, identifying risks and issues in advance helps with planning to mitigate the risks and address issues with proper resolution mechanisms. The funds or budget allocated initially with approvals, and any modification can be tracked and stored in the system for records from a compliance reporting perspective. The critical resource needed for project execution can be planned based on schedule and vendor identification. Contract and negotiation can be initiated to ensure better planning when project execution starts.
- Hassan, M. K. and Ilyas, M. A. B. (2014). Innovation, portfolio management, and agility as a happy family. Paper presented at PMI® Global Congress 2014—North America, Phoenix, AZ. Newtown Square, PA: Project Management Institute.https://www.pmi.org/learning/library/innovation-portfolio-managementagility-happy-family-9357
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