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Blog posted by: Ian Clarkson – Practice Director, PPM, QA, 15 December 2022.

Portfolio management in organizations is more important than ever as change becomes ubiquitous – and not just for large enterprises.

Whether it’s technology-driven or not, the pace of change is not slowing. So, every business needs to “get its ducks in a row” and have a clear strategy for how change will deliver the most benefit.

Coming out of Covid-19, the “hopper” of change initiatives is filling up again in many organizations and they need to decide what happens and when, but also what shouldn’t. Indeed, how many changes get done in your organization that shouldn’t have ever been started?

However, portfolio management – and best practice approaches such as Management of Portfolios (MoP) – are not well-established in organizations and are even less integrated with project and programme management.

Why portfolios?

A portfolio is the totality of change for an enterprise, and this needs proper criteria for deciding what the right type of change means, i.e. which projects/programmes to do and which to stop. Essentially, in a world of finite resources organizations can’t do all the changes that are desirable, and so trade-offs are needed, i.e. “Why should I invest in Project A over Project B?”

However, what I often see is organizations that are good at running projects and programmes but less mature in deciding on the “right” things to progress. Indeed, a bottom-up approach to decision making can happen because, for example, senior managers have “pet projects” or something seems like a good idea. In our world of finite resources, optimism bias can (and often does) come into play also: project proposers overestimate the benefits of a project and underestimate the costs. For another soundbite, portfolios are a “funnel not a tunnel”, and so optimism bias makes a project look more desirable to get into the “funnel”.

This needs to be flipped around based on what the collective requirement is and what’s necessary. In portfolio management, there should be multi-criteria for deciding what gets into the portfolio (into the “funnel”) and the organization should be clear as to what those criteria are. And then, a change initiative is only a candidate; that doesn’t guarantee it will happen – it still needs prioritizing and planning.

The risks of choosing the wrong type of change

Portfolio management is benefits realization at the corporate level.

Without this, you can end up with things happening which lack a strong link to the organization’s strategic objectives. You run projects that should never have seen the light of day and don’t deliver benefits. Equally problematic, your resources can’t be allocated to more worthy projects, which results in the “double-whammy” of delivering “stuff” nobody wants at the expense of something else with greater benefit.

The value of best practice approaches – MoP

Before any change initiative becomes a candidate, there should be greater scrutiny of the business case to know whether the project/programme is viable and achievable.

Best practice portfolio management helps to free up resources (avoiding capacity bottlenecks) and stop change initiatives that are no longer viable; providing ongoing assurance and making holistic decisions across all change initiatives rather than based on just one project or programme.

MoP, as defined in the guidance’s foreword, offers “improved prioritization of our investment in change” and “ensuring successful delivery and realizing the full benefits…” MoP is about “doing the right things’’ while PRINCE2 and Managing Successful Programmes (MSP) are about “doing things right”.

Along with being simple to understand, the guidance is very practical, with many techniques practitioners can use immediately and examples, in the form of case studies, from different organizations and industries.

The portfolio definition cycle in MoP is really where the practical approaches come in – including explanations for how to do ROI calculations and other approaches to tailor portfolio management to your own organization.

There is also a big emphasis on organizational energy: “the extent to which an organization (division or team) has mobilized its emotional, cognitive and behavioural potential to pursue its goals” – which means having the drive to keep things going, creating a more permanent state for the portfolio structure and improving it.

Who is MoP for?

The people who get most value from MoP are usually working at a senior level and want to know more about the principles of portfolio management. This could include portfolio directors, plus other directors and heads of department or division. This is important, as the energy of portfolio management needs to permeate down through the organization.

However, MoP can be for project/programme managers also. This can support career progression because, in my view, running portfolios can benefit from individuals having previous experience of running projects and programmes, enabling them to make effective and efficient decisions based on an understanding of them.

MoP helps organizations deploy change to the best effect and to really understand how it will meet their overall, strategic direction.