The activity is done in a workshop, with all core portfolio board members or at least their proxies in attendance. One day is usually enough, but some organizations may need longer.

An example is available to show how documents can change in this activity.

1. Updating the Portfolio Description

The portfolio board members check to see whether anything in the Portfolio Description needs to be updated to match the current strategies, policies, and processes, or simply to improve how they work in the portfolio management system. Some changes to the Portfolio Description may require changing the Value Generation Matrix as well (e.g., targets for categories of value).

2. Adding new programs and projects

Portfolio board members bring their new program and project ideas to the workshop (e.g., those generated in activity G02 of P3.express). They review the output of activity X1 and use it as a source of inspiration for brainstorming and generating new ideas together. All ideas are recorded in the Value Generation Matrix.

Organizations that are focused on their internal projects can benefit from using all employees’ and even end users’ opinions to generate ideas. Each portfolio board member is responsible for seeking ideas from people related to their department and bringing them to the workshop. In addition to that, employees should have a direct channel to send program and project suggestions to the portfolio manager. Accepting anonymous submissions can help increase contributions.

In general, the portfolio board needs a holistic, top-down approach to identifying programs and projects. They shouldn’t limit themselves to the programs and projects suggested by the environment but always ask, “What other programs and projects can we have to improve our portfolio?”

Note that the number of items in the matrix reflects the organization’s options. The more options you have, the more flexibility and freedom you’ll have; that’s why bigger matrices are desirable. Remember that the matrix is not limited to what can be done in the next few cycles but contains everything you might want to do some day in the future.

3. Appointing sponsors

After adding a new item to the matrix, one of the portfolio board members should be assigned to it as the sponsor.

4. Introducing Business Cases

The sponsor makes sure that their program or project has at least a rough Business Case to describe its purpose and justification. When needed, the sponsor can initiate programs or projects (assign a team to create a high-level plan without executing it) and use the output to create a refined Business Case.

Sponsors may delegate the responsibility of preparing their Business Cases to specialized people, but they stay accountable. Program and project managers may help in this process by providing some of the required information, but it’s best not to give them the whole responsibility of preparing the Business Cases because they usually don’t have the necessary background and strategic information.

5. Balancing sizes

Normally, programs and standalone projects in the matrix are of different sizes. However, having items that are vastly different in size would make it difficult to manage the matrix. Therefore, when possible, the portfolio board members must try to break down those that are too large into smaller ones and merge the ones that are too small and have similar goals into larger programs.

Remember that projects underneath a program won’t be directed in the portfolio management system directly.

6. Absolute justification

The portfolio board members need to estimate the expected benefits and required investment of new ideas and revise that of the old ones if needed. The Value Generation Matrix should be updated with these data.

Then, they should judge the absolute justification of each idea: Are the expected benefits higher than the required investment? Should we do this program/project at all? The status of the idea will be updated based on this decision. Note that rejected ideas must not be removed from the matrix, but rather marked as rejected and moved to the bottom of the matrix for future reference.

Sometimes, organizations have to accept programs or projects with benefits lower than their investment, because otherwise some of their capacity would remain unused, and some benefit may be better than no benefit at all. This situation should be considered in this step, but more importantly, the portfolio board should investigate this unhealthy situation to see how they can prevent it in the future.

The portfolio board members may estimate the required parameters and the final decision by voting using the method documented in the Portfolio Description.

If an ongoing program or project loses its absolute justification, the board should cancel it in this activity. This can also be done in activity Y2, if the portfolio manager and the sponsor can agree on it.

7. Relative justification and initial ordering

The programs and projects on the matrix will be sorted based on their status: finished → ongoing → pending → canceled → rejected

Items within each of the above statuses will be ordered based on date, except for pending ones that will be initially ordered based on their Value (the ratio between their expected benefits and estimated investment), so that the more Valuable ones are placed first.

The initial ordering of the Value Generation Matrix

If the relative justification of an ongoing program or project decreases dramatically, the board may decide in this activity to pause it to free up capacity for more important ones. This can also happen in activity Y2, if the portfolio manager and the sponsor can agree on it.

8. Revising the total capacity

The board members discuss the idea of increasing or decreasing capacity (e.g., hiring more people in the organization) and evaluate its impact on the portfolio. This consideration covers the upcoming cycle on the one hand and the long-term capacity of the organization on the other.

9. Balancing and final prioritization

The matrix should have columns for various categories of Value:

General categories (necessary for all organizations)
- Continuity (sustainer, diversifier)
- Return on investment timeframe (short-term, medium-term, or long-term)
- Overall risk (low, medium, high)
Categories specific to the organization

A “sustainer” is a program or project that helps improve the existing services, whereas a “diversifier” is one that helps create new product or service channels. Some organizations are entirely focused on a single specialist field, but even they can and should consider diversifying their services in that field or related ones.

Each program or project has a contribution of between 0% and 100% in each category to indicate what portion of its benefits serves that category.

Each category should have a relative target, and the sum of the benefits of all programs and projects in a balancing horizon should more or less match that relative target. By default, the balancing horizon is the upcoming cycle plus the three previous cycles. The previous cycles are determined by facts. To determine the upcoming cycle, a rough estimate of how many of the programs and projects can be done in the cycle is necessary.

The balancing horizon for the upcoming cycle

To balance the portfolio, the order of pending items on the matrix should be manually adjusted so that their combined calculated benefits in each Value category gets close to the relative targets. This means that the total Value of the balanced portfolio may be lower than the unbalanced one – that’s the price we have to pay to have a balanced whole. However, in rare cases, we may sacrifice balance to gain exceptionally higher Values and then make up for it in future cycles.

Balancing the portfolio for the upcoming cycle

At this point, the matrix has an optimized list of pending programs and projects. When enough capacity is freed up in the organization, the highest pending program or project in the matrix that matches the available capacity can be started in activity Z2.

Some organizations may need to have extra balancing criteria; for example,

When an external customer requests a proposal, it can’t be done at any desired time, but if you wish to proceed, it has to be done on a certain date, and the organization should be ready to start the project if the proposal is accepted.
For organizations focused on conducting their own projects, some of their projects may have dependencies with each other, which should be made visible in the matrix and considered when balancing. However, note that projects that have dependencies with each other usually belong to a program and won’t be directed in the portfolio management system directly.

There are many uncertainties about how portfolios work. Therefore, the matrix can never be precise enough to be optimized mechanically based on calculations, and so the judgment of experienced portfolio board members is essential. As a result, it’s important not to waste time and energy trying to make the numbers more precise than they should be. Instead, the portfolio manager should encourage collaboration, involvement, transparency, and critical thinking.

All portfolio board members should be involved in balancing the portfolio. When needed, they can combine their opinions by voting, following the voting method documented in the Portfolio Description.