MoP - Portfolio Definition vs Portfolio Delivery
The Portfolio Definition cycle covers 5 sequential practices:
1. Understand: Portfolio Definition must start with the Understand practice – it is essential to get a clear and transparent view of what is in the current portfolio and the project development pipeline as well as performance to date and, looking forward, the forecast costs, benefits and risks to delivery and benefits realization. MoP sets out the keys to success and explains how to go about each one.
2. Categorize: once the Understand practice is complete the change initiatives (project and programmes) can be categorized so that senior decision makers can make decisions in areas like priority of resources and strategic alignment. MoP gives several examples drawn from real life experience from different industries.
3. Prioritize: this orders the projects and programmes – often along financial lines – and MoP gives examples of metrics that can be used such as NPV, IRR and Payback. “Money isn’t everything” however so MoP also describes multi-criteria analysis used by some organizations using factors such as “return or attractiveness” and the “risk or achievability” of each change initiative.
4. Balance: Prioritization results in a ranked list of change initiatives but the purpose of the balance practice is to make sure that the resulting portfolio is balanced in terms of time, coverage of strategic objectives, impact across the business, risk : return and available resources. MoP provides an example of how Aston Martin, the luxury car manufacturer balanced its IT portfolio.
5. Plan: The final practice of the Definition cycle collates information to create a portfolio strategy and delivery plan which will be approved by the Portfolio Direction Group (also known as the Investment Committee). Planning serves to provide the “clear line of sight” about what initiatives are included, their schedule and timing, resource requirements, risks and benefits to be realized. MoP has a full appendix devoted to an outline of the contents of the portfolio strategy and delivery plan.
With Definition complete, the Portfolio Delivery cycle covers 7 simultaneous practices:
1. Management control – this practice is about making sure that progress is on track against the portfolio strategy and delivery plan (typical contents for both are included in the MoP manual). Management control includes the creation of consistent business cases which can demonstrate the strategic contribution of change initiatives.
2. Benefits management – is about identifying and managing the benefits being realized from the portfolio. This includes areas such as benefits categorization (common approaches are suggested), a portfolio level benefits realization plan and the arrangements for benefits tracking
3. Financial management - includes investment criteria and financial metrics, rules to standardize cost forecasting, efficiency savings and limits for reporting variances.
4. Risk management – provides a consistent approach across the portfolio including dependencies. MoP sets out some of the key challenges to dependency management and suggests sample solutions which can be used by the portfolio executives
5. Stakeholder engagement – this practice provides a co-ordinated approach to stakeholder engagement and communication so that the needs of the portfolio’s customers are identified and managed and stakeholder support for the portfolio is gained by effective consultation and involvement in the definition and delivery of the portfolio. Modern approaches are encouraged – even Twitter gets a mention!
6. Organizational governance - this must include a vision about what the portfolio is designed to achieve, role profiles (in the MoP manual), stage gates and escalation paths with tolerance limits along with regular reviews of the business case and progress. The portfolio office has a key role to play here
7. Resource management – at some level the amount of resource available to deliver change is restricted. Most organizations have more ambitions than people so the supply and demand have to be balanced and where there are gaps these must be filled by recruitment, external resource or staff development.
