With portfolio management, ROI is paramount
Most companies have more than one IT project on the go at any given time, each with its own objectives and planned outcome. Then, after a while, especially in silo managed organisations, it becomes obvious that elements of the various projects overlap and some projects may even be combined.
In an ideal world, project management kicks off with a cohesive end in mind; an end that ties directly back to the business’ strategies. In other words, start with what you want to achieve and work backwards. If you begin with individual projects you are immediately in a reactive position, dealing with piecemeal initiatives.
Simply put, projects have a defined start and end, deliverables, budget and resources. A programme is a collection of projects and a portfolio is a collection of programmes (and their individual projects). A company could even have different portfolios serving different sectors of the business.
Companies that work from the bottom up seldom have a portfolio concept, or even a portfolio manager. This means that they could invest millions with no underpinning strategic intent.
Perhaps the best way to underscore the importance of portfolio management is to understand the different skills sets required to manage projects, programmes and portfolios.
In this context, the project manager (PM) is essentially a ‘gun for hire’, only interested in and focused on the project; ideally with predominantly technical skills, as opposed to business skills.
The programme manager is juggling oversight of more than one project and needs a bigger picture view, and much more business than technical skill.
The portfolio manager – who functions as the project investment manager – needs to understand project management but business skill is what this role is all about. To the portfolio manager falls the task of overseeing the two most important aspects of IT project management: cost versus benefits and Return On Investment (ROI).
Portfolio management is essentially a measurement of the business benefit derived from projects undertaken and involves the identification of candidate projects; and the prioritisation, oversight and measurement of ROI of these. One could argue that there is always, by default, a portfolio of projects but the differentiator is whether they are managed as such.
It takes a very mature business model (as opposed to individual ‘fiefdoms’ each protecting their own turf) to judge all projects equally, using ROI as the all important yardstick. Those organisations brave enough to go this route, will certainly reap the rewards.
© Tony McManus, McManus Consulting.