Portfolio Management: Getting it Right

19 November

The word "portfolio" is from the Italian word "portafoglio", which in 1719 translated to a case for carrying loose papers. Today's definition is much broader but based on the same concept of organising different things into one defined container. In the context of business or organisational portfolio management, it can mean anything from managing a group of short term departmental projects to coordinating groups of subsidiaries.

This article outlines the three must-have components that any portfolio management program needs to be successful, independent of the size and scope.

1. Know the goals

  • Successfully managing a portfolio depends on the context and goals of the portfolio owner. If the items in your portfolio are at the enterprise level, then your portfolio owner could very well be a board of directors.
  • The ability to clearly state what outcome is desired from managing the portfolio is a necessary ingredient to successful portfolio management. Sometimes the portfolio owner needs help articulating what this is and how it’s to be measured.
  • Don’t shortcut this component or make untested assumptions about what the portfolio owner wants. Doing so jeopardises any chance of “getting it right”.

2. Be fair and accurate

  • Once the goals are clear, mechanisms to facilitate their delivery can be put in place. From deciding which items get funding and when, to staffing and delivery decisions, ways to evaluate new and ongoing activity against the goals must be done in a transparent, timely and rational manner.
  • Portfolio management that is unstructured, arbitrary or unstable, where priorities and decisions continually whipsaw project staffing and funding, are rarely effective. They also have the potential for degrading overall project performance by generating mistrust, scepticism and apathy among team members whose well-intentioned efforts can be set aside for no apparent reason.

3. Learn from each portfolio item

  • Each item in the portfolio represents a learning opportunity, regardless of the outcome. Study what went right and what went wrong as part of a review or closing process. Scrutinise wherever managing the portfolio intersected with each project and determine whether value was added or lost. Ask the item owners what could have been done better.
  • At regular intervals, appropriate for how often the portfolio changes, aggregate the individual items for a macro view. Determine whether the goals are being met overall. Include the feedback from the item owners during this review and make adjustments to the management process to make things better.

Even in its simplest form, portfolio management can be a daunting activity. But if the three points above are used as touchstones to guide the process, measurable value and continuous improvement are absolutely achievable over time.

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