What is a portfolio?

A portfolio of projects refers to a number of projects and programmes which have been grouped together to meet certain goals or aims.

Each project or programme within the portfolio might have different specific aims or characteristics, but they may be related because they have similar strategic goals.

The Project Management Institute explains how this type of management structure is beneficial:

In the oil and gas sector, this type of management is very common.

The diagram here (PMI, 2013, p.5) is a typical representation of a portfolio of projects for an engineering company. Indeed a portfolio can include sub-portfolios, programmes (which includes projects) or even single standalone projects.

Let's imagine there is an oil and gas company called O & G. This company might have 50% of its business in country X, and country X has specific regulations and conditions which are very different from other countries. Therefore, the company may want to create a sub-portfolio which encompasses all the projects it has in country X. A person with expertise in the regulations and conditions of country X might be in charge of managing this particular sub-portfolio.

Then O&G might want to group its projects by type. It may want to group together all the exploration projects (such as projects to identify new oil fields) in a single programme led by an expert in exploration.

The company might also have a single specific project it is carrying out. For example, this might be to build a prototype for a new and more efficient refinery designed to totally change the market in this field. Perhaps the company wants to keep this separate from other projects and programmes, and have the best people in the company fully dedicated to work on this project.

You can see how this fictional oil and gas company, and indeed other companies will choose to organise their projects into portfolios to maximise their internal and external resources. A company may look at its external resources and create a list of suppliers to share across to all the different projects, or it may list a specific class of supplier specific to country X or to a certain type of project. A portfolio approach is also used to distribute risks (eg a company may decide to have one risky project for every 10 safe projects). A portfolio structure allows companies to allocate resources more efficiently (eg a large boat might be a resource a number of projects need to share) and therefore companies develop an inter-project perspective.

Please refer to the glossary to check any terminology you are unfamiliar with: Glossary of Project Management Terms

Coming up...

In the next section you will be invited to discuss your experiences of programme management.