Importance of Portfolio Management - Essay Example

PORTFOLIO MANAGEMENT AND PROGRAMME MANAGEMENT By Introduction A strategy flowing through an organization passes through many functional boundaries such as business management, strategy management, and project management (Morris and Jamieson, 2004). Translating corporate strategy to program or project strategy involves a stream of processes practices and people factors. This paper discusses portfolio management and program management as some of the methods used in translating corporate strategy to program or project strategy. Key Definitions Project: This is a process structured to produce outputs in the constraints (time, cost and quality). In so doing it considers other factors including risks and resource (Tjahjana, Dwyer and Habib, 2009). Another definition is that it is a temporary endeavour to create a unique product, service result. The use of the word “temporary” suggests it is time oriented and therefore has a definite end date. Projects are often created in response to business changes. Programme: This is a formal process of managing multiple ongoing projects within an organization. A programme aims at grouping related projects for optimum coordination of resources at maximum beneficial allocation for the organization. They do not have a definite time boundary and they are constant (Tjahjana, Dwyer and Habib, 2009). Programmes thrive on the notion that it is more economical to group projects together in order to streamline management, staffing, purchasing and other work. Portfolio is a collection of programmes or projects that are grouped to facilitate management of the work to meet strategic objective (Pennyparker and Ritchie, 2005). A similar description is the total investments of the organization including all of its programmes and projects (Mlybari, 2011). Portfolio Management According to Mlybari, portfolio management can be defined as a collection and management of an organization’s programmes, projects and other works to achieve the organization’s strategic objectives considering resources limitation. Portfolio management is often characterized by business leadership alignment. It provides a comprehensive view of all projects and initiatives that take place within and across an organization thus allowing a better understanding of them. This further helps in concentrating on what is significant, avoiding duplication and informing decision making (Mlybari, 2011). While both portfolio and programme management focus on prioritizing and optimizing the business benefits, portfolio management tends to be more about the selection and prioritization of projects or programmes (Morris and Jamieson, 2004). Pennypacker and Ritchie argue that one can accomplish a project portfolio management through application and integration of project portfolio processes. These methods include inventory, analysis, planning, execution, monitoring or control, and portfolio improvement. Morris and Jamieson also present a generic portfolio management that consists of five stages namely: Solicitation, selection, prioritization, registration and resource final allocation. In the case study of a global pharmaceutical company, portfolio management was found to be an essential element in the way the company handled drug development projects. The pharmaceutical company had a dedicated portfolio management practice that played a critical part in project development. It used quantitative methods incorporated in a dedicated portfolio management process to select and prioritize projects (Morris and Jamieson, 2004). Another scenario where project portfolio management would be much more suited is in the engineering and construction industry. Here, all projects are bespoke and many projects are running concurrently. The project process is same for all projects to ensure consistency and quality of delivery for each project. Profits and business depend on this and therefore project portfolio management is at the centre of operational management activities (Successful Project Management). Programme Management There is confusion in literature regarding the definition of programme management. Tjahjana, Dwyer and Habib describe programme management as the alignment of ongoing projects within an organization. Pennypacker and Ritchie, on the other hand, define it as the application of knowledge, skills and techniques to programme activities to meet programme requirements. Morris and Jamieson argue that most companies consider that programme management implies the management of business benefits as well as the ideas of the product, brand, or resource management. It is about the daily management of programmes to deliver business value. Programme management is a fundamental method for ensuring maximum benefits for an organization from integration of project management activities. It is a tool of strategic reflection (Morris and Jamieson, 2004). According to Mlybari (2011), programme management’s key feature is business sponsorship. Therefore, the business needs sponsor the programmes based on decisions at portfolio management level. Programme management provides benefits such as delivering more strategic objectives, increasing efficiency, reducing risk and providing information to support the core business of an organization, besides ensuring that the strategic delivery of each project is consistent with that of other projects and their own strategies (Mlybari, 2011). In the United Kingdom, the Office of Government Commerce considers the alignment between strategy and projects as one of the significant benefits associated with programme management. They proposed a programme management process consisting of four stages namely: Identifying, defining and establishing a programme. Managing the portfolio. Delivering benefits. Closing the programme (Morris and Jamieson, 2004). The Office of Government Commerce perceives the structure of programme management as one where the programmes stem from business strategies and initiatives. A hierarchy of programmes, projects and business operations further proceeds from the business strategies and initiatives. The next stage is creating the objectives and strategies for each program or all programs combined. These goals and strategies aligne consequently with those of the organization. Then is the alignment of objectives and strategies for each project with their respective programs (Morris and Jamieson, 2004). In the case of the International Transportation Company based in the UK, programme management is defined as the management of a group of projects with a similar or same aim (Morris and Jamieson, 2004). The company even cites an example where a single major infrastructure programme was implemented at all the company’s major sites. This comprised a total of 146 projects managed using major projects project management process. Some examples of scenarios where programme management can be preferred are; hosting the Olympics, for example the London 2012 Olympics, or any other major sports event, and developing and marketing of a particular unknown drug to combat a known disease after discovering the active molecule (Successful Project Management). References Morris P. & Jamieson A. (2004). Translating Corporate Strategy into Project Strategy: Realizing Corporate Strategy Through Project Management. Pennsylvania, Project Management Institute, Inc. Mlybari, E.A 2011, Managing Value, Requirements and Risk in the Appraisal Stage of UK Construction Projects. Ph.D thesis, The University of Leeds. Available from http://etheses.whiterose.ac.uk/2403/1/My_Final_Thesis_after_VIVA-vf.pdf [26 Nov 2014] Pennypacker J. & Ritchie P. (2005). The Four Ps of Strategy Execution: Integrating Portfolio, Program, Project, and Performance Management. Toronto. Available from http://crossderry.files.wordpress.com/2008/01/ntr04_strategicperformancemgmt.pdf [26 Nov 2014] Successful Project Management, Project Portfolio Management vs. Programme Management –what is the difference? Available from http://www.successful-project-management.com/project-portfolio-management.html [26 Nov 2014] Tjahjana, L., Dwyer, P., & Habib, M. (2009). The program management office advantage a powerful and centralized way for organizations to manage projects. New York, American Management Association. Read More