How to implement Project Portfolio Management?

Estimated reading time: 9 minutes

Key Takeaways

  • Project Portfolio Management is designed to enable the centralized management of multiple, interrelated initiatives that need to be orchestrated and prioritized.
  • To implement PPM, start by analyzing and understanding your current situation; define a set of objectives and milestones, and eventually an action plan that should be presented and validated by key stakeholders.
  • Key steps along the implementation roadmap include the definition of a methodology and governance structure, the standardization of management systems to optimize the utilization of resources and funds, the deployment of appropriate tools, and change management effort.

 

 

Successfully establishing a Project Portfolio Management system in your organization

 

Any organization that runs projects eventually reaches a point where implementing Project Portfolio Management practices becomes necessary or even indispensable. As project activity grows more complex, the need to prioritize demand and resources, identify conflicts between activities,  and define work and resource plans with increased accuracy becomes more pressing. Establishing Project Portfolio Management helps improve visibility over project and portfolio activities and provides insight into how they align with strategic objectives.

However, implementing a Project Portfolio Management system is not as easy as it may seem. This involves introducing organizational changes that will impact the process, structure, and culture of the enterprise.

Purpose and objectives of Project Portfolio Management

The Project Management Institute defines Project Portfolio Management as “centralized management of one or more portfolios that enable executive management to meet organizational goals and objectives through efficient decision making on portfolios, projects, programs and operations.

The need for a structured PPM approach usually arises when the organization starts struggling to meet ever-increasing project demand with its limited capacity and budget.

What then happens is that various departments and stakeholders insist that such and such project is to be launched as a matter of urgency. Under pressure, project management leaders then typically try to bite off more than they can chew and due to a lack of sufficient resources, end up with a backlog of projects. This often results in significant delays and overruns in strategic projects and eventually impairs the organization’s ability to service customers and fulfill its mission.

And this is where businesses implement proper Project Portfolio Management capabilities with a view to stabilizing project management and to achieving more predictable outputs. PPM helps strengthen the bond between the firm’s strategic objectives and the realization of benefits through projects, prioritize work more effectively and more efficiently, and optimize the use of the organization's resource pool.

To implement PPM successfully, start by analyzing the current state

The first step is to run an analysis of the project and portfolio management practices, systems, and tools currently in place and in use in order to understand the requirements.

Take an objective snapshot of the way things are and work currently, trying to figure out what needs to be tweaked or overhauled. Then you should drill down into the details in order to tie problem symptoms to their probable root causes. This is the best way to identify effective solutions.

Many of the companies that set about to implement PPM in order to address insufficient work prioritization and competition for limited resources have the following problems:

  • Without a formal governance framework or system, no one is responsible for overseeing the end-to-end life cycle of cross-functional projects.
  • Different tools and processes are used by different functions and groups to record, analyze, and track project requests, and those disconnected processes are not always clearly defined.
  • Project resources and funding may be tracked and managed at the level of a domain, but there is no company-wide supervision. Schedule clashes and conflicts are frequent.
  • Data collection is inconsistent and haphazard, leading to missing, inaccurate, redundant or outdated information.
  • Because of a lack of communication across functions, different teams make commitments to delivering projects without confirming that capacity allows it.

This round-up covers some of the key issues that companies may try to solve with the implementation of Project Portfolio Management. However, every organization is faced with unique challenges and requirements, which should be mapped out and analyzed in order to implement PPM successfully. Drawing a clear picture of the challenges and performance gaps that are to be addressed is the key to establishing a PPM process and system that will actually make an impact and drive measurable improvement.

Defining the scope and objectives of the new PPM process

Following the analysis of your current position, you should be able to get a good idea of where you want to get. For each of the areas showing room for improvement, use a competitive benchmark to quantify performance gaps. You should also try to assess to what extent your new PPM process can make things better. It is important to set realistic expectations. There’s only so much that PPM can do: it is not a cure-all for all business issues. For example, even the best of PPM systems won’t do much to solve problems due to an ill-fitted strategic positioning. You need to make sure that you understand what you can really achieve with your PPM initiative. Otherwise, making overpromising claims and pursuing unattainable targets will harm the value — both actual and perceived — of your endeavor.

