Project, Programme, and Portfolio Management 

 May 8, 2021

By  Dave Litten

Project, Programme, and Portfolio Management

Projects are unique, transient endeavours, undertaken to bring about change and achieve planned objectives, which can be defined in terms of outputs, outcomes or benefits. A project is usually deemed to be a success if it achieves the objectives according to its acceptance criteria, normally within an agreed timescale and budget.

Project work is conducted across normal organisational functional areas, setting up a temporary organisation, drawing on the skills, expertise and knowledge of the organisation, as well as third parties, where appropriate.

Projects normally use capital expenditure to acquire, upgrade and maintain assets, services, products and capability. Projects may also need to take into account the ultimate requirements for decommissioning and disposal.

In some settings, it is possible to find arrangements involving multiple projects running in parallel, or related to one another, to provide support or to build additional capabilities.

Multiple concurrent projects may require prioritisation in terms of scheduled deployment, importance of primary deliverables or the availability of key resources, skills, or individuals.

Differences between a Project and business-as-usual (BAU)

The term business-as-usual (BAU) refers to an organisation’s normal day-to-day operations. It can also be referred to as steady state. A Project contrast with BAU in a number of ways.

It is important for the success of the project that the project’s unique characteristics are recognised and that the most appropriate structures, management and controls are put in place.

Project, Programme, and Portfolio Management

Typically, a project’s objective is to deliver outputs, for example a software solution, a building, a process or a service.

The project team transitions the outputs to an internal or external client to deliver the desired outcomes and benefits.

Sometimes, the project also includes the work required to deliver outcomes and benefits. In such cases, the project team leads more of the work to deliver the changes required by the client to realise the project’s intended benefits.

BAU on the other hand uses the products of the project to realise the benefits. It is unusual for projects to deliver any benefits into the organisation during their deployment (unless there is some form of phased roll-out, or a delivery contractor benefits by being paid to deliver specific phases).

All projects trade the triple constraints of time, cost and quality in achieving the defined scope of the project within the defined tolerance for risk.

Triple constraints of time, cost and quality

Project managers must understand the relative priorities of time, cost, and quality as an important part of the decision as to which life cycle approach will suit best.

Project, Programme, and Portfolio Management

Differences between project, programme and portfolio management

Project, programme and portfolio management is concerned with managing discrete packages of work to achieve objectives. The way the work is managed depends upon a wide variety of factors.

The scale, significance and complexity of the work are obvious factors; relocating a small office and organising the Olympics share many basic principles but offer very different managerial challenges. Scale and complexity are not the only factors.

Managing a major infrastructure development for delivery to a client will need a different approach from internally managing the merger of two banking organisations.

A good distinguishing factor is often to look at the nature of the objectives.

Objectives may be expressed in terms of outputs (such as a new HQ building), outcomes (such as staff being relocated from multiple locations to the new HQ), benefits (such as reduced travel and facilities management costs) or strategic objectives (such as doubling the organisation’s share price in three years).

Commonly, work of a lesser scale and complexity, leading to an output, is referred to as a project.

Work that combines projects with change management to deliver benefits is considered to be a programme, while a collection of projects and programmes designed to achieve strategic objectives is called a portfolio.

However, some undertakings that only deliver outputs may be very large and complex, while some work that delivers benefits and encompasses the management of change may be relatively small and straightforward. Small organisations will have strategic portfolios that are nowhere near as complex and expensive as, say, a large government IT project.

Although projects, programmes and portfolios are often spoken of as being mutually exclusive approaches, they are actually just convenient combinations of managerial tools and techniques used to describe typical sets of circumstances.

The concept of projects, programmes and portfolios should be thought of as just points on a gradual scale of managing effort to deliver objectives.

Relationship between programmes, projects and strategic change

Strategy implementation, often recognised as the hardest part of the strategy process, is delivered through the execution of strategic projects and programmes and the realisation of their targeted benefits. From an executive perspective, project-work is an essential part of making strategic investment work.

The key focus is on the creation of value through projects that will enable meaningful execution of both deliberate and emergent strategies. This implies extending the scope of interest around projects and programmes to incorporate the realisation of benefits that will justify the investment and fulfil the criteria outlined in the business case.

Programmes are unique and transient strategic endeavours, undertaken to achieve beneficial change and incorporating a group of related and business-as-usual (steady-state) activities. They can be defined as coordinated projects and change management activities combined to achieve beneficial change. The distinction between projects and programmes depends on context and the guiding criteria between them often relates to the complexity of scope and the addition of change activities. The need for significant improvement will be consistent with the organisation’s strategy, and programmes will help to deliver elements of that strategy.

Projects, programmes and portfolios tend to flow out of strategic decisions made by the organisation and can therefore be viewed as strategic investments that enable other activities and capabilities to be developed.

This diagram shows how the organisation in response to the environment has set its strategic objectives for change, which could involve a number of structural choices from portfolios to programmes to projects:

Project, Programme, and Portfolio Management

Portfolio management is mainly focused on the selection and prioritisation of projects and programmes within the capacity to deliver. Programme management then focuses on the coordination of projects and business-as-usual with particular emphasis on the achievement of beneficial change.

Ultimately it is project-work that is concerned with the ability to enact the organisational strategy by enabling benefits to be realised so that the intended value can be accrued. These projects could be part of a programme or directly part of a portfolio.

Projects could also be delivered as single entities by the host organisation because there is no advantage in them being part of a programme or portfolio, but they are still required to be delivered to fulfil the organisations strategic objectives.

