Chapter 3

Programme and Portfolio Management

Abstract

The differences between project management, programme management and portfolio management are discussed.

Keywords

Portfolio management; Programme management
Programme management can be defined as ‘The co-ordinated management of a group of related projects to ensure the best use of resources in delivering the projects to the specified time, cost and quality/performance criteria’.
A number of organizations and authorities have coined different definitions, but the operative word in any definition is related. Unless the various projects are related to a common objective, the collection of projects would be termed a ‘portfolio’ rather than a ‘programme’.
A programme manager could therefore be defined as ‘The individual to whom responsibility has been assigned for the overall management of the time, cost and performance aspects of a group of related projects and the motivation of those involved’.
Again, different organizations have different definitions for the role of the programme manager or portfolio manager. In some companies, he or she would be called manager of projects or operations manager or operations director, etc., but it is generally understood that the programme manager’s role is to coordinate the individual projects that are linked to a common objective. Whatever the definition, it is the programme manager who has the overall picture of the organization’s project commitments.
Many organizations carrying out a number of projects have limited resources. It is the responsibility of the programme manager to allocate these resources in the most cost-effective manner, taking into consideration the various project milestones and deadlines as well as the usual cost restrictions. It is the programme manager who may have to obtain further authority to engage any external resources as necessary and decide on their disposition.
As an example, the construction of a large cruise ship would be run by a programme manager who coordinates many (often very large) projects such as the ship’s hull, propulsion system and engines, control systems, catering system and interior design. One of the associated projects might even include recruitment and training of the crew.
A manager responsible for diverse projects such as the design, supply and installation of a computerized supermarket check-out and stock-control system, an electronic scoreboard for a cricket ground, or a cheque-handling system for a bank would be a portfolio manager, because although all the projects require computer systems, they are for different clients at different locations and are independent of each other. Despite this diversity of the projects, the portfolio manager, like the project manager, still has the responsibility to set priorities, maximize the efficient use of the organization’s resources and monitor and control the costs, schedule and performance of each project.
As with project management, programme management and the way programmes are managed depend primarily on the type of organization carrying out the programme. There are two main types of organizations:
• Client organizations
• Contracting organizations
In a client-type organization, the projects or programmes will probably not be the main source of income and may well constitute or require a major change in the management structure and culture. New resources may have to be found and managers involved in the normal running of the business may have to be consulted, educated and finally convinced of the virtues, not only of the project itself but also of the ways it has to be managed.
The programme manager in such an organization has to ensure that the project fits into the corporate strategy and meets the organization’s objectives. He or she has to ensure that established project management procedures, starting with the business case through implementation and ending with disposal, are correctly employed. In other words, the full life-cycle systems using all the ‘soft’ techniques to create a project environment have to be in place in an organization that may well be set up for ‘business-as-usual’, employing only well-established line-management techniques. In addition, the programme manager has to monitor all projects to ensure that they meet the strategic objectives of the organization as well as fulfilling the more obvious requirements of being performed safely, minimizing and controlling risks at the same time meeting the cost, time and performance criteria for every project.
Programme management can, however, mean more than coordinating a number of related projects. The prioritization of the projects themselves, not just the required resources, can be a function of programme management. It is the programme manager who decides which project, or which type of project, is the best investment and which one is the most cost-effective one to start. It may even be advantageous to merge two or more small projects into one larger project, if they have sufficient synergy or if certain resources or facilities can be shared.
Another function of programme management is to monitor the performance of the projects that are part of the programme and check that the expected deliverables have produced the specified benefits, whether to the parent organization or the client. This could take several days or months depending on the project, but unless it is possible to measure these benefits, it is not possible to assess the success of the project or, indeed say, whether the whole exercise is worthwhile. It can be seen therefore that it is just as important for the programme manager to set up the monitoring and close-out reporting system for the end of a project, as the planning and control systems for the start.
In a contracting organization, such a culture change will either not be necessary, as the organization will already be set up on a project basis, or the change to a project-oriented company will be easier because the delivery of projects is after all the ‘raison d’être’ of the organization. Programme management in a contracting organization is therefore more of the coordination of the related or overlapping projects covering such topics as resource management, cost management and procurement, and ensuring conformity with standard company systems and procedures. The cost, time and performance/quality criteria therefore relate more to the obligations of the contractor (apart from performance) than those of the client.
The life cycles of projects in a contracting organization usually start after the feasibility study has been carried out and finishes when the project is handed over to the client for the operational phase. There are clearly instances when these life-cycle terminal points occur earlier or later, but a contractor is rarely concerned with whether or not the strategic or business objectives of the client have been met.

