Portfolio, Programme and Project Management

The strategic importance of managing multiple projects has sharpened the focus on the programmes and portfolios in which projects operate. Aubry et al. (2007) referred to this as 'organisational project management' in which projects are not just expected to be delivered on time and schedule but programmes and the portfolio create value for the organisation. They go so far as determining strategic alignment between them as a core function: 'the need to join together portfolios of disparate, proliferating projects into an efficient coherent whole' (p. 329). The resultant benefit of the whole exceeds the sum of the performances of the individual projects.

Mueller (2009) expressed the importance of project portfolio, programme and project management as being part of organisational governance. Project portfolio, programme and project management is tied to corporate governance through their shared goal of maximising shareholder/stakeholder value. The board of directors and senior management, when implementing corporate governance principles, are responsible for project portfolio, programme and project management. He captured this obligation as follows:

Governance, as it applies to portfolios, programs, projects and project management, coexists within the corporate governance framework.

It comprises the value system, responsibilities, processes and policies that allow projects to achieve organizational objectives and foster implementation that is in the best interests of all stakeholders, internal and external, and the corporation itself, (p. 4)


A project portfolio is a collection of project programmes that work together to meet strategic business objectives. Project portfolio management is viewed as the major interface with corporate strategy. Governance structures and relationships, covered in the following chapter, underpin the process of selecting projects for the portfolio. The governance processes of project portfolio management are shown in Figure 4.2.

Only the 'best' projects are included in the portfolio, namely those that support the interaction of business and project strategies, within the constraints of available organisational skills and resources. Mueller (2009) defined 'best' as projects of quality and short implementation and suggested that it is preferable to have a large number of good projects than a small number of excellent ones. Mueller (2009) identified three criteria by which the quality of the project portfolio can be measured.

Governance processes of project portfolio management

Figure 4.2 Governance processes of project portfolio management

First is the achievement of desired portfolio results. The portfolio supports the success of the business as well as its projects. For the portfolio it is about improving customer satisfaction, getting products and services onto the market in a timely fashion, increasing the organisation's financial returns, and so on. For projects, it is to meet cost, time and quality estimates when achieving these objectives.

Second is the achievement of project programme purposes. The objectives and strategies of the project portfolio are translated to the programme level and hence the same success criteria apply. Performance is measured by how well programmes in the portfolio fulfil the purposes delegated to them.

Third is to achieve strategic alignment. Each project is tested against the strategic goals of the organisation. Mueller (2009) referred to the 'strategic bucket' approach in which the project is placed under the particular strategic goal that it satisfies. The organisation would have a number of these strategic buckets. An example is grouping projects that contribute to improving customer satisfaction.

Project risks play an important part in approving or rejecting a project proposal. The financial impacts of risks on project costs and benefits have to be estimated and the project has to show a net positive return as the hurdle rate for further consideration. Alternatively, risk may be assessed in nonmonetary terms when new products and service developments are proposed. Rather than focusing on a financial return, the organisation seeks strategic advantages, for example by being first to the market even at an initial cost to itself. Project risk plays an important role in investment management, outlined in a later section.

The PRG perspective is to reduce the overall risk of the project portfolio through project diversification. This requires a relatively stable environment in which long-term decisions can be made and the portfolio evolves in an orderly manner over time. With increasing volatility in the environment and the need to be responsive to new demands, this may no longer apply as much as in the past. In contemporary organisations, processes and structures are constantly being questioned and modified to adapt to the changing environment. De Reyck et al. (2005) found that fewer than 33 per cent of organisations used portfolio management to diversify and reduce overall project risks.

Checklist: Project Risk Governance in Project Portfolio Management

• Does the organisation assess the risk associated with the project portfolio?

• Is the organisation's project portfolio aligned with the PRG strategy of value-protecting?

• Is the organisation's project portfolio aligned with the PRG strategy of value-creating?

• Is the project portfolio consistent with the organisation's PRG capacity?

• Is the project portfolio prioritised, refreshed, maintained and pruned in such a way that project risk plays a strategic role in the organisation?

• Does the organisation discriminate between activities that should be managed as projects and other activities that should be managed as nonprojects?

• Does the organisation engage with all stakeholders on project risks to ensure a sustainable portfolio?


A programme is a group of related projects, managed in a co-ordinated way, superior to managing individual projects. While a project is a temporary organisation with a set of specific objectives, a programme is a more permanent structure that provides strategic direction to a project collection. Projects within the programme are related through sharing a common objective, client and/or resources, as well as through their interdependencies. The project programme achieves objectives or benefits that a single project alone cannot.

Example of a Project Programme

The NASA Apollo programme in the 1960s illustrates the concept of a project programme (Mueller, 2009). It was formed to raise the reputation and national pride of the US as a major player in space exploration. This could not be achieved through a single mission to space; rather, a series of flights took place, each representing a project. The sum of results of each project added to the value of the programme, initially in more of an intangible form (e.g. national pride) and later more tangibly (e.g. technological discoveries of the space programme could be sold to industry).

