No company has the resources to meet all of the business requests placed on it. Resource constraint issues are especially troublesome when times are tough. The typical response to managing scarce resources is to come up with a prioritization process to ensure that the approved work will provide the most value. But even with the process in place, you may wonder how you know that you're applying the right resources against the highest valued work.
Portfolio management series
This is the first article in a series on portfolio management. It provides a high-level description of portfolio management and its importance. The rest of the series will include information on:
- Portfolio planning and prioritisation
- Managing the portfolio
- Managing change within the portfolio
- Measurement and feedback
This is a tough question to answer and it certainly cannot be answered in isolation. What you really need to understand is your overall business strategy and where you are trying to move your company. Then you have some context in which to make decisions about what work is most important. In fact, you may turn down projects that have a huge return on investment because the project does not really help you execute your business strategy.
Financial portfolio management
You may be familiar with the term "portfolio management" in the financial sense. You want to manage your money in a way that maximizes your return and minimises your risk. This includes understanding the investment alternatives available and picking the ones that best meet your overall financial goals.
For instance, the investment decisions you make are different if you are 30 years old than if you are 55. Also, you don't look at each investment in isolation but in the context of the entire portfolio. You may have a bond fund that is not doing as well as your stock funds.
But you may decide to keep it because it provides balance to your entire portfolio and helps reduce your overall risk. Depending on market conditions, you may find that your stock funds are suddenly down, but your bond fund is now providing the counterbalancing strength.
6%
1%
