As state and local government officials feel the

pinch of budget cuts and increased demand

for service, they have begun looking for ways

to make better and more informed investment

decisions.

One method for making the most of lim-

ited resources is portfolio management, an

increasingly popular process that allows orga-

nizations to roll their various projects up into

a portfolio. There is a holistic way to approach

these initiatives in the strategic context of the

organization’s mission and goals with visibility

over all competing initiatives. The question is,

“What does it mean to manage with a strate-

gic portfolio perspective?” The first step is to

gain a total view of all assets and initiatives

across the enterprise and seek a purposeful

prioritization and balance among them. This

has been termed “taking a portfolio view” of

the business. The concept has actually been

refined into a disciplined portfolio manage-

ment process.

Portfolio management gives decision mak-

ers visibility into their organization because

a portfolio of projects allows for compari-

sons. The operative concept is “comparison.”

Instead of seeing only individual projects

meeting cost and schedule goals on their own

separate tracks, the tracks can be compared.

This means that a project may be performing

adequately in its own right, but something else

may be coming into the portfolio that provides

greater value to the enterprise. In this way,

officials can compare and contrast projects

to determine not only individual project per-

formance, but also link overall benefit to the

organization according to predetermined val-

ues and business objectives.

Portfolio management is actually an exten-

sion of project management methodology but

is very different in its practice and conclu-

sions. Current project management pursuits

are cost-based, work at prioritizing project

schedules, manage risks across the project,

manage scope, and attempt to answer the

question: Are we doing things right?

Portfolio management, by contrast, is invest-

ment-based, focuses on scheduling priority

projects, and answers the question: Are we

doing the right things? The notion of “doing

the right things” reflects the strategic align-

ment with the mission and goals. Projects

need to be judged against how they meet the

organizational goals and how they compare

to each other. Portfolio management helps

PORTFOLIO MANAGEMENT:MAKING THE MOST OF LIMITED RESOURCESW

hite

Pap

er

Solut ion used:

The question is, “What does

it mean to manage with a

strategic portfolio perspective?”

ensure that organizations get the most value

from the projects they invest in because the

selection process helped to align them in

the first place. In short, portfolio manage-

ment offers an organized and effective way

to select and prioritize which projects to pur-

sue—rather than simply choosing according

to emotion, the same way of doing business,

or guesswork.

Portfolio management is a facilitated pro-

cess that leads to a structured, repeatable

approach. Through this process, Robbins-

Gioia works with executive leaders to define

what they think is important and determine

what decisions they want to make. A selection

process cannot be created without the active

involvement upfront of people with authority to

make decisions about what they value most.

These values lead to the construction of the

selection criteria. The portfolio management

process forces executives to decide first

which values and objectives are most impor-

tant to the organization and then align those

priorities with appropriate investments.

As a result, state and local government offi-

cials can optimize the balance of their invest-

ments across business functions and accord-

ing to risk levels, short-term versus long-term

needs, innovations, and project life cycles.

Portfolio management offers state and local

government officials—especially those deal-

ing with budget shortfalls—a number of other

benefits as well. It enables them to:

focus limited resources on projects

that further the organization’s most

important goals

keep close tabs on a project’s

effectiveness and value throughout

its life cycle

discover and eliminate duplicate

projects;

recognize earlier in the process

those projects destined to come in

over budget or schedule.

In the end, operational excellence is achieved

as organizations pursue and devote resources

to only those projects offering high-qual-

ity, reliable, and predictable outcomes. Once

these projects are selected, they become part

of the portfolio and are monitored and evalu-

ated throughout their life cycles, allowing deci-

sion makers to see how investments can be

maintained, reprioritized, or even eliminated.

TAKING ACTION

Technically, portfolio management is defined

as the dynamic decision process of assessing

value and allocating resources to meet key

business objectives in which an enterprise

analyzes and competitively selects investment

initiatives, controls the resulting investments

throughout their life cycles, and constantly

evaluates their effectiveness in meeting stra-

tegic objectives.

Portfolios can be set up any number of

ways, including by project type, division, or

geographic region or even across the entire

enterprise. It is a methodology that can fit in

anywhere.

By the same token, portfolio management is

a cyclical process. As such, the methodology

can be implemented whether an organization

has yet to begin planning projects or has

more than a thousand underway. It does not

matter when you start, but one fact remains

constant: The key to success at any stage is

to have strong upper management support

and involvement.

To begin the portfolio management process,

the following steps are required:

Take an inventory–Government officials need to develop an inven-tory of projects; this effort alone will help decision makers discover redundancies and start the discernment of what is important.

Create Selection Criteria–The objectives defined in the strate-gic plan will form the basis for creating weighted selection criteria. Some objec-tives will have more value to an organization than others. Robbins-Gioia will work with decision makers to develop agreement on which criteria are more important. Once the agreed-upon selection criteria are in place, projects are scored against them. The resulting project scores are used to rank projects.

Validate the Project Portfolio–Robbins-Gioia provides score-cards that rate existing and

In short, portfolio

management offers an

organized and effective

way to select and prioritize

which projects to pursue—

rather than simply choosing

according to emotion, the

same way of doing business,

or guesswork.

new projects and then rank them so that they can be presented in investor maps. Investor maps enable decision makers to quickly see where projects fall in terms of risk, return, “go live” date, cost, schedule, or geographic region, function, or division. This is especially powerful because decision makers can test “what if” scenarios to determine the possible impact of reallocating funds on a periodic basis.

As an organization becomes ready to perform

its first portfolio analysis, it should begin by

mapping each of the investments to each

of the weighted objectives. In doing this,

an organization might conclude that certain

projects meet its immediate business needs

while others do not. Some may provide too

little business value; some may be too risky,

expensive, or time-consuming; and some may

be redundant or depend too much on another

project.

Now that the data has been turned into real,

usable information, the organization needs

to enter the manage, control, and evaluate

phase. At this point, Robbins-Gioia in conjunc-

tion with executives will recommend corrective

actions, such as go/kill, no-go, or resource

reallocation decisions, and begin implement-

ing project management discipline for those

projects going forward. Projects that have

been selected through the portfolio manage-

ment process have the best chance at suc-

ceeding and providing value to the business.

Although this first iteration has been complet-

ed, the portfolio management process never

stops. Projects must continue to be screened

against KBOs and tweaked and refined over

time, as projects can lose their overall value

or new, more effective projects enter into the

portfolio.

CONCLUSION

Portfolio management is a process that uses

simple management techniques to bring order

to the investment selection process. Just as

an investor would look over a stock portfolio

for balance, risk, and long-term value, so

too can an organization assess and manage

a portfolio of projects to effectively allo-

cate resources and optimize business value

against one or more key objectives.

The keys to success are senior management

commitment, consensus, and the ability and

willingness to define and communicate stra-

tegic objectives. As state and local govern-

ments implement portfolio management with

senior management support, they will realize

tremendous benefits in delivery of projects

to citizens, despite limited budgets. The cost

of failure is too high to attempt a lesser

approach.

The keys to success

are senior management

commitment, consensus,

and the ability and

willingness to define and

communicate strategic

objectives.

Robbins-Gioia has been dedicated to delivering management

solutions to government agencies and Fortune 500 companies

since 1980. We help our global customers optimize their

business processes, accelerate change, and establish time,

cost, and quality improvements to transform their businesses.

Selected Past & Current Clients

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