- The Standard for Portfolio Management describes a suite of best practices for portfolio management with respect to projects, programs, and organizational strategy.
- The Standard for Portfolio Management defines vocabulary that portfolio managers can use in their professional careers. SfPfM uses a combination of well-established and process-specific terms.
- The Standard for Portfolio Management is predominantly focused on helping businesses attain goals and objectives. This can be facilitated by considering six key areas that detail resource allocation, alignment, and risk management.
| Aspect | Explanation |
|---|---|
| Definition | The “Standard for Portfolio Management” is a set of guidelines and best practices developed by professional organizations, such as the Project Management Institute (PMI), to facilitate effective portfolio management within organizations. It provides a structured framework for selecting, prioritizing, and managing a portfolio of projects and programs to align with an organization’s strategic goals and objectives. This standard outlines principles, processes, and techniques to optimize resource allocation, monitor performance, and ensure that investments deliver value and contribute to overall success. |
| Key Concepts | – Portfolio Management: The practice of overseeing and controlling a collection of projects and programs to achieve strategic objectives. – Alignment: Ensuring that the portfolio aligns with the organization’s strategic goals. – Prioritization: The process of selecting and ranking projects based on their potential impact and contribution to strategic objectives. – Resource Optimization: Balancing resource allocation across projects and programs for optimal utilization. – Performance Monitoring: Continuously monitoring project and program performance to make informed decisions. – Value Delivery: Ensuring that projects and programs deliver value to the organization. |
| Characteristics | – Strategic Focus: Portfolio management is driven by the organization’s strategic direction and objectives. – Continuous Evaluation: Ongoing assessment and adjustments are made to the portfolio as conditions change. – Resource Allocation: Effective allocation and reallocation of resources based on portfolio priorities. – Risk Management: Addressing risks and uncertainties associated with projects and programs. – Value Maximization: Maximizing the value generated from the portfolio investments. – Alignment with Strategy: Ensuring that every project contributes to the strategic goals. |
| Implications | – Strategic Execution: Effective portfolio management ensures that the organization executes its strategy through the right projects and programs. – Resource Efficiency: Optimizing resource allocation leads to better resource utilization and cost control. – Risk Mitigation: Identifying and mitigating risks at the portfolio level reduces potential disruptions. – Value Realization: Ensuring that the organization derives value from its investments by selecting and managing projects effectively. – Competitive Advantage: Portfolio management can give an organization a competitive edge by aligning its efforts with its strategic objectives. |
| Advantages | – Strategic Alignment: Ensures that the portfolio of projects and programs supports the organization’s strategic objectives. – Resource Optimization: Balances resource allocation to maximize efficiency and minimize waste. – Risk Management: Identifies and addresses risks at the portfolio level, reducing potential disruptions. – Value Delivery: Ensures that projects and programs contribute to the organization’s value creation. – Performance Monitoring: Continuously assesses performance to make informed decisions and adjustments. |
| Drawbacks | – Complexity: Implementing portfolio management can be complex, requiring significant organizational change. – Resource Constraints: Limited resources may challenge the allocation and execution of projects. – Resistance to Change: Stakeholders may resist changes to existing project selection and management processes. – Initial Investment: Establishing portfolio management processes and tools may require an initial investment. – Data Quality: Relies on accurate and timely data for effective decision-making. |
| Applications | – Business: Used in business environments to manage a portfolio of projects, product development, and initiatives. – Government: Applied in government organizations to align projects and programs with public policies and objectives. – Nonprofits: Used by nonprofit organizations to optimize resource allocation and achieve their missions. – Healthcare: Applied in healthcare to prioritize and manage projects and programs that improve patient care and services. – IT: Used in IT departments to select and manage a portfolio of technology projects and initiatives. |
| Use Cases | – Project Selection: Prioritizing and selecting projects that align with the organization’s strategic goals. – Resource Allocation: Allocating resources efficiently across projects and programs. – Risk Management: Identifying and addressing risks that could impact the portfolio’s success. – Value Measurement: Measuring and quantifying the value delivered by the portfolio investments. – Performance Monitoring: Continuously assessing the performance of projects and programs. |
