Project/Program/Portfolio: What’s Different?

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.
Going back to the initial examples, I would probably lean toward classifying the building of an airport as a program while the building of the city as a portfolio which could contain multiple projects and programs.  The creation of the product and service as well as the implementation of the IT system will greatly depend on the scope and size along with the size of the organization.  They could be classified as either a project or a program.  As I said earlier, there are too many factors to make a decision without getting into the details of the initiatives and organization.
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4 Responses to “Project/Program/Portfolio: What’s Different?”

  1. Dr Sheriff Hashem – June 9th, 2011

    Thanks Philip. Most ‘projects’ contain ‘subprojects’. Such ‘subprojects’ to ‘projects’ act as ‘projects’ to ‘programs’. Thus managing most ‘projects’ would require ‘program management’ approach rather than mere ‘single project management’. How do you think about that?

    1. Philip R. Diab – June 9th, 2011

      Sheriff, it is true that projects can contain subprojects. However in my experience there is a big difference between managing a subproject as part of a project and managing a project as part of a program. For one thing, the governance and methodology used in each case is very different. Also, the role of the program manager is very different from that of the project manager.

  2. Bayhas – June 9th, 2011

    Hope my comment didn’t come late.
    What I usually explain to my trainees is:
    1- Start by your SMART business objectives. Decompose them into milestones and allocate them on your time frame line.
    2- Now, all your initiatives and work to be taken to achieve every one of these milestones will be under one portfolio, thus having a portfolio for each milestone
    3- Create your set of projects, that will deliver every milestone objective.
    4- Now, if you find that the managing of your portfolios can be easier, if you group some similar projects under one umbrella, then create this umbrella and call it a program
    In your previous examples, Philip, you didn’t mention what are you strategic objectives, making it hard for us to decide which is which. My rule of thumbs, and correct me please if I’m wrong:
    - If you don’t know what it is, then it’s a portfolio :-) Eventually any activity should be aligned to some strategic objective. Otherwise, you’ll end up with orphan projects
    - If you manage your projects based on similarities then your managing programs. Ex. IT projects in our company, Damascus projects…etc.
    I have partly built this experience from Microsoft in its EPM solution, where they ask you first to state your business drivers, prioritize them and kick-off your projects accordingly.
    My 2 cents.. :)

    1. Philip R. Diab – June 13th, 2011

      Thanks Bayhas. One assumption that you’re making is that the projects within the portfolio are related. This can be the case but that does not always have to be true. Sometimes the portfolio can include projects that are unrelated. Thanks for the comment. I appreciate your insight. Philip