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Project portfolio management (PPM) describes how project managers wrangle the often-confusing mix of interrelated, dependent, and connected projects.

PPM considers the big picture of past, present, and future projects and calculates their optimal prioritization and sequencing to maximize an organization’s return on investment (ROI).

In this article, I’ll cover everything you need to know to get started with PPM and how to successfully implement PPM to improve your projects.

What is Project Portfolio Management?

Project portfolio management refers to the centralized management of one or more projects to achieve strategic objectives. It is a way to bridge the gap between strategy and implementation by ensuring that an organization successfully selects, prioritizes, and executes projects.

What is the Purpose of Project Portfolio Management?

The primary objective of PPM is to maximize the benefits a company accrues from the projects it undertakes. This involves selecting only those projects that offer value, taking into consideration strategic fit with company goals, the level of effort required to execute the project, and available resources.

Other objectives include achieving balance across the entire portfolio by ensuring an appropriate mix of high- versus low-risk and long- versus short-term projects. Establishing an optimal project mix better positions a company to achieve its operational and financial goals.

What is the Role of a Project Portfolio Manager?

A project portfolio manager is tasked with overseeing an organization’s project portfolio and is therefore integral to strategic execution.

Often, the role of a project portfolio manager involves managing one or more portfolios and using various financial models to assess project alignment against the company’s strategic objectives, and figuring out what to prioritize (often a major pain point for project portfolio managers).

Often, project portfolio managers are part of a project management office (PMO). The PMO is responsible for establishing project management workflows and standards that apply across an organization’s portfolio. 

The PMO may also determine which project management methodologies an organization uses (ex. Scrum) and ensures that project managers are adhering to these methodologies on the individual projects they manage.

What is the Difference between Project Management and Portfolio Management?

Project and portfolio management do require some of the same skills, but despite their similar-sounding names, project management and portfolio management are quite different.

Project management, as you know, is the application of knowledge, skills, tools, and techniques to project activities to meet stated requirements.

PPM is less concerned with running projects but rather focuses on choosing which projects to pursue based on whether they support business goals. Organizations should not invest in projects that do not align with company objectives.

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.

Learn more about the key differences between project and portfolio management.

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What is the Difference between Program Management and Portfolio Management?

Program management involves managing a set of related projects together to accrue benefits. For example, a nonprofit program to provide clean drinking water in a rural area might include an infrastructure project, a research project, and a public education project. It is beneficial to manage these projects together because they are each focused on a similar end goal.

You can evaluate project success in part by assessing whether the project contributed to advancing program goals.

PPM is more concerned with how a project impacts organizational strategy and the business itself. Goals set at the portfolio level will give shape to different projects, programs, and operational activities. Project selection and prioritization are integral components of PPM and as such impact capacity planning, resource allocation, and resource management and planning.

Why is Project Portfolio Management Important?

You know the score—your agency has got 50 projects on the go. The timelines overlap, not to mention the clients and the team members assigned to work on them. You’re doing some of the projects to keep the lights on, others for the prospect of awards, and others for innovation plays.

But as an agency owner, program manager, or project director, how do you know if you’re focusing your teams and their projects on the right things? You’re wondering:

  • Is this project a good idea? If not, what should we be doing instead?
  • What projects should we be prioritizing?
  • How can we focus our resources most efficiently?
  • How can we run these projects concurrently and profitably?

When done properly, PPM helps organizations:

  • Identify the potential returns on a project. PPM makes it possible for companies that want to invest in new projects (and often competing projects) to forecast risks and make an informed go/no go decision.
  • Communicate effectively across the organization. PPM ensures that cross-functional parties involved in projects are on the same page, reducing the risk of discord.
  • Obtain stakeholder buy-in for projects by helping them to understand the broader context and better manage and mitigate project risks.

The Project Portfolio Management Process: 5 Phases

A strategic portfolio management system requires a portfolio management process.

Here are the steps involved in a robust PPM process:

1.   Create an inventory and establish a strategy

First, identify the projects in the pipeline, including potential projects, by gathering key project and organizational information. Categorize the projects based on where they are in the project life cycle, inclusive of completed and canceled projects.

Then, identify your company’s strategic goals and business objectives to assess whether the projects you’ve selected align with those objectives. Ask yourself questions like “how much will this cost the company?”, “how will this benefit us?”, and “is this project required for growth and survival?” as part of your project prioritization framework.

2.   Analyze your project portfolio

Next, analyze the strengths and weaknesses of your project portfolio. Evaluate each project individually based on planned milestones, estimated ROI, reporting schedule, and resource allocation.