| Future Trends | – Data Analytics: Increasing use of data analytics and artificial intelligence for portfolio optimization and decision-making. – Agile Portfolio Management: Adoption of agile practices in portfolio management to enhance flexibility and responsiveness. – Digital Transformation: Integration of digital tools and platforms for portfolio management processes. – Sustainability Focus: Greater emphasis on integrating sustainability and environmental factors into portfolio decision-making. – Economic Uncertainty: Strategies to adapt portfolios to economic uncertainties and disruptions. |
| Standard/Framework for Portfolio Management | Description | Key Insights |
|---|---|---|
| Project Management Institute (PMI) Standard for Portfolio Management | Developed by PMI, it provides guidance and best practices for portfolio management | Emphasizes aligning portfolio decisions with organizational strategy and objectives. |
| The Standard for Portfolio Management by The Portfolio Management Institute (PfMI) | Published by PfMI, it offers a comprehensive framework for portfolio management | Focuses on governance, optimization, and strategic alignment of portfolios. |
| The Portfolio, Programme, and Project Management Maturity Model (P3M3) | An assessment framework that evaluates an organization’s maturity in portfolio management | Helps organizations identify areas for improvement and enhance portfolio management capabilities. |
| PRINCE2 (Projects IN Controlled Environments) | A process-driven project management methodology that includes portfolio management | Integrates portfolio management as part of its project and program management approach. |
| The Open Group Architecture Framework (TOGAF) | An enterprise architecture methodology that includes portfolio management aspects | Ensures alignment of IT portfolios with business objectives and architectural standards. |
| ISO 21504:2015 (Guidance on Portfolio Management) | An international standard offering guidance on portfolio management practices | Provides a globally recognized framework for effective portfolio management. |
| A Guide to the Project Management Body of Knowledge (PMBOK Guide) | Developed by PMI, it covers portfolio management within its project management framework | Addresses portfolio management processes, governance, and alignment with strategic objectives. |
| Agile Portfolio Management Frameworks (e.g., SAFe, Disciplined Agile) | Frameworks that adapt agile principles to portfolio management | Support agile organizations in managing portfolios with flexibility and responsiveness. |
| COBIT (Control Objectives for Information and Related Technologies) | A framework for governance and management of enterprise IT, including portfolio management | Ensures IT portfolios align with business goals, risks are managed, and resources are optimized. |
| Benefits Realization Management (BRM) Framework | Focuses on tracking and realizing expected benefits from portfolios | Enhances accountability for delivering value and benefits. |
| ITIL (Information Technology Infrastructure Library) | A set of practices for IT service management that includes portfolio management | Ensures IT services and projects align with business needs and objectives. |
| The Agile Practice Guide | Published by PMI and the Agile Alliance, it addresses portfolio management in agile environments | Promotes flexibility, adaptability, and value delivery in agile portfolio management. |
| Organizational Project Management (OPM) | An approach that integrates portfolio, program, and project management | Aligns all levels of organizational work with strategic objectives. |
| Strategic Portfolio Management (SPM) | An approach that focuses on aligning portfolios with an organization’s strategic goals | Prioritizes projects and initiatives that contribute most to strategic objectives. |
| IT Portfolio Management (ITPM) | A specialized approach for managing IT portfolios | Ensures that IT investments support the organization’s IT strategy and objectives. |
| Lean Portfolio Management (LPM) | Part of the SAFe framework, it applies lean and agile principles to portfolio management | Maximizes the flow of value, minimizes delays, and fosters collaboration in portfolio management. |
The Standard for Portfolio Management (SfPfM) describes a suite of portfolio management processes concerning programs, projects, and organizational strategy. The Standard for Portfolio Management is a creation of the Project Management Institute (PMI).
Understanding The Standard for Portfolio Management
In compiling a list of portfolio management processes, the PMI ensured that each approach satisfied two criteria:
Must be “generally recognized”
They must be “generally recognized” in the sense that knowledge and practices apply to most portfolios most of the time.
There must also be relatively widespread agreement regarding their value and usefulness.
Must be “good practice”
They must be “good practice”, with general agreement that the combination of tools, skills, and techniques can contribute to the success of many different portfolios.
Here, good practice does not mean that knowledge or methods are applied uniformly.
Must share a common vocabulary
There is still a requirement that portfolio managers identify what is most appropriate to their needs.
