Posted by: Harin Dave | February 15, 2010

Relationship between Project Management, Program Management and Portfolio Management and role of PMO

Project Managmenet exists in a broader context that includes program management and portfolio management. Here is brief explanation about each of them with examples, their relationship and PMO’s (Project Management Office) role.

Portfolio Management

A portfolio refers to a collection of projects or programs and other work that is grouped together to facilitate effective management. The projects or programs of portfolio may not necessarily be interdependent or directly related. For example, as infrastructure firm that has the strategic objective of “maximizing the return on its investments” may put together a portfolio that includes a mix of projects in oil and gas, power, water, roads, rail and aisports. From the mix, the firm may choose to manage related projects as one program. All of the power projects may be grouped together as a power program. Similarly, all of the water projects may be grouped together as a water program.

Portfolio management refers to the centralized management of one or more portfolios and includes identifying, prioritizing, authorizing, managing and controlling projects, programs and other related work. Portfolio management focuses on ensuring that projects and programs are reviewed to prioritize resource allocation and that the management of the portfolio is consistent with and aligned to organizational strategies.

Program Management

A program refers to a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may include elements of related work outside the scope of the discrete projects in the program. For example, a new car model program that involves projects of the design and upgrades of each major component (e.g. the transmission, engine, interior and exterior) while ongoing manufactoring occurs on an assembly line.

Program Management can be viewed as the centralized, coordinated management of a group of projects to achieve the program’s objectives and benefits. Programs can involve several repetitive or cyclical undertakings. For example, utility companies may combine a series of projects into an annual “construction program”.

Projects and Strategic Planning

Projects are a means of organizaing activities that cannot be addressed within the organization’s normal operational limits. Projects are often utilized as a means of achieving an organization’s strategic plan.

Projects are typically authorized as a result of one or more of the following strategic considerations. Some examples of these include, but are not limited to:

  • Market demands
  • Organizational needs
  • Customer requests
  • Technological advances
  • Legal requirements

Projects, within programs or portfolios, are a means of achieving organizational goals and objectives, often in the context of a strategic plan. Although a group of projects within a program can have discrete benefits, they often also contribute to consolidated benefits as defines by the program.

Organizations manage their portfolios based on their strategic plan, which may dictate a hierarchy in the portfolio, program or projects. One goal of portfolio management is to maximize the value of the portfolio by careful examination of the candidate projects. Those projects not expected to meet the portfolio’s strategic objectives may be excluded. The organization’s strategic plan and available resources guide these investments in projects.

Portfolio, Program and Project Managenent Interactions

As figure 1-1 illustrates, organizational strategies and priorities are linked and have relationships between portfolios and programs, between programs and individual projects. Organizational planning impacts the component projects by means of project prioritization. Organization planning can direct the funding and support for the component projects on the basis of risk/reward categories, specific lines of business or general types of projects such as infrastructure and internal process improvement.

At the same time, projects provide feedback to programs and portfolios by means of status reports and change requests that may impact other projects, programs and portfolios. The needs of the projects, including the resource needs, are rolled up and communicated back to the portfolio level, which in turm sets the direction for organizational planning.

Project Management Office (PMO)

A PMO is an organizational body or entity that can be responsible for the centralized and coordinated management of the projects, programs and portfolios under its domain. The projects supported or administrated by the PMO may not be related other than by being managed together. The specific form, function & structure of PMO are dependent upon the needs of the organization that it supports.

A PMO may be delegated authority to act as an integral stakeholder and a key decision-maker during the initiation phase of each project, to make recommendations or to terminate projects to keep business objectives consistent. In addition, the PMO may be involved in the selection, management and redeployment of shared or dedicated project resources.

Some of the key features of a PMO may include, but are not limited to:

  • Managing shared resources across all projects administrated by the PMO
  • Identifying and developing project management methodology, best practices and standards
  • Developing and managing project policies, procedures, templates and other shared documents
  • Coordinating communication across projects

Project managers and PMOs pursue different objectives, are driven by different requirements. All of these efforts, however, are aligned with the strategic needs of the organization. Differences between the role of project managers and a PMO may include following:

  • The project manager focuses on the specified project objectives, while the PMO manages major program scope changes and can view them as potential opportunities to better achieve business objectives.
  • The project manager controls the assigned project resources to best meet project objectives, while the PMO optimizes the use of shared organizational resources across all projects.
  • The project manager manages the scope, schedule, cost and quality of the products of the work packages, while the PMO manages the overall risk, overall opportunity and interdependencies among projects at the enterprise level.

This should give you an idea about the need of strategic goals of an organization and how they get segregated into programs and projects. You can clearly identify the projects that are aligned with organization’s strategic goals to take them forward and remove projects that are not aligned or adding value to organization’s strategic goals. You should also get an idea about role & importance of project manager & PMO in case of multiple projects.

Reference: PMI PMBOK


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