Portfolio decisions span the selection, prioritization, and authorization of various aspects related to a portfolio. These include components, plans, budget, and roadmap. A comprehensive knowledge in these areas forms the core of an efficient portfolio manager’s skill set.
- Components: The components of a portfolio can include an assortment of investments, ranging from stocks, bonds, to mutual funds, among others, depending on the nature of the portfolio.
- Plans: A well-structured plan outlines the objectives and strategies for managing the portfolio, ensuring that it aligns with the goals of the organization.
- Budget: The budget factor is primarily concerned with the allocation of resources within the portfolio, and how these resources would be managed.
- Roadmap: A roadmap provides a strategic view of where the portfolio intends to go within a certain timeframe, charting out the means to get there, including scheduling and risk management.
Recommendations and Approvals
As a Portfolio Manager, crafting strong recommendations starts with proper analysis and evaluation of the portfolio’s performance and potential risks. Herein, it’s pertinent to remember that these recommendations should not be just financial predictions, but strategic inputs that align with the organizational goals.
To obtain approval on recommendations, you should adhere to the governance model in place in your organization. This generally involves presenting your recommendations to the portfolio steering committee or the relevant authority and gaining their consent.
For example, consider a hypothetical situation where a part of your organization’s portfolio is underperforming. After thorough analysis, you infer that the underperformance is due to inadequate resources. Accordingly, you recommend a budget increase for that section of the portfolio. The process would involve:
- Preparing and submitting a detailed proposal regarding the budget overhaul.
- Justifying the necessity of the proposed change during a steering committee meeting.
- If approved, implementing the change and communicating the same to all stakeholders.
Importance of Effective Communication
One critical aspect often overlooked during this process is effective communication. Portfolio Managers need to communicate clearly, succinctly, and convincingly to get approval from key decision-makers. Highlighting the importance and benefits of your recommendations can help incentivize your audience to provide their approval.
For instance, in the above example, explicitly mentioning how the budget increase could lead to better overall portfolio performance and indirectly contribute to organizational success should form a part of your communication strategy.
Conclusion
Overall, the ability to make strong recommendations and successfully get them approved is crucial for any Portfolio Manager striving for efficiency and optimization. It demands not only an understanding of various portfolio aspects but also fine communication skills. With a PfMP certification, you acquire the necessary proficiency and increase your caliber in effectively managing portfolio decisions in line with the governance model of your organization.
Practice Test
True or False: It is vital to make recommendations and obtain approval regarding portfolio decisions from key decision makers.
• True
• False
Answer: True
Explanation: Key decision makers have the authority to approve or reject recommendations so it’s important to engage them in portfolio decisions.
The governance model highlights which of the following?
• A. Key decision makers only
• B. The hierarchy of employees only
• C. Roadmap only
• D. Key decision makers, employees hierarchy, roadmap, budget, and more
Answer: D. Key decision makers, employees hierarchy, roadmap, budget, and more
Explanation: The governance model is a comprehensive blueprint covering all aspects of an organization including decision makers, hierarchy, roadmap, budget etc.
True or False: Components and plans are not part of portfolio decisions.
• True
• False
Answer: False
Explanation: Components and plans are fundamental parts of portfolio decisions and should be included in discussions with key decision makers.
Communication with key decision makers in portfolio decisions should be:
• A. Formal only
• B. Informal only
• C. As per the choice of project manager
• D. Both formal and informal
Answer: D. Both formal and informal
Explanation: Depending on the situation, communication with key decision makers may be formal or informal, but all such communications should be documented.
True or False: It is not necessary to authorize the execution of the portfolio after approval.
• True
• False
Answer: False
Explanation: Authorization after approval is the next step in executing the portfolio.
Who should be making recommendations for portfolio decisions?
• A. Project manager only
• B. Governance board only
• C. Both project manager and governance board
• D. Any employee
Answer: C. Both project manager and governance board
Explanation: While the project manager often makes the recommendations, important decisions should involve the governance board as well.
The roadmap in portfolio management refers to:
• A. The journey of the project manager
• B. The travel plan of the organization
• C. The strategic plan outlining the project’s steps and goals
• D. The hierarchy of the organization
Answer: C. The strategic plan outlining the project’s steps and goals
Explanation: The roadmap in portfolio management provides a detailed plan and direction for the project.
