Project Portfolio Management Vs. Programme Management

Revision as of 03:24, 2 December 2014

As a consequence of globalisation of markets for goods, capital and labour, it became common to use internationally recognised terms in many companies and organisations. Especially in the field of project Management, it can be hard to understand the background and relevance of different methods and terms compared to each other. Additionaly Programme and Project Portfolio Management are often mentioned in the context of the overall topic of Project Management and thereby it can be confusing to understand the differences. The objective of this article is to clearly determine the distinctions according to existing literature and best practices, by the determination of main differentiating factors, the interface and related responsibilities.

What is a standard

This section seek to give the reader a understanding of what a standard is. Further it will explain the definition of a standard and how the numerous standard setting organizations (SSO) are related. It is often mentioned that a certain project management method is a standard, which is developed by a specific organisation such as ISO, CCTA or PMI. The clarification of the meaning and relation of those terms can be crucial, in order to understand the overall topic of this article.

Definition

A standard is in general defined as something considered by an authority or by general consent as a basis of comparison; an approved model^[1]. According to the International Organisation for Standardization a standard is defined as a document that provides requirements, specifications, guidelines or characteristics that can be used consistently to ensure that materials, products, processes and services are fit for their purpose. ^[2]

International Standards

Internationally there are many standards organizations. The three mostly established and largest of them are the International Organisation for Standardization (ISO), the International Electrotechnical Comission (IEC), and the International Telecommunication Union (ITU). Both ISO and IEC are composed of national standard bodies. ITU is a treaty based organisation established as permanent agency of the United Nations, were governments are the primary members. In 2001 the World Standards Cooperation was established by the International Electrotechnical Comission (IEC), the International Organisation for Standardization (ISO), and the International Telecommunication Union (ITU). The aim of WSC is to strengthen and advance the voluntary consensus-based International standards systems of IEC, ISO and ITU^[3].

• ISO promotes worldwide proprietary, industrial and commercial standards
• IEC promotes standards for all electrical, electronic and related technologies
• ITU promotes standards for the telecommunication sector

National Standards

National standard bodies are in general existent in each country or economy. These standard bodies may either be public or private sector organizations, or a combination of the two^[4].

Standard in the context of Programme Vs. Project Portfolio Management

Todays most common standards of Programme Management are the approaches of MSP and PMI. In many markets there is a debate about which of the two programme management frameworks should be adopted. An article written by Rod Sowden, lead author for MSP 2007 and 2011, compares MSP and PMI. Sowden concludes that these two methods are surprisingly compatible and build on the strengths and weaknesses of each other rather than proposing opposing approaches. ^[5] Further Sowden distinguish PMI and MSP as follows:

• PMI has its roots in project management and would be stronger in the specification led type of change.
• The MSP framework is built from the strategic management view and is intended to align with one or more corporate objectives, which are often more ambiguous, which is reflected in the way MSP approaches the challenges.

Since this article is focused on the field of Project Management, it is based on the definitions of the standard for Programme and Portfolio Management of PMI.

Programme Management

Definition

Figure 1 - Program Benefit Management, Project Management Institute 2006

The definition of a Programme is, that a Programme contains a group of related projects which are managed in a coordinated way to obtain benefits and control of the overall outcome. This approach would not be possible by managing these projects individually, without the umbrella of a programme. Programmes may include elements of related work (e.g., ongoing operations) outside the scope of the discrete projects in a Programme. ^[6] When a large project is split into multiple related projects with explicit management of the benefits, then the effort becomes a Programme.^[7] In General Programme Management is used for the creation of portfolios of projects ^[8], implementation of strategies ^[9] and change generation in products, businesses or ways of working. ^[10] The distinction between a Project and a Programme is given by the benefits which a Programme provides over and above those that projects can achieve on their own. ^[11]

Differentiating factors

The following distinctions are determined throughout the literature and best Practice as being the main differentiating factors of Programme Management Vs Project Portfolio Management:

• A Programme contains a group of related projects
• A Programme has a overall benefit which can be measured in terms of return of investments, new capabilities and/or benefit delivery
• Programmes have a Wide Scope which may change to meet benefit expectations of the organisation
• Programme Managers have to expect change
• Leadership style focuses on managing relationships and conflict resolution
• Programme Managers manage Project Managers
• Programme Managers create high level plans providing guidance to projects where detailed plans are created

Project Portfolio Management

Definition

The term Portfolio is widely used throughout many different organisations and has come to represent different meanings. Thus the focus of this section lies on Project Portfolio Management.

Figure 2 - Portfolios, Programmes, and Projects - High Level View, Project Management Institute 2006

The origins of Project Portfolio Management are found in the application of modern portfolio theory to the project selection problem first mentioned in the work of Markowitz.^{[12] [13]} The definition of a Project Portfolio is a collection of projects and/or programmes and other work that are grouped together to facilitate effective management of that work to meet strategic business objectives. The Projects or Programmes of the portfolio (components) may not necessarily be interdependent or directly related. ^[14] Project Portfolio Management is defined as a dynamic decision process, which constantly updates and revises active projects. ^[15] Project Portfolio Management enables the organization to align the Project Portfolio to strategic objectives, thereby approving only the components that directly support business objectives, and considering the portfolio risk as a result of the mix of components in a Project Portfolio at any time. ^[16]

It is stated that a Project Portfolio most likely is one of the most correct measures of an organisation´s intent, direction, and progress. Using this, an organisation can reasonably question components of a Project Portfolio when they are not aligned to the strategy. ^[17] Resultantly, Project Portfolio Management as a dynamic decision making process includes the collection, identification, categorisation, evaluation, selection, balance and review of components according to the organisation´s specific key indicators and the strategic plan. Figure 2 visualise a High Level view of a example of a portfolio, it is shown that the Portfolio can contain projects, programs and other portfolios. For example can a portfolio of a Business Unit, contain a portfolio of the project department within the Business Unit.

