Tel. (UK) 0845 458 1944
Tel. (Int.) +44 1844 271 640
Email [email protected]
Web apm.org.uk
Association for Project Management
Ibis House, Regent Park
Summerleys Road
Princes Risborough
Buckinghamshire HP27 9LE
C M Y K
C M Y K
For Project, Programme and Portfolio Managers
C M Y K
C M Y K
C M Y K
Portfolio Management A practicle guide
Portfolio Management
A practical guide
Portfolio
Management
A practical guide
Association for Project Management
Association for Project Management
Ibis House, Regent Park
Summerleys Road, Princes Risborough
Buckinghamshire
HP27 9LE
© Association for Project Management 2019
First edition 2019
All rights reserved. No part of this publication may be reproduced, stored in a
retrieval system, or transmitted, in any form or by any means, without the express
permission in writing of the Association for Project Management. Within the UK
exceptions are allowed in respect of any fair dealing for the purposes of research
or private study, or criticism or review, as permitted under the Copyright, Designs
and Patents Act, 1988, or in the case of reprographic reproduction in accordance
with the terms of the licences issued by the Copyright Licensing Agency.
Enquiries concerning reproduction outside these terms and in other countries
should be sent to the Rights Department, Association for Project
Management at the address above.
British Library Cataloguing in Publication Data is available.
Paperback ISBN: 978-1-903494-86-8
eISBN: 978-1-903494-87-5
Cover design by Fountainhead Creative Consultants
Typeset by RefineCatch Limited, Bungay, Suffolk
in 10/14pt Foundry Sans
v
Contents
List of figures and tables vii
Preface viii
About this guide x
The authors xii
Acknowledgements xiii
Executive summary xiv
1 Introduction to portfolio management 1
1.1 Fundamentals of portfolio management 1
1.2 How portfolio management contributes to organisations 2
1.3 Signs your organisation might benefit from portfolio
management 3
1.4 Where does portfolio management fit within the organisation? 4
2 Adopting portfolio management and the organisational
context 7
2.1 The strategic plan 7
2.2 Portfolio governance 10
2.3 Sponsorship and stakeholder engagement 13
2.4 Portfolio management and management of risk 14
2.5 Portfolio management ROI and benefits management 18
2.6 Portfolio management of projects with different delivery
methodologies 19
3 Portfolio management core processes 22
3.1 Construct and prioritise the portfolio 22
3.2 Develop, monitor and control the portfolio 28
3.3 Manage and deliver programmes and projects 31
3.4 Review the portfolio 31
vi
Contents
3.5 Reporting on the portfolio 33
3.6 Assessing the performance of the portfolio 36
4 Implementing portfolio management 40
4.1 Business drivers for portfolio management – understanding
the business imperative 40
4.2 Introducing portfolio management 42
4.3 Establishing portfolio management 46
4.4 Governance roles and relationship to organisational
governance 48
4.5 How to measure early success 53
4.6 Challenges for portfolio management 53
5 Recommended focus areas 58
Appendix Summary roles and responsibilities 60
Glossary 63
vii
List of figures and tables
Figures
1.1 How portfolio management contributes to business success 3
1.2 Portfolio management framework – process overview 5
2.1 Maturity of organisational approach to portfolio
management – APM Portfolio SIG Survey 10
2.2 Portfolio perspective 12
2.3 Benefit risk model 17
3.1 Construct and prioritise the portfolio 23
3.2 A value score chart – benefit and cost comparison 28
3.3 Example portfolio dependency map 29
3.4 An example portfolio overview dashboard 35
3.5 Portfolio performance assessment maturity model 39
4.1 Strategy and portfolio alignment 41
4.2 Centralised portfolio management 50
4.3 Decentralised portfolio management 51
4.4 Organisational skills levels 55
Tables
1.1 Factors suggesting portfolio management might be beneficial 4
4.1 RACI matrix for creating an effective portfolio environment 52
A1 The roles involved in portfolio management, how they
contribute and the value they deliver 60
x
About this guide
This guide illustrates how portfolio management is a key mechanism in enabling
an organisation to optimise delivery of its strategic goals, maximising value, and
do so in the required time frame.
The guide is designed to serve three main aims:
n to promote awareness of, and outline good practice in, portfolio management
for the practising or developing portfolio manager or portfolio office manager.
All organisations can learn from each other, but ultimately each needs to build
its own version of portfolio management practice that addresses their own
business need;
n to provide a benchmark for portfolio managers and the portfolio management
community to assess their own organisation’s maturity in the discipline;
n to stimulate new thinking and contribute to the development of portfolio
management practice.
