Portfolio Management’s Role in Organizational Strategy
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Organizational strategic planning, operational planning, and portfolio management are interrelated but distinct parts of any organization’s strategic management framework. These components work together to ensure that an organization has well-defined strategic objectives and that its resources are effectively allocated to achieve them.
Strategic and operational planning within an organization serve as the foundational elements of the organizational strategy. This strategy is further refined as it progresses through portfolio management, eventually guiding project and program management activities. What you see as a program delivering value for the organization has its roots in processes that a program manager is often unaware of, and providing some clarity to the big picture can help a program manager understand their significance in the grand scheme of things.
Strategic and operational plans constitute the top-tier components of an organization’s strategy. While complementary, they serve distinct purposes:
- The organization’s strategic plan is a high-level roadmap that outlines the organization’s overall direction and goals. It spans typically three to ten years or more, aligning the organization with its mission and vision. Details like major initiatives, target market positioning and broad goals or decisions on critical business goals such as expansion plans or organization structure are provided in the strategic plan.
- In contrast, the operational plan delves into greater detail, focusing on a shorter timeframe, usually one year or less. It addresses immediate concerns such as setting targets, budgets, and resource allocation for the near future.
- The operational plan encompasses resource allocation, process enhancements, and performance management. Unlike the high-level strategic plan, it provides specific actions, timelines, responsibilities, and budgets.
Organizational strategic plans and organizational operational plans are closely related facets of an organization’s overall strategy. The strategic plan primarily addresses the “what” and “why” of the organization’s goals — answering questions like “What should we achieve?” and “Why are these goals important?” Conversely, the operational plan focuses on the “how” of achieving these goals, detailing the specific steps, tactics, and activities required for implementation.
In summary, the operational plan outlines the concrete actions necessary to realize the strategic plan’s objectives.
Portfolio management enters the picture as the process of selecting, prioritizing, and overseeing the projects, programs, and initiatives that bring the organization’s strategic objectives to fruition. It aligns with the strategic direction set by the organization and selects projects, programs, and initiatives that enable the organization to achieve these objectives.
Regular portfolio reviews, integral to portfolio management, ensure that the organization’s portfolio — its set of investments — aligns with the organizational strategy. This systematic evaluation assesses whether projects, programs, and initiatives deliver the expected value, utilize resources effectively, and remain aligned with the organization’s strategic objectives.
Portfolio management reinforces components of the portfolio that align with the organizational strategy and drive desired outcomes. Initiatives that don’t align are phased out. During portfolio reviews, new initiatives that better align with the strategy are proposed, analyzed, and integrated to enhance the organization’s ability to attain its goals. These may take the form of programs or projects that offer added value to the organization. Portfolio management ensures that the organization allocates its limited resources to a set of projects and programs that collectively support and advance strategic goals.
In essence, strategic planning, operational planning, and portfolio management collaborate to bridge the gap between high-level strategic objectives and the successful implementation of initiatives that propel an organization toward success. Without effective portfolio management, organizational strategy remains a collection of intentions. Portfolio management transforms these plans into tangible projects and programs, bringing them to life.
