Defining a Portfolio

A simple definition of a project portfolio is that it is a collection of projects that share some common link to one another. The operative phrase in this definition is “share some common link to one another.” That link could take many forms. At the enterprise level, the link might be nothing more than the fact that all the projects belong to the same company. While that will always be true, it is not too likely the kind of link you are looking for. It is too general to be of any management use. Some more useful and specific common links might be any one of the following:

• The projects may all originate from the same business unit — for example, information technology.
• The projects may all be new product development projects.
• The projects may all be research and development projects.
• The projects may all be infrastructure maintenance projects from the same business unit.
• The projects may all be process improvement projects from the same business unit.
• The projects may all be staffed from the same human resource pool.
• The projects may request financial support from the same budget.

Each portfolio will have an allocation of resources (time, dollars, and staff) to accomplish whatever projects are approved for that portfolio. Larger allocations usually reflect the higher importance of the portfolio and stronger alignment to the strategic plan. One thing is almost certain: whatever resources you have available for the projects aligned to the portfolio, the resources will not be enough to meet all requests. Not all projects proposed for the portfolio will be funded and not all projects that are funded will necessarily be funded 100 percent. Hard choices have to be made, and this is where an equitable decision model is needed.

Your organization will probably have several portfolios. Based on the strategic plan, resources will be allocated to each portfolio based on its priority in the strategic plan, and it is those resources that will be used as a constraint on the projects that can be supported by the specific portfolio. Chapter 14 discusses the details.