The guide is divided into four main sections:
Section 1: Introduction to portfolio management: This section
explains what portfolio management comprises and why it is important to
organisations. It outlines the kind of situations that an organisation might
encounter where introducing portfolio management could bring significant
benefits. This section concludes with examples of where portfolio management
might fit within an organisation’s structure; there is no ‘one-size-fits-all’ with
portfolio management.
Section 2: Adopting portfolio management: This section deals with
how portfolio management links to the existing organisational processes, such
as strategic planning, stakeholder engagement, risk management, return on
investment (ROI) and benefits. It also considers the different delivery
methodologies. It shows how the purpose of portfolio management is to optimise
delivery of the corporate strategy and goals, to ensure that all projects and
programmes are directly contributing to achieving those goals.
xi
About this guide
Section 3: Portfolio management core processes: This section looks in
depth at constructing the portfolio, including any business-as-usual (BAU) and
other initiatives within its scope, and how it should be managed. It shows how to
ensure that the portfolio is on track to deliver its benefits and the strategic goals,
how to consider any adjustments, and mitigate portfolio-level risks. It includes
the role of portfolio reviews (by the executive committee overseeing the
portfolio), what to report and how to assess whether the portfolio comprises the
most effective set of projects and programmes to achieve delivery of the strategic
goals in the appropriate timeframe.
Section 4: Implementing portfolio management: This section illustrates
how an organisation will need to clearly and unambiguously identify what will
deliver value for them, and then adapt the practice of portfolio management to
their needs. It suggests treating the introduction of portfolio management as
a project in itself and shows how to deal with a number of key challenges, such
as the cultural context. For example, organisations may need to put in place
an executive-level sponsor to support the portfolio manager, with overall
accountability for the success of the portfolio.
The APM Portfolio Management Specific Interest Group (SIG) has acquired
many examples from experienced practitioners of good and best practice,
collected at our SIG events, annual conferences and from our committee and
members. We are pleased to be able to bring all of this together into a single
guide and we hope it will serve our SIG members, and non-members, well.
We hope you enjoy reading the guide and that it contributes to your
understanding of portfolio management, as well as that of your organisation, and
so meets our SIG aim of helping organisations achieve their corporate strategy or
strategic intent.
Please email any comments, questions or suggestions to:
Stephen Parrett and Steve Leary, co-chairs, APM Portfolio Management SIG,
2017–2018
Lynne Ratcliffe and Steve Leary, co-chairs, APM Portfolio Management SIG,
2018–2019
xiv
Executive summary
Mature portfolio management practices can deliver greater value to an
organisation through more predictable and more efficient achievement of its
strategic goals. It does this by helping to guide the board to invest money and
resources in the most appropriate projects and programmes in the context of
their strategic goals.
Key to the success of portfolio management is the relationship between
strategy and implementation, with strong alignment between the organisation’s
strategic goals and those of the portfolio. For this reason, portfolio management
should be seen as an integral part of the business planning, delivery and benefits
realisation cycle.
There are many different approaches to portfolio management, and the one
adopted will depend on the needs and context of your organisation. The one thing
all approaches have in common is the importance of engaging stakeholders –
particularly the senior executives, who are by definition the sponsors of the
strategic portfolio.
Portfolio management contributes to organisations in many crucial ways:
n Provides a focal point for strategic goals. Portfolio management
should be complementary to the overall management of the organisation; it is
not an additional bureaucracy. The board sets the vision for the organisation,
the corporate mission and the strategic goals, and how they expect those
goals to be achieved. Without clearly defined organisation goals, the portfolio
helping to achieve them cannot succeed. Decisions to start, stop and continue
projects are based on these goals, and only these goals.
n Ensures the prioritisation of the goals, with prioritisation rules for
projects and programmes that are clear and unambiguous. Clearly
defined and prioritised goals are essential for decision making at a portfolio
level, which then leads to more transparent and realistic decisions. Portfolio
management helps executives to articulate the prioritisation criteria which
contributes to improved decision making. For example, if all goals are ‘high
priority’ then in reality none are, and decisions will be taken on other factors.
xv
Executive summary
n Helps ensure the whole board and executives are fully behind the
approach, are sponsoring the portfolio and are actively championing
portfolio management and empowering a capable team. Ideally,
everyone from the very top, through middle and junior management of the
organisation needs to champion the strategy and the portfolio to ensure ‘buy in’
from the whole workforce to a structured portfolio management approach. An
honest and collaborative style will build and engender trust within the
management team across the portfolio and organisation.
n Provides the capability to assess all key change factors. It takes
into account the constraints of opportunity, threat, resource availability,
affordability, customer impact and the organisation’s capacity to absorb and
manage change. In doing this, it enables the managing of projects and
programmes at a collective level, through effective corporate governance,
engagement of key stakeholders, adherence to key processes and the
optimisation of limited resources and dependencies.
n Considers in-flight projects and programmes and business as
usual (BAU) in the same way and ensure full alignment to the
strategic goals. Portfolio management should always aim to balance
competing demands from within and outside the scope of the portfolio to
ensure business success. Decisions taken on balancing BAU and change, and
allocation of resources must be measured against those same strategic goals.