Senior leaders within the organisation are able to demonstrate how each project or programme that they fund contributes to the overall strategy. Where projects or programmes cannot be justified or aligned with the organisational strategy, their continued operation and purpose can be questioned.

It is worth noting that supplier organisations managing projects for their clients on a commercial basis may have a different strategic justification for conducting commercial work.

Project work may also be needed as an enabler to maintain existing capabilities or assets, ensure compliance with newly introduced legislation or satisfy other professional requirements or business imperatives.

Situations where the use of programme management may be appropriate

Programmes typically combine new deployment with some elements of business-as-usual. Consequently, they utilise capital expenditure to acquire assets, services, products and capability, alongside operating expense incurred as a result of performing normal business operations.

Programmes are often defined as delivering change, and would typically incorporate the full utilisation of benefits to satisfy the business case.

The overall measure of success will be determined by the actual realisation of the expected benefits, which frequently involves the use of capabilities or facilities created by the programme in an ongoing, business-as-usual manner.

Programme management may be appropriate if the organisation wishes to achieve the following:

  • More effective delivery of change – project interdependencies are managed to greater effect allowing them to have the greatest chance of delivering their benefits without adverse effect on business-as-usual. It is likely that projects within the programme will have a complex set of dependencies and outputs, which would be more difficult to deliver as individual projects
  • Increased responsiveness to strategic initiatives – filling the gaps between strategies, business cases and projects. The programme level view will look for synergies between individual project business cases in order to yield a greater return from the projects as a programme rather than if each project had delivered independently
  • More effective management of resources – through prioritisation and project integration allowing for resource conflicts, within individual projects, to be managed at a programme level ensuring that those projects that are of priority get first call on resources to maximise benefits realisation within business-as-usual
  • Better management of risk in a wider business context – contingencies that are applied to projects on an individual basis may lack economies of scale. If these risk contingencies are applied at a programme level, the overall contingency amount may be reduced as common responses made at this level may influence several projects simultaneously. This will typically benefit the organisations where there were a number of higher risk projects being delivered
  • More efficient coordination and control – by defining roles and responsibilities for managing the programme and application of a uniform process to initiate, accelerate/de-accelerate and terminate projects within the programme. Bringing together common processes for delivering scope will result in a greater likelihood of those projects being more fully utilised by the organisation, once they are delivered
  • Increased focus on obtaining strategic benefits – by having an insight into the strategic goals and needs of the organisation, projects can be directed into business-as-usual in a combined way that has the best chance of achieving any benefit synergies that may not be apparent if projects were delivered singly out with the programme

If an organisation is under challenge in attempting to deliver a range of projects in different areas of its business, effective programme management becomes a critical success factor.

Situations where the use of portfolio management may be appropriate

Portfolio management is used to select, prioritise and control an organisation’s programmes and projects, in line with its strategic objectives and capacity to deliver. Their goal is to balance the implementation of change initiatives and the maintenance of business-as-usual, while optimising return on investment.

Portfolios are used to structure investment decisions. They can be managed at an organisational or functional level to optimise strategic benefits or operational efficiency and address a number of major questions:

  • What are the projects and programmes needed to deliver the strategic objectives, taking account of risk, resource constraints and affordability?
  • Is the organisation capable of delivering them effectively and efficiently?
  • Are the full potential benefits from the organisation’s investment capable of being realised?

For organisations implementing portfolio management, the following situations would be where the use of such a process would be most appropriate:

  • Where there is a need for the organisation’s projects and programmes to be more aligned with its key business objectives, including those of profitability, customer service, reputation, sustainability and growth
  • When the organisation’s financial controls, financial planning and expenditure review processes need to be applied to both individual projects and the portfolio as a whole
  • When assurance is required of how the mix of projects continues to support strategy and take account of changes to external factors
  • Where the need exists for the organisation to effectively discriminate correctly between activities that should be managed as projects and other activities that should be managed as non-project operations
  • A need for assessment and addressing of risks associated with the project portfolio, including the risk of corporate failure needs to be highlighted and monitored
  • Provide verification that projects and programmes are consistent with the organisation’s existing capacity and capability
  • To allow the organisation’s engagement with project suppliers to encourage a more sustainable portfolio by ensuring their early involvement and by a shared understanding of the risks and potential rewards
  • Provide more evidence that the organisation’s engagement with its customers and engagement with the sources of finance for its projects encourages a sustainable portfolio
  • Assurance that the impact of implementing a project portfolio is acceptable to its ongoing operations

Applying portfolio management allows organisations to:

  • Drive priorities for change by adopting a high level ‘whole picture’ view of their business and how it must react to change
  • Make the best decisions using information that is clear and representative of the true potential effect of key business drivers
  • Use the most appropriate resources to achieve the best results with the least amount of wasted effort

Corporate leaders are accountable for demonstrating profitability and return on investment, and therefore view project work as a critical part of delivering that investment and contributing to the overall benefit of the organisation.

Portfolios play an important part in maintaining the alignment between project work and strategic objectives and in enabling the realisation of the benefits that underpin the successful capture of the intended value and securing the return on investment.

Dave Litten

David spent 25 years as a senior project manager for USA multinationals, and has deep experience in project management. He now develops a wide range of Project Management Masterclasses, under the Projex Academy brand name. In addition, David runs project management training seminars across the world, and is a prolific writer on the many topics of project management.

The Projex Academy

related posts:

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}

Use Coupon Code at checkout 'PROJEX20'