Basic project portfolio management in any enterprise requires a Portfolio Manager to prioritise projects or project-related activities against each other. The process is aimed at determining a sensible order of work with the aim of portfolio optimisation. Portfolio optimisation, in this sense, can simply be defined as an enterprise-wide project portfolio with strategic alignment to enterprise aspirations, optimal return for investment and a suitable level of risk and resource demand.
Successful portfolio management is an area of continuing debate with various proponents, each presenting their own slant on essentially the same fundamentals. However, much of the debate centres around which portfolio management tools or, in many cases, which portfolio software provides the best outcomes for an enterprise.
There seems little debate about the benefits of portfolio management and prioritisation itself. Prioritisation of projects with the aim of portfolio optimisation is beneficial for any organisation, regardless of size or nature of business. Regardless of the portfolio management process or software chosen, the basics of project portfolio prioritisation remain essentially the same.
What is Portfolio Management Prioritisation?
Project portfolio prioritisation is essentially about comparing potential projects on aspects such as risk, return, investment, strategic alignment and resourcing requirements to ensure that the portfolio of projects is tuned optimally to deliver enterprise-wide strategy and the best return for capital investment.
The prioritisation process usually involves both quantitative and qualitative assessments. The key however, is that the factors used for assessment and ranking must be important to the organisation concerned.
Simple Steps of Portfolio Prioritisation
The process can essentially be reduced to a small number of basic steps. How these steps are executed, whether manually or with portfolio management software, is to an extent irrelevant. Additionally, the complexity applied to each of these steps such as the number of factors considered is also irrelevant to an extent.
Instead, what is presented below is the basic steps of project portfolio prioritisation:
- Identify and quantify the costs associated with each piece of work or project to be prioritised
- Quantify the project benefits to be realised by each piece of work to be prioritised
- Identify and quantify where possible any risks associated with each project. These risks may be operational (post project implementation), technology-related or may even involve an assessment of reputational and brand-related risks should something go wrong with project delivery
- Ascertain the enterprise strategy the project delivers to
- The Portfolio Manager, in consultation with the wider enterprise, should then assign appropriate weightings to each of the quantitative assessments above
- For each project, each quantitative factor can be multiplied by its relevant weighting to receive a ranking score
The portfolio manager now has a ranked list of potential projects from which to select their project portfolio for potential delivery. At this point, considerations such as available resourcing may need to be considered. It's no good having a collection of optimal projects in a portfolio for which resourcing demand far exceeds supply. Additionally, there is little point having a project portfolio, for which the capital investment required exceeds that which is available. These factors should be considered at this point as a means of narrowing down potential projects for delivery.
An element of common sense must also be applied and this is where an effective Portfolio Manager will add value to project portfolio prioritization, and indeed any portfolio optimisation activity. For example if an organisation must complete a compliance related project to stay in business then it simply has to rank towards the top of the prioritised project list.
What are the Benefits of Effective Portfolio Prioritisation?
Undoubtedly, a disciplined approach to project portfolio prioritisation takes an investment of both time and money. However, the benefits it can deliver provide more than adequate return on these investments. In brief, some of the benefits include:
- A portfolio of projects that stand to better deliver an enterprise strategy
- A greater return on project capital investment
- An improved rate of successful project delivery
- Improved resource management, ultimately delivering savings in resource costs per units delivered
Can Project Management or Portfolio Management Software Help?
The short answer is yes. But portfolio management software can only add value if a manager understands the basics, as outlined here. The software can only stand to optimise a project portfolio if the information it sources is accurate and tempered with some enterprise-based realism.
Portfolio management software and indeed project management software can be of benefit to any enterprise if the Portfolio Manager using the tool has a firm grasp of portfolio management basics.
Portfolio Optimisation - Further Considerations
Project portfolio prioritisation is just the first step to successful enterprise portfolio optimisation. Furthermore, the above gives only a basic framework for carrying out this work; a framework to which can be added many complexities and considerations. However, any successful portfolio management and optimisation has to start with the fundamentals.
Ashley Wright - Ashley defines himself as a father, husband and writer, all roles that he cherishes. After spending a number of years in the workforce, in ...
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