1. Introduction toIntroduction to
Project PortfolioProject Portfolio
ManagementManagement
Andrew P. Valenti,Andrew P. Valenti,
Valenti PartnersValenti Partners

2. What is a Portfolio?What is a Portfolio?
Terms and DefinitionsTerms and Definitions
 AA portfolioportfolio consists ofconsists of
projects or programsprojects or programs
and other work groupedand other work grouped
together to facilitate thetogether to facilitate the
accomplishment ofaccomplishment of
business objectivesbusiness objectives
 It consists of currentIt consists of current
components andcomponents and
planned/future work.planned/future work.
 A portfolio, unlike aA portfolio, unlike a
project/program, isproject/program, is notnot
temporarytemporary

3. What is a Portfolio?What is a Portfolio?
Key PointKey Point
 AA portfolioportfolio is ais a
snapshot of itssnapshot of its
components,components,
reflecting thereflecting the
strategic goals ofstrategic goals of
the organizationthe organization

4. What is a Portfolio?What is a Portfolio?
Portfolio managementPortfolio management
includes processesincludes processes
for:for:
 IdentifyingIdentifying
organizationalorganizational
prioritiespriorities
 Making investmentMaking investment
decisionsdecisions
 Allocating resourcesAllocating resources

5. Relationships Among Portfolio, Programs, &Relationships Among Portfolio, Programs, &
ProjectsProjects
Portfolio
Portfolios Projects Programs
Programs Projects
Projects
Programs
Projects
Other WorkProjects
Projects
Figure 1.1

6. All portfolio components:All portfolio components:
 Represent investmentsRepresent investments
made or plannedmade or planned
 Are aligned with org’sAre aligned with org’s
strategic goalsstrategic goals
 Have distinguishingHave distinguishing
features for groupingfeatures for grouping
 Can be measured, ranked,Can be measured, ranked,
prioritized (i.e.prioritized (i.e.
quantifiable)quantifiable)
Relationships Among Portfolio, Programs, &Relationships Among Portfolio, Programs, &
ProjectsProjects

7. Portfolio, Programs, & ProjectsPortfolio, Programs, & Projects
Key ConceptKey Concept
 Portfolio management ensuresPortfolio management ensures
interrelationships between programs &interrelationships between programs &
projects are identified and resources areprojects are identified and resources are
allocated according to org prioritiesallocated according to org priorities
 Programs focus on achieving benefitsPrograms focus on achieving benefits
expected from the portfolio as per strategicexpected from the portfolio as per strategic
org objectivesorg objectives
 Projects concerned with specificProjects concerned with specific
deliverables/org objectivesdeliverables/org objectives

8. What is Portfolio Management?What is Portfolio Management?
Portfolio Management is:Portfolio Management is:
 The management of components toThe management of components to
achieve organizational objectivesachieve organizational objectives
 Using its tools to identify, select,Using its tools to identify, select,
prioritize, govern, monitor, & report aprioritize, govern, monitor, & report a
component’s contribution to, andcomponent’s contribution to, and
alignment with org objectivesalignment with org objectives
 Not concernedNot concerned with managing thewith managing the
componentscomponents

9. What is Portfolio Management?What is Portfolio Management?
““Doing the right work, not doing the workDoing the right work, not doing the work
right.”right.”

10. Portfolio Management andPortfolio Management and
GovernanceGovernance
GovernanceGovernance
 Guides theGuides the
execution ofexecution of
organizationalorganizational
activitiesactivities
 MaximizesMaximizes
delivery ofdelivery of
valuevalue
 Minimizes riskMinimizes risk

11. Portfolio Management andPortfolio Management and
GovernanceGovernance
Organizational GovernanceOrganizational Governance is theis the
process that:process that:
 Directs and controls operations andDirects and controls operations and
strategic activitiesstrategic activities
 Responds to the rights,Responds to the rights,
expectations and desires ofexpectations and desires of
stakeholdersstakeholders

12. Portfolio Management andPortfolio Management and
GovernanceGovernance
Project Portfolio GovernanceProject Portfolio Governance is theis the
set of processes by which:set of processes by which:
 An organization prioritizes, selects,An organization prioritizes, selects,
and allocates resources toand allocates resources to
accomplish its activitiesaccomplish its activities

13. Management by Projects
Organizational Governance
Portfolio Management and GovernancePortfolio Management and Governance
Strategic Planning
Portfolio
Management
Program
Management
Project
Management
Process
Tools Metrics
Management of
Operations
Relationships among Organizational Governance, Operations, and Portfolio Management
Figure 1.2

