Key performance indicators for portfolio management

The measurement and transparent reporting of key performance indicators (KPIs) is extremely beneficial for portfolio managers in making informed and improved decisions regarding resource allocation and risk management. By tracking specific metrics, portfolio managers can determine which programs and projects are delivering on time and which are underperforming. The metrics required by portfolio managers vary depending on the industry in which they operate. In this article, the focus will be on appropriate primary and secondary KPIs for managing a portfolio in the consultancy industry. In this industry, time is the commodity sold, with the product being derived from the knowledge, expertise, and advice provided to the client. The main aim of this article is to differentiate between KPIs used in product, project, and portfolio management. The primary KPIs that will be discussed in portfolio management are Turnover, EBIT margin, Accounts Receivable, and Backlog, while the secondary KPIs discussed are Work-in-Progress (WIP), Own Production (OP), and Contingency. It is often assumed that the same KPIs are used in project, program, and portfolio management, but that is not the case. KPIs used in project management tend to focus on the operational aspects of managing a project, while portfolio management considers the strategic implications of projects and programs. Furthermore, the application of KPIs in managing a large energy portfolio for a leading engineering consultancy will be demonstrated. Portfolios, unlike programs and projects with a short life cycle, often have a longer longevity and thus require ongoing management attention. At last, limitations of KPIs will be discussed, specifically the accuracy of data, contextual issues, and limited information. In conclusion, paying attention to KPIs is essential to achieve optimal performance and align with organizational strategies, goals, and objectives. <ref> [''1.1 Purpose of the standard for Portfolio Management''] https://content.knovel.com/content/pdf/13786/51975_01.pdf?ekey=f2AgMtPziM6rvTNh5JfrbVinHPOx3NMTm4v3_d5aDHGzHAowSUCkBwnfmZAGnYSOWa </ref> <ref> [''KPIs for effective portfolio management''] https://thinkingportfolio.com/en/7-key-kpis-for-effective-project-portfolio-management/ </ref>