Decision-Making as a Challenge in Portfolio Management
Decision-making is often the greatest challenge within portfolio management. The process of making decisions is already complex, but within portfolio management—especially in public or political organizations—it becomes even more intricate.
📊 Many portfolio methodologies describe tasks, roles, techniques, and deliverables, yet they dive deeply into the art of decision-making.
👀 The often unjustly criticized PRINCE2™ framework—“old world, waterfall is no longer relevant”—has, since 1996, outlined the decision-making process and the decisions that the project sponsor must make, not the steering group as is frequently misunderstood. Interestingly, the 1996 version of PRINCE2™ explicitly mentioned the Agile principle as an option in Managing Product Delivery. So much for “old world” and “waterfall.”
The Real Issue: The Art of Decision-Making Itself
🔑 In organizations that embrace and professionalize portfolio management, the emphasis is often placed on methods, priorities, and reporting. Decision-making, unfortunately, receives little attention.
🚨 The common perception? “Decisions need to be better substantiated.” However, this often leads to increased pressure on portfolio managers, while the underlying problem is quite different: many leaders have never learned how to make decisions about a portfolio. The issue lies not in the methodology but in the skills.
📋 In our recent article, we explained that portfolio management is not merely a “Überstuur group” or a collection of lists. It involves forward-looking strategy and making choices that extend beyond the short term. But which decisions are truly important in the portfolio process?
📌 Two Key Decision Flows in the Portfolio Process
Decisions on Change Initiatives:This involves decisions about initiating, planning, executing, and closing initiatives, as well as decisions regarding deviations in the case of significant changes.
Decisions on Portfolio Strategy:This concerns long-term strategies, capacity and budget considerations, and scenarios for the coming years.
⏳ Most organizations primarily focus on change initiatives. However, it is the strategic perspective and long-term choices that truly make a difference in portfolio management. It is crucial not to get swept up in short-term problems and the “here and now”—making adjustments in the moment always takes more time and resources than strategically looking ahead.
🌍 How can Decision-Making be Successful within Portfolio Management?
Focus on the Future:The guiding principle should be the horizon that extends five quarters ahead, not just the present.
Avoid Acting as a “Super Steering Group”:Leave micromanagement to project and program managers. The Portfolio Board should focus on strategy and guidance.
📉 Decision-makers must concentrate on strategic scenarios rather than the details of program or project plans. Focusing on minutiae undermines an effective portfolio process. As a portfolio manager, your role is not that of a quality advisor; you are there to set the course and provide direction. 📈
Why Does it Often Go Wrong?
Portfolio Boards that concern themselves with program and project plans and deviation reports should stop! It’s a waste of time and signifies the failure of an effective portfolio process. This responsibility lies with sponsors/steering groups, not the Portfolio Board. A portfolio manager is not a quality advisor; trying to improve plans is a misallocation of a well-paid role.
📑 Organization of Decision-Making: An Overview
🛠️ In my experience, a structured approach is essential. Decision-making within portfolio management can be categorized into decisions about change initiatives, such as:
📥 Intake Decision: Should this initiative be included in the portfolio?
📅 Planning Decision: Should the initiative be developed, and if so, when?
✅ Execution Decision: Can this initiative commence? Prioritization plays a significant role here.
🔄 Deviation Decision: What actions should be taken in the event of a significant deviation?
📤 Discharge Decision: Has the initiative been delivered in accordance with agreements?
For the portfolio strategy, the decisions extend beyond the upcoming year:
📌 Strategy Decision: What course will we follow, always looking at least 2-5 years ahead?
💰 Capacity and Budget Decision: Are there issues for the coming years that require action?
📉 Scenario Decision: What scenarios will we implement to achieve our strategy?
🔄 Adjusting Scenario Decision: What actions are needed to adjust our course?
🔍 Conclusion
🌅 Effective decision-making within portfolio management starts with a focus on the future and avoids micromanagement. Establish clear agreements on who makes which decisions, and ensure that strategy and change initiatives are always on the Portfolio Board's agenda.
🔗 Want to learn more about optimizing decision-making within your portfolio? Feel free to reach out—I’d be happy to share my tips and tools to help you navigate the world of strategic choices! 📬
Comments