Balancing The Project Portfolio

There are many factors to consider when balancing a project portfolio. Just as an unbalanced stock portfolio can be dangerous or non-productive, so can a project portfolio. Consider the following key factors in balancing.

■ Market side vs. supply side

■ Research vs. development

■ Risk and rewards

■ Allocation to assets (maintenance vs. development) MARKET SIDE VS. SUPPLY SIDE

As in the examples cited earlier in this chapter, if your organization has excess capacity and could deliver more to the market, but it does not have enough customers, the project portfolio should lean toward addressing the market constraint. Similarly, the major constraint of the organization could be internal, but it will not be across every department. It might be in operations, engineering, shipping, etc. Or it might be in another part of the supply chain, e.g., you simply cannot get enough raw materials to produce your products. The portfolio manager must understand where the organization's constraint is, and tilt the portfolio to address it.


How much pure research is enough to ensure that your organization will stay healthy? This is not a question strictly for business. It applies equally to government and not-for-profit organizations. For example, there is a big question now about how much research the government should have devoted before 9/11.

Market and product research projects must exist in every portfolio. The difference between these and other projects is that it is quite possible that nothing will result from some of these projects. For example, a drug company does a lot of pure research, but only some of the research results in possible drugs. The drugs must be manufactured in small, controlled lots and undergo clinical trials before a drug application to the FDA is submitted. And a drug application is no guarantee that it will be approved.

A balanced portfolio will have pure research, but there is no predetermined answer for what the correct percentage is for either expenditures or number of projects. The portfolio manager must consider the company's position relative to its needs, in order to assess this and recommend an answer to the Governance Board.


How many high-risk projects does the company want or is capable of sustaining? This factor must be known by the portfolio manager and taken into account when assessing the portfolio and making recommendations. If the company' s cash flow situation suddenly becomes very poor, the portfolio will need to be balanced differently. If the company's shareholders expect huge breakthroughs in product development or new markets, the risk and reward factors in the portfolio need to reflect these expectations.


The asset portfolio reflects the assets of the organization in terms of services and products, as well as in infrastructure to support the sale of those products and services. Assets may include system applications, the hardware to support the software, buildings, or anything that can be legally identified as a taxable asset. It also includes those assets the organization has identified as essential to its business but not necessarily a taxable asset. For example, the organization' s Web site and the development effort that goes into the Web site is such an asset.

The Governance Board must ensure that the projects selected for development address assets in a manner that will best help the business grow. Activated projects should help enhance or add to the asset base of the business. If the portfolio manager sees a portfolio where 70% of the investment is going toward declining assets, the portfolio is probably out of balance and needs adjustment. The asset portfolio helps everyone understand what is important in terms of physical or intellectual property.


The strategic objectives of a business can take many forms. Typical strategic objectives are improving profitability, increasing market share, compliance with mandated regulations, improving customer service, and penetrating new markets. The strategic objectives portfolio applies to companies that are non-profit as well. These objectives might include seeking new funding, providing improved security, and decreasing defects.

The Governance Board must ensure that all projects activated are assigned a primary business goal so that the total risk and effort of that goal can be actively considered in the entire portfolio process.

The strategic objectives portfolio helps everyone understand how their work is directly affecting a specific, executive mandated business goal.

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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  • semere
    How to balance project portfolio?
    16 days ago

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