How To Manage A Project Portfolio?
Estimated reading time: 11 minutes
- Project Portfolio Management helps organizations execute projects in a way that will support their strategic priorities and goals. PPM processes help organizations of all shapes and sizes prioritize their project pipeline and focus their project activity on delivering measurable business value.
- In order to successfully get started and implement PPM, you can follow a structured process:
- Gather comprehensive sets of data about your project pipeline and assess the scope, health, and risk/benefit profile of the various projects;
- Perform an alignment analysis to evaluate health and balance at the level of the portfolio; course-correct to drive maximal alignment, while making sure that the concerned stakeholders understand and support the initiative;
- Finally, adjust over time.
The Keys To Managing A Portfolio Of Projects Successfully
Project Portfolio Management (usually shortened to PPM) is a discipline that focuses on the management of groups of interconnected and interdependent projects. PPM considers a mix of past, active, and future projects as a whole in order to determine the optimal way to sequence, arrange, and prioritize them. Because of the need to manage relations and dependencies across multiple projects which share productive, financial, and human resources, PPM is an intricate activity that requires a sound process. Below is an overview of what you should know and consider in order to implement PPM successfully and maximize project ROI in your company. We will define the concepts of PPM, then explore the benefits, the key steps to be taken, as well as the tools that will enable you to achieve great Project Portfolio Management.
Project Portfolio Management is basically the centralized administration of one or several portfolios of projects in order to attain targeted benefits or strategic objectives. In that way, PPM bridges the gap between execution and strategy and enables the enterprise to make the most out of its project activity.
The objectives of Project Portfolio Management
The purpose of PPM is to maximize the value that an organization can get from its projects. A key goal of the discipline is to leverage project selection successfully. The company’s resources should be invested in the projects offering the best return on investment, considering the organization’s specific objectives. Without PPM, projects are often selected and prioritized in a haphazard way. Among the other objectives of PPM is the optimization of organizational risk profile and market exposure: the project mix should offer an appropriate balance between high-risk ventures and low-hanging fruits, between long-haul initiatives and short-term projects. PPM also oversees project implementation and sees to it that execution maximizes the chances for the business to materialize its plans and achieve its goals.
A few use cases of Project Portfolio Management
PPM methods prove very useful when the organization wants to select the new projects it will invest in. The Project Portfolio Management process helps to make informed trade-off decisions when considering multiple competing projects by assessing their potential returns and risks.
As a methodical, structured approach to project value appraisal, PPM objectivizes the decisions and aligns various stakeholders around a shared vision and shared objectives. Because it brings everyone on the same page, PPM enhances accountability while enabling improved communication and seamless collaboration across different teams and stakeholders.
Expected benefits of Project Portfolio Management
Here are a few of the organizational benefits that companies have reported after implementing Project Portfolio Management:
- Eradication of inefficiencies at the level of portfolios
- Increased rate of successful project delivery
- Improved decision making and consistent prioritization of high-value projects
- Better control over project and portfolio budgets
- Improved allocation of critical resources
- More effective change management and increased business agility
The difference between Project Portfolio Management and Project Management
Although PM and PPM are related and may involve common processes and skills, there are important differences between the two disciplines, which should not be confused.
Project Management focuses on the successful implementation of individual projects. Project Managers leverage specific techniques, tools, and skills to make sure that project activities meet such requirements as delivery within deadline, within budget and within scope.
Project Portfolio Management, however, emphasizes the selection and enablement of strategy-aligned projects. The primary concern doesn’t lie with the specifics of project execution, but rather with the ability of the overall project activity to support the goals and objectives of the company. It is all about deciding which projects should be carried out, how they should be incorporated into portfolios, and how to make sure that they will achieve the desired goals and benefits.
The difference between programs and portfolios
According to the Project Management Institute, a program is defined as “a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may contain elements of work outside of the scope of the discrete projects in the program.”
In other words, a program is a collection of projects which are undertaken to pursue a specific tactical goal, or to perform a specific activity. For example, the launch of a new airplane is a program composed of several projects, one for each feature or system.
One may create a program to achieve a specific business objective or around all the work performed for a given client. Program Management refers to the assessment of the different risks and issues that may occur over the course of a program and the management of these events.
Portfolios are more strategic in nature. A portfolio is an overarching structure encompassing projects and programs that are managed as a group in order to achieve the organizational strategy and the long-term objectives of the business.
A business may have only one portfolio consisting of all its projects and programs, or it may create and manage several portfolios for project selection and investment decisions.
The Project Portfolio Manager
The Project Portfolio Manager is in charge of high-level oversight of one portfolio or more. Project Portfolio Managers define and implement dedicated processes and standards to steer the portfolio(s) they are responsible for. They typically leverage advanced financial modelling to align their portfolios with the strategic goals of the organization.
As opposed to most Project Managers, Project Portfolio Managers assume responsibilities that reach far beyond project execution monitoring and day-to-day management. The scope of their action usually requires liaising and collaborating with various other stakeholders across the company, and they are instrumental to successful implementation of the business strategy.
Project Portfolio Managers are often part of a Project Management Office (PMO) which supervises Project Management, Program Management, and Project Portfolio Management at the level of the whole organization. A PMO can bring valuable support to Project Portfolio Managers by providing a methodological framework (e.g. defining a company-specific hybrid PPM process), but also resources and guidance.
