Corporate Portfolio Management Best Practices to Manage Complexity Across Units

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Corporate portfolio management aligns investments to corporate strategy. It defines a portfolio strategy and its implementation for material investments of the business units. For companies of medium to large size, it is common for initiatives to number 1,000 to 5,000 every year. The complexity of analyzing, selecting, and allocating capital for many initiatives can quickly become overwhelming. In addition, aligning the units to the corporate strategy and achieving buy-in is critical to success. A few best practices can help manage such complexity.


Best Practices

Corporate management can reduce the complexity of managing strategic planning across multiple units by adopting best practices to standardize the approach and level the playing field.

  1. Integrate strategic planning at the corporate level.  The benefits are significant and include maintaining a long-term strategic focus, a coherent approach to aligning units to corporate strategy, and capital allocation based on rigorous analysis.  By contrast, the absence of an integrated approach gives rise to a short-term opportunistic focus, units setting their independent direction, and capital allocation not tied to the corporate strategic context.
  2. Establish a few standard metrics across units.  It’s essential to measure the units’ performance with uniform metrics to avoid inadvertent bias. Also, too many metrics can cause the measuring process to cave under itself – similar to the Balanced Score Card, which has proven unwieldy. Therefore, using a few core measures of short-term and long-term performance is essential.
  3. Adopt a clear articulation of the corporate strategy.  The planning units must be informed by the corporate strategy and driven by corporate strategic intent and objectives. 
  4. Determine the correct unit of analysis.  This determination is one of the most consequential in aligning units to the corporate strategy and funding the right initiatives.  Enterprises are usually organized by business units or in a matrix format.  There may be more insightful ways to analyze the portfolio.  Units of analysis vary significantly by company.  They can include business units, geographic markets, vertical markets, product groups, strategic alliances, and functions, including IT, R&D, and Marketing.
  5. Baseline the current portfolio.  A baseline reading of the current portfolio forms the basis for current and historical performance at corporate and unit levels.  This baseline reading serves as a map to assess the units’ position and guide strategic planning. 
  6. Establish clear directional goals for each unit.  Direction setting is critical in aligning planning unit strategies and performance to corporate expectations.  Upfront alignment allows planning units to attempt to develop strategic plans consistent with the corporate strategy.
  7. Share relevant information.  Sharing summary information and analysis at the corporate level with the units can provide meaningful strategic context and guidance for their strategic planning.
  8. Define what is considered a material investment.  The definition of what is regarded as a “material” investment is a cornerstone to effective capital allocation and varies by company. Some set a threshold amount, e.g., $100,000 for a medium-sized company, above which the unit must justify the investment. Some distinguish between strategic, tactical, and operational discretionary investments. Others use a zero-based budgeting approach that requires justifying any investment beyond ‘keeping the lights on.’  Whatever the definition, “material” investments must cover all meaningful corporate investments broadly and deeply.
  9. Standardize planning guides and analytical frameworks.  The distribution of planning guides and analytical templates to the units facilitates the situation assessment, strategy formulation, and implementation planning.  It also facilities the review process and understanding of the unit’s analytical approach.
  10. Set an ongoing collaborative dialog with the participants.  A top-down approach from corporate leaders rarely works and almost always backfires: it lacks credibility, can insert inaccurate views about the market and its developments, and proves demotivating. Better to establish a collaborative dialog among the corporate managers, unit managers, and the finance department based on shared information and common objectives.
  11. Employ consistent evaluation criteria across opportunities.  Investment decisions cannot depend on corporate leaders’ gut instinct, the intuition of a few, ad-hoc exceptions, or changing criteria – which can be inaccurate. Data-driven decisions must balance subjective decision-making. The reason is that data-driven decision-making works and is viewed positively by the capital markets. 
  12. Maintain regular communication during the review and approval process.  This practice enhances the quality of the review, helps clarify areas requiring further analysis, drives meaningful strategic dialog, and maximizes the effectiveness of presentations, discussions, and feedback.



How effectively and efficiently a company manages the allocation of its capital among competing opportunities is the most critical decision management makes. However, managing the corporate portfolio is complex, given the sheer number of potential initiatives, the specific market situation, and the buy-in from the units.

Corporate management can reduce complexity by setting guidelines for a consistent approach to strategic planning and consistently presenting the strategy, initiatives, implementation, and request for funds across units.

Corporate management can improve strategic alignment and buy-in by the units by promoting a collaborative dialog, sharing relevant information, viewing managers as experts in their capacity, challenging their initiatives, and forcing transparency throughout the process, from setting directional goals to allocating resources.

Successful corporate portfolio management does not result from a one-size-fits-all framework.  It is a combination of process and organizational behavior specific to each company based on its capabilities as they evolve with experience.