Portfolio Management: The SMART framework
As organizations become more project-savvy, the concept of portfolio management is gaining some momentum and growing acceptance.
While inherently complex to set up, manage, and measure its achievements, the benefits of setting up a portfolio are considered worth the pain involved. The question is: what do organizations need to know and do if they wish to take up a portfolio management approach?
As crude as it sounds, organizations exist in a normal business environment to generate revenue (at least in the majority of cases). They are not primarily out there to become project management mature. What this means is that we cannot expect organizations to make high-priority, deliberate efforts to become project management mature.
One can argue that moving to greater project management maturity can provide the necessary springboard from which to setup a robust portfolio structure for the management of projects and programs. Yet, in hindsight, it is not something that organizations spend their time dreaming of. Hence, setting up a portfolio structure is something that would require a robust case for how it is going to tangibly benefit the organization. To achieve buy-in from senior management for setting up a portfolio management approach to projects and investments, one must consider a host of things related to strategy and operations. With that in mind, here are some of the issues that can help bring clarity around the need for establishing a portfolio approach. Combining them under the umbrella term ‘SMART framework’ is expected to simplify understanding and implementation.
‘Strategic awareness’ refers to the emphasis placed by the organization on strategy and how much it realistically contributes to shaping the future of the organization. There are a number of issues worth considering, including how much effort an organization puts into understanding market dynamics, the documentation of organizational strategy, the communication of the strategy across various tiers of the organization, and the commitment of people to implement the organizational strategy, just to mention a few.
Senior management’s approach to strategy will be a good indicator for understanding the existence of strategic awareness. If the senior management considers building strategy more than a one-off yearly event, then it is very likely that the organization has the environment to leverage it for strategic awareness. In cases where the strategic focus is not there, it will be very hard for organizations to take a portfolio management approach to the management of projects. Therefore, building strategic awareness is the first step towards taking a portfolio management approach to project management.
‘Mature management’ is about the commitment and support for setting up structures and systems that could support the sustainable development of the organization—something that is challenging in the short term but beneficial in the long run. In particular, commitment and support for framing policies that describe ‘how the organisation should use its resources competitively?’ are vital for building maturity. Aligning resource deployment to achieve strategic objectives and allocating resources with holistic thinking rather than piecemeal intuitive judgement will contribute towards building maturity and increasing the use of the portfolio management approach in projects.
Management oversight and support are needed to ensure resource allocation is purposeful and directed towards the achievement of strategies. Further, emphasis on formal education or certification in a portfolio-based approach to resource management could also be useful to enable people to gain the desired skills for using a portfolio management approach towards projects.
‘Agile mindset’ describes a level of alertness to opportunities and threats to ensure that the organization operates sustainably while growing at the same time. With an agile mindset, it is expected that organizations will place emphasis on project-driven growth and regularly scout for information on new or contemporary ways of managing an organization. The existence of an agile mindset will also facilitate regularly assessing threats and making an effort to remain aware of such threats.
Further, it will allow the development of strategies to upskill key people’s competencies in the management of projects and programmes, as well as develop the depth and breadth of project management knowledge within its routines and operations.
Rationalisation of potential benefits
‘Rationalization of potential benefits’ refers to the level of understanding of how taking a portfolio management approach will help in bringing benefits to the organization, and how these benefits can be measured.
To use portfolio management, organizations need a mechanism to measure the benefits realized through the implementation of projects. Understanding and actively assessing the benefit-cost ratio and the current contribution that project and program management make to organizational productivity will instill confidence that organizations have the internal mechanisms to establish a portfolio management approach. Another area where organizations can look into is the relationship between project management maturity and project benefit realization. The stronger the relationship, the stronger the likelihood that the organization has the potential to use a portfolio management approach for the management of projects.
Tactical preparedness and support
‘Tactical preparedness and support’ refers to the level of readiness for deploying a portfolio approach within the organisation. In this regard, organizations can assess various aspects of their tactical preparedness, including (but not limited to) how many people are certified in portfolio management, the current level of project management maturity within the organisation, the existence of a project management office, the project management culture within the organization, management support for building project management culture, and the desire among staff to be project management skilled.
While the pointers listed above do not present an exhaustive list of things that need to be considered, they certainly provide a starting point for the assessment of capabilities and the need for taking a portfolio management approach. What is very important about the SMART approach is that it is tailorable and scalable with little effort in order to achieve greater effectiveness.
Project failure rates have remained high historically. Organizations therefore need to be proactive in ensuring that their investments in projects do not go to waste. With markets getting more competitive and the dynamics of markets making them unpredictable, organizations are always up against the tide, so to speak. As such, taking a portfolio management approach can reduce risks, save dollars, and bring stability to the management of projects.
With that in mind, we have looked at some of the key aspects that can help organisations build the momentum and platform needed to consider portfolio management. Termed a SMART framework, it highlights some of the key strategic and tactical issues that need to be considered for establishing portfolio management thinking within an organizational system. Needless to say, the aspects highlighted in the SMART framework are neither exhaustive nor conclusive, but they reiterate some of the issues highlighted in the extant literature on project portfolio management.
Tahri, H., & Drissi-Kaitouni, O. (2015). New design for calculating project management maturity (PMM). Procedia-Social and Behavioral Sciences, 181, 171-177.
Hadjinicolaou, N., & Dumrak, J. (2017). Investigating association of benefits and barriers in project portfolio management to project success. Procedia Engineering, 182, 274-281.
Jonas, D. (2010). Empowering project portfolio managers: How management involvement impacts project portfolio management performance. International journal of project management, 28(8), 818-831.
Jiwat is a Professor in Project Management. He has considerable experience of working internationally in diverse cultures and business environments.
He has a growing portfolio of work on issues related to artificial intelligence, machine learning and large language models (LLMs). His work has been published in top scientific journals.
Jiwat actively contributes to project management community. More recently, he has published a number of articles on some of the contemporary issues confronting project management and business management in various industry based outlets.
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