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An enterprise portfolio management strategy
The purpose of this paper is to provide the requirements, processes and procedures to develop an enterprise portfolio management model for an organisation. This paper will show how governance links through corporate strategy to define, align, approve and manage a portfolio to maximise the value and reduce risk thereof.
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Portfolio management is rapidly evolving as a result of:
* organisations not having visibility of their investments;
* programmes and projects not delivering their required results;
* end products not performing; and
* metrics not defined to link the benefits to the return on investment (ROI).
Effective enterprise portfolio management enables an organisation’s executive to engage all levels of the organisation effectively and deliver results efficiently.
It will further ensure:
* Compliance with governance regulations;
* Alignment with strategic goals;
* Enabling the right component selection and trade-off;
* Demonstration of measurable business value;
* Effective response to environmental impacts; and
* Effective and timely communication to the business and stakeholders.
The development of enterprise portfolio management will be determined by the values and culture of an organisation, together with the maturity level of the component staff in programmes and projects.
The process
Portfolio management comprises processes to assess aggregate performance of strategic goals.
This is delivered through components and management processes.
The process of implementing enterprise portfolio management is explained below, based on the diagrams shown.
The process is detailed according to the following topics:
* Governance
* Portfolio Requirements
* Corporate Strategy
* Approve Portfolio Process
* Enterprise Portfolio Management Process and Office
* Portfolio Management Review Board
Enterprise portfolio management is driven through Corporate Governance.
Governance is a generic term that describes the way in which rights and responsibilities are shared between the various corporate participants.
An organisation’s governance brings its strategic methodologies, processes, and technologies together to advance strategic goals and objectives and to realise strategic benefits.
Governance keeps all levels and areas of the organisation accountable, providing decision-making mechanisms for the organisation as a whole.
Portfolio Requirements are driven from an organisation’s need to:
* expand its operation/s;
* be accountable for growth, investment, returns, and exposure;
* view and track a greater picture of its investment across the enterprise; and
* select the right investment and trade-off.
This will be performed through correct understanding of proper response to market demand, customer request, technology advances, business needs, social needs, ecological impacts and legal requirements.
Requirements could be initiated from executive management, business unit managers, customers and business partners.
Note the above organisational structure that shows the relationship of portfolio management to the organisation.
Corporate Strategy is developed at the executive level of the organisation. The assessment, definition and application of a strategy should include representatives from all levels of the work to be performed.
Alignment to strategy may be an iterative process as the maturity of the organisation increases. Through this process, threats and opportunities may surface, of which the organisation needs to be aware. As organisations grow and strategies are met, these threats and opportunities may be identified at all levels of the organisation.
To assist corporate strategy, an Enterprise Risk Management (ERM) must be defined and enforced, so that the alignment to strategy is understood and managed throughout the organisation.
In 2003, the Casualty Actuarial Society (CAS) defined ERM as the discipline by which an organisation in any industry assesses, controls, exploits, finances and monitors risks from all sources for the purpose of increasing the organisation’s short- and long-term value to its stakeholders.
The Approve Portfolio Process includes the cost vs. benefit vs. risk assessment and must include people from different organisational positions. These people should also have different responsibilities, backgrounds and perspectives, which are indicative of the culture and environment of the organisation.
The following process steps occur:
* Justification requires having the right perspective, choosing the right work at the right time with the right people. This requires alignment of cost vs. benefit vs. risk and aligns directly to the strategic goals of the organisation.
* Gather and Define the information based on the characteristics of the portfolio.
* Evaluating Alternatives based on the gather and define process are required. The final choice of the portfolio must be agreed and signed off by all levels of involvement and must align to corporate strategy and governance.
* Prioritise portfolios requires that the right work will be done, and done correctly.
* The Maturity Level of programmes and projects within the organisation needs to be assessed, defined, and agreed upon. For effective responses, the assessment should be performed before embarking on an enterprise portfolio management strategy. Alongside the assessment of the organisation, the assessment of the competency of programme and project staff is required. Dependent on the result of the organisation and individual assessments, a development road map of development will be developed to allow for migration of maturity to the next level.
