A recent study conducted in 2019 stated that the global portfolio management market was valued at $4.2 billion, which will further increase by 13.4% in the next seven years. This aspect of project management is becoming more and more widely accepted over time and holds significant value for organizations. Is portfolio management similar to project management? To understand the basics of what portfolio management is with respect to project management and the important concepts involved, read the article below.
What Is A Portfolio?
All organizations have a number of programs and software they use to complete and manage their projects, and these companies also have a number of ongoing projects at the same time. This means the larger an organization is, the more complex the project management system gets. Keeping track of all the projects and processes at the same time becomes difficult over time, which is why many companies create a portfolio.
A portfolio is a place where all the projects, programs, and software that are used by an organization are collected. These can include the processes and programs used to manage other projects, operations, or functions. A portfolio is created to help companies coordinate their processes and projects on a larger scale to make sure the projects get deployed successfully and on time. It helps improve the efficiency of all resources and optimization of the programs that the organization has invested in. It is a tool to help enterprises achieve maximum value for their investments.
There are many factors involved in making a portfolio. These include the skill and ability of the portfolio manager, the sponsor, the visibility of all the programs and projects, the ability of the organization to accept the strategic implementation of changes, and the level of alignment towards governance.
What Is Portfolio Management?
Now that there is a clear understanding of what a portfolio is, one can start discussing more about portfolio management. The portfolio management of an organization with respect to project management that includes their biggest assets such as their projects and programs. These programs and projects are selected, prioritized, and managed in a way that they are always aligned to the main business goals of the company.
The main goal of portfolio management for any company is to make sure that the business operates and functions normally while there are new changes in programs being implemented across the organization. The main goal is to keep working at the same level (or improved) of productivity and optimize the ROI on the implemented changes at the same time.
The programs and projects are considered to be investments for the company. They need to be carefully managed so that they can continue to deliver optimal value to the enterprise. Portfolio managers are the ones in charge of managing the portfolio and they are responsible for understanding what the strengths and weaknesses are of the organization’s investments.
Why Is Portfolio Management Important?
There are many challenges that occur when project management strategies are implemented ineffectively. According to a recent study, these challenges have cost organizations up to $109 million in project investments out of every $1 billion. This is more than 10% of the overall expenditure in a project, and these challenges can even lead to failure in said projects.
This is where project portfolio management comes into the picture. Portfolio management can prove to be a valuable asset to a company because it can help organizations plan their future strategies and keep track of how their current strategies are working. It keeps the risk tolerance of an organization as well as its budget and ROI in mind before making future investments. It also provides a holistic view of all current and past projects, which helps companies improve their risk management strategies and predict future risks before they can occur.
Portfolio management also helps organizations gain a better understanding of their resources and see if they have enough to take on any new projects. This helps in the management of the existing projects so that all of them get delivered on time and are of high quality.
It helps align the goal of each individual project with the overall organizational goals and helps in the improvement of flaws in the processes within the company.
Types Of Portfolio Management
There are three types of portfolios created to help organizations achieve optimal operational efficiency as well as success in their projects. These three types of portfolios are designed to address different problems that project in an organization face. Generally speaking, the types of portfolios are:
- Project portfolios that focus on value creation for the company’s projects with the help of strategic and company-wide projects
- Project portfolios that are focused on improving operational efficiency in an organization
- Portfolios that are focused on completing the projects necessary to maintain compliance regulations for organizations as well as their projects
How Portfolio Management Works?
The portfolio management process starts with defining all the projects in a portfolio and dividing them into categories. After all the projects have been identified and categorized, they get validated to see if they are aligned with the organization’s business objectives. Then the projects get prioritized and a schedule is created. The portfolio also includes a uniformed data bank for all organizational resources which is created as the next step.
All resources from this bank get allocated to the projects depending on their priority, availability, and requirements. Then the budgets are compared to see if all project needs are being met monetarily in the portfolio and arrangements and rearrangements are made to sort out any problems that may arise.
Once all the above-mentioned steps have been completed, the projects are managed individually and overseen as a whole in the portfolio. This process gets repeated on a regular basis to make sure all projects are working optimally.
Portfolio management is gaining importance across the globe as a sound way to manage projects and company assets. Organizations can use portfolio management services to improve their operations and project processes. It is critical for enterprises and individuals to invest in widely-recognized Project Management Certification courses for them to gain a better understanding of project management best practices and how program and portfolio management work in an organization.