Portfolio Management Knowledge Areas

Portfolio Management Knowledge Areas


Portfolio Performance Management

The objective of portfolio management is to determine the optimal mix and sequencing of proposed projects to best achieve the organizational strategy and objectives. Portfolio performance management is the systematic planning, measurement, and monitoring of the portfolio's organizational value through achievement against these strategic goals (business value is explained in Section 1). In addition, the performance management process manages the sourcing of key resources such as finance, assets, and human resources to ensure optimal returns.

Organizational strategy can be expressed through the organization's vision and mission, including orientation to markets, competition, and Other environmental factors. Effective organizational strategy provides defined directions for development and growth in addition to performance measurement metrics for success. Portfolio performance management is critical in closing the gap between organizational strategy and the fulfillment of that strategy.

Organizations can further facilitate the alignment of these components by strengthening organizational enablers such as structural, cultural, technological, and human resource practices.

Through the identification of organization value areas where components are most likely to impact, the organization can clearly justify why and how investing resources in the selected projects Will benefit the organization.

Sometimes a project may affect two or three value areas simultaneously, such as increasing revenues, bringing in new customers, and increasing revenue from existing customers, Acceptance that not every Project Will be valuable to the organization is the key to making decisions, Performance metrics are the mechanism used tor targeting areas of measurement for assessing how the mix of portfolio components is performing. Quantitative qualitative, in addition to tangible and intangible, measures are used.

Examples of the quantitative measures include:

·         Increases in revenue attributable to the portfolio,

·         Decreases in cost attributable to the portfolio,

·         Change in net present value (NPV) of the portfolio,

·         Return on investment (ROI) of the portfolio,

·         Internal rate of return (IRR) of the portfolio, and

·         Percentage by which cycle times are reduced due to the portfolio.

Examples of the intangible, qualitative measures include:

·        Degree of strategic alignment,

·        Degree to which portfolio and organizational risks have been adequately managed by undertaking the portfolio components,

·        Recognition Of legal and regulatory compliance, and

·        Sustainability and corporate responsibility.

Typical attributes of projects that are collected and analyzed in a portfolio include each project's total expected cost, consumption of scarce resources (human, financial, or material), expected timeline and schedule of investment magnitude and timing of benefits to be realized, and the relationship or interdependencies Other components in the portfolio. Portfolio value is delivered when the portfolio components are utilized by the organization, community, customer, or Other portfolio beneficiaries. Benefits are sometimes not realized until long after the end of active work on a portfolio component.

Many organizations Will express progress in the form of a dashboard, which can quickly communicate status to the sponsor and stakeholders on how the portfolio is performing against expectations. In addition, reporting is communicated through variance reports, benefits realization, and resource utilization reports.

The Portfolio Performance Management processes are:

6.1 Develop Portfolio Performance Management Plan—Developing the performance management plan as to how portfolio value is defined and realized through the portfolio measurements and targets, alignment to organizational strategy and objectives, and roles and responsibilities in executing the plan.

6.2 Manage Supply and Demand—identifying and allocating the required portfolio resources capacity and capabilities according to each component proposal or plan.

6.3 Manage Portfolio Value—Measuring, capturing, validating, and reporting portfolio value at an aggregate level delivered by portfolio components with the goal of maximizing return on investment (within an acceptable level of risk).