Once an association has adopted a
strategic plan, the next step is to convert the goals and objectives in that
plan to a work plan and budget. But how
can this be done? Every association
program or service has a constituency and a claim on resources. How then to weigh the allocation of scarce
resources to ensure that the objectives of the plan are attained and member
needs are served? Portfolio analysis has
been devised to help associations bridge the gap between strategy formulation
and strategy implementation. In other
words, it helps you make the hard choices of where to put your money. It is the
creation of Dr. Ian MacMillan of the University
of Pennsylvania ’s Wharton School
and the basis for The Forbes Group’s model.
What
Portfolio Analysis Is
Portfolio analysis is a systematic way to analyze the products and
services that make up an association's business portfolio. All associations (except the simplest and the
smallest) are involved in more than one business. Some of these include publishing, meetings
and conventions, education and training, government representation, research,
standards setting, public relations, etc.
Each of these is one of the association's strategic business units (SBUs).
Each business consists of a portfolio
of products and services. For
example, an association's publishing business might include a professional
journal, a lay magazine, specialized newsletters geared to different member
segments, CDs, a website, social networking sites, etc.
Portfolio analysis helps you decide
which of these products and services should be emphasized and which should be
phased out, based on objective criteria.
Portfolio analysis consists of subjecting each of the association's
products and services through a progression of finer screens. During a time of cutbacks and scarce
resources, it is essential to screen out programs and services that are not
essential to most members. Those that
appeal to a more limited segment can be funded by those desiring the product or
service rather than by dues.
Advantages
and Disadvantages of Portfolio Analysis
Portfolio analysis offers the following
advantages:
1. It
encourages management to evaluate each of the organization's businesses
individually and to set objectives and allocate resources for each.
2. It
stimulates the use of externally oriented data to supplement management's
intuitive judgment.
3. It
raises the issue of cash flow availability for use in expansion and growth.
Portfolio analysis does, however, have
some limitations.
1. It
is not easy to define product/market segments.
2. It
provides an illusion of scientific rigor when some subjective judgments are
involved.
Considering both its advantages and
disadvantages, portfolio analysis should be regarded as a disciplined and organized way of thinking about asset allocation. It is only a subjective tool, however, and is
not a substitute for the ultimate professional judgment of the responsible
decision-makers.
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