The definition of Portfolio Management is “is the continuous process of identifying and selecting ……..…..a portfolio of projects in alignment with key performance metrics and strategic business objectives” (Source: Microsoft Corporation). Portfolio Management is a top down planning and selection process involving review of alternative types of projects in each type of defined portfolio category and assessing what the mix of project types to be deployed based on their alignment with risks to the organization and rewards when they are successful. The process includes an analysis of the human and capital costs to develop the projects in each portfolio category versus the alignment with strategic objectives and the payback and attainment of key performance objectives to the company. The management of a portfolio of possible or proposed projects that involve the planning of FTE (full time equivalent) human resources required versus those skills available, costs, payback and is always goal driven. See adjacent diagram.
Portfolio Management in a manufacturing and engineering environment typically involves a product portfolio organized by line of business or business segment. Good portfolio management systems are very dependent on having good data about historical project performance from the project management system. Many times an organization will have to choose where to start and if their project management system is weak with poor data, poor schedule performance and poor cost performance will lead the organization to consciously choose to begin their PPM initiative with enhancing to Project Management portion of the system.
Portfolio level reporting during the identification and selection phases includes resource utilization forecasts (full time equivalent of human resources and capital forecasts in dollars) to identify resource over/ under utilization, project schedule overviews (both projects and programs) to view timing of overall project and program delivery and spend forecasts.