The Standard for 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:

  • 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.
  • 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. 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 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.

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