The strategy of an organization helps define the direction the organization is headed in-and how the organization will move from one point to another point, one that is hopefully better from a business and profit standpoint. This strategy might be to make the organization the leader in a specific area of technology, or it might be to increase sales in order to expand the business (or something completely different). Few companies survive without a concrete strategy that can be implemented.
In order to realize the strategy (whatever it is), the organization will most likely be engaged in multiple projects that can be combined under a single portfolio. While projects in a portfolio are not directly linked as projects in a program are, the portfolio should be managed and set up in a way that supports the overall strategy of the organization. In order to make sure this is done, the manager of the portfolio needs to carefully review all of the projects in light of the overall strategy of the organization.
The portfolio manager should be working toward a full analysis to ensure that the portfolio of projects is ensuring the success of the organization's strategy.
Defining the Project Types
Every project in the portfolio should be understood as a certain type of project. Different portfolios might need different definitions and types, but in general, the portfolio manager should understand whether a project is supporting ongoing maintenance or is a customer request. Some projects might belong in different phases of the strategy; perhaps certain infrastructure projects need to be complete before the sales team can be expanded. In addition, some projects might be considered "nice to have" while other projects are essential to meeting the strategy of the organization.
Once the types of projects have been fully identified, then the portfolio should be pulled apart and analyzed so that each project is assigned to the correct type. The portfolio manager and the decision makers will then know which projects are essential to the strategy and which projects can be focused on later down the road.
Using the project types as a tool to distribute the projects within the portfolio can help focus everyone on the important things that relate to the strategy of the organization. If the portfolio is just a random list of projects, then no one will get anything out of someone trying to manage it.
Defining the Project Direction
The direction the project is moving toward should be understood by the portfolio manager. For example, if a project is not doing well because the schedule is out of date and the scope is not being met, then that project is headed toward failure.
On the other hand, if the project is almost finished and the customer or client is happy with what is going on, then that project is headed out the door and the portfolio manager does not have to worry as much about it. If a project was in trouble but is getting turned around, then it is headed up to a "green" status.
Taking into account the direction of the project and the type of project, the portfolio manager will be able to clearly identify which projects the stakeholders and the decision makers need to concentrate their time and attention on.
Defining the Project Status
Understanding the direction of the project leads directly into defining a project status. This could be as simple as red (in trouble), yellow (about to be in trouble) or green (not in trouble) status, or it could be something more complex that takes into account the type and direction of the project. While it may be more complicated to evaluate and determine the status beyond just red or green, this can be helpful to the portfolio and the strategy--and can bring even more visibility to the work of managing a portfolio.
Putting Everything Together
A good example of putting all of this together would be to create a matrix of projects with the impact on the main strategy goals as one axis and the direction of the project (headed to success or headed toward failure) on the other axis. This matrix will help focus attention on projects that are headed toward failure and critical to the strategy of the organization.
Portfolio management is geared toward helping the organization manage disparate projects, but in an organization that is moving toward success, there should be no disparate projects; everything should be working toward the overall strategy of the organization and the portfolio should be working to make that happen