The objective of Project Portfolio Management (PPM) is to determine the optimal mix and sequencing of proposed projects to best achieve the organization’s overall business objectives typically expressed in hard economic measures and business strategy goals.
7 Benefits of Project Portfolio Management
1. Improved alignment with business strategy and objectives
- Demand management
- Portfolio selection
- Capacity planning
- Portfolio reporting.
2. Improved visibility and control within the organization
- Resource management
- Financial management
- Project reporting
- Project scheduling
- Project management.
3. Improved collaboration
- Improved interdepartmental collaboration
- Structured sharing of information to support knowledge sharing
- Change management
- Communication of schedule milestones
- Issues and risk management.
4. Improved Pipeline Management
The determination of which set of projects in the portfolio can be executed by a company with finite development resources in a specified time. Fundamental to pipeline management is the ability to align the decision-making process for estimating and selecting new capital investment projects with the strategic plan.
5. Improved Resource Management
The focus on the efficient and effective deployment of an organization’s resources where and when they are needed. These can include financial resources, inventory, staff, technical skills, production, and design.
The continuous process of evaluating an organization’s resources and performance to determine its capacity for the production of work.
Proactive capacity planning allows organizations to finalize a release roadmap that maximizes resource utilization.
6. Improved Financial Management
Portfolio Management allows the finance department to improve their accuracy in estimating and managing the financial resources of a project or group of projects.
In addition, the value of projects can be demonstrated with the strategic objectives and priorities of the organization through financial controls and to assess progress through earned value and other project financial techniques.
7. Improved Risk Management
An analysis of the risk sensitivities residing within each project, as the basis for determining confidence levels across the portfolio.
The integration of cost and schedule risk management with techniques for determining contingency and risk response plans, enable organizations to gain an objective view of project uncertainties and to develop a ‘risk-adjusted’ schedule.
Costs of Not Using Project Portfolio Management
- Million-dollar projects, which may or may not match the company’s objectives, are awarded to business units headed by the loudest executives.
- Weak IT governance structures mean that business executives don’t have clear ideas of what they’re approving and why.
- The organization doesn’t build good business cases for IT projects.
- Organizations attempting to do many more projects than they had the capacity to do.
- Bad projects squeezing out good projects.
- No visibility of what is being done throughout the organization.
- Excessive project delays due to “not enough resources”.
- High turnover due to “burn out” of key project contributors because they are working on too many projects.
- Frequent change of status of projects (i.e., moving from “active” to “on hold” to “top priority” and back).
- Completion of projects that, when all is said and done, don’t really meet a strategic need.
- Rather than cooperation among departments, intense competition, when staffing and funding projects.
This short video highlights important research about the costs of not using project portfolio management – and the benefits of implementing this approach.
Key Actions for Implementing Project Portfolio Management
- Gain stakeholder alignment on goals for PPM.
- Obtain senior management support for the PPM.
- Develop an implementation strategy for a PPM framework.
- Align with key stakeholders on criteria for decisions and prioritization for projects within the project portfolio.
- Decide what tools will be used to support the PPM meetings to record and report decisions.
- Determine the reporting requirements for different in stakeholders in terms of format, frequency, and medium.
- Decide on how the PPM framework will be monitored, measured and how it be continuously improved.
- The PMO will facilitate the design of the PPM process with key stakeholders as part of the deliverables of the project that will be signed off by the PPM steering committee.
- The PMO will communicate the PPM roles and responsibilities and the PPM process as well as provide end-user training for the PPM process and templates.
- The PMO will facilitate the testing of the PPM process, templates, and tools with key stakeholders as part of a pilot.
The Project Portfolio Management Process
1. A good evaluation process can help organizations detect overlapping project proposals upfront, cut off projects with poor business cases earlier, and strengthen alignment between IS and business senior managers.
2. After evaluating projects, most companies will still have more than they can fund. The strength of portfolio management is that ultimately, the prioritization process will allow an organization to fund and resource the projects that most closely align with your company’s strategic objectives.
3. Portfolio management begins with gathering a detailed inventory of all the existing and proposed projects in your organization, ideally in a single database, including name, length, estimated cost, business objective, ROI and business benefits.
4. Consolidating all projects into a single central repository provides visibility and control to your organization’s entire workload.
5. This is required for maintaining a single source of truth for work demand and for making informed allocation decisions.
6. Put the inventory into a master project schedule, to gain an understanding of the resource requirements of all the projects.
7. Create a standardized intake process for new project proposals.
8. Develop a standardized process for evaluating a portfolio of project requests, prioritizing the requests and approving or rejecting requests.
9. Standardization allows for consistent methods in evaluation and decision-making.
10. Formalize the definition of strategic goals and objectives to support portfolio prioritization and selection.
- Define the business driver and impact measures
- Prioritize business drivers.
11. Assess the impact of new projects on the business drivers
12. Maximizing portfolio return starts with optimizing the selection of projects to pursue.
13. By comparing objective priority scores across projects, fact-based decision-making discussions are made possible. Prioritize the projects against weighted criteria as:
- Financial valuation
- Strategic alignment
- Project priorities
- Resource availability
- Project complexity
- Organizational capability for change.
14. Perform project portfolio selection and sift out the ones with questionable business value either placed “above the line” (those projects that should be funded) or “below the line” (those that shouldn’t).
15. Portfolio reporting supports portfolio selection discussions by providing a common and consistent view of the entire project portfolio to decision-makers.
16. Schedule and assign resources to the entire project portfolio, supported by detailed project planning.
17. Regular portfolio monitoring for ensuring successful project delivery, ongoing project tracking and reporting; and portfolio realignment.
Editor’s Note: This post was originally published in March 2015 and has updated for freshness, accuracy, and comprehensiveness.