Project Portfolio Management Software
Successfully managing the complexity that comes with a set of interdependent projects is next to impossible without the support of the right Project Portfolio Management software and tools. Industry-proven platforms consolidate large sets of project data to provide a clear view of health and performance at the level of a portfolio. Such tools help understand which of the projects are running as planned and are on track to deliver the expected benefits, and which require the Portfolio Manager to step in. Analytics capabilities, such as predictive modelling and support for what-if scenarios, assist in decision making. To find the PPM solution that is best suited to their organization’s situation and objectives, Portfolio or PMO Managers should first of all conduct an assessment of their firm’s PPM challenges and expectations, build a business case, then compare the market. Many vendors offer demos, previews, or free trials to help prospective clients understand what they could really get from their tools.
Successful Project Portfolio Management requires the support of a solid, well-thought PPM process. Here is a step-by-step approach to guide you in crafting yours:
1. Get to understand the strategies and map out projects
It all starts with an information round up. You need to gain a clear understanding of the goals, objectives, and strategies of your organization. Read the vision and mission statements of the firm carefully, gain access to documentation detailing key strategic plans, connect with high-level decision makers to make sure you fully understand the long-term orientations and the definition of success at the enterprise level.
Then gather key data about all active and potential projects and determine which are effectively supporting those strategic objectives, and to which extent. In addition to understanding the purpose, scope, and expected strategic benefits of projects, you should evaluate their potential ROI, their risk level, their resource needs (differentiating critical and non-critical resources), as well as the quality of their planning.
2. Assess the portfolio and check strategy alignment
After evaluating each project in your portfolio individually, you can group them in general categories — by ROI, chances of success, transformation versus maintenance, by risk, by value… The classification will really depend on the type and goals of your business. This will help you understand whether some of these projects should be merged together for the sake of efficiency, whether some should be moved to a different portfolio, or whether it would make more sense to terminate some others. This will also enable you to evaluate the overall health and risk levels of your project portfolio and to perform an alignment analysis. The goal here is to understand whether your critical resources are working on the highest-value-added projects, if the projects that the organization plans to launch really align with the strategic orientations, and if the portfolio as a whole makes sense from business and economic perspectives.
You should also consider the balance at the portfolio level. Taking into account the full spectrum of possible project risk — including, but not limited to, financial risk, technology risk, market risk — try to assess the overall exposure of your portfolio. Evaluate the mix of projects in the portfolio by type, time horizon, and probability of achieving return.
3. Manage and drive alignment
Now that you have a clear view of your portfolio make-up and status, it is time to make and implement decisions. Based on your findings, reallocate budgets and resources, reprioritize, reorganize or reschedule projects in order to maximize alignment and meet internal requirements. All this while keeping in mind the target risk level.
At this stage, you should be prepared to answer the questions that team members, workers, and decision makers across the business will inevitably ask you. They may wonder what is PPM, why it is needed, what is the rationale behind the changes you are making, how much this will cost the business, how this will impact them and what will be expected from them…
To assist you in the change management effort, it helps to be supported by a dedicated Project Portfolio Management team, but also by senior leaders willing to act as champions and possibly as a governance body. Your team should also include technical experts to aid in the implementation of your digital PPM system.
4. Evolve and fine-tune
Lastly, you will probably need to adjust your approach and process over time. Implementing Project Portfolio Management in a company is all but simple. Because of the sheer number of variables to be taken into account and coordinated, the first time probably won’t be the charm. For that reason, you should stand prepared to adapt and adjust your PPM process in real-time based on stakeholder feedback and portfolio performance after deployment.
Getting started with Project Portfolio Management is never easy. While the potential benefits are definitely worth the effort, it comes with its shares of challenges. But here is a list of key points of attention that should at no cost be overlooked:
- Risk does exist. Identifying the risks that might derail your projects is of key importance. Qualify and quantify the various types of risk, and come up with clear mitigation and remediation strategies.
- Don’t shy away from killing projects. Many project and portfolio leaders feel disinclined to terminate active projects. However, halting or cancelling projects that no longer make sense against the strategy of the business definitely is a healthy practice.
- Make sure you have great data visibility. Quality data is at the foundation of sound decision making. Having access to accurate and reliable data is an absolute prerequisite to the success of your Project Portfolio Management initiative.
- Get proper equipment. In order to manage the complexity of the PPM process, you do need to get a tool — and to make sure it is the right one for your organization.
- Think change management. Getting the teams on board should be a priority. Communicate and explain the change, highlight the benefits and expected value to everyone concerned. Try to simplify the process for project team members, especially at the outset. You can always introduce additional processes and requirements later on, as the PPM maturity of your organization and teams grows. Be well aware that the change won’t happen overnight.
This overview of the reasons why PPM matters and of the process for implementing Project Portfolio Management in your organization obviously doesn’t cover it all. And, as no two companies are the same, the basic process outlined above should be adapted to the culture and organization of each business. Feel free to adjust the proposed methods and implement PPM differently: after all, the end goal is to create lasting value for YOUR organization and help it stand out in its market.
Suggested resources for further information on Project Portfolio Management:
- How to get more value out of your Project Management tool?
- What are the criteria to evaluate PPM tools?
- Free Webinar : Managing Change when launching a PPM solution