What Is Portfolio in Project Management
A portfolio is simply a generic term for a grouping of things. Depending on the context and industry, it can be a collection of assets, products, investments, or other items. A portfolio in project management refers to a grouping of projects, and programs. It can also include other project-related activities and responsibilities. The purpose of a portfolio is to establish centralized management and oversight for many projects and programs. A portfolio also helps establish standardized governance across the organization.
The purpose of creating and managing a portfolio is to ensure the business takes on the right projects and that they align with the company’s values, strategies, and goals.
How does a portfolio relate to programs and projects?
Programs are created to group similar or related projects. This allows for the strategic management of interdependencies, such as shared resources. Portfolios are created to ensure projects and programs align with the strategy of the business. Let’s say your company builds and repairs ships. The construction of a naval ship would be a project. The repairs of a commercial ferry would be another project. These two projects are unlikely to be grouped into a program because they’re not very similar. If there were five separate projects to construct five separate naval ships, they would likely have many factors in common, such as:
- Similar scopes
- Common requirements
- The same resource demands
- Shared stakeholders
- Identical quality measures
- Similar timelines, and so on
Therefore, management may decide it’s best to group them as a program under a program manager. This could allow for opportunities, such as discounts for ordering five ships worth of material together. It could also assist with sharing resources, knowledge, best practices, and other assets across projects.
Now consider that your shipyard can only take on so much work at a time. For instance, you may only be able to take on five projects at a time, regardless of the type of job (repair or build). Although commercial repairs and naval construction are not in the same program, they may become part of the same portfolio, if it makes sense for the business.
Portfolio management would help ensure the company balances the overall number and type of projects it takes on. In this case, it would ensure the total projects planned at one time does not exceed its maximum capacity of five. It can also help ensure the company takes on the appropriate project ratio. For example, repair projects are likely to be shorter-term and higher risk, but more profitable, while construction projects will be longer-term and lower-risk, but less profitable. Depending on the company’s priorities and appetite for risk, management may want to maximize one type of project over the other. But if they’re not managed under a centralized portfolio, this type of strategic planning would be difficult, if not impossible.
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