Differentiating factors

The following distinctions are determined throughout the literature and best Practice as being the main differentiating factors of Project Portfolio Management Vs Programme Management :

• A portfolio is a collection of projects and/or Programs and/or other work that are grouped together to facilitate effective management of that work to meet strategic business objectives
• The scope of a Portfolio is a business scope, that can change with the strategic goals of the organisation
• Succes is measured by the performance of Portfolio components
• The focus of the Portfolio Management results in the views of programs and projects in terms of priority for resource allocation
• The projects and/or programs may not necessarily be interdependent or directly related
• Project Portfolio Management is a dynamic decision process
• Project Portfolio Management enables the organisation to align the Project Portfolio to strategic objectives
• The portfolio risk is a result of the mix of the components

Interface

This section seeks to define the interface between Programme and Portfolio Management. The Interface and correlation between Programme and Project Portfolio Management may be the reason for confusion when one is trying to understand the differences. The key factors stated in the previous sections should give the reader an idea of the distinction of the terms, which now will be more detailed by the definition of the interface.

Figure 3 - Cross-Company Portfolio Management Process Relationships, Project Management Institute 2006

It is important to understand the responsibilities in relation to the different components of a Project Portfolio. As described in the section above about Project Portfolio´s : The role of the Project Portfolio Management is the collection, identification, categorisation, evaluation, selection, balance and review of components. That means that once the components (Project and/or Programme) are authorized for the perspective Project Portfolio, it becomes the responsibility of the Programme/Project Management team to take control of the components and apply the correct management processes to ensure that the work is done effectively and efficiently. This is illustrated in Figure 3. It is then the responsibility of the Programme/Project Management team to monitor planned-to-actual performance (time, budget, resources, quality, and scope) of the components and provide the Project Portfolio Management with consolidated information.[5] This information is used in Portfolio reviews to determine required actions. Programme and Project Management may work together with Portfolio Management to determine "go/no go" criteria for proposed and current components, including "termination criteria" (phase gates). Programme and Project Management may also work together with Portfolio Mangement in capacity planning by inputting resource requirements (e.g., human resources, financial and physical assets). [11]

Discussion

Through the analysis of the article, it can be concluded that many factors have an influence on the understanding of the overall topic : Project Portfolio Management Vs. Programme Management. The existence of numerous standardization organizations, standards and best practices make it even more complex and challenging to gain a coherent understanding of the terms and differences. Having said this, it is important to be critical and to question a general accepted standard, as projects, programs and portfolios clearly differ in complexity and uncertainty. The need of being adaptable and agile in terms of project management is of great importance, since the nature of projects evolve hand in hand with the growth of knowledge and technology.

See also

For further information according to the topic:

http://apppm.man.dtu.dk/index.php/Systems_Engineering_versus_Project_Management,_a_comparative_study

http://apppm.man.dtu.dk/index.php/The_Role_of_Program_Management_in_an_Organisational_Change

http://apppm.man.dtu.dk/index.php/Project_Evaluation_and_Selection_for_the_Formation_of_the_Optimal_Portfolio

References

1. ↑ http://dictionary.reference.com/browse/standard
2. ↑ http://www.iso.org
3. ↑ http://www.worldstandardscooperation.org/newsletters/003/newsletter03.html
4. ↑ http://www.iso.org/iso/home/about/iso-and-developing-countries.htm
5. ↑ https://aspireeurope.files.wordpress.com/2013/06/programme-management-msp-v-pmi-which-is-right-for-you.pdf
6. ↑ Project Management Institute. The Standard for Program Management: What is a Program. Project Management Institute, Inc, 2006.
7. ↑ Project Management Institute. The Standard for Program Management: What is a Program. Project Management Institute, Inc, 2006.
8. ↑ [ Gray, R.J., 1997. ] Alternative approaches to programme management 5–9. Int.J. Proj. Manag. 15
9. ↑ Partington, D., Pellegrinelli, S., Young, M., 2005, Int. J. Proj. Manag. 23
10. ↑ Pellegrinelli, S., 1997
11. ↑ Pellegrinelli, S., 1997
12. ↑ [ Markowitz, H.M. J. Financ. 7 (1), 1952] Portfolio selection 77–91
13. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named ref_name
14. ↑ [ Project Management Institute, Inc, 2006.] The Standard for Portfolio Management: The Portfolio Management Framework
15. ↑ [ Cooper et al., 1998a, b; Griffin, 1997; Graves et al., 2000; Ringuest et al., 1999; Roussel et al., 1991] Cooper et al., 1998a, b; Griffin, 1997; Graves et al., 2000; Ringuest et al., 1999; Roussel et al., 1991
16. ↑ [ Project Management Institute, Inc, 2006] The Standard for Program Management: The Relationship between Program Management and Portfolio Management
17. ↑ Cite error: Invalid <ref> tag; no text was provided for refs named The_Standard_for_Program_Management:_The_Relationship_between_Program_Management_and_Portfolio_Management