True or False: The budget is not necessary for portfolio decisions.
• True
• False
Answer: False
Explanation: Budget is a vital component of portfolio decisions as it outlines the financial capability of the project.
Governance models are:
• A. Fixed and cannot be changed
• B. Flexible and can be changed
• C. To be decided by the project manager
• D. Not significant in portfolio management
Answer: B. Flexible and can be changed
Explanation: Governance models are flexible and may change depending on the needs of the organization or project.
Which of the following is not a consideration in portfolio decisions?
• A. Components
• B. Plans
• C. Roadmap
• D. Personal preference of project manager
Answer: D. Personal preference of project manager
Explanation: Portfolio decisions should be made based on strategic factors such as components, plans, and roadmaps rather than personal preferences.
Interview Questions
What is the role of key decision-makers in the execution of a portfolio?
Key decision-makers in the portfolio governance model, like executives or board of directors, have the responsibility to provide strategic direction, make decisions on the recommendations provided, approve budgets, and authorize the execution of the portfolio.
What kind of recommendations might you make regarding portfolio decisions?
Recommendations may include adding or removing components from the portfolio, reallocating resources, adjusting the timeline, or changing the strategic focus or intended outcomes of the portfolio.
Why is obtaining approval from key decision-makers crucial in portfolio management?
Obtaining approval from key decision-makers ensures alignment with the strategic goals of the organization, guarantees the resources and necessary support for the portfolio, and authorizes the execution of the portfolio.
How can the portfolio roadmap help in obtaining approval for portfolio decisions?
The portfolio roadmap visualizes the timeline, key milestones, dependencies, resources, and intended outcomes of the portfolio, making it an effective tool for communication with key decision-makers and helping them understand the need for certain decisions and their impacts.
What role does the budget play in making recommendations and obtaining approval?
The budget is a significant factor in portfolio decisions. Recommendations should consider the budget and provide a clear estimate of the costs involved. The budget’s approval ensures that the portfolio has the necessary financial resources for execution.
What are the main components of a portfolio that you might need to get approval for?
The main components that require approval are the projects and programs within the portfolio, resource allocation, timeframes, budget, and the strategic alignment of the portfolio.
What happens if a portfolio decision does not align with the governance model?
If a portfolio decision does not align with the governance model, it may risk the strategic objectives of the organization and might not get the necessary approval from key decision-makers, which could delay or jeopardize the portfolio’s execution.
How often should the portfolio be reviewed by key decision-makers?
The portfolio should be reviewed regularly – typically on a quarterly basis or whenever a significant decision needs to be made.
How can effective communication with key decision-makers aid in obtaining approval for portfolio decisions?
Effective communication ensures that key decision-makers understand the reasons behind recommendations, the value and benefits to the organization, the risks involved, and how the portfolio aligns with strategic objectives, thereby increasing the chances of approval.
Why is the portfolio governance model important?
The portfolio governance model directs how portfolio decisions should be made and who should be involved in the decision-making process. It provides a structure for decision-making and enables efficient and effective portfolio management.
What should be done if a portfolio decision isn’t approved?
If a portfolio decision isn’t approved, the feedback and reasons for non-approval should be considered, the decision or approach should be re-evaluated and revised, and then resubmitted for approval.
What is the role of a Portfolio Management Professional (PfMP) in the decision-making process?
The PfMP’s role is to manage the portfolio in alignment with the organization’s strategy, make viable recommendations for portfolio decisions, present these decisions to key decision-makers, and procure their approval for executing these decisions.
How should a PfMP approach changes in a portfolio?
A PfMP should approach changes by analyzing the change’s impact on the portfolio and the organization, deciding whether it is advantageous to adopt the change, and then making a recommendation to the key decision-makers for their approval.
What potential consequences can occur if key decision-makers are not adequately involved in portfolio decisions?
Inadequate involvement of key decision-makers can lead to misalignment with business objectives, inefficient use of resources, poor decision-making, and eventually potential failure of the portfolio to deliver expected outcomes.
What kind of information should be communicated to key decision-makers when making recommendations?
When making recommendations, the PfMP should communicate the anticipated benefits, risks, impacts on resources, and alignment with strategic objectives, along with the cost and timeline of the portfolio. Providing all necessary information helps decision-makers make well-informed choices.
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