It is common knowledge that the realization of projects is essential for organizations to achieve their strategic goals. And in addition to managing each of the projects effectively, it is essential to select the initiatives that most contribute to the organization’s strategic objectives.
After all, there’s no point in managing a project that shouldn’t even be carried out, do you agree? In this context, portfolio management makes use of techniques, knowledge, and strategies in the management of integrated works of several projects, to maximize and optimize the value that the portfolio adds to the organization. Let’s get right into it.
What is a portfolio?
The portfolio, based on the definition of the Project Management Institute, is a collection of projects, programs, and other work that is grouped to facilitate the effective management of that work to meet strategic business objectives.
What is project portfolio management?
Portfolio management is the centralized administration of the project portfolio, which will select and prioritize those most aligned with the organization’s business strategies. Most companies have a clear vision of where they want to go. But to achieve this goal, all projects need to be aligned with it.
Thus, the objective of portfolio management is to identify, prioritize, and choose the projects that will have the most impact on this vision of the future, indicating which are the best to invest time and money. As it is a management that aligns projects, planning, strategy, and innovation, it contributes to Making better decisions, Optimization of resources, Increased delivery of value, Alignment between projects and organizational objectives, and Increased return on investments.
What is the difference between Project Management and Portfolio Management?
Project management focuses on either a single project or a couple of projects within the same department or team and the best way to execute and deliver those projects, while portfolio management will think about the best projects to do. Both are very important to ensure the desired results, but their goals are quite different.
While project management is related to the daily life of projects, portfolio management is more related to the long-term development of the organization. In other words, project management is carrying out projects the “right” way. Portfolio management is the realization of the “right” projects at the right time.
Why portfolio management?
As the world tours through its fourth industrial revolution, competition in the business sphere remains on the increase. Today, every sustainable organization must be built not only on a solid business plan but also on the ability of the organization to make smart decisions. Now, it isn’t just about making decisions but making decisions at the right time for the right projects and implementing them in ways that increase your organization’s overall ROI. In a nutshell, this is the goal of project portfolio management.
Portfolio management gives organizations and managers the ability to see the big picture. For every professional, project portfolio management represents an advantage in an organization, because it aims to manage the various projects and strategies of that organization and after due consideration decides which must be implemented.
In this vein, attributes of investment alternatives are analyzed, and the objective of investment guides where and how much money to allocate to each of the alternatives. Investing in more and more assets with different attributes diversifies the risk of a portfolio, thereby increasing the reasonable assurance of the returns.
Through this management, the portfolio manager verifies that the project is being implemented efficiently and profitably, in line with the strategic objectives of the organization.
To obtain good portfolio management, it is necessary to consider the desired returns, risks, resources, and interrelation between investments. Correctly used project portfolio management tools have been known to generate greater alignment between the company’s objectives and projects, identifying potential projects and understanding indicators such as NPV (Net Present Value), payback, IRR (Internal Rate of Return), and projected absolute value, ease of decision-making around conflicting projects, achieving better governance and oversight in project management.
However, for this, one must take some precautions, such as having goals that are achievable within the strategic planning, having a vehement clear vision of what portfolio management means within the company, and defining portfolio governance very well.
In conclusion, “Organizations exist to create value for its stakeholders, to create value, organizations must do only the right work, it is by doing only the right work that an organization can achieve its strategic objectives”- Taopheek BABAYEJU, iCentra CEO.