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What is the difference between Portfolio Management and the PMO?

Article Written by Gwen Miller, PMP


You may look at the question and say ‘duh, anyone can tell the difference between Portfolio Management and the PMO’.  Could the PMO be a Portfolio Management Office that is responsible for Portfolio Management? Or could it be two separate and distinct items in the Project Management world.  Let’s take a closer look.

Portfolio Management

Portfolio Management is a group of processes used to manage the portfolio of project and programs for an organization.  Those processes include identifying, selecting, prioritizing, monitoring and reporting.  While the portfolios can big or small, they are aligned with strategic business goals to attain business value.  This could be increased market share, improvement in cash flow, etc.  There is some ‘benefit’ obtained by the components of the portfolio that have a direct effect on the bottom line of the organization and the monitoring and reporting provide the insight into whether that benefit will/will not be obtained.

 

PMO – Which one is your flavor?

The PMO is a group or department in the organization.  It could be a Portfolio Management Office, Program Management Office, or a Project Management Office. This department could report to the CIO, CFO, CTO, or even the CEO.

 

The Portfolio Management Office

The Portfolio Management Office is a strategic group or department that works closely with executive leadership to focus organizational resources on those initiatives that align with corporate strategy. This group executes and refines the processes that were defined in Portfolio Management above.  In some organizations this is called a Project Portfolio Management Office (PPMO) so its function and focus is not confused with the Project Management Office (PMO).

 

The Program Management Office

The Program Management Office (PgMO) unlike the Portfolio Management or Project Management Office can be temporary in nature and only exists as long as the program for which it was established continues.  Once the program completes the Program Management Office can be dismantled.  Most organizations would have established more than one program and the Program Office would live on.  The focus of this department is the methodology, tool and techniques to realize the efficiencies of managing the constituent projects of the program as a whole rather than individually.  The Program Manager manages the interdependencies of the program as a whole and in doing so, has increased the probability that the organization will successfully derive the benefits that the program was intended to deliver.

 

The Project Management Office

The Project Management Office (PMO) is the department that usually defines and refines the standardized project management processes.  By instituting standard processes, which are consistently used by all departments for managing projects, the organization should reap the benefits of better managed projects with more predictable results.  The PMO is a resource for project management documentation, governance, and project metrics.  This group reviews their processes to continually improve project delivery.

 

A portfolio of projects and programs can be administered in a Project Management Office and/or a Portfolio Management Office.  The organization’s leadership will determine the name of the department and the services that it will provide.  There are many different configurations with different names that deliver relatively similar services.

Just remember that Portfolio Management is a process and the PMO is a department where that process is executed.  Who said this stuff was boring?

 

© 2011 Gwen Miller.  All Rights Reserved.

 

So is this a Project, Program, or Portfolio? Can you tell the difference?

Article Written by Gwen Miller, PMP

Project Managers and project management in general has its own lexicon.  Acronyms abound when we speak PM.  And we tend to mix terms causing further confusion.  Programs are projects, projects are programs and then we add project portfolio to the mix.  YIKES!!  Can we have a cheat sheet, please??

Portfolios contain the projects and programs that are linked to strategic business objectives.  These objectives are defined by the organization’s strategic plan.  An organization can have more than one portfolio, each addressing distinct business areas (like marketing) or objectives (introducing products into a new market).

The portfolios exhibit the investments (projects and programs) planned or made by the organization.  If projects or programs do not align with strategic objectives, it most likely will not become a part of the portfolio.  Also, changes to the strategic business objectives will require a re-alignment of the portfolio.

Programs consist of multiple projects.  The projects are related by virtue of common results or collective capability that the program will deliver.  There is a benefit that will be derived when the program concludes.  A good example of a program is Extreme Home Makeover.

To build the house, numerous discrete projects execute simultaneously, but are coordinated to obtain benefits (the completed house) and control of the end result that would not be possible if managed individually.  There are programs where projects deliver benefits incrementally, before the program completes. An example of this is a process improvement program that consists of multiple projects in the program.

Last, but not least, projects.  Projects are tactical in nature whereas programs and portfolios are more strategic.  Now don’t get me wrong, a project should be linked to a strategy.  The company is making an investment for a reason.  It is a part of achieving a strategic objective, and does not have to be a part of a program to be in the portfolio.  It can be a lone wolf.  But a project can be undertaken for other reasons, such as implementing new regulations.

So to sum it all up:

  • · Portfolios consist of projects and programs
  • Must align with strategic objectives
  • · Active for a very long time
  • · Reviewed and revised if strategic objectives change
  • · Programs consist of projects
  • · Active until all components are delivered
  • · Projects within the program can deliver their benefits incrementally or when all the projects of the program are  finished.  Then the program is retired
  • · Projects are more tactical in nature, a temporary initiative, with a defined start and end date, undertaken to meet unique goals and objectives, to bring about beneficial change or business value.

Can you tell the difference now?

 

© 2011  Gwen Miller, PMP