Distinguishing Portfolio Management, Program Management, and Project Management

February 3, 2009
By
John Reiling
There is often a misunderstanding, and hence a mixed and overlapping use of terms, when it comes to program management. Sometimes a program is called a project. Sometimes a project is called a program. In addition, sometimes project portfolio and program are mistakenly used interchangeably. This article is intended to clarify the main differences and to distinguish the unique aspects of project portfolios, programs, and projects.

A great way to start to think about these is to think in terms of a pyramid hierarchy. At the top of the pyramid is portfolio management, which contains all of the projects and programs that are prioritized by business objectives. Below that is program management, which contains numerous projects that are interrelated, since they support a particular business objective. Programs consist of multiple projects, but projects can be independent and simply part of the portfolio. Projects differ from programs in that they are strictly tactical in nature.

Here is a more detailed look at each:

Portfolio Management
One of the key distinguishing features about Project Portfolio Management is that it is a process that is clearly characterized by business leadership alignment. Priorities are set through an appropriate value optimization process for the organization. Risk and reward are considered and balanced, and programs are selected based on their alignment with organizational strategy. Feedback is provided from program and project implementation so that portfolio adjustment can occur, if necessary. Strategic changes can also require portfolio adjustments.

Program Management
A key distinguishing feature of Program Management is business sponsorship. Almost by definition, based on decisions made at the Portfolio Management level, programs are sponsored by business needs. The Program takes on the ownership of benefits and is measured primarily based upon achievement of those benefits. Programs can also sometimes have “benefits streams”, or sets of interrelated benefits, such as increased R & D capabilities combined with increased market penetration, that cut across functions in the organization. Because programs, naturally consisting of multiple projects, span functions within an organization, they have all elements of a business system, and hence are general management oriented.

Project Management
Project Management is most concerned with delivery of capabilities, typically as defined within a program. Projects need to be strategy-driven, but do not own the strategic initiative as does a program. Rather, the project takes inputs and develops and implements a tactical plan. Monitoring along the way and final measurement of success is typically based more on the tactical considerations such as budget and schedule than upon achievement of a strategic business objective.

Now, with the basic distinctions among Project Portfolio Management, Program Management, and Project Management defined, each organization must “personalize” its implementation of these 3 processes within the organization. Some key factors and how they affect choices made about implementing each are as follows:

Industry – Industry provides insights into the stability and consistency of operations. Some industries, like pharmaceuticals, are be very driven by product lifecycles, albeit fairly long ones that include a major regulatory process. Consumer electronics companies are driven by much shorter project lifecycles and rapidly evolving technology, with little regulation. Construction firms are highly porjectized and deal with very stable technologies and products.

Organization size – Generally, greater size requires more formal organization. Without structure, the relationships between strategy, portfolio management, programs, and projects can become blurred and disjointed. The 2 points of focus here are to have well-considered organizational frameworks for each of portfolio, program, and project management, and then to pay special attention to building strong ties among them for communication, collaboration, and information flow.

Operational Breadth – A more narrowly defined operational capability, such as found in a sales-focused or production focused organization, will tend to require less formality, and information will flow more freely among portfolio, program, and project management processes. In organizations that are well-integrated horizontally, containing well-developed core competencies in R&D, marketing, production, distribution, and the like, there will be natural separations that need to be managed. This will make program management especially challenging, since it is likely to cross those boundaries.

Strategy – Like the various operational considerations, the strategy will effect organization of portfolio, program, and project management based on how complex it is. One key consideration not mentioned above is strategic alliances, which can greatly effect how tightly managed and how structured these processes need to be.

Standards for Portfolio, Program, and Project Management
Standards for Project Portfolio Management, Program Management, and Project Management do exist, and clear definitions can be found within. The worldwide Project Management Institute (PMI, www.pmi.org)) has developed and published the following standards (free for members):

The Standard for Portfolio Management
The Standard for Program Management
A Guide to the Project Management Body of Knowledge (PMBOK® Guide)Third Edition

*********************

John Reiling, PMP, has experienced portfolio, program, and project management in organizations of all sizes. John’s web site Project Management Training Online provides numerous courses on these topics for PDUs, PMP Prep, and PgMP Prep. See John’s related article on Program Management , with a nice graphic on the topic, at John’s blog, PMcrunch.com

 

Popularity: 1% [?]

Tags: , , , , , ,

4 Responses to Distinguishing Portfolio Management, Program Management, and Project Management

  1. Kristina Podnar on February 3, 2009 at 4:50 pm

    John,

    This is a nice post and does a great job of defining portfolio, program, and project management, as well as providing delineating boundaries between the three.

    I am often amazed at how interchangeably folks use the three terms, especially as I work in the Web Operations Management (WOM) arena, where not only are the terms interchangeably used, but there seems to be little or no awareness of the need for portfolio management of Web properties. Most of the time I find people are either interested in speaking at the program or project level, with project management being the preferred topic as it is simpler and most folks are used to living in this arena.

    I especially appreciated your tieback to strategy and the need to have strategy drive the portfolio, program, and project management. Some organizations get this, but for a lot of folks out there the dots have not yet fully connected.

    Thanks again.

    Kristina

  2. Demian Entrekin on February 3, 2009 at 5:51 pm

    A useful, concise breakdown of the three levels of “project work.”

    One thought to consider is that these three areas are not as neatly separated as one might conclude from these definitions. In many cases, the constraints of the project (skills, timing, etc.), can have a big influence back up the chain, all the way to the portfolio. As a result, there is often a fair amount of back-and-forth in the project approval process.

    One more interesting concept: unlike a project and a program, which are very likely to have start and end dates, the portfolio is a never ending flow of inputs and outputs, which makes it more like a pipeline than a program.

  3. Josh Nankivel on February 4, 2009 at 3:55 am

    Thanks John! I think I always just assumed that portfolio and program management were just two terms for the same thing….I never saw them as separate. Probably just a product of the companies I’ve worked for.

    Thanks!

    Josh Nankivel
    http://pmStudent.com

  4. priya on February 4, 2009 at 7:35 am

    good classification between portfolio, project and program management, though I guess when someone is working in a company they better be aware of these definitions.

    http://www.deskaway.com

Leave a Reply to Kristina Podnar Cancel reply

Your email address will not be published. Required fields are marked *