Project/Program Portfolio Management (PPPM)
By PH Lohnes, PMP
PPPM Life Times: Portfolio Lifetime Considerations
In a previous blog, I discussed the different lifetimes between the PPPM levels and how they impact the decisions being made given the objectives toward which each level must progress. The lifetimes are the foundations for the objectives, but in this post, why is the indeterminate lifetime of the portfolio so important in how the portfolio achieves its objectives and ultimately its goals?
If you remember, the portfolio’s objective is to minimize risk while its goal is the maximization of benefits to the organization through the choice, implementation, and success of its components or investments. Since a portfolio can have and usually contains different sized investments each with different time horizons, budgets, and schedules, a portfolio focused on the strategic perspective of an organization does not end with a particular reporting period just as the organization does not end with each annual reporting cycle or budgetary period. The portfolio has the same lifetime as the organization or at least until the senior management team determines to utilize another method to achieve its strategic objectives and goals.
Thus, since the portfolio does not have a finality to its existence, it should pursue a different decision model or matrix in minimizing risk and maximizing benefits. The portfolio manager, privy to the strategic planning and management activities of the organization, will manage the portfolio in manner that may not seem to be in the best interests of the programs, projects, or activities that comprise its content. It is precisely this juxtaposition of interests that make the portfolio manager’s role one of complexity in attempting to keep all parties aligned even in the face of what may seem as contra-productive decisions if taken from the program or project perspective.
Minimizing risk means that the portfolio manager must look beyond the boundaries of the investments in his/her portfolio and consider how the overall mixture will perform in meeting the strategic vision of the organization. Since your organization is most probably still structured under the Alfred Sloan’s concept of the “division of management,” paralleling Adam Smith’s “specialization of labor,” as most USA commercial and non-profits are, the amount of information varies from the board room to the break room. It is this difference in information that makes the different levels of PPPM necessary. Project management is a form of specialized management as is the program level. These again are different from the portfolio perspective requiring a focal point that is more temporally distant than the lower two levels.
Portfolio manager’s must minimize risk for the entire portfolio, not for each individual investment in the portfolio.In similar fashion a financial portfolio manager makes allocation decisions to minimize overall portfolio risk and maximize benefits. The financial portfolio manager may manage investment construction and content not from the point of optimization, but from the obtaining the highest benefits for the appropriate level of risk tolerance of the client, or in this case, the organization. PPPM portfolio managers must conduct a similar symphony — sometimes that sounds discordant to the individual artists in the orchestra depending on where they are playing from or at what level they are directing their actions.
Thus, it is of primary importance that the portfolio manager understands or has access to portfolio level risk management expertise. I always make the recommendation to my clients that if you are going to have a PPPM environment with a viable portfolio level then the requirement for a portfolio level PPPM risk management solution is mandatory. It is from the portfolio level that true PPPM risk management can have it most positive impact.
What are the necessary vocational skills needed by an effective portfolio manager will be the subject of the next post. The right portfolio manager with the right mindset and skills can assist in the achievement of the PPPM benefits of strategic goal acquisition supporting organizational growth and relevance.