The first essential step to establish consistent portfolio management practices is understanding and applying the right standards and protocols. The Portfolio Management Professional (PfMP) certification offered by the Project Management Institute (PMI) educates professionals on best practices that have been established by the industry-standard – The Standard for Portfolio Management.
The Standard for Portfolio Management is a comprehensive guide that details the best practices, tools, techniques and the body of knowledge that defines the profession. Adhering to this standard ensures that portfolio managers can effectively manage the portfolios using tried and tested methods, aligning strategic objectives with organizational goals, and maximizing business value.
Organizational Assets
Leveraging organizational assets significantly enhances the efficiency of portfolio management. These assets primarily include the information systems and Subject Matter Experts (SMEs).
- Information Systems: Technological tools are indispensable to modern portfolio management. Information systems, such as Project Portfolio Management (PPM) tools, provide a comprehensive view of all ongoing projects, helping portfolio managers to prioritize, allocate resources, identify risks, and make informed decisions. These tools often offer features for portfolio modeling, tracking, reporting, and communication, making it easier for the portfolio managers to manage and review the portfolio’s performance continually.
- Subject Matter Experts (SMEs): SMEs are crucial assets to any organization. Their deep knowledge in specific areas brings invaluable insights that help in decision-making, risk management, and maintaining strategic alignment. Involving SMEs in portfolio management aids in defining clear deliverables, setting realistic timelines, and identifying potential obstacles.
Industry Standards
Industry standards often shape the way portfolio management is approached in organizations. One such method is the Project Management Body of Knowledge (PMBOK), endorsed by the PMI. Similarly, Prince2 for projects in a controlled environment, Agile Project Management (APM), Lean, Six Sigma, and ITIL for IT service management, are other standards that make for comprehensive portfolio management practice.
These standards typically cover all aspects of portfolio management, such as governance, risk management, communication, financial management, and procurement. Adapting these standards allows organizations to enjoy several benefits including increased efficiency, improved quality of deliverables, reduced risks, better communication, and ultimately, increased ROI.
Best Practices for Consistent Portfolio Management
- Align Portfolio with Business Strategy: Always ensure that the portfolio reflects the business strategy. Projects and programmes within the portfolio should deliver business benefits and strategic outcomes.
- Active Governance: Governance ensures the portfolio’s strategic alignment and maintains its ability to deliver business benefits.
- Regular Reviews: Portfolios should be subjected to regular reviews. This ensures their continuous alignment with the business strategy.
- Risk Management: It’s essential to identify, assess and manage risks throughout the portfolio lifecycle.
- Stakeholder Engagement: Active and strategic stakeholder engagement helps in addressing their expectations and aligns them with the portfolio’s benefits.
- Resource Balancing: Balancing resources efficiently across the portfolio ensure maximum value realization.
While individual organizations may have different portfolio management approaches, adhering to recognized standards, leveraging organizational assets effectively, and following the established best practices ensure a consistent and robust portfolio management practice. The Portfolio Management Professional (PfMP) certification from PMI is a great way to achieve this by equipping professionals with the knowledge and skills needed to align strategy with execution successfully.
Practice Test
True or False: Portfolio management standards and protocols should be universally applied without taking into account the unique nature of the organization.
- True
- False
Answer: False
Explanation: Portfolio management standards and protocols should be tailored to the unique needs, assets, and context of the organization for optimal results.
Which of the following is not a key component in determining portfolio management standards and protocols?
- A. Organizational culture and structure
- B. Information systems
- C. Subject-matter experts
- D. Personal preferences of the portfolio manager
Answer: D. Personal preferences of the portfolio manager
Explanation: While the portfolio manager plays a key role, decisions should not be based on personal preference but on industry standards, organizational needs, and the best use of available assets.
True or False: Consulting with subject matter experts is a best practice when establishing portfolio management standards.
- True
- False
Answer: True
Explanation: Subject matter experts possess specialized knowledge which can be critical in making informed decisions and establishing best practices in portfolio management.
In order to establish consistent portfolio management practices, it is important to:
- A. Use industry standards as a guideline
- B. Adapt practices to fit the organization’s unique context
- C. Both A and B
- D. None of the above
Answer: C. Both A and B
Explanation: Industry standards provide a solid foundation, whereas adapting these standards to the organization’s unique context makes them more applicable and effective.
A key aspect of portfolio management is:
- A. Using information systems for analysis and decision making
- B. Ignoring industry standards to maintain exclusivity
- C. Relying solely on financial data for decision making
- D. Disregarding the input of subject matter experts
Answer: A. Using information systems for analysis and decision making
Explanation: Information systems are an important asset in portfolio management as they provide valuable data and insights for effective decision making.
