Project/Program Portfolio Management (PPPM)
By PH Lohnes, PMP
The Portfolio Level Perspective: Creating Benefits for Business.
Discussion at the portfolio level which is also misplaced at most organizations is centered around the strategic benefit generation of project completion. Organizations grow by selecting the right mixture of projects to complete, not just the right projects. This sounds like double talk, but it is understanding the true nature of project instantiation which is the subject of another post. However, for now, understand that focus of the project level is not about the generation of business benefits — this assumed to have already been adjudicated since the project has been selected for completion else it would not have been assigned to a program or need a project manager.
The perspective of the portfolio level for its characteristics are (from a previous post):
- Focus on the strategic level of organizational activities
- Component utilization of the investment, i.e., of capital
- Objective is to minimize risk in the generation of benefits
- Goal is to generate business benefits — not business value since value is unitless
Since the focus of the portfolio level is from the strategic advantage point, a portfolio manager must be a member of the senior or executive management team. Most organizations, including all those that I engaged with during my “working research period,” did not understand the need to make portfolio manager a functional title, and not a reporting title. To be strategically focused, the portfolio manager must be involved in all the strategic formulation and decision making activities of the organization. Making the portfolio manager a reporting title is to remove this role from understanding or having input as to how portfolio investments are instantiated, measured, prioritized, and selected for portfolio inclusion. The portfolio is simply handed to the portfolio manager and they are told to manage.
The component that the portfolio and portfolio manager utilize in order to achieve the goal via the execution of the objective is the investment. This concept of treating all portfolio components as investments is necessary to provide the correct perspective of the portfolio manager towards the strategic nature of the portfolio’s objective — the minimization of risk while achieving the most business benefits from the implementation of the portfolio corral of chosen investments (projects, programs, or activities).
Minimizing risk to organization may be confusing to many readers as the objective for the portfolio level; however, when discussing investments, the contra nature of any investment is the understanding and management of the risk in making the investment. Whether one is discussing financial investments, resource investments, or project capital investments, risk is always, or SHOULD BE, the natural opposite side of the investment’s proposed benefit. There is NOTHING in existence as the riskless investment. Thus the objective of the portfolio is to minimize risk towards achieving the goal of benefit generation.
Finally, the goal of the portfolio level can now be more clearly understood and accepted — the generation of business benefits. The reason that the normal discussion in most board rooms today is the generation of business value, is that they have never given the definition of value a second thought. Most senior level executives hold either an MBA or CPA and their professors, also without thinking of the definition of the word value, spouted this phrase often enough in class to become the meaningless buzz word of today’s business professional. Value can be either position or negative. Yes, I understand that business value is assumed to be positive, but we all know the problem with making assumptions.
In precise use, the word benefit only has one contextual meaning — positive. There does not exist a negative benefit. This is to misuse the modifier in the extreme sense of the English language.
The portfolio level perspective therefore is focused on the strategic utilization of investments towards the minimization of risk in achieving the most benefits from the existence of the portfolio itself.