Project Portfolio Management (PPM) is a fancy term to describe how we manage the often-confusing mix of interrelated, dependent, and connected projects. PPM considers the big picture of all projects grouped together; past, present and future – and calculates the optimal prioritization and sequencing of projects to maximize return on investment.
While we often theorize projects as discrete, independent units – the truth is that we rarely manage projects in isolation. The reality is that they’re inextricably interconnected. The question is by how much. Projects are always connected whether that’s by budget, timeline, or resources. How we manage and prioritize the mix of projects to ensure success across all the projects is what Project Portfolio Management is all about.
You know the score – your agency has got 50 projects on the go, and they’re all overlapping, some of them for the same client, all using the same resources, some of them you’re doing to keep the lights on – others for the prospect of awards, and others just for pure innovation.
But as an Agency Owner, Program Manager or Project Director, how do you know if you’re making good decisions? How do you know if you’re focusing your teams and their projects on the right things? We’re all asking the same questions – Is this really a good idea? What should we really be doing? What projects should we be prioritizing right now? How can we focus our resources most efficiently? How can we run these projects concurrently, and profitably?
These are the kinds of questions that project portfolio management (PPM) enables us to answer, and in this post, we’ll discuss how to successfully implement PPM to achieve maximum returns from projects. With many competing projects and priorities stretching resources in different directions, good PPM is the only thing standing between us and bad project decisions which offer nothing but poor return on investment. In order to get a clear understanding of how a successful implementation of PPM facilitates maximum returns on projects, we first set the context that helps us understand:
- What PPM is
- The difference between PPM and project management
- The objectives of PPM
- The role of the portfolio project manager
We then take a look at the critical steps involved in effective Portfolio Project Management as well as tools that are available to make the process more efficient and effective. As with anything worth investing in, PPM has benefits if successfully implemented, so we conclude with an overview of the benefits of PPM.
What is project portfolio management (PPM)?
Project portfolio management refers to the centralized management of one or more project portfolios to achieve strategic objectives. It is a way to bridge the gap between strategy and implementation, and ensures that an organization can leverage its project selection and execution success.
PPM is generally used by organizations to identify the potential returns on project. It make it possible for companies that want to invest in new (and often competing) projects to forecast risks inherent in each and make an informed decision. Its value extends beyond that though. It also facilitates team communication and ensures that all parties involved in projects are on the same page.
When done properly, PPM is a valuable tool for obtaining the buy-in of all stakeholders in an organization. By enabling various stakeholders – including clients and company executives – to see the bigger picture, obtain consistent feedback, understand, manage and mitigate risks, there’s much less likely to be discord, which can often be the bane of successful project management. PPM also enhances transparency, governance, and accountability.
What is the Difference Between Project Management and Portfolio Management?
Despite their similar-sounding names, project management and portfolio management are actually quite different, especially in their purposes. Project management, as you know, is the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements and its importance cannot be over-emphasized. The operative word in Project Portfolio Management on the other hand, is portfolio. PPM is not primarily concerned with running projects, rather its focus is on choosing which projects to be involved in and how to fund them, based on whether or not they support the goals and objectives of the company. Projects that do not fall within the scope of the company’s objectives are removed from contention.
If you were managing a technology company’s portfolio for example, you would most likely reject a proposed building project, because it doesn’t align with the company’s stated strategy of focusing only on some predefined type of tech projects.
What are the Objectives of Portfolio Management?
The primary objective of PPM is to maximize the benefits a company accrues from the projects it undertakes. This necessarily involves selecting only those projects that offer the right amount of value, taking into consideration the resources that need to be allocated as well as the strategic fit with the company’s goals. Other objectives include achieving balance in the project portfolio by ensuring an appropriate mix of high and low risk and long term and short-term projects. By establishing an optimal mix of projects, PPM ensures a company is better placed to achieve its operational and financial goals.
What Is the Role of the Project Portfolio Manager?
As the person with oversight of an organization’s project portfolio, the portfolio project manager is integral to successful execution of the organization’s strategy. Often, the role of a project portfolio manager revolves around managing one or more portfolios and working with different financial algorithms and financial models to align projects to the company’s strategic objectives. Portfolio Managers often develop often develop management standards to guide the portfolio and they keep a high level over view of everything within the portfolio.
The project portfolio management process
The Project Portfolio Management process usually involves a step-by-step process which includes:
1. Create an Inventory and establish a strategy
First, identify all the projects in the pipeline by gathering key project and organizational information. Categorize these, identify your company’s strategic goals and determine if these projects support those strategic objectives, and if so, which ones.
Business strategies are the basis of Project Portfolio Management and as such, it is important to have a strategy in mind before proceeding. Preparing answers to common questions you expect to get during this phase is also advisable. Common questions can be anything from “What is project portfolio management?” to “How much will this cost the company?” to “How will this benefit us?” and even “Why do we need project portfolio management?”. It’s always good to be prepared. Establish what you would like your process for prioritizing projects to be like.
After you’ve set a strategy, you need to build an implementation team. Your implementation team should include technical team members (to help with new systems) and portfolio managers, to name a few. Your implementation team may need a governing body, which is typically made up of senior management.
