Many people hear the terms projects, programs and portfolio, but are not sure what they all mean and how they fit together. All three are structures that allow us to organize certain types of work. These three concepts need to be understood by project managers.
Projects, by their definition, have a defined start and end date. There is a point in time when the work did not exist (before the project), when it does exist (the project), and when it does not exist again (after the project). This is the key determinant of whether a piece of work is a project. Projects also include a defined scope, finite budget and assigned resources. Another characteristic of a project is that they always build something. If you find that all you are doing is meeting, then you probably are not on a project. Projects always create one or more deliverables. Projects should be managed proactively using solid project management processes and techniques.
Some initiatives are so large that it makes sense to break them up into a set of smaller projects. These smaller projects are easier to plan, manage and finish successfully. However, the problem with breaking up work into smaller projects is that each project may start to make independent decisions that will be good for that project, but detrimental to the initiative as a whole.
The purpose of a program is to provide central management and control over a set of underlying projects that are all trying to deliver a common solution. The program allows the projects to achieve a common benefit that would be difficult for each project to achieve independently.
Portfolios are collections of work. The term is used a couple ways. Portfolios can actually be similar to departments in that they could exist on the organization chart. One day you could have a Finance Department and the next day you could have a Finance Portfolio.
However, in most cases the portfolio is not a formal organization but is a logical way to group, organize and manage a collection of work. The work may be related or it may not be. A portfolio typically contains projects, but they can also include support, operations and other types of work as well. Portfolio management is generally performed by managers. Projects are initiated, approved and prioritized at the portfolio level. The collection of active projects is then staffed, monitored and supported at the portfolio level.