In conducting this analysis, ask questions like:

  • Are any of these projects duplicative?
  • Can we combine any of our existing projects for the sake of efficiency?
  • Are there any projects that we should halt completely?
  • What is the likelihood that this project will succeed?
  • What risks do we anticipate in execution?
  • What are the expected project benefits?

3.   Ensure alignment with strategic objectives

Next, perform an alignment analysis to determine whether the projects you decide to undertake align with the company’s strategic initiatives. Some of your guiding principles should include:

  • The degree of 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.
  • The distribution of projects, including the number and nature of the projects, aligns to 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 assess risk not only in financial terms but also in terms of schedule, scope, resources, and technology.

4.   Manage your project portfolio

Next comes the management aspect of the process. At this point, you need to reevaluate the project portfolio to make informed decisions about potential reallocation of budget and resources. For example, does it make sense to have high-performing staff working on less critical projects?

You may need to be prioritizing projects in your portfolio based on information you uncovered during previous phases of the PPM process. You may also need to reschedule projects based on that reprioritization effort.

Obviously, collaboration is absolutely critical before making these decisions to make sure you end up with the right portfolio.

In the end, your portfolio should have a healthy mixture of risk and reward and 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 in real-time.

What adaptation means is quite different for every company, as it should be, but it’s a good idea to test your new portfolio with a few stakeholders, taking feedback as needed.

How Mature is Your Project Portfolio Management Process?

Organizations don’t simply wake up one day with a fully baked company strategy, a project portfolio that aligns to that strategy, and a high functioning set of processes to support it. PPM takes some work to implement successfully. 

Here are the stages of maturity that an organization typically goes through when it comes to PPM implementation:

  1. Set up the initial process. At this stage, an organization is primarily engaging in ad hoc project execution. If it follows any PPM processes, these processes are not documented.
  2. Create a structured process and set of standards. At this point, an organization has decided it would benefit from PPM and begins to document some of its management processes.
  3. Document repeatable management processes. Continue the work of documenting existing processes to apply throughout the project portfolio.
  4. Follow a managed PPM process. An organization applies PPM processes throughout the company and also monitors performance metrics to track portfolio health.
  5. Optimize the PPM process. Collect and apply lessons learned to be able to continuously improve the organization’s PPM.

Tips 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:

  • Prioritize the accurate identification of risks and associated remediation strategies (ie. risk management)
  • Don’t be afraid to cancel projects if they no longer align with company strategy
  • Enable architects, IT planning teams, and the 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
  • Prioritize data accuracy and access to data. A delay in getting data can impinge on your decision making ability, as well as your ability to comply with regulatory requirements
  • Use the right tools to keep on track and simplify the process. For example, giving your project team the freedom and flexibility to capture task and time data can improve the accuracy of your portfolio performance metrics.

For more, listen to our podcast episode on optimizing project portfolio management here.

Benefits of Project Portfolio Management

PPM offers many benefits, which include:

  • better decision making
  • the ability to prioritize high-value projects
  • decreased probability of overspending
  • more effective change management
  • highly efficient project execution
  • increased likelihood of project delivery success.

Regardless of how high value and successful a project may be, it could still be a victim of overspending. PPM helps a company to nip overspending in the bud, as it is easy to see where resources are being overallocated.

PPM can also be a valuable tool for 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 organizational goals. PPM also makes a company more nimble and capable of adapting to change with minimal fuss or disruption.

Project Portfolio Management Software

Choosing the right project portfolio management software and tools is often the key to successful PPM. Depending on your needs, our list of the best project portfolio management software or enterprise project portfolio management software will help you find the best tool for your situation.

These tools can provide dashboards for tracking portfolio progress, profitability, and whether deliverables are on time; automations to help you make sure you get notified about the right items; Gantt charts for tracking workloads and dependencies; and other work management features.

Many tools also offer apps and desktop versions, integrations so you can connect them with any existing tools, and templates for quick set up.

Before diving into PPM software or project portfolio management tools, check out the demos and free trials offered by many portfolio tracking software providers. 

And, if you realize you don’t need the bells and whistles of a PPM tool, you’ll find there are simpler project management tools to help you manage tasks and teams that span multiple projects.

Need expert help selecting the right Project Portfolio Management Software?

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By Sarah M. Hoban

Sarah is a project manager and strategy consultant with 15 years of experience leading cross-functional teams to execute complex multi-million dollar projects. She excels at diagnosing, prioritizing, and solving organizational challenges and cultivating strong relationships to improve how teams do business. Sarah is passionate about productivity, leadership, building community, and her home state of New Jersey.