One common area of confusion when studying for the PMP Exam is the difference between projects, programs and portfolios. PMBOK clearly outlines the difference between projects, programs and portfolio management. To help clarify the air on the difference between these three concepts, this post sheds some light on the characteristics of each.
Project management focuses on managing and completing temporary endeavours. The term, "project" denotes a set of activities that have a well-defined beginning and an end.
Project Management leads to the fulfilment of project objectives and focuses on individual project needs.
With project management, there are 47 processes, 5 process groups and 10 knowledge areas. It requires knowledge of PMBOK.
Projects are more tactical than strategic.
This focuses on managing related projects. A program is a collection of projects that are managed together because you get benefits greater than if you were to manage them individually.
For a group of projects to be classified as a program, it means there is a common outcome to all the projects. For example, a program to build an estate may comprise: 1) Design project 2) Construction project and 3) Furnishing project. All these projects on their own, contribute to the creation of the new estate.
Program management is done with the objective of aligning the direction of organizational projects and helps to coordinate related projects.
Programs consist of multiple projects, but projects can be independent of any program and simply form part of the portfolio.
This focuses on investments related to projects, operations and programs. Portfolios are investment tools that align with the strategy of the organization.
Portfolio Management aims to answer the question, what do we invest in? Businesses need to invest in the right ventures. No business can turn every idea/insipration into a project. With portfolio management, ideas are gathered, prioritised and the ones that are in line with the company's strategy are shortlisted, eventually becoming programs and projects. As a result, the way projects and programs are managed are tied back to portfolio management.
Portfolio management may also be described as a centralized effort aimed at achieving the strategic objectives of the organization. A portfolio decision is made to either invest or not invest in a project or a program.