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Project vs Portfolio Management

One of the first things I am doing at my new client is to get involved in the selection of a Portfolio management tool/system. The first thing to do is to differentiate between Project Management (which the client does plenty of) vs Portfolio management. This will form a key factor in differentiating the two areas and explaining the difference to senior management.

Here is a good definition provided the Project Management Institute :  " Portfolio management is the centralized management of one or more portfolios in order to achieve specific strategic business objectives. As a process, portfolio management enables organizations to identify, categorize, evaluate, select, prioritize, authorize, terminate, and review various portfolio components to ensure their alignment with current and future business strategy and goals, which in turn helps organization optimize limited resources.

As it is frequently stated, portfolio management deals with "doing the right project(s)" while project management deals with "doing the project right."

The last line is the one that sums it all up. Here is a more detailed description of the difference between Project and Portfolio management systems:

Project management and portfolio management systems have gone through significant growth and evolution in the past 10 years as technology has allowed portfolio and project
systems to merge while exhibiting capabilities that address each discipline respectively.There are, however, key differences between project and portfolio management capabilities.
Although both summarize project-level attributes, a project management system tracks individual project performance against the original project plan. The emphasis is on single project controls and resource task assignments. Updates to the project plan are reflected in the project management system. The availability of resources for project work is known to all project managers through an enterprise resource pool. From a process perspective, a project management system will enable any standard project management methodology such as the initiate-plan-execute-control/monitor-close life cycle from the Project Management Institute.

The summary of all project work in the organization is available for review; however, planned projects in the project management system are assumed to have gone through a selection and prioritization process by the senior leadership team. As a result, the capabilities of a project management system generally do not include the assessment of project opportunities, strategic alignment, and scoring and ranking according to defined prioritization criteria.  

The portfolio management system enables the creation of project opportunities, each associated with one or many portfolios in the organization. The project request will follow phases and activities in which different stakeholders provide input on the project request. All requested projects are analyzed against each new and existing project, based on defined criteria to determine whether a project (or sets of projects in the case of a program) is worth executing. Selection, prioritization (or ranking), and optimization of projects and resources are critical components of the portfolio management process. The portfolio management system provides the analytical toolset to achieve this. Once projects are reviewed and approved (or rejected) by the senior leadership, the rest of the organization is then informed, and the assigned project manager continues with the project life cycle. During the project life cycle, the portfolio level data will be synchronized with project information to ensure the accuracy of project- and portfolio-level information.

Now to find the right tools. We will be issuing a RFP to a number of vendors. While I cannot let you know which one we select (due to client confidentiality), I will let you know the vendors we looked at and what were the key selection criteria used.


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