What is Portfolio Management

A portfolio is defined as a set of projects and programmes that are managed by an organization. A portfolio can consist of multiple programmes and/or multiple projects. The projects within a portfolio can also be different from each other. However the programmes within a portfolio are formed by related projects. The portfolio represents the implementation of an organization’s strategy.

Portfolio Management is the coordinated management of the projects and programmes that help achieve specific business objectives. Portfolio management defines priorities based on the business objectives. Projects and programmes that are to be implemented are based on these priorities. The selected projects and programmes will together enable the most effective balance of creating business value, the risk level and resources to be used. Where project management serves to correctly manage projects, portfolio management serves to choose the right projects.

In the MoP (Management of Portfolios) guide, Axelos defines portfolio management as; “a coordinated collection of strategic processes and decisions that together enable the most effective balance of organizational change and business as usual.”

Portfolio management characteristics:

• Portfolio management is focused on return of investment (ROI) and effective implementation of change through both programmes and project
• Portfolio management is used to ensure to an excellent allocation of resources (human resources, assets, materials, funds and services), to achieve the key strategic objectives
• Portfolio management supports organizations to choose the suited future projects and programs by providing structured information to managers
• Portfolio management is used to ensure that the priority of projects and programmes is periodically reviewed in order to invest resources according to the strategic objectives of the organization

Differences between Portfolio management and Programme management

In the blogpost ‘What is Programme management’ we explained the meaning of a Programme and Programme management. According to Axelos a Programme consists of one or multiple projects and serves to meet one or more strategic objectives while focusing on enabling change. Programme Management is the management of all related projects that together form the Programme.

The main difference between Programme and Portfolio management is that Programme management is about similar projects. Portfolio management on the other hand manages projects and programmes within a wide range and even different fields.

Portfolio management: why it matters

Portfolio management can allow organizations to:

• Better allocation and use of resources between projects or programmes
• Better communication between projects and programmes
• Better coordination between projects and programmes

According to Axelos, “in an ever faster and more demanding world like today, portfolio management can help organizations successfully implement change and achieve their strategic goals.” *

Today more than ever organizations that want to keep up with changes and innovations need an approach that focuses not just on projects and programmes, but on portfolio. The challenge is to find the balance between managing business as usual and change, while ensuring that the business and the whole organization are willing, ready, and capable of supporting and assimilating change.

*Axelos: What is Portfolio Management