Project portfolio management enables organizations to focus on the right projects at the right time, enhance decision-making, and deliver improved business value.
A successful project portfolio is measurable, supported by clear alignment with strategic goals, and regular reporting using comprehensive product and portfolio management metrics.
It’s also important to periodically review the overall status of the portfolio against agreed objectives and external business factors to identify any changes.
Let’s take a look at each of these components, starting with strategy.
Project Portfolio Management and Business Strategy
- Strategy is “a process of analysis which is designed to achieve the competitive advantage of an organization over another in the long term”.
Aligning Projects with Strategic Objectives
Strategy should reflect the organization’s purpose , informing the company structure and ways of working. Porter identified three types of strategy (cost leadership, differentiation, or focus) and recommended that organizations pursue one strategy type to achieve optimal results.
Realizing a strategy depends on comprehensive implementation plans, which reflect internal capabilities and resources, and external opportunities and threats.
From Strategic Vision to Project Execution
Projects are core to the delivery of the agreed strategy. However, projects can only yield the desired results when the strategy is defined and aligned with project portfolios.
Ideally, organizations should define their strategy, possibly with frameworks like Objectives and Key Results (OKRs), before creating a project portfolio to reach these goals.
Connecting the Dots Between Strategy and Portfolios
There is a circular link between strategy and project portfolios. Strategy informs the portfolio, which impacts approved projects. In turn, these projects deliver the desired solutions and innovations.
Without the ‘big’ picture, it’s too easy to waste time and resources on the wrong projects or to assume all projects are equal and deserve the same support.
Linking strategy and portfolios helps senior management make informed decisions, end underperforming projects, and improve business performance.
Additionally, teams who are familiar with the strategy and the business value of a project are more likely to deliver the desired result.
Driving Strategic Alignment for Project Portfolio Success
Finally, aligning strategy and project portfolios creates the optimal culture for success.
Senior management should encourage everyone to focus on key strategic objectives. This will help portfolio managers to determine what projects to execute and when, and where to deploy the right resources.
Once your strategy and project portfolio are aligned, the next step is to measure the effectiveness of this relationship with metrics.
The PMO’s Contribution to Value Through Metrics
A Project Management Office (PMO) enhances business value by using metrics to demonstrate progress and impact. PMO performance is measured by process standardization, project success rates, and strategic alignment.
PMOs track specific KPIs to monitor progress and identify areas for improvement. These value metrics show both delivery efficiency and organizational impact. Regular measurement and reporting enable better decisions and optimal resource allocation across the portfolio.
Project Portfolio Management Metrics
A metric refers to a measurement of something. In a project management context, these management measurement tools include estimated project costs, risks, and project duration.
Project performance is tracked over time against the agreed metric, helping teams to make decisions and manage risks as work progresses.
Why Portfolio Management KPIs Matter
Strong portfolio performance metrics should be visible, measurable, understood by management, and reveal the value delivered by the overall portfolio. This applies especially to product portfolio management metrics that connect directly to product success.
Metrics are also a common language for project teams and stakeholders throughout the organization, improving collaboration and communication.
How to Select Effective KPIs with the SMART Framework
When selecting metrics, including any specific portfolio management KPI, use the SMART framework to match measurements with your goals successfully:
- Specific
- Measurable
- Attainable
- Relevant
- Timely
Here are six commonly used project portfolio management KPIs and metrics to consider using.
1. Strategic Alignment
Areas to examine include alignment indicators like percentage of projects supporting objectives, time to market for a new solution, and the number of completed projects within the portfolio.
2. Timeliness
Use this metric to identify the on-time completion percentage and how many adjustments were made to schedules by project teams, often measured through schedule variance (SV). The overall project completion rate is also important, as timely delivery significantly affects project success rates.
Understanding these trends is especially important if your business strategy is based on quick product releases or a ‘first-mover’ advantage.
3. Budget
A popular financial metric is budget variance, the difference between proposed and actual costs. More detailed tracking uses earned value (EV) to measure progress and the cost performance index (CPI) to evaluate budget efficiency.
You should also review how much time was needed to develop the budget and how frequently the budget was revised during project execution.
4. Quality
To help determine business value, gather customer satisfaction rates using surveys, and expand to overall stakeholder satisfaction. Consider implementing Net Promoter Score (NPS) for projects to measure advocacy, alongside tracking customer loyalty metrics and employee satisfaction, as engaged teams often produce higher-quality work.
Once the solution is launched, track customer complaints and feedback to gauge if the project delivered as expected.
5. Effectiveness
Collate both the number of recorded errors and rework on various projects as these affect the schedule, budget, and overall business value.
Additionally, monitoring resource usage is essential for effectiveness. Resource capacity helps with planning, while tracking resource profitability and reviewing allocation metrics can help optimize project staffing and financial results.
6. Business Value
Typically, this is measured as Return on Investment (ROI), though including net present value (NPV) can provide a more complete financial view. Tracking the benefits realization rate ensures planned advantages materialize.
The ultimate goal is to quantify the business value generated from the portfolio. Other measurements also include customer satisfaction surveys and the volume of customer complaints following a new product launch.
Metrics, data sources, and reporting tools will vary between organizations. Depending on your current requirements and portfolio processes, it may be best to start with just a few metrics to track and understand the health of your portfolio before introducing more metrics over time. If you are unsure where to start, check with your project management office or consult with senior management.
Tracking Portfolio Metrics with Microsoft 365
Deciding which metrics to track presents certain challenges; selecting how to track metrics is another, especially when tracking portfolio metrics with Power BI.
Using a collaborative tool such as BrightWork 365, which offers configurable metric tiles, scorecards, and dashboards, create a single source of project truth.
Real-time dashboards provide visibility and insight for senior management, informing key business decisions such as resource allocation.
Reviewing Your Project Portfolio
From time to time, review the health of your portfolio to check if any projects need to be stopped or re-prioritized. Businesses must adapt to customer demands and new opportunities so it is essential to take a flexible approach to your portfolio.
The frequency and duration of the review will depend on local needs. A review can take place when a major project ends, when reallocating resources to new projects, or as part of annual business planning.
You can examine the entire portfolio or pick a few projects to rank against part of your business strategy, for example, focusing on high-value or high-risk projects only.
Portfolio Management KPIs to Guide Strategic and Tactical Reviews
Using agreed goals and metrics, the review may also be divided into strategic (overall portfolio results) and tactical (health and performance of individual projects) considerations.
Here are some questions to help you get started.
- How will current projects support the organizational business strategy?
- Does the portfolio balance short, medium, and long-term business needs and opportunities?
- Are ongoing projects sequenced correctly to deliver business value and optimize resources?
- How many projects are at risk?
- What is their total risk exposure?
- Are these projects interdependent?
- What actions are needed to address this issue?
- Do approved projects match current/future customer needs and new strategic objectives?
- Are the right resources available when needed?
- What is the estimated actual ROI of the portfolio?
Portfolio Reporting with BrightWork 365 and Power Platform
If you’d like to see how BrightWork 365 delivers cross-project reporting for Microsoft 365 and Power Platform, take a look at our free video demo.
In just 20 minutes, you’ll see how BrightWork will help you to:
- Manage Projects with flexible apps, automated reporting, and collaborative team sites.
- Control Portfolios with project request management, real-time portfolio dashboards, and resource allocation.
- Leverage Power Platform with secure, scalable deployment in your existing Microsoft 365 cloud.
