You know what I need in my life? More processes.
Errrrr, said no one ever.
Processes. They have a bad rap. A bureaucratic tool for micro-managing. Layers of red tape stopping the good stuff from actually getting done.
But — sometimes at least — processes can be powerful. We think they deserve a second chance.
In this article, we’re going to show you the key processes for managing your portfolio, explain why they’re important, and help you avoid some common pitfalls.
So, what is portfolio management?
The Project Management Institute (PMI) defines portfolio management as: “the continuous process of selecting and managing the optimum set of project-oriented initiatives that deliver the maximum in business value or return on investment”.
It’s a mouthful, we know.
Essentially, it’s all about managing what’s in and what’s out of your project portfolio, and how you make those decisions. It focuses on ‘doing the right things’ rather than ‘doing things right.’
Portfolio management processes provide a forum for stakeholders to agree on a portfolio of projects that align with the strategic goals of the organization, to make decisions on any competing priorities, and ensure the workload requirements match the resource capacity.
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The 4 elements of successful portfolio management
Successful portfolio management is made up of 4 separate phases.
Let’s look at each portfolio management process in more detail.
Inventory
The inventory stage is an opportunity for the business to take stock of the current projects in its portfolio.
Most businesses have a process to assess the feasibility of a potential project when proposals are brought for approval. The problem is that things change over time. A change in business goals or strategy means that projects that used to be relevant no longer are.
Also, resource capacity analysis is often focused only on individual projects, so it can seem like there is scope to add work. Without fully understanding how a resource is managed across the whole portfolio, it can be easy to reach capacity.
What happens during the inventory stage?
The key activity during this stage is to capture relevant project and organizational data to inform the analysis process that comes afterward. It’s also important to agree on how projects will be prioritized within the portfolio.
To gather this information, it’s important to work closely with stakeholders to get their opinion on both the financial and non-financial benefits associated with the project.
Stakeholders should include senior management and other business representation, the portfolio manager, individual project and program managers, and the project management office (PMO) if there is one.
It’s not enough to rate projects on their financial return on investment alone. A project to update data security software may have no financial benefit, but the regulatory and reputational benefits may make it a top priority for the business.
Happily, collaboration is one of staging-mondaycomblog.kinsta.cloud’s superpowers.
Our Work OS allows you to view, share, and comment on project and portfolio information. So it’s easy to get an opinion from those closest to the data.
Anything else to consider?
A common challenge at this stage is to get full visibility of all your projects. Often there are a number of small to medium size projects at the department level that aren’t reported organizationally.
Individually, these projects don’t need much but, added together, they can be a significant resource suck.
Make allowances for them by capping your resource capacity for larger, strategic projects at 80% of the total. This allows some flex for smaller projects that are flying under the radar.
staging-mondaycomblog.kinsta.cloud has a brilliant portfolio management tracker that provides a high-level snapshot of the current health of your portfolio. It’s intuitive, and data can be displayed in a number of different ways depending on stakeholder motivation.
Analyze
During the analysis stage, the data collected during the inventory phase is scrutinized to assess the strengths and weaknesses of the current portfolio.
What happens during the analysis stage?
A number of tools and approaches can be used during this stage to look for imbalances both operationally and strategically.
Reviewing the original justification for projects joining the portfolio can identify projects trying to solve problems that are no longer an issue for the business.Or more than one project trying to solve the same issue that would be better off being combined.
In staging-mondaycomblog.kinsta.cloud, all this crucial information is captured using our project proposal template.
Checking information on resource allocation may highlight where there are going to be future resourcing conflicts and opens a discussion on resource management options that could solve the problem.
I’m guessing you won’t be surprised to learn we’ve got a template for that too.
Dependencies between multiple projects in the portfolio should also be highlighted during this process.
Projects judged lower in value may receive a higher priority in the portfolio due to their impact on other key projects. Pausing or canceling a project that another project is reliant upon could be extremely detrimental.
Anything else to consider?
This is the time to consider the overall portfolio risk.
It’s different from risk management at an individual project level. It’s about weighing up the likelihood of success — defined as delivering benefit to the business — against the anticipated size of the benefit.
Classic risk vs. reward type stuff.
This can be a challenging thing to analyze, as measuring the likelihood of success is pretty subjective. The business will also have to decide how it defines ‘benefit’ — many use net present value, a financial evaluation method.
This analysis can be presented visually in the form of a ‘bubble chart’ and should act to initiate a conversation about risk tolerance within the business.
Align
By this stage, business stakeholders should have a clear understanding of how the portfolio needs to be rebalanced in order to meet its strategic goals.
What happens during the align stage?
This stage can be tricky as it’s when tough decisions have to be taken to decrease the scope of — or even stop — projects. For team members invested in those projects, that can feel demoralizing and it may take some time to adjust if they are reassigned.
And, of course, the perceived costs and benefits associated with projects may feel different to some stakeholder groups than others.
One of the benefits of bringing stakeholders into the process at the inventory stage is that it begins the conversation about the need to change the portfolio and may ease the transition.
It’s helpful at this stage to model a number of “what if” scenarios to test the impact of re-scoping, stopping, or bringing new projects into the portfolio.
If you need more help on scenario planning, we’ve got you covered in our article.
The key benefit of this stage is achieving balance across the portfolio — matching the desired outcome with a realistic assessment of what can be achieved.
Anything else to consider?
The biggest challenge at this stage is managing the fallout from rebalancing decisions.
It can be tempting to change your prioritization and project selection criteria to pacify stakeholders, especially those perceived to be influential through either organizational role or ability to rock the boat.
For this reason, it’s important that decisions taken in building the optimal portfolio are done by a committee with wide business representation and with enough influence for decisions to be respected.
Manage
Once the portfolio is rebalanced, the challenge becomes one of ongoing management. The key requirements in this stage are for communication and collaboration.
What happens during the Manage stage?
Information about the portfolio needs to be accessible to all stakeholders so that agreement can be reached on ongoing prioritization, management of competing resource requirements, and when a project should be re-scoped or stopped.
This is also the time to make improvements in project or business processes. For example, whether business cases for each potential project joining the portfolio are developed and scrutinized in a standardized way.
It may also be the time to set up new governance for the portfolio to track portfolio performance.
Communicating portfolio decisions back into the business is important and can be made easier through automation. A shared workspace like the staging-mondaycomblog.kinsta.cloud Work OS makes this simple.
Notifications can be set up to inform the project team of workload or budgetary constraints, and resourcing departments about status changes to project activities.
Anything else to consider?
In working through this process, the business should have a clear understanding of any gaps in its data collection or reporting practices that could improve its portfolio management.
The PMI believes an integrated project portfolio management software solution is best suited to support an effective project portfolio management system.
Within that solution, you’ll need the functionality to:
- Gather data on each individual project and the collective portfolio
- Create a storage area for documentation on best practices, lessons learned, and useful templates
- Estimate and track project costs
- Gather information on the capacity and capability of human resources
By this point, I’m sure you’re not surprised to learn that staging-mondaycomblog.kinsta.cloud has all this — and more — wrapped up in its colorful and easy-to-use platform. Worth thinking about.
Portfolio management processes help inform decision-making
Understanding how your business strategy changes over time and aligning your project delivery with that is crucial for managing your portfolio successfully.
Using the 4 steps outlined above helps you make key decisions about what stays in your portfolio and what’s moved out.
Our project proposal template helps make sure each project contributes to wider organizational goals – why not get started?
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