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What are the benefits of portfolio management

what are the benefits of portfolio management

The Benefits of Project Portfolio Management

Many companies concentrate their management efforts on executing individual projects but fail to give the same attention to the project portfolio itself. The result is suboptimal performance and returns for the portfolio as a whole. Project portfolio management (PPM) attempts to rectify this situation by ensuring that:

The right mix of projects are in the portfolio to maximize overall returns. The project portfolio is composed of projects that offer widely differing value. Projects vary by their short- and long-term benefits, their synergy with corporate goals, and their level of investment and anticipated payback. Taking these factors into account, PPM seeks to optimize the returns of the entire portfolio. It selects the most value-producing projects for execution, ensuring that funds are directed toward deserving initiatives. It also eliminates overlaps and redundancies between projects, saving time and costs.

The risks posed by the projects in the portfolio are balanced. Just as an investor attempts to minimize risk and maximize returns by diversifying portfolio holdings, companies should assess and balance the risks of the projects in their portfolios. A conservative portfolio, like an investment portfolio skewed toward bonds, may minimize risk and preserve principal, but it also limits the potential returns. Conversely, an aggressive project portfolio may offer greater odds of a "big win" but at a substantially higher risk of failure or loss. PPM diversifies the company's project portfolio, balancing risks with potential returns.

Resources are allocated optimally across those projects. With a

limited number of people, all projects must compete for resources. PPM quantifies, compares, and prioritizes projects to help companies identify and staff the most valuable ones instead of unwittingly wasting resources on other, less useful efforts. Through high-level executive oversight, it resolves resource conflicts between ongoing projects. It also incorporates formal sourcing strategies to determine the skill sets needed for each project and the best source of those resources.

Performance problems are corrected before they become major issues. PPM cannot eliminate performance problems, but it can help address them early on before they fester. Swiftly recognizing, escalating, and responding to execution issues keeps projects on track and avoids compromising dependent or downstream projects.

Projects remain aligned with business goals throughout their execution. PPM provides continuous management oversight, regular communication and coordination, and constant course correction to minimize project drift. It redirects projects when business objectives change and maintains alignment.

Projects receive the support and oversight needed to be completed successfully. By elevating the prioritization and oversight responsibilities to the executive level, PPM ensures that projects receive the backing they need to succeed. Executives have the authority and business knowledge to ensure alignment between projects and business strategies; to fine-tune the timing and order of projects to exploit synergies, avoid rework, and eliminate redundancies; to optimally assign resources; to direct funds to the most valuable initiatives; and to help resolve critical performance issues.

-- Ian Hayes. Senior Consultant, Cutter Consortium

The Benefits of Project Portfolio Management

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