Once you have a good idea of what you’re trying to reach, you need to find the path that’ll take you there. In other words, determine what should be the scope and extent of the methodology you are trying to develop. Understand if the PPM process should be integrated with other organizational systems (e.g. Financial Management, Human Resources Management). Define near-term areas of focus for your PPM (based on the most immediate needs and priorities) and a longer term roadmap (the milestones to achieve in the mid and long term). Identify who should be spearheading the process in order to maximize adoption and impact as well as whose skills and which tools will be needed for successful implementation and for the related change management effort. Don’t forget that introducing PPM into your organization will disrupt the habits and ways of working of many people across the business. They’ll need to be convinced of the relevance of your initiative and supported as they learn to work under the new system.

The findings of your analysis and the proposed PPM model should be consolidated into a business case and presented to executive and operational stakeholders. The goal is to create a common understanding of the challenges at hand and a shared vision of the desired outcomes in order to secure validation and endorsement for your plan.

Implementing your plan

Once you have obtained validation and set expectations, it is time to implement your strategy to establish the PPM system.

A clear PPM methodology and an integrated governance model

The PPM methodology you are designing and implementing should provide a clear and solid framework. It should include criteria to assess project-worthiness according to specific requirements (such as project duration, required investment, complexity, number of departments involved…) along with a method for prioritizing initiatives and for incorporating them into a specific portfolio. It should also provide a methodical approach for project planning, initiation, execution and delivery, with clear processes to manage workflows, permissions, and approval criteria. Finally, don’t forget to set up a benefit review system.

Following the establishment of selection and prioritization criteria, it is a good idea to put these criteria to the test of reality. You could, for example, ask project managers to test the system against a sample of representative projects that have already been completed, comparing criteria-based assessments with actual outcomes. This will let you know if your system and assumptions are valid and where they require adjustments.

You also need a portfolio management governance to actively support this methodology. A common and simple way to establish a governance structure is to create a Portfolio Management Council gathering the business and PPM leaders who participated in the strategy formulation and benefit identification process. Your governance body will help identify different categories of projects in line with the corporate strategy and allocate dedicated budgets to each category. It’ll be in charge of distributing the resources required to implement decisions and will also take action to mitigate the issues and risks that might threaten benefit realization.

In addition to that top-level PPM governance body you can establish subsidiary governance structures to oversee and manage specific PPM aspects or areas — for example, to ensure that individual projects are aligned with the strategy and are properly executed. These lower-level councils may bring together sponsors, program and portfolio managers, and representatives from the different business units. Having several layers of governance helps better connect portfolio-level decisions with operational realities. This will help not only select and prioritize activities, but also sequence and plan them in the best possible way against your business needs and capacity.

Focus on resource management systems and processes

A key role of the governance body is to perform an ongoing analysis of the portfolios and project pipelines to examine, endorse, and fund the initiatives to be conducted as part of a given portfolio. This requires investment capabilities to ensure effective investment of funds and resources.

Standardizing business case processes and templates will enable you to perform a sound analysis of project ideas or demands, factoring in potential return, resource usage estimates, and risks. When selecting and prioritizing projects, the value analysis shouldn’t only be focused on financial factors, but also include aspects such as regulatory compliance, brand image, sustainability, and corporate responsibility.

Your PPM system should also provide consistent and realistic estimates of resource utilization, as well as mechanisms to optimize the allocation of resources across projects, programs, and portfolios in order to maximize the overall benefits for the organization. PPM software platforms typically provide capabilities to plan capacity based both on business case requirements and on resource attributes (roles, skills, and more), and to then monitor actual resource consumption against forecasts.