14. Portfolio Management and OrganizationalPortfolio Management and Organizational
StrategyStrategy
Organizational StrategyOrganizational Strategy
 Capitalizes onCapitalizes on
opportunitiesopportunities
 Minimizes the impact ofMinimizes the impact of
threatsthreats
 Responds to marketResponds to market
changeschanges
 Reinforces focus onReinforces focus on
critical ops activitiescritical ops activities

15. Portfolio Management and OrganizationalPortfolio Management and Organizational
StrategyStrategy
Organizational StrategyOrganizational Strategy
 Is the result of theIs the result of the
strategic planning cyclestrategic planning cycle
 Translates vision andTranslates vision and
mission into strategicmission into strategic
planplan
 Consists of initiativesConsists of initiatives
influenced by marketinfluenced by market
dynamics, customers,dynamics, customers,
shareholders,shareholders,
regulations, competitorsregulations, competitors

16. Relationship between Strategic and OperationalRelationship between Strategic and Operational
ProcessesProcesses
Vision
Mission
Organizational Strategy and
Objectives
High-Level Operations
Planning and
Management
Project Portfolio
Planning and
Management
Management of On-Going
Operations
(recurring activities)
(producing value)
Management of
Authorized Programs and Projects
(projectized activities)
(increasing value production capacity)
Organizational Resources
Sets Performance
Targets
Establishes
Initiatives
Executes
Activities
Figure 1.3

17. Portfolio Management and OrganizationalPortfolio Management and Organizational
StrategyStrategy
Impact of portfolio plan onImpact of portfolio plan on
strategy is achieved by:strategy is achieved by:
1.1. Maintaining portfolioMaintaining portfolio
alignmentalignment
2.2. Allocating financial resourcesAllocating financial resources
3.3. Allocating human resourcesAllocating human resources
4.4. Measuring componentMeasuring component
contributionscontributions
5.5. Strategic risk managementStrategic risk management

18. Figure 1.4

19. Portfolio and OperationsPortfolio and Operations
Management LinkManagement Link
 Functional groups can beFunctional groups can be
stakeholders in the portfolio orstakeholders in the portfolio or
sponsors of componentssponsors of components
 ““Operations” includes: production,Operations” includes: production,
manufacturing, finance, marketing,manufacturing, finance, marketing,
IT, HR, etc.IT, HR, etc.
 Processes/deliverables used by opsProcesses/deliverables used by ops
management are outputs of themanagement are outputs of the
portfolio componentsportfolio components

20. Operational ProjectsOperational Projects
Ops Projects (ref figure 1.3):Ops Projects (ref figure 1.3):
 Are groups of operational, recurringAre groups of operational, recurring
activities managed as projectsactivities managed as projects
 Form a portfolio in “high-level operationsForm a portfolio in “high-level operations
planning and management”,planning and management”,
encompassing the work in “managementencompassing the work in “management
of ongoing operations”of ongoing operations”
 Are linked to the organizational strategyAre linked to the organizational strategy
by the portfolioby the portfolio

21. Building a Comprehensive Project PortfolioBuilding a Comprehensive Project Portfolio
Organizational Strategy & ObjectivesOrganizational Strategy & Objectives
(communicated through a strategic plan)
Project PortfolioProject Portfolio
(consisting of prioritized strategic and operational programs and projects)
InitiativesInitiatives
(defined to accomplish strategic and operational objectives)
Operations PlanningOperations Planning
(continuing to run the business)
Strategic PlanningStrategic Planning
(responding to environmental changes)
Organizational ResourcesOrganizational Resources

22. Operational StakeholdersOperational Stakeholders
Typical StakeholdersTypical Stakeholders
 FinanceFinance
 MarketingMarketing
 Human ResourcesHuman Resources
 InformationInformation
TechnologyTechnologyFrom Wikipedia:
A corporate stakeholder is a party that can
affect or be affected by the actions of the
business as a whole. The stakeholder
concept was first used in a 1963 internal
memorandum at the Stanford Research
institute. It defined stakeholders as "those
groups without whose support the
organization would cease to exist”

23. Role of the Portfolio ManagerRole of the Portfolio Manager
 Establishes/maintains a framework,Establishes/maintains a framework,
methodology for portfolio management inmethodology for portfolio management in
the orgthe org
 Establishes/maintains relevant processesEstablishes/maintains relevant processes
 Guides selection, prioritization, balancingGuides selection, prioritization, balancing
of the portfolio and component alignmentof the portfolio and component alignment
with strategic goalswith strategic goals
 Establishes/maintains relevantEstablishes/maintains relevant
infrastructure and systemsinfrastructure and systems
 Ensures ongoing compliance with evolvingEnsures ongoing compliance with evolving
organizational goalsorganizational goals

