47
Portfolio Performance
Management
Study Hints
Effective portfolio performance is essential to portfolio management success. The
Portfolio Performance questions on the PfMP
®
certication exam constitute 25%
of the exam or 43 questions.
These questions are part of the Portfolio Performance Management
Knowledge area as well as in the Dening and Aligning Process Groups in The
Standard for Portfolio Management—Third Edition (2013). There are three pro-
cesses in Portfolio Performance Management:
1. Develop Portfolio Performance Management Plan
2. Manage Supply and Demand
3. Manage Portfolio Value
The rst process is from the Dening Process Group, while the other two are in
the Aligning Process Group.
The purpose of portfolio performance management is to ensure there is an
optimal mix of components in the portfolio, and they are sequenced to best
achieve business value. Organizational value then is obtained through this pro-
cess of planning, measuring, and monitoring overall performance and sourcing
needed resources. Performance metrics, therefore, are used to determine areas of
improvement, which include both quantitative and qualitative measures. In many
organizations the tangible metrics will take precedence, while in others intan-
gible metrics may be of greater value.
As the portfolio performance management plan is developed, it focuses on
how portfolio value is dened and how resources are allocated to the compo-
nents. This plan may be part of the portfolio management plan, or it may be a
separate document. To develop it, the goals from the portfolio strategic plan are
used along with objectives to reach these goals Through performance manage-
ment progress toward these goals are measured, and any needed changes to the
48 ◾ PfMP® Exam Practice Tests and Study Guide
portfolio mix to reach these goals are assessed, The benets of each component
also are emphasized and tracked for the optimum value Another area of empha-
sis is providing the governance group and other key stakeholders with metrics to
determine if the organizational strategy will be met. As well, the metrics provide
sponsors and component managers the details on how their components are
doing in the context of others in the portfolio as the goal is to ensure the port-
folio consists of the components that will create the greatest value given avail-
able resources.
Selection of appropriate metrics is based on the areas of importance to each
organization, and a goal is to have a few key metrics that can be easily analyzed
and used. They are ones that follow the SMART (specic, measurable, attainable
realistic and time based) approach. It therefore is useful to have an easy- to- use
portfolio management information system and to focus on capacity and capabil-
ity analysis
As the plan is prepared, a number of people are involved, and templates and
examples are included for performance measures and targets. These key perfor-
mance indicators (KPIs) then report on the progress of the portfolio as well as
future indicators.
In the Aligning Process group, managing supply and demand is critical.
Review Figure6-4 in The Standard and recognize the usefulness of a mas-
ter schedule of resource allocation. Supply, as used in The Standard, involves
resource capacity, recognizing resources are more than just people, while
Demand is the resource requirements from proposed and existing components
in the portfolio. It is essential to minimize unused capacity and demand, and
balance resources according to priorities since resources are constrained in most
organizations. Optimal monitoring of the supply and demand then is critical to
portfolio success. Scenario analysis, quantitative and qualitative analysis, and
capability and capacity analysis are used, and through this process updates to the
portfolio are expected.
This knowledge area also involves Managing Portfolio Value, and it is
expressed in different ways by organizations. A best practice is to use a value
measurement framework to organize how value will be created and measured,
considering both tangible and intangible metrics. The expected value from each
component in the portfolio is measured throughout its life cycle to see if changes
are warranted to achieve greater benets. The objective is to ensure through
the current work is in the portfolio, objectives are being achieved, and value
estimates are established, focusing on continuous improvement of the value
measurement framework, Recommendations for change to the portfolio manage-
ment mix are expected through this process. Study Figure6-9 as an example of
a performance variance report that may be used, along with Figure6-10 for a
benets realization plan. Changes in weighting for scoring performance also may
be necessary, as shown in Figures6-11 and 6-12. Value scoring and measurement
analysis and benets realization analysis are used. Not to be overlooked is the
usefulness of the portfolio efcient frontier, as shown in Figure6-13 as a tool to
Portfolio Performance Management ◾ 49
optimize the portfolio given resource constraints. Consider reviewing the work
done by Henry Markowitz in the nancial arena and relate it to portfolio man-
agement for the organization.
Following is a list of the major topics in the Portfolio Performance domain.
Use this list to focus your study efforts on the areas that are most likely to appear
on the exam.
50 ◾ PfMP® Exam Practice Tests and Study Guide
Major Topics
Portfolio performance management purpose
◾ Optimal mix of components
◾ Sourcing of key resources
◾ Examples of quantitative and qualitative measures
Dening Process Group
Aligning Process Group
Develop Portfolio Performance Management Plan process
◾ Purpose
◾ Inputs
− Portfolio management plan
• Stakeholder expectations and requirements
• Governance model
• Framework for strategic change
• Planning, procurement, and oversight processes
− Portfolio process assets
• Portfolio strategic plan
• Charter
• Schedules
• Processes, policies, procedures, knowledge bases
− Organizational process assets
• Human- resource related policies
− Enterprise environmental factors
• Organizational culture
• Structure
• Human resources
◾ Tools and techniques
− Establishing SMART performance metrics
− Portfolio management information system
• Cost, performance metrics, risks
• Performance improvement measures
• Established baselines
− Capability and capacity analysis
• Denitions, resource types
• Resource schedules
• What- if scenarios
• Finite capacity planning and reporting
• Resource management tools
Portfolio Performance Management ◾ 51
◾ Outputs
− Portfolio management plan updates
• Steps and measures to manage portfolio performance
• Roles and responsibilities for measurement
• Performance measures
• Performance reporting
• Resource optimization
• Benet realization
• Key performance indicators
− Portfolio process assets updates
Manage Supply and Demand
◾ Purpose
− Denitions
− Unused capacity and unmet demand
− Types of resources
− Continual monitoring
◾ Inputs
− Portfolio
• Resource requirements
• Component prioritization
− Portfolio management plan
• High- level guidelines for management
• Reporting risks, communicating, engaging stakeholders, recommend-
ing changes
− Portfolio reports
• Resource utilization
• Vacation schedules
• Equipment/ supply
• Financial
◾ Tools and techniques
− Scenario analysis
• Possible resource allocation
• Impact on component schedules
• Resource management tools
− Quantitative and qualitative analysis
• Resource leveling
• Resource schedules
• Dependency analysis
• Trend analysis
− Capability and capacity analysis
◾ Outputs
− Updates to the portfolio, portfolio management plan, portfolio reports
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