Portfolio Management

The APM Body of Knowledge defines portfolio management as:

The selection and management of all of an organisations projects, programmes and related operational activities taking into account resource restraints.

Portfolio management, which can be regarded as a subset of corporate management, is very similar to programme management, but the projects in the programme manager’s portfolio, though not necessarily related, are still required to meet an organization’s objectives. Furthermore, portfolios (unlike projects or programmes) do not necessarily have a defined start and finish date. Indeed portfolios can be regarded as a rolling set of programmes monitored in a continuous life cycle from the strategic planning stage to the delivery of the programme. In a large organization, a portfolio manager may be in charge of several programme managers, while in a smaller company he or she may be in direct control of a number of project managers.
Companies do not have unlimited resources, so the portfolio manager has to prioritize the deployment of these resources for competing projects, each of which has to be assessed in terms of:
1. Profitability and cost/benefit
2. Return on investment
3. Cash flow
4. Risks
5. Prestige
6. Importance of the client
7. Company strategy and objectives
Portfolio management therefore involves the identification of these project attributes and the subsequent analysis, prioritization, balancing, monitoring and reporting of progress of each project or in the case of large organizations, each programme. As each project develops, different pressures and resource requirements appear, often as a result of contractual changes or the need to rectify errors or omissions. Unforeseen environmental issues may require immediate remedial action to comply with health and safety requirements, and there is always the danger of unexpected resignations of key members of one of the project teams.
A portfolio manager must therefore possess the ability to reassign resources, both human and material (such as office equipment, construction plant and bulk materials), in an effective and economical manner, often in emergency or other stressful situations, always taking into account the cost/benefit calculations, the performance and sustainability criteria and the overall strategic objectives of the organization.
The difference between programme management and portfolio management is that in the former the projects being managed are related in some form, while in the latter, the projects may or may not be related. For example, the projects controlled by a portfolio manager may be as diverse as an update of the company’s IT system to the development of a commercial building or shopping centre.
The portfolio manager will normally be part of the senior management team which determines which projects go ahead and which should be shelved, not started or even abandoned.
Clearly the degree of detailed involvement in the individual projects by the portfolio manager must therefore be limited, as no one can be an expert in everything. Instead, the portfolio manager has to ensure that the projects under his control meet the corporate ethical and quality standards as well as the basic criteria of cost, time, performance and the last, but not the least, safety.
As with programme management, the order of priority of the various projects must be established at an early stage, but as circumstances change (often outside the control of the manager or even the organization) the priorities will have to be adjusted to suit the latest overall strategy or the resources (often financial) of the organization.

Further Reading

APM. APM introduction to programme management. APM; 2007.

Bartlett J. Managing programmes of business change. Project Manager Today; 2010.

OGC. An executive guide to portfolio management. The Stationary Office; 2010.

PMI. The standard for portfolio management. PMI; 2008.

Reiss G. The Gower handbook of programme management. Gower; 2006.

Sanwal A. Optimising corporate portfolio management. Wiley; 2007.

Thiry M. Programme management. Gower; 2010.

Venning C. Managing portfolios of change with MSP for programmes and Prince for projects. The Stationary Office; 2007.

..................Content has been hidden....................

You can't read the all page of ebook, please click here login for view all page.
Reset