Next, analyze the current strengths and weaknesses of your Project Portfolio. Evaluate each project individually – project milestones, potential ROI, reporting schedule and resource allocation. After collecting data, it’s generally a good idea to organize it by category. These categories can be anything you think is necessary, but generally, include completed and canceled projects and growth and survival categories. In conducting this analysis, you should ask questions that aim to reveal whether there is duplication or whether some existing projects might not be better combined for the sake of efficiency or even halted completely. You should also assess the overall risk of the project portfolio as a whole by comparing the probability of technical success against the anticipated benefit from the project. Remember to have a good communication process in place so that all the key variables are thoroughly discussed.
3. Ensure Alignment
Next, perform an alignment analysis that will show you whether your critical resources are working on critical projects and whether the projects you do decide to carry on with really align with all the strategic initiatives the company wants to undertake. Some of your guiding principles should include:
- The degree of the strategic fit between the portfolio and the company. You need a balance between near-term growth opportunities, long-term goals, and the quest for long term innovation.
- Ensuring the distribution of projects, including the number and nature of the projects, are aligned to different strategic goals in a way that makes economic sense.
- The probability that the end product will deliver the return expected.
- An evaluation of associated risks. It is important to take a broad inclusive approach to risk and not only measure in financial terms, but include schedule, scope resource and technology risks
Next comes the management aspect of the process. At this point, you need to view the project portfolio and make necessary decisions about reallocation of budgets and resources, or reprioritization based on information you uncovered during the previous legs of the process. You may also need to reschedule projects which you may have decided to keep, but who scheduling risk does not quite align with your strategy. Obviously, collaboration is absolutely critical before making these decisions and ending up with the right portfolio.
In the end, your portfolio should have a healthy mixture of risk and reward and should meet internal requirements.
5. Test and adapt
Lastly, test and adapt. There is no guarantee you will get your PPM process right immediately, and in fact you shouldn’t expect to. You will need to adapt and make changes as you go. What adaptation means is quite different for every company, as it should be, but it’s generally a good idea to test your new portfolio with a few stakeholders, taking feedback as needed.
PPM can be quite a complex process, especially in the beginning. There are project portfolio management templates and Portfolio and project management software that can help, and I’ll talk about this more in a little bit.
How to achieve project portfolio management success
Once your portfolio has been rolled out, it can be difficult to see where to go from there. Here are a few tips for achieving success:
- Accurate identification of risks and associated remediation strategies is critical and should be prioritized.
- Don’t be afraid to cancel projects if they no longer align with company strategy.
- Enable architects, IT planning teams, and C-suite to align execution with business strategy
- Simplify time and task management for project team members, ensuring they have the freedom and flexibility to capture task and time data as necessary.
- Accurate data is absolutely critical and should be prioritized. So should access to data, as delay in getting data can impinge on your decision making ability, as well as your ability to comply with regulatory requirements.
- Utilize the right tools to keep on track and simplify the process. For example, giving your project team the ability submit timesheets remotely or giving stakeholders the ability to keep track of project status could save you a lot of time.
- Don’t micromanage.
Project portfolio management software
Choosing the right project portfolio management software and tools is often the key to successful PPM. There are so many with different capabilities. If you were to search for, “best PPM software”, for instance lots of software will show up. However, the term “best” is subjective. Something may be the best for one company, but completely useless for another. It really depends on your situation and how many projects you have.
Perhaps, the best way to choose software and tools is to keep these questions in mind.
- What do I need this for?
- Do I want my PPM software to be web based or not?
- How many people will be using this software?
- Do I want to be able to manage clashes?
- Is this software for internal employees or external clients? Is it for both?
- Do I care about how the user interface looks?
- How easy should the software be to use – is the preference for a less powerful tool but that’s quick to learn, or something more powerful with a steep learning curve?
Those are some good starting questions, that often give you a basic outline of what software and tools you’ll be needing. It’s best to really consider your situation before tying yourself down to one program.
Often, project portfolio management software companies offer free trials. This can be extremely beneficial as it allows for you to have a look at the software without any monetary commitment. Apart from MS project portfolio management, there are several other project management tools that let you do many things like managing tasks and teams across multiple projects. Others offer real-time dashboard tools that provide you with the latest business intelligence. Regardless of your needs, you are guaranteed to find one that works for you.
Benefits of project portfolio management
Project portfolio management has many benefits, which include increased success in project delivery, better decision making and the ability to prioritize high-value projects, among others. Regardless of how high value and successful a project may be, it could still be a victim of overspending. Again, PPM helps a company to avoid this; it allows managers to nip overspending in the bud as it is easy to see where resources are being over-allocated.
PPM can also be a veritable tool in organizational change management; with an effective PPM strategy, a company can restructure and improve its methods for project execution as part of a larger process to change the company’s operational or strategic direction. In the process, it will remove inefficiencies and be better able to focus on appropriate strategies for achieving goals. Lastly, PPM also makes a company more nimble and able to adapt to change with a minimum of fuss or disruption.
I have attempted to give you a concise breakdown of what, in reality, can be quite a complex process. An efficient and effective PPM process obviously isn’t going to happen overnight, but with the right tools and internal commitment to the process, it will happen. In the end, what is required to be successful at PPM is commitment and adaptability.
What Do You Think?
Let me know your thoughts in the comments section. I’d love to hear from you.