The Standard for Portfolio Management also details a common vocabulary that professionals can use when discussing or applying aspects of portfolio management.
The Standard for Portfolio Management definitions
Here are some of the core definitions of SfPfM:
Portfolio
A collection of programs and projects grouped to facilitate the completion of work in meeting strategic goals and objectives.
Projects and programs do not need to be related or interdependent.
Portfolio management
The coordinated and continuous management of one or more portfolios using interrelated processes that support decision making.
The business must consistently evaluate, prioritize, and allocate resources to ensure that portfolios meet strategic goals.
Aligning Process Group
A group of individuals that determine how portfolio components will be categorized, evaluated, and managed for potential inclusion in a portfolio.
Monitoring and Controlling Process Group
Who periodically review portfolio KPIs to determine whether they are contributing to company success.
Portfolio management and organizational strategy
The PMI note that the ultimate goal of SfPfM is to link it with organizational strategy to establish a business plan that is both balanced and executable.
Businesses can develop this plan by addressing six different areas:
Maintaining portfolio alignment
While each portfolio should be aligned to strategic objectives, this alignment cannot occur if the business does not understand what its objectives are.
Each new or pre-existing portfolio component must support the fulfillment of company strategy.
Allocating financial resources
Resource allocation is tied to the prioritization of portfolio components.
Allocating human resources
High-priority portfolio components receive funding for resource planning, recruitment, scheduling, and the training or upskilling of talent long-term.
Allocating material or equipment resources
Each component must be allocated information, equipment, or space.
This includes capital investment to ensure that the needs of each component are met at the organizational level – including needs related to constraints.
Measuring portfolio component performance
Portfolio performance must only be measured in the context of whether the portfolio helped achieved a strategic goal.
Managing risk
Each component should be routinely evaluated for internal and external risks that might prevent strategic goals from being achieved.
Key takeaways
- The Standard for Portfolio Management (SfPfM): The Standard for Portfolio Management is a set of best practices created by the Project Management Institute (PMI) that outlines portfolio management processes related to programs, projects, and organizational strategy.
- Criteria for Portfolio Management Processes: The PMI established two criteria for including portfolio management processes in the standard:
- Processes must be “generally recognized,” meaning they apply to most portfolios most of the time and have widespread agreement on their value.
- Processes must be “good practice,” indicating that a combination of tools, skills, and techniques can contribute to the success of various portfolios.
- Common Vocabulary: The SfPfM provides a common vocabulary that professionals can use to discuss and apply portfolio management concepts.
- Core Definitions in SfPfM:
- Portfolio: A collection of programs and projects grouped to achieve strategic goals and objectives. Components need not be related or interdependent.
- Portfolio Management: Coordinated and continuous management of one or more portfolios through interrelated processes to support decision-making.
- Aligning Process Group: A group that categorizes, evaluates, and manages portfolio components for potential inclusion.
- Monitoring and Controlling Process Group: Periodically reviews portfolio Key Performance Indicators (KPIs) to determine their contribution to company success.
- Linking Portfolio Management and Organizational Strategy: The ultimate goal of SfPfM is to link portfolio management with organizational strategy to establish a balanced and executable business plan.
- Six Areas for Business Plan Development:
- Maintaining Portfolio Alignment: Ensure each portfolio component supports fulfilling company strategy.
- Allocating Financial Resources: Allocate resources based on component prioritization.
- Allocating Human Resources: Prioritize high-priority components for resource planning, recruitment, and training.
- Allocating Material or Equipment Resources: Allocate resources including capital investment to meet component needs.
- Measuring Portfolio Component Performance: Measure portfolio performance in the context of achieving strategic goals.
- Managing Risk: Evaluate each component for internal and external risks that could impact strategic goal achievement.
- Key Takeaways: The Standard for Portfolio Management provides best practices for portfolio management processes, offering a common vocabulary for professionals. It aims to help businesses achieve their goals and objectives by considering resource allocation, alignment, and risk management across six key areas.
What are the premises of portfolio management?
Some of the premises are:
What the definitions of portfolio management?
Some core definitions comprise:
How do you align portfolio management and organizational strategy?
You can align portfolio management and organizational strategy by:
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