The process of producing and managing a portfolio of projects is an integrative function from beginning to end. Portfolio development involves aligning new projects so that the entire organization is positioned to implement top-level strategic and business plans. The integration of projects with business direction is a key high-level activity that begins the portfolio process. Integration, in this case, means that projects are made part of the fabric of the business; projects are seen as instruments of the business plan, focused on business growth and expansion. The way integration is accomplished at this level involves the following steps:
■ Review of business strategic objectives
■ Weighting business objectives relative to each other
■ Scoring each candidate project against each strategic objective
■ Integrating weights of the objectives and project scores
The weighted scoring model is a tool to assure that projects are seen in terms of how projects "rack up" against the business strategies, weighted to reflect their relative importance to the business. The tool is flexible, so weighted objectives can be changed as the business changes, and scoring can be enhanced by modification of project plans.
The development of a portfolio and scoring of candidate projects is largely a subjective system performed through a group meeting of key business management and experts. Integration in this case occurs in the thinking process of the participants as well, reflecting the views and insights of thoughtful participants.
The gateway decision here is whether projects fit the organization's direction and purpose and serve as capital assets to grow the business. Projects enter the portfolio pipeline and are budgeted and funded by a capital rationing technique. Capital rationing integrates the company's allocation of available program resources with its strategic objectives through a weighted scoring model. Through the budgeting process, funds are allocated to strategic objectives according to their relative importance (triggered by their relative weights), then project costs and scores against objectives are used to fund projects until funds run out.
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