24. Role of the Portfolio Manager, cont.Role of the Portfolio Manager, cont.
 Provides stakeholders with timelyProvides stakeholders with timely
assessments of component selection,assessments of component selection,
prioritization, performance and earlyprioritization, performance and early
identification of risks and issuesidentification of risks and issues
 Measures and monitors value to the orgMeasures and monitors value to the org
via KPIsvia KPIs
 Communicates portfolio componentCommunicates portfolio component
progress, changes, etc.progress, changes, etc.
 Participates in program/project reviewsParticipates in program/project reviews
 Adhering to ethical standardsAdhering to ethical standards

25. Portfolio Manager SkillsPortfolio Manager Skills
 Strategic AlignmentStrategic Alignment
• Participates in corporate strategy developmentParticipates in corporate strategy development
• Monitors execution of initiatives in support ofMonitors execution of initiatives in support of
strategystrategy
 Portfolio Management MethodsPortfolio Management Methods
• Project selection methodsProject selection methods
• Decision support tools, e.g ROI, IRR,Decision support tools, e.g ROI, IRR,
simulation techniques, etc.simulation techniques, etc.
• Prioritization algorithmsPrioritization algorithms
• Capability/capacity modeling toolsCapability/capacity modeling tools
• Project/program auditing techniquesProject/program auditing techniques
• Organizational & Portfolio risk managementOrganizational & Portfolio risk management

26. Portfolio Manager Skills, cont.Portfolio Manager Skills, cont.
 Program and Project ManagementProgram and Project Management
MethodsMethods
 Process Development & ContinuousProcess Development & Continuous
Improvement, e.g Six Sigma, TQM, CQIImprovement, e.g Six Sigma, TQM, CQI
 General business skillsGeneral business skills
• Understand key financial principlesUnderstand key financial principles
• Use KPIs in portfolio performanceUse KPIs in portfolio performance
measurementmeasurement
• Analyze financial info and trendsAnalyze financial info and trends
• Analyze business cases for portfolio selectionAnalyze business cases for portfolio selection

27. Portfolio Manager Skills, cont.Portfolio Manager Skills, cont.
 Stakeholder managementStakeholder management
 General management skillsGeneral management skills
• Goal settingGoal setting
• Performance managementPerformance management
• RecruitmentRecruitment
• Employee development, mentoring,Employee development, mentoring,
coaching, trainingcoaching, training
 Risk and opportunity managementRisk and opportunity management

28. Portfolio Management and MetricsPortfolio Management and Metrics
Portfolio ReportingPortfolio Reporting
 Strives to understand portfolio content andStrives to understand portfolio content and
measure component performancemeasure component performance
 Facilitates effective communicationFacilitates effective communication
between portfolio sponsor andbetween portfolio sponsor and
stakeholdersstakeholders
 Primary purpose to supply sponsors withPrimary purpose to supply sponsors with
performance metricsperformance metrics
 Should also provide managers with statusShould also provide managers with status
of their components in the context of otherof their components in the context of other
portfolio components, to optimize resourceportfolio components, to optimize resource
utilizationutilization

29. Portfolio Reporting and the PMOPortfolio Reporting and the PMO
The PMO may report effectiveness ofThe PMO may report effectiveness of
components via dashboards, e.g.components via dashboards, e.g.
 Portfolio Overall HealthPortfolio Overall Health
 Strategic Goal AchievementStrategic Goal Achievement
 Organization Risk ProfileOrganization Risk Profile
 Resource capabilityResource capability
 Financial informationFinancial information

30. Portfolio Management MetricsPortfolio Management Metrics
Quantitative measuresQuantitative measures
 Increase in revenueIncrease in revenue
 Development of new marketsDevelopment of new markets
 Cost reductionsCost reductions
 Change in NPV of the portfolioChange in NPV of the portfolio
 ROI from the portfolioROI from the portfolio
 IRR of the portfolioIRR of the portfolio
 Risk reduction degreeRisk reduction degree
 Resource AvailabilityResource Availability
 Change in quality improvementChange in quality improvement
scoresscores
Qualitative benefits include degree of strategic
alignment and recognition of legal and regulatory
compliance

31. ReferencesReferences
1. The Standard for Portfolio Management, Second
Edition,, Project Management Institute, ISBN
978-1-933890-53-1
2. Wikipedia