Effective portfolio management is a collaborative partnership across the
organisation. The core message is to prioritise and keep prioritising throughout
the portfolio life.
n Ensures ‘tactical’ projects contribute to the strategic goals – if
they don’t, don’t do them. There will always be a place for tactical projects
within a portfolio, but they all need to take the organisation in the right direction
towards one (or more) of its strategic goals. Tactical projects take finite
resources away from others delivering the strategic objectives, usually for
immediate support to a short-term goal. Questions need to be asked as to
whether the portfolio is correctly balanced and if the organisation really needs
to do a project or piece of work. If the work is critical, ensure it doesn’t render
any other outcome impossible.
n Embeds portfolio governance into the organisation’s controls
and makes it robust. Additional governance is unnecessary provided an
organisation has mature controls where portfolio governance can be aligned
with the business planning and decision-making processes ensuring seamless
7
2
Adopting portfolio
management and the
organisational context
This section deals with how portfolio management links to the organisational
processes such as strategic planning, stakeholder engagement, risk management,
ROI and benefits. It also considers the different delivery methodologies.
Figure 1.2 provides a framework and overview of the processes.
Section 3 addresses the core processes that are more specific to portfolio
management.
2.1 The strategic plan
The board sets the vision for the organisation, the corporate mission and the
strategic goals, and how they expect those goals to be achieved. Depending on
the organisation’s structure, these may be devolved to a divisional level, or to a
group of business areas or business units.
This strategic planning process defines what is required and determines the
high-level plan to meet the targets set by the board, i.e. the goals and strategy.
The portfolio management team works closely with the strategy group (or
equivalent), plus the executives and business area directors and managers within
the organisation, to develop the portfolio plan to achieve those goals.
2.1.1 Goals and objectives
The corporate goals need to be framed with a clear focus on the changes required,
and should include targets and metrics.
n The goals and strategy drive the changes. The task of the portfolio manager/
function is to work with the management and planning teams to ensure that goals
and objectives and the required strategies are understood and can be achieved.
Portfolio Management
8
n The portfolio represents the organisational changes necessary to meet the
strategic goals, and hence will include how various programmes, projects, and
business unit plans contribute to those goals.
Portfolio management is an integral part of the strategic planning process and
supports the ‘how’ of strategic delivery and implementation through such things
as modelling possible portfolio outcomes to provide various forward views for
consideration. These models will include current, in-flight projects as well as new
contenders, and should provide views on the potential impact on business-as-
usual (BAU) or operational processes that will be already in place and delivering.
Commercial considerations will determine the level of investment and flexibility
for a given period, and hence will influence how soon the goals might be achieved.
2.1.2 Process and organisational alignment and embedding
The portfolio will be managed to meet the strategic goals and optimise the overall
ROI and benefits, and therefore will ensure that the objectives of the business units’
and functions’ projects and programmes are directly contributing to, and fully
aligned with, those strategic goals. The projects and programmes will themselves
be planned and managed in the usual way using ‘standard’ project and programme
management and controls. Although the portfolio management function does
not manage the individual projects and programmes, it will set the priorities and
influence areas such as resource allocation and timeline planning.
The overall planning process also considers BAU or operational plans – i.e.
the total investment (revenue and capital) that the organisation is making.
Budget planning and portfolio planning processes are often iterative, looking
at business demand, capability, internal and external risks and pressures and
funding availability. A high-level portfolio plan can help determine what can
realistically be achieved and identify the resources and skills required. As options
are reviewed and agreed the portfolio and associated budgets can be set,
together with outline budgets for subsequent periods and the lifetimes of the
projects and programmes. The amount of change also needs to be considered so
that the business can absorb the planned changes while continuing to operate.
An annual cycle is unlikely to be frequent enough for the portfolio reviews and
several organisations have moved to a six-monthly or quarterly cycle. Such
reviews may also be triggered by market or other major events and lead to
re-alignment of investment and resources outside the ‘normal’ financial and
portfolio planning cycles.
40
4
Implementing portfolio
management
This section will cover the drivers and main steps to building, developing and
sustaining a portfolio management capability within an organisation.
Portfolio management includes defining portfolio governance, clear roles,
responsibilities, accountabilities and reporting structures that support decision
making. Introducing it will have a significant impact on the organisation and will
fundamentally alter how change is managed. It is therefore likely to require a
change in the organisation’s behaviours and culture.
