Setting Boundaries

What organizational design is in place to help a portfolio leader understand the boundaries of their decision authority? Start with questions like:

• What kinds of things should be in this portfolio (vs. other portfolios)?
• What is the relationship of this portfolio to the business?
• What is the relationship of this portfolio to product, program management, and development?

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Identify Context

We will begin by describing a context, dedicated to the portfolio management function for a specific portfolio, (1) that will support the business by rationalizing (and potentially consolidating) investments to drive change, and (2) where the investments can be allocated to either specific programs/projects or specific products/solutions (which are modeled as other contexts). The first context-to-context relationship we’ll cover is the parent-child relationship.

The Parent Context for this portfolio management functional context is a line-of-business (LOB), or a grouped set of cross-business offers that needs thoughtful allocation of resources to achieve its strategic aims and performance targets. It is sponsored (and funded) by the parent to support the funding of programs and/or products with appropriate budgets, which is a job-to-be-done in their Journey/Job Map for running the business. The parent’s business strategy is visible through the Parent Goals and specific Parent Results, usually financial targets and market-specific aspirations. The business strategy sufficiently details the “Where to Play” and “How to Win” choices such that the needs for business capabilities (and funding of those needs) can be addressed by this Strategic Portfolio Management context.

Define Context Scope

The Mission of Portfolio Management is to enable the a specific business (or set of businesses) to win by fueling Programs and/or Products to strengthen (or build) the capabilities needed by the specific business. Interactions with the business context can expressed as a service catalog, if desired, to help them understand how to engage with this context.

Its Responsibilities include:

1. Working with the business to identify the needed changes in business capabilities needed to win (see how this facilitation works in the Set Direction section below)
2. Rationalizing/consolidating the programs and/or products based on the needed capabilities
3. Allocating budget to programs and/or products to enable and maintain capabilities

Assets owned and maintained by the Portfolio Management context include: Systems for managing intake of capability improvement needs; Systems for communicating budget allocations; Systems for tracking spend-to-date against the allocated budget; Systems for aligning goals between the business and the programs and/or products (e.g. OKR systems).

The leader(s) of the Portfolio Management context have the complete Decision Authority to decide:

• The relative priority of the capability needs (working with stakeholders)
• The budget allocated to each prioritized program and/or product (working with stakeholders)
• The expected results for each funded capability enhancement (working with stakeholders)

Decision Rights

Leaders delegate decision making by creating boundaries of authority. Decision rights enables the speed and effectiveness of decentralized decision making.

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Define Context Behaviors

The portfolio management context executes a set of systems for the business, not specific business Capabilities. Performance and success for the context are governed by KPIs that show how efficiently the portfolio management systems are executing:

• Cycle time for ideation of capability enhancement ideas
• Customer satisfaction (of the business stakeholders) on the internal decision architecture
• Cost per Roadmap update, counting all contributing hours across all stakeholders

Portfolio managers execute a Workflow that produces outputs consumed by their “customers”, the business leaders, quarterly:

1. Refine ideas for capability needs and enhancements (single-piece flow, continuous)
2. Rationalize, consolidate, and prioritize capability needs (monthly)
3. Allocate budget/resources to needs via specific programs and/or products (quarterly)
4. Report on each investment in terms of goal progress vs. spend-to-date (quarterly)
5. Share a roadmap of expected investments over time (monthly)

Portfolio managers will work with business leaders, functional leaders, program leaders, and product leaders to execute the above workflow. Their workflow Needs Value from the financial management context in step 4 to understand the spend-to-date, via their systems (like time tracking, etc.). This Portfolio Management context is considered to be a Peer Context of the business-specific contexts that it serves. It is not a Parent Context of the contexts that ultimately receive funding allocations; those are parented by the business(s) that are served by the Portfolio Management context.

Portfolio leaders drive several key Rituals to help communication and alignment across their stakeholders:

• Quarterly Portfolio Review
• Monthly Roadmap Review
• One-on-ones (between context leader and related child and parent context leaders)

The Portfolio Management context can charge a monthly Rate to the business (if desired) for their service that is proportional to the run rate for the context itself (i.e. staff). [Note: Since this context supports standard systems (not unique business capabilities), the Rate might actually be paid be a central, cross-business context.] The Portfolio Management context will pay a monthly rate to a peer context driving needed services like time tracking (to receive that value from their systems).

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