The role of portfolio management differs a lot based on how development is organized within the company. If development funding is centrally managed, the role of portfolio management is to drive decision-making. If development funding is fully decentralized across the organization, and development budgets are managed within different units and departments, the role of portfolio management is more about creating alignment and networking across the organization.
Sometimes organizations also move from one end to another – first centralized approach may seem too heavy and a bit bureaucratic, and to bring decision making closer to business, portfolio management is decentralized. This blog is reviewing the different approaches and where could be the balance – and also some thinking related to agile ways of working in the portfolio context provided.
Ultimately, the choice between centralized and decentralized development portfolio management depends on the organization’s specific needs. Each organization is unique, and perhaps something between fully centralized and completely distributed may be a good spot – finding the balance, and enjoying the benefits of lean but powerful governance, but also managing portfolio dependencies well across the company.
Centralized development portfolio approach
When development funding is centralized, portfolio governance is typically managing investment decisions, and driving development roadmaps. In a decentralized approach, portfolio management is focusing more on creating alignment, networking across organizations and coaching. Let’s review a bit more what could be potential benefits and challenges for fully centralized portfolio management approach:
Potential benefits
- Driving development based on strategic priorities in enterprise level
- Prioritization of development across different business areas and business units
- Common governance model, standardized processes and ways of working
Potential challenges
- Decision making may be far away from the business units or teams
- May feel bureaucratic, and slow; lack of agility in decision making
Decentralized development portfolio approach
On the other hand, if development funding is fully decentralized across different departments and cost centers, decision-making is typically close to the business, but seeing the big picture in business or in enterprise may be challenging. Let’s review the potential benefits and challenges:
Potential benefits
- Increased agility and responsiveness to the change
- Possibility to find ways of working, which work well in a specific business unit or function
- Decision making is close to the business teams
Potential challenges
- Lack of transparency in enterprise level & across untis
- Sub optimization in enterprise level due to optimization in units and functions
- Lack of common ways of working due to the freedom and autonomy
- Challenges to manage common resources across different portfolios
How is agile development impacting portfolio management?
Also lean and agile ways of working are changing the role of portfolio management – instead of driving decision making via project gates approvals, agile teams typically have own budget frames or guardrails, and decision making for development priorities is happening within the team and stakeholders.
Tip! For organizations using Scaled Agile Framework, a good read for evolution of Lean Agile Center of Excellence: https://scaledagile.com/blog/how-to-start-and-grow-lean-agile-center-of-excellence/
What would be optimal in your organization?
How do you see your organization – where are you now in the scale from a fully centralized vs. fully decentralized approach? Is everything working smoothly, or could there be some actions to find a better balance? Where would you like to be within a 3-year time frame?
Strategic Portfolio Management 
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