Two types of project programme exist (Mueller 2009). Temporary programmes have a defined end date and aim to achieve a specific benefit by that date. It could be a suite of computer modules within a business system, such as inventory management. Each computer module has to be designed, written, tested and implemented as a separate project within the programme of the inventory application. Only when all modules are implemented will the overall benefits of inventory management become apparent: less capital tied up in inventory holding, faster turnover of inventory items, ability to promote and increase the sale of items that provide the highest profit margins, and so on.

Semi-permanent programmes remain active as long as there is demand for the product or service. Programmes rely on the vision and entrepreneurial capacity of the organisation to continue year after year. Mueller (2009) used the example of car manufacturing. The specific model of the car continues to be made but each year it is fine-tuned by redesign or adding new features. Each change represents a project within the programme of the car's manufacturing. The programme continues until a drop in demand makes production unviable and the model of car is discontinued.

Programme management can be an alternative to portfolio management as the main interface with corporate objectives. This is seen as being realistic and pragmatic because of the closer linkage between programmes and projects. It is argued that project programmes are able to adapt better to changes in the market place compared to the larger, more inflexible project portfolio. This has particular significance for PRG since project risks are most apparent as programme/project details emerge. Compared to project portfolio management, project programme management is regarded as still being in its infancy. It lacks the current strategic approach to portfolio management, made potentially worse by the influence of heavily codified and prescriptive approaches used in the projects that constitute the programme (Young et al. 2012).

The performance of PRG should be monitored as the project programme progresses, at the end of each programme phase:

• Pre-programme. During this phase agreement is reached on the risk profile of the programme after considering the risk appetite and tolerance of the organisation.

• Programme set-up. Broad risk categories are identified within the programme and initial risk strategies determined for value-creation and value-protection.

Programme establishment. The project manager takes on the responsibility of identifying risk at the project level and develops procedures to analyse risk, determine its significance and how to respond.

Value realisation. During the development of projects, the impact of risks on costs and benefits is monitored. Depending on their effect, the decision is made to continue the project, modify or abandon it.

Programme closure. A final cost/benefits statement is produced to establish whether or not the programme has produced its objective. The project team documents the lessons it learned about project risk management.

Checklist: Project Risk Governance in Project Programme Management

• Does the organisation distinguish between temporary and semipermanent project programmes?

• Is project programme management seen as an alternative to project portfolio management?

• Is the risk profile of the project programme determined during the pre-programme stage?

• Are initial project risk strategies determined during the programme set-up stage?

• Are project risks analysed during the programme establishment stage?

• Are the impacts of project risk changes monitored during the value realisation stage?

• Are 'lessons learned' documented at programme closure?


The approaches to project management have variously been described as 'microscopic' and 'magic bullet type' (Young et al. 2012): microscopic, because of the narrow emphasis on meeting expectations for delivering the project on time and within budget; a magic bullet because of the assumption that following guidelines automatically produces the desired project outcome. Critics have pointed out that project managers are failing to engage adequately with top managers on the strategic aspects of projects.

Risk management at the project level currently follows the pragmatic approaches contained in guides such as PMBOK® (Project Management Institute 2008) and PRINCE2™. They provide the 'how' details to identify inputs, use tools and techniques, and produce outputs across five major stages of project risk management: planning, identification, analysis, response and monitoring. It was argued by PMI that they are 'presented as a set of procedures that are self-evidently correct' (Williams 2005, cited by Kutsch and Hall 2010: 246) and therefore have gained universal acceptance.

The foregoing discussions indicate clear differences in PRG during project, programme and portfolio management. The scope of risk management at the project levels is much narrower than during programme and portfolio management. Individual risk items are managed by the project team, while at the portfolio level an overall project risk profile is determined to meet the organisation's risk appetite. At the top level, project risk strategies are aligned with those of the business and these strategies are further developed in project programmes and implemented in projects. Different skills are required at each level, ranging from strategic to operational. Portfolio success is measured as improved business outcomes, while the project manager is concerned with the cost-effectiveness of risk management. Responsibility for portfolio management is with the board of directors, who delegate responsibilities to the steering committee and project sponsor who in turn oversees the risk management activities of the project manager. A comparison of PRG activities across projects, programme and portfolio is provided in Table 4.1.

Table 4.1 Project risk governance in portfolio, programme and project management






Manage risk through project life cycle

Track benefits/costs in project risk strategies

Align project risk and business strategies

Primary role

Identify and respond to individual project risks

Implement value-protecting and value-creating strategies

Diversify project risks across project portfolio

Focus on

Project risk analysis and risk register

Organisational project risk issues

Strategic project risk issues


Project risks are controlled and monitored

Programme delivered within agreed project risk strategies

Improved business performance


Project risk response is cost-effective

Business values are created and protected

Overall business success in increased

Skill required

Project risk management

Organisational leadership

Executive leadership



Project manager

Project sponsor, Project Management Office

Steering committee, Project sponsor

Responsible to

Project sponsor

Steering committee

Board of directors



Project risk management practices

Project risk governance principles

Project risk governance principles

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