You need a holistic workforce management system to ensure that projects don’t compete for the same resources. What more, the resource management system should be aligned and connected with the scheduling and time tracking systems. This will improve your understanding of the overall demand for resources and facilitate identification and management of potential constraints. In turn, this will enable your portfolio managers to adjust the scope and priority level of initiatives to match resource availability.

The importance of a PPM information system to consolidate and leverage data

You need the ability to run in-depth analysis to select and prioritize projects, make investment decisions, and optimize resource allocation. This requires the support of a robust Project Portfolio Management Information System. PPM tools provide a single platform to accommodate all project-related data (including financials, schedules, resource information, etc.) at the level of multiple portfolios, with safeguards and audit trail mechanisms to ensure data integrity and accuracy. Such platforms also make it possible to automate a number of repetitive tasks in order to get the required data at the push of a button while reducing the administrative overhead for project managers and contributors.

A professional software tool will also highlight the linkages between projects, portfolios, and strategic orientations, crunch the numbers using advanced analytics and financial modelling capabilities, and enable you to run simulations. PPM tools provide the precious insights that will facilitate reporting and help decision-makers make informed decisions to manage the portfolios on an ongoing basis.

Managing the change

Introducing Project Portfolio Management into your organization will bring about significant change in the ways of working. It will have a deep impact on the day-to-day of the people in your business. You need to manage that change to get good results. To address the issue of change management, formalize and circulate information in order to communicate a clear vision of what you’re trying to achieve, and what for. Explain how your initiative will benefit the PPM staff, as these people are on the front line. Their buy-in is critical to achieving proper implementation of your PPM process.

You’ll also need to explain and illustrate the desired behavior changes as clearly as possible.

Design and disseminate communication and training materials, with messaging tailored to respond to the needs, expectations, and roles of your different groups of users. Set up various training and support resources: tutorials, job aids, help centers, news feeds, workshops, lunch-and-learns, and so on. Socialize your agenda and the progress against your milestones and objectives in order to keep people involved and engaged in the success of your PPM implementation plan.

Refining your PPM system, process and model over time

Even after you’ve successfully implemented and established PPM into your organization, the journey isn’t quite over yet. A corporate organization is a living entity that changes and evolves over time, both under the pressure of external forces (markets, consumers, regulation) and in response to its own internal dynamics. The PPM process is required to follow suit and adapt accordingly in order to stay relevant and effective.

In particular, managing portfolios in the digital age demands increased team cohesion and collaboration. As the complexity of the business environment is increasing, projects and portfolios involve growing numbers of stakeholders of different types. Accordingly project practitioners and PPM leaders are required to communicate and work with new constituents from the IT and business sides of the organization. Effective collaboration requires breaking down any silos that may reduce visibility to interdependencies and risks across a wide range of practices and areas.

In fact, Gartner finds that optimizing the value of all major initiatives in the organization requires embracing integrated portfolio management: “Integrated portfolio management and governance has an important role, because well-governed IT portfolios result in superior organization performance, with an increased return on assets of 30%.”

More generally speaking, PPM leaders should continuously evolve their leadership style and competencies to support the ongoing change in the way we do business. Competing in the digital era requires more agile management models enabling swifter response to change. What is at stake is the organization’s ability to optimize cost, risk, and value and accelerate the realization of strategic benefits.

The successful implementation of PPM practices in a project organization requires a methodical approach and a sound process. You will need to design and apply a standard methodology, a governance structure, and management processes designed to facilitate operations and decisions. The goal? To enable the business to derive superior value from its investments in its portfolios of projects.

The key to a quality PPM initiative is to mold the process to your organization’s specific challenges and configuration. While it does require some upfront effort, it yields much better results than trying to force-fit a solution that’s not aligned with your business drivers.

 

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Shi Jackson

Shi Jackson is the Digital Marketing Manager for Sciforma in Germany. Her daily work is characterized by operational marketing activities and optimizing the strategy behind it. The main focus of Shi's work is on process optimization, digital transformation and effective collaboration.