True or False: The best practices in portfolio management are static and do not evolve over time.
- True
- False
Answer: False
Explanation: Best practices in portfolio management evolve over time due to changes in industry standards, advancements in technology, and variations in organizational needs and structures.
What is best practice in managing a portfolio?
- A. Strict adherence to protocols and standards regardless of the outcomes
- B. Regularly reviewing and updating standards and protocols as per organizational needs and industry evolution
- C. Disregarding organizational assets while setting portfolio management standards
- D. None of the above
Answer: B. Regularly reviewing and updating standards and protocols as per organizational needs and industry evolution
Explanation: Regular reviews and updates ensure that the portfolio management practices stay relevant and effective.
True or False: Portfolio management standards and protocols should always prioritize financial results over strategic alignment.
- True
- False
Answer: False
Explanation: While financial outcomes are important, strategic alignment of the portfolio with organizational goals is as crucial in achieving long-term success.
Establishing portfolio management practices includes all of the following EXCEPT:
- A. Formulating portfolio management standards
- B. Identifying the subject-matter experts
- C. Following industry benchmarks
- D. Ignoring organizational assets
Answer: D. Ignoring organizational assets
Explanation: Organizational assets, such as information systems and subject matter experts, are crucial in establishing portfolio management practices.
True or False: It is not necessary to use organizational assets such as information systems to establish portfolio management standards.
- True
- False
Answer: False
Explanation: Information systems are key organizational assets that provide data and insights, which are crucial in shaping portfolio management standards and practices.
Interview Questions
What are the key components to establish consistent portfolio management practices?
Some of the essential components involve setting up portfolio management standards, protocols, and rules. Leveraging organizational assets such as information systems, subject-matter experts, and enterprise environmental factors are significant. Reference to industry standards and guidelines like The Standard for Portfolio Management by PMI can also be beneficial.
What is the role of an information system in establishing portfolio management practices?
Information systems play an essential role in organizing, storing and analysing data related to various projects within the portfolio. They support portfolio managers in decision-making, risk assessment, resource allocation, and in tracking the progress of projects.
What does The Standard for Portfolio Management by PMI consist of?
The Standard for Portfolio Management by PMI includes guidelines and best practices for portfolio management. It encompasses different domains of portfolio like strategic alignment, governance, performance management, risk management, and communication management.
Why is the use of subject-matter experts (SMEs) crucial in portfolio management?
SMEs provide valuable insights due to their deep knowledge of a specific area. They can be instrumental in assessing the feasibility of projects, guiding the project team, and mitigating the potential risks. They help in the design and implementation of standards, protocols, and rules in portfolio management.
What are some of the best practices in portfolio management based on industry standards?
Some best practices include aligning projects with overall business strategy, establishing robust governance structure, adopting an effective risk management strategy, maintaining a balance between risk and return, and utilizing structured portfolio review and reporting mechanisms.
How does strategic alignment in portfolio management help organizations?
By ensuring all projects and programs within a portfolio align with the larger organizational strategy, resources can be effectively managed. It helps in prioritization of projects based on strategic importance, ensuring that the projects with the most potential for achieving strategic goals get the requisite support and resources.
How can industry standards be used to establish portfolio management practices?
Industry standards, such as those provided by PMI, represent universally accepted best practices in portfolio management. They provide systematic procedures and processes which can be adopted by organizations to manage their portfolios effectively.
How does effective risk management contribute to portfolio management?
Effective risk management allows the identification, assessment and mitigation of risks that could affect the progress of the projects in the portfolio. It ensures that catastrophic impacts are avoided, and aligns the risk appetite of the organization with the strategic objectives of the portfolio.
How does governance structure support consistent portfolio management practices?
A governance structure provides clarity around roles and responsibilities related to portfolio management. It facilitates decision-making, ensures alignment with business strategy and adherence to standards, protocols and rules.
What role does communication management play in portfolio management?
Good communication is paramount in portfolio management. It ensures transparency, helps in stakeholder management, enables timely decision making, promotes team collaboration and optimizes the workflow by keeping everyone in the loop and managing expectations.
How can resource allocation be optimized in portfolio management?
Resource allocation can be optimized through strategic alignment, prioritizing projects with high value or return, utilization of data and analytics through information systems, and efficient resource management practices like load balancing and capacity planning.
What is the importance of performance management in portfolio management?
Performance management in portfolio management helps in monitoring and controlling the projects’ progress towards their objectives. It includes metrics for project efficiency, effectiveness, impact and overall portfolio value.
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