Optimize the Portfolio Against Constraints to Get the Biggest Bang for the Buck

Scarcity is the essence of reality; you simply do not have the budget, skilled resources, technology, or organizational ability to undertake all project requests. So how do you select the best portfolio of projects given these constraints? You could rank-order them based on their strategic value (that is, the common currency defined above) and select them in order until you run out of funds. Yet in most cases, there are multiple constraints, including limited competencies, project dependencies, mandatory projects, and more. In order to optimize a portfolio, organizations should look to maximize the total strategic value their project portfolio can yield in relation to all constraints, and this requires mathematical optimization.

Optimization is best seen through the use of an Efficient Frontier with which you can benchmark any proposed portfolio against the best you could possibly do given your constraints. (The Efficient Frontier concept is explained in Chapter 4.4.) The Efficient Frontier tool seamlessly looks across all of the possible portfolios and gives you the confidence to know where you are in comparison to the optimal solution, and what is holding you back from reaching it. (See Figure 10.3-2.)

Figure 10.3-2 The Efficient Frontier

Figure 10.3-2 The Efficient Frontier

Moving to a fact-based decision model that enables identification of trade-offs between more and less valuable portfolio components leads to responsible decision making and maximum support of the company's business direction.

Was this article helpful?

0 0
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.

Get My Free Ebook


Post a comment