This is the second in a short series on Management of Portfolios. The first part, about the foundations of any portfolio management initiative, can be found here.

The thing that makes a portfolio different from a project (well, one of the things) is that it doesn’t have a start, a middle and an end. It’s an ongoing, long-term initiative designed to support and achieve the company’s strategic objectives. To that goal, it could be going on for years. I know, that doesn’t sound like a project, but it is still important for project managers to understand about portfolios as it’s very likely that you are working (or at some point in your career, will be working) on a project that is part of a portfolio. It’s useful, and important, to know how your project fits into the bigger corporate picture.



The Portfolio Definition Cycle


So, if there is no start, middle and end, how does work get done? The portfolio definition cycle is a continuous piece of work that enables senior executives to define what makes it into the portfolio. Think of it as a way of selecting the appropriate projects and programmes, along with business as usual work, to ensure that the business does the right things.

The main effort involved will come from the Portfolio Office team, who will gather information to provide reports and key facts to the decision makers, normally the members of the board or another senior executive team. This gives that group the opportunity to make fact-based decisions about what work to invest the time and effort in doing. They can also get involved with prioritisation, as you’ll see in the 5 step cycle approach below.






5 steps in the cycle


The portfolio definition cycle includes 5 steps to help business managers decide what work is in, and what’s out. These are:

Understand: the first step. It provides that initial understanding of what the portfolio should be achieving. It focuses on defining the scope of the portfolio (useful for when a company has more than one portfolio). It can also include an understanding of any existing change initiatives which could fit into this portfolio. After all, work doesn’t stop just because there isn’t a portfolio to drop the projects into, so it is quite likely that there will be some projects or programmes ongoing that can be absorbed into the portfolio. Brainstorming which projects are out there with a group of project managers, and capturing the results in a tool like Seavus DropMind, can be a good way to ensure that nothing is overlooked.

Categorise: it’s complicated to manage too many change initiatives in a big bucket, so projects and programmes should be categorised. You can then see if any one area is lacking investment. Categorisation can be done on any criteria that suit your business, and you can even set up sub-portfolios.

Prioritise: this step is essential! No business can do every project that they want to, all at the same time. It’s important to prioritise the initiatives inside the portfolio so that the projects and programmes with the best return and the best link to strategy are at the top. These then get the project resources and investment first, so the company gets the benefits. It’s helpful to have a structured prioritisation method so you don’t have to rely on gut feel – if you do, all projects seem to end up as the top priority.

Balance: the portfolio should be balanced. By that, the guidance means that it should make logical sense in terms of timing (not too many projects delivering all at the same time), risk (not too many high risk projects happening at the same time), and resources (ensuring there are resources to do everything; not spending a year doing Finance projects only to leave all the Marketing ones to next year).

Plan: this is mainly the work that the project, programme and portfolio managers will do. The idea is to create a portfolio strategy for that portfolio, and to put together a delivery plan. Then this can be published widely, the executives can publicly declare their support for it and work can begin.