Portfolio management has many aspects, and an organisation will need to
clearly and unambiguously identify what will deliver value for them, and adapt
the practice of portfolio management to their individual needs. This will require
careful management, coordination and capable resources. Portfolio management
is most effective when driven by business goals and strategy, either at an
organisation or business area level, although it has often been introduced via the
IT function.
One of the hardest things about introducing portfolio management to an
organisation or system is the mirror that is held up to the executives, and dealing
with the behaviours of people as a result. Organisations that have shared their
experiences have found that treating the introduction of portfolio management
as a project and adopting a change management approach helped them achieve
a successful outcome.
4.1 Business drivers for portfolio management
– understanding the business imperative
There are many reasons why an organisation might decide that portfolio
management is required. Often it will be introduced in response to issues
resulting from the actual or perceived failure of current processes, or it might
41
Implementing portfolio management
even be brought in during a crisis, where the business needs to make a radical
reappraisal of its change initiatives and performance.
There are several structured change and project methodologies that can be
used and, as with any project, change management needs to be integrated into
the approach.
4.1.1 Getting portfolio management started
The drivers for change will manifest themselves in many ways, such as:
n a desire to implement a major transformational change across the organisation;
n a corporate review of strategy implementation, highlighting significantly
disconnected change management and mismatch between expectations and
reality;
n a senior executive discovering from their peers that alternative, more effective,
ways of achieving the corporate goals and managing their portfolio should be
explored;
n awareness by new management that there are better ways of achieving the
strategy, and managing delivery and benefits through portfolio management;
n an enforced reassessment of the investment priorities, for example due to a
takeover or a major change in the market or environment;
n the existing planning, strategy or portfolio team being unable to satisfy
executive questions about the effectiveness of the organisation’s investment,
where it is being spent, what benefits are being achieved and what the ROI is.
Several organisations have reported being surprised at the findings once they
carry out an inventory of in-flight projects.
Figure 4.1 Strategy and portfolio alignment
60
Appendix
Summary roles and
responsibilities
Table A1 The roles involved in portfolio management, how they contribute
and the value they deliver
Roles Contribution to
portfolio management
Value received or
delivered
Board of directors n Portfolio sponsor
n Sets and communicates the
strategic goals for the
organisation
n Prioritises the corporate
mission and strategic goals
n Sets the proportion of the total
investment/funding that is for
‘change’ and for ‘operations or
business as usual’
n Allocates investment/funding
to the portfolio/s
n Sets the risk profile, or risk
profile limits, for the overall
portfolio.
n Achievement of the
organisation’s goals
n Increased ROI and benefit
n More effective and efficient
achievement of the strategic
goals
n Greater visibility of the
benefits expected from
change investment
n Improved confidence that
the investment is optimised
to achieve its strategic goals.
63
Glossary
Agile A family of development methodologies where requirements and
solutions are developed iteratively and incrementally throughout the life
cycle.
Assurance The process of providing confidence to stakeholders that projects,
programmes and portfolios will achieve their objectives for beneficial
change.
AXELOS, P3M3
Examples of externally available models to assess the maturity of portfolio
management within an organisation. AXELOS is a joint venture company,
created in 2013 by the Cabinet Office on behalf of Her Majesty’s
Government (HMG) in the UK and Capita plc, to manage, develop and
grow the Global Best Practice Portfolio.
Balanced portfolio
A point in the portfolio life cycle where the component projects and
programmes are balanced, for example, in terms of strategic alignment,
overall risk, resource usage, cash flow and impact across the business.
These attributes are considered in the light of data available and
confidence.
Benefit A positive and measurable impact of change.
Benefits
management
The identification, definition, planning, tracking and realisation of
benefits.
Benefits realisation The practice of ensuring that benefits are derived from outputs and
outcomes.
Bi-modal project
management
Bi-modal project management is changing how projects are executed.
Instead of having to choose one practice over another, it’s about
implementing more than one method across an organisation – allowing
the portfolio manager to choose whichever methodology best suits each
project.
Board (programme
or project)
A body that provides sponsorship to a project or programme. The board
will represent financial, provider and user interests.
Board (executive) An executive body that oversees the governance of a portfolio, and
provides direction on strategic goals, priorities, risk appetite and
investment levels.
Business case Provides justification for undertaking a project, programme or portfolio. It
evaluates the benefit, cost and risk of alternative options and provides a
rationale for the preferred solution.
Tel. (UK) 0845 458 1944
Tel. (Int.) +44 1844 271 640
Email [email protected]
Web apm.org.uk
Association for Project Management
Ibis House, Regent Park
Summerleys Road
Princes Risborough
Buckinghamshire HP27 9LE
C M Y K
C M Y K
For Project, Programme and Portfolio Managers
C M Y K
C M Y K
C M Y K
Portfolio Management A practicle guide
Portfolio Management
A practical guide
