Earlier today I delivered a presentation on project portfolio management and the importance of project selection to organizational strategy. Much of the discussion was focused on the benefits that an organization can capitalize on from adopting PMI’s portfolio management practices (as described in the Portfolio Management standards) and the details of the framework. One of the key elements highlighted was the phased approach that an organization can adopt in identifying, selecting, prioritizing, planning, and managing projects as part of a portfolio.
In addition to the discussion above, one interesting dialogue was based on a question relating to how organizations define efforts/initiatives. In other words, how do I know if the effort I am scoping is a project, program, or a portfolio? To help better illustrate the question consider the following examples:
- Building an airport
- Implementing an ERP (enterprise resource planning) system
- Creating a new consumer product
- Launching a new service (such as a banking solution)
- Building a city
While of the above efforts are projects versus programs, versus portfolios? To answer this question consider the following definitions from the PMI standards:
- “A project is a temporary endeavor undertaken to create a unique product, service, or result.”
- “A program is a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually”
- “A portfolio is a collection of projects and/or programs and other work that are grouped together to facilitate the effective management of that work to meet strategic business objectives.”
The challenge is that while these definitions offer a solid explanation to the experienced professional, one has to dig deeper into the standards to understand that ultimately the decision on whether to define an effort as a project or a program is ultimately in the hands of the organization. It is up to the leaders of the organization to define the best suited management approach for an initiative.
Having said this though, there are a couple of rules of thumb that I use based on the standards.
- When it comes to the value or benefit derived from a given initiative, if the organization can benefit from the components even if the entire effort is not 100% successful then we are dealing with a program. However, if the failure to deliver one component of the initiative will deem the whole effort to failure then we are dealing with a project.
- On efforts that we deem as programs, the organization needs to be able to staff at least 1 program manager and 2 or more project managers on the various projects that make up the program. If we find ourselves in a position where there is only one person responsible for the “project management” activities and we want to divide the effort into a program, we are opening ourselves to a variety of risks.
- Portfolios are a totally different animal from projects or programs. A portfolio can contain multiple projects and/or programs. It can also contain work that is not project oriented. The primary focus is on managing organizational investment in initiatives in such a manner as to maximize the benefit of such an investment. A portfolio can be managed by an individual or a group of people. As such, the distinction between a portfolio versus a program is a lot easier to understand. Furthermore, organizations may also opt to have multiple portfolios that can be managed separately. These could include a marketing portfolio, an IT portfolio and so forth.