* Assignment of the human resources will be made based on the right person, doing the right work, to correctly portray the person’s position in the portfolio. A portfolio manager must understand the strategic business goals and priorities and should have skills in:
– Portfolio management;
– Programme and project management;
– Process development and continuous improvement; and
– General business skills.
According to the PMI® , the portfolio management component process is performed through performing two streams, as indicated by the diagram below.
Establishment of an Enterprise Portfolio Management Office (EPMO) is an important support for the portfolio process.
The mandate of the EPMO needs to be defined clearly and aligned to the corporate strategies based on the organisation’s vision and mission.
The entire organisation needs to be considered when establishing an EPMO, therefore operational areas, programme management and project management staff need to be involved.
A Portfolio Review Board must be established, the main purpose of which will be to review capacity management and resource pools within a portfolio.
This will ensure correct resources used and buy-in is attained; assets are managed correctly; and resources are assigned, cancelled or refocused based on the performance of the portfolio.
Further roles of the Portfolio Review Board will be to:
* manage portfolio metrics in line with organisational requirements;
* analyse ways to improve value or ROI driven through the organisation; and
* perform ‘what if’ scenario analysis to ensure alignment to corporate strategy.
Roles and responsibilities
A project manager is deliverable-focused, with each unique project delivering a product service or result. He/she is accountable for delivering the expected product against baselines in accordance to specification, reporting status to the sponsor and/or directly or indirectly to the Portfolio Review Board.
A programme manager is outcomes-focused and leads the programme staff, the project managers, and component managers. He/she is accountable for delivering status to the Portfolio Review Board on how the deliverable of components can be integrated into the programme’s end product service, result or benefit.
A portfolio manager or the portfolio management team are responsible for the work within a specific portfolio. They will receive information from the various components within the portfolio and report on the alignment to strategy and appropriate actions against performance.
PMI® states that the portfolio manager is primarily a conduit between the portfolio and the portfolio management board.
Portfolio management metrics
The metrics of the portfolio will indicate the progress and performance of the various portfolio management components against strategy.
This performance will also be used to update the portfolio on the delivery of the required value.
A common reporting tool will be in the form of a dashboards or overview reports. These dashboards include:
* Organisation Portfolio Health Check;
* Organisation Strategic Goal Achievement;
* Organisation Risk Profile;
* Organisation Resource Capability; and
* Organisational Financial Information.
Common benefits and barriers to portfolio management
Benefits:
* Lower costs;
* Repeatable best practice processes;
* Global compliance and governance;
* Integrated programme and project management discipline;
* Enhanced visibility and transparency;
* Correct and consistent governance, risk and performance management;
* Increased communication;
* Reduction of failed projects and programmes;
* Defined and effective selection of programmes and projects;
* Measurable business value; and
* Alignment to strategic goals.
Barriers:
* Commitment from all stakeholders;
* Protection and lack of transparency of current information;
* Change management in terms of operational influences;
* Retrofitting of programmes and projects; and
* Initial investment in terms of cost and time is high.
Critical success failures
* CSF 1 – Establish and/or confirm Corporate Governance.
* CSF 2 – Alignment to corporate strategy, understanding the cost vs. benefit analysis.
* CSF 3 – Establish the organisational maturity level, with an emphasis on programme- and project management; and individual maturity.
* CSF 4 – Assessment, development and assignment of resources to specific roles
* CSF 5 – Establish an Enterprise Portfolio Management Office (EPMO).
* CSF 6 – Establish a Portfolio Management Review Board.
Conclusion
Enterprise portfolio management is a process, and will take time to implement: starting with the development and understanding of corporate strategy, followed by aligning the right resources to perform the right activities at the right time for the right result.
The portfolio management role within an organisation needs to be defined and implemented following the process outlined in this document to ensure that all the critical success factors are met.
This paper has been based on common business development within southern Africa for PM.Ideas (Pty) Ltd; and with guidance from The Standard for Portfolio Management – 2nd Edition, 2008.
Adrian Lovel-Hall; consultants: PM.Ideas (Pty) Ltd; with input from Karin Deacon, managing director: PM.Ideas (Pty) Ltd
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