Portfolio Management
Organizations may pursue their objectives by combining three different initiatives: Projects, Programs, and Portfolios. Each of these initiatives plays a role within the value chain. Firstly, a project develops unique deliverables. Secondly, a program aggregates related projects, sub-programs, and supporting activities required to meet an outcome. Lastly, portfolios aggregate programs, projects, and sub-portfolios managed in a coordinated manner to meet strategic objectives. We will explore the meaning of portfolio and portfolio management in this post.
An Overview of Portfolios
A portfolio is a set of initiatives managed in a coordinated manner to optimize the organization’s strategic results. Moreover, the initiatives within the portfolio may or may not be related. A portfolio may include different initiative types, such as sub-portfolios, programs, projects, and supporting activities.
Project Management Courses
Understanding Portfolio Management
Organizations have many actual and potential initiatives. These initiatives will have their business justification, risks, and strategic alignment. They will also use the organization’s resources differently. For example, they may have different demands for people, funds, and risk tolerance. Moreover, each initiative contributes differently to the organization’s objectives. These objectives will also have various levels of strategic importance.
The organization should ensure that its staff and funds are used wisely. Therefore, the role of the portfolio manager focuses on maximizing the organization’s strategic targets within existing constraints. Hence, portfolio management enables the organization to identify, assess, categorize, prioritize, and authorize initiatives. Consequently, the organization can maximize its results within its constraints.
Firstly, portfolio managers should identify potential initiatives. Secondly, they should assess these initiatives. This assessment may consider, for example, the financial, physical, and human resources required to complete the initiative. It should also consider its benefits, risks, feasibility, and strategic justification. Moreover, it should consider how the initiative may impact the existing portfolio. Thirdly, portfolio managers may categorize these initiatives to manage them properly. They may also prioritize and order these initiatives considering the previous assessment. Fourthly, portfolio managers may authorize initiatives fully aware of their impact. Finally, they can change these initiatives to ensure strategic objectives are met. In summary, portfolio managers optimize the strategic results within constraints.
Exploring the Reasons to Operate Portfolio Management
There are solid reasons for the increasing demand for portfolio management competencies.
Firstly, portfolio management enables the organization to authorize the “right” initiatives. In other words, organizations can use their staff and funds wisely. In other words, the organization can focus on high-priority initiatives. Moreover, the portfolio manager allocated resources to the initiatives that are more likely to succeed.
Secondly, portfolio management can help to track progress toward the organization’s goals. More specifically, portfolio managers will have a better understanding of key performance indicators. The status of each initiative will also be more transparent. Consequently, portfolio managers will be able to have a positive influence over their progress. They may, for example, be able to prevent delays, contain costs, or mitigate risks. When applicable, they may also be able to ensure that the initiatives change to adapt to the existing environment.
Thirdly, portfolio management helps to manage resources better. More specifically, portfolio managers will be able to understand which initiatives are using which resources. They will also be able to determine when these resources will be used and when they will be available for other initiatives.