Functional managers and process owners with resources portfolio

Project Management Institute

The Standard for

©2006 Project Management Institute, Inc. All rights reserved.

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©2006 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA iii

Contents

Chapter 1—Introduction ........................................................................................................3 1.1 Purpose of The Standard for Portfolio Management ..............................................4 1.1.1 Audience for The Standard for Portfolio Management ............................4
1.2 What is a Portfolio? ............................................................................................4 1.3 What is Portfolio Management? ...........................................................................5 1.4 The Link with Organizational Strategy ...................................................................6 1.5 The Link Between Portfolio Management and Organizational Governance ...............8 1.6 The Link Between Portfolio Management and Operations Management ..................9 1.6.1 Finance ............................................................................................10
1.6.2 Marketing .........................................................................................10
1.6.3 Corporate Communications ................................................................10
1.6.4 Human Resource Management ..........................................................10
1.7 The Links Between Portfolio Management and Program and Project Management .11 1.8 Role of the Portfolio Manager ............................................................................11 1.8.1 Benefits Realization ..........................................................................11
1.8.2 Program and Project Management Methods and Techniques ................12
1.8.3 Process Development and Continuous Improvement ............................12
1.8.4 General Management Skills ...............................................................12
1.9 Portfolio Management Metrics ...........................................................................12 1.10 Portfolio Management Reporting ......................................................................12 1.10.1 Program/Project Reporting ...............................................................13
1.10.2 Financial Reporting ..........................................................................13

Chapter 2—Portfolio Management Process and Organization ................................................15 2.1 Portfolio Management Process Overview ............................................................15 2.1.1 Links with Strategy ............................................................................15
2.1.2 Portfolio Management Process Cycle ..................................................16
2.2 Portfolio Stakeholder Roles and Responsibilities ................................................16 2.2.1 Executive Managers ..........................................................................16
2.2.2 Portfolio Review Board .......................................................................17
2.2.3 Portfolio Managers ............................................................................17
2.2.4 Sponsors ..........................................................................................17
2.2.5 Program Managers ............................................................................17
2.2.6 Project Managers ..............................................................................17
2.2.7 Program/Project Management Office ..................................................17
2.2.8 Project Team .....................................................................................18
2.2.9 Operations Management ....................................................................18
2.2.10 Functional Managers .......................................................................18
2.2.11 Finance Managers ...........................................................................18
2.2.12 Customers ......................................................................................18
2.2.13 Vendors/Business Partners .............................................................18

Section III—Appendices

Appendix A—(Reserved for docummenting future updates) ...................................................45

Glossary ..............................................................................................................................77

Index by Keyword ................................................................................................................79

©2006 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA vii

Foreword

I trust that each of you will find this latest addition to the PMI library of standards beneficial to yourself as well as to your organization.

The Standard for Portfolio Management is organized as follows:
Chapter 1 – Introduction to Portfolio Management: Defines key terms associated with portfolio management and provides an overview of the rest of The Standard for Portfolio Management.

Chapter 2 – Portfolio Management Process and Organization: The key components of the portfolio management context.

©2006 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA xi

Chapter 1

Introduction to Portfolio Management

©2006 Project Management Institute, Four Campus Boulevard, Newtown Square, PA 19073-3299 USA 3

1.1 Purpose of The Standard for Portfolio Management

Defined, a portfolio is a collection of projects (temporary endeavors undertaken to create a unique product, service, or result) and/or programs (a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually) and other work that are grouped together to facilitate the effective management of that work to meet strategic business objectives. The components of a portfolio are quantifiable; that is, they can be measured, ranked, and prioritized.

The projects or programs (hereinafter referred to as ‘‘components’’) may not neces-sarily be interdependent or directly related. At any given moment, the portfolio repre-sents a view of its selected components that both reflect and affect the strategic goals of the organization—that is, the portfolio represents the organization’s set of active programs, projects, subportfolios, and other work at a specific point in time.

A portfolio reflects investments made or planned by an organization, which are aligned with the organization’s strategic goals and objectives. It is where priorities are identified, investment decisions are made, and resources are allocated. If a portfolio’s components are not aligned to its organizational strategy, the organization can reason-ably question why the work is being undertaken.

All components of a portfolio exhibit certain common features:
● They represent investments made or planned by the organization
● They are aligned with the organization’s strategic goals and objectives
● They typically have some distinguishing features that permit the organization to group them for more effective management
● The components of a portfolio are quantifiable; that is, they can be measured, ranked and prioritized.

Table 1-1. Comparative Overview of Project, Program, and Portfolio Management

The middle of the triangle (‘‘High-level Operations Planning and Management’’and ‘‘Project Portfolio Planning and Management’’) represents the processes that establish appropriate actions required to meet the goals. These processes interact with the bottom of the triangle, in which the contribution of all operational activities must be compared to ongoing value creation, and the contribution of all project activities must be compared to the creation of new value.

‘‘Management of On-going Operations’’ and ‘‘Management of Authorized Programs and Projects,’’ which appear at the bottom of the triangle, correspond to those compo-nents that ensure the organization’s operations and portfolios are executed effectively and efficiently.

and management. The project side of the organization uses program/project manage-ment processes that enable efficient project planning and implementation activities. At the tactical management level, the question is: ‘‘Is this operation or project managed efficiently with optimal results, from an optimum use of resources, with optimum effort, and complying with organizational values and standards?’’
Organizations rely on projects and programs in order to achieve their strategic intent. The application of portfolio management allows this interconnection by the sharing of goals and the allocation of resources. The flow of control is as follows:

1. Strategic intent and prioritization provide direction for determining the financial resources that should be allocated to the portfolio.

1.5 The Link Between Portfolio Management and Organizational Governance

Portfolio management is one of several governance methods used within organizations. Governance is the act of creating and using a framework to align, organize, and execute activities in a collectively coherent and intelligible manner in order to meet goals. Organizational governance establishes the limits of power, rules of conduct, and proto-cols of work that organizations can use effectively to advance strategic goals and objectives and to realize anticipated benefits.