Project Portfolio Management methods and tools have been gaining traction of late. Over the recent years, growing numbers of businesses and organizations have implemented Project Management Offices, professional PPM solution tools, and PPM processes. However, many other companies have been conducting projects and managing portfolios of projects without the support of dedicated methods and teams. And they report to be doing just fine. This raises the question: What is the importance of project portfolio management? Is it really worth it to define and implement specific processes to manage project portfolios, to invest in yet another set of tools, to hire professional portfolio managers — who, let’s put it bluntly, do not produce anything themselves — and possibly disrupt legacy practices or established ways of working in order to embrace the PPM process?

As always in business, there is no ready-made answer: it is all a matter of value-added. The question that organizations who wonder whether to adopt PPM should ask themselves is: Would the benefits and value of introducing PPM processes and capabilities into the organization outweigh the overall investment and change management costs?

Let’s try to narrow down the question by exploring the outcomes, benefits, and importance of Project Portfolio Management.

What is Project Portfolio Management (PPM)?

First of all, let’s attempt to define clearly what we mean by PPM. The Project Management Institute defines Project Portfolio Management as a discipline that “focuses on doing the right projects at the right time by selecting and managing projects as a portfolio of investments”. Project Portfolio Management is designed to help businesses commit their limited pool of resources and means to the most valuable projects in order to make their strategic goals executable.

In this regard, PPM is markedly different from traditional Project Management, which is focused on ensuring proper execution of individual projects. For regular Project Managers, success means keeping projects in check to ensure delivery on time, within budget and within scope.

The PPM process reaches far beyond that scope of regular Project Management. In fact, practitioners of Project Portfolio Management may assume such functions and responsibilities as:

  • Selecting, vetting and prioritizing projects and initiatives 
  • Determining if and when projects should be delayed or even terminated 
  • Building well-balanced, consistent portfolios of projects 
  • Assessing the business value of projects, including financial measures 
  • Evaluating the risk/opportunity ratio
  • Ensuring project alignment with strategic goals 
  • Managing projects according to the goals and the resources available

As these responsibilities extend beyond the typical assignments of traditional project managers, the Project Portfolio Management process may require input and contributions from a variety of other stakeholders and corporate functions: operations executives, financial managers, marketing experts, human relations departments, and so on. Accordingly, engaging in PPM necessitates to implement broader, more inclusive processes to address that expanded scope.

Let’s now get to the heart of the matter and try to map the benefits that an organization can expect from embracing and implementing Project Portfolio Management methodologies.

The Importance of Project Portfolio Management for Operational Visibility and Clarity

When planning projects or programs, it is of key importance to set proper and achievable expectations around what can be achieved, by what time and at what cost. In a Project Portfolio Management framework, project professionals and managers are empowered and encouraged to liaise with various stakeholders and teams around the business in order to negotiate realistic project timelines. This enables them to leverage insights from analogous projects, both past and active, in order to make sure that budget and delivery estimates are neither over-ambitious nor aiming too low. This is of particular importance in organizations with lower Project Management maturity, where tasks tend to be underestimated, and schedules compressed in order to expedite delivery. In addition to helping the organization deliver projects within deadline and budget, this will help maintain the quality of project output and deliverables.

PPM-oriented portfolio managers or Project Management Offices will also track and monitor the progress of all the projects in the portfolio to ensure dynamic portfolio optimization over time. They will implement tools and processes to collect and consolidate the data available in order to gain a clear view of project health and performance at the portfolio level. This way, they can understand which of the projects are performing, which are actively contributing to the objectives of the organization, and they can possibly course-correct to ensure that the company’s needs are met. Ultimately, PPM allows the firm to gain improved understanding of the benefits of each of its investments in projects.

In short, the Project Portfolio Management discipline provides a systematic way of capturing and sharing the data related to project activity across the whole enterprise, enabling the organization to make more timely and smarter decisions.

Managing Complexity at Scale

Clear and comprehensive visibility, which improves the decision-making ability at the level of the portfolio provided by the PPM discipline, actually becomes quite indispensable when an organization scales up its project activity.

At its inception and throughout the early stages of its development, a young start-up or small business may very well manage its projects with a traditional, project-focused approach, using Excel or other such tools. With smaller data sets, fewer initiatives to manage and coordinate, and fewer cross-functional dependencies, using basic desktop tools and document sharing solutions to track project progress may do just fine.

But what happens when growth and expansion introduce larger amounts of data to analyze and more complex linkage between projects, resources and functions? At some point in their life and growth journey, organizations eventually turn into data-rich enterprises. When managing dozens of projects across sites, countries or even time zones, disconnected Microsoft Office tools may no longer be enough to understand whether your projects are profitable, aligned with the strategy of the business, and on track to succeed. Not even mentioning the fact that a proliferation of unconsolidated spreadsheets may actually become a major pain point for the business.

Faced with the necessity to manage a growing number of interdependencies and schedule or resource conflicts across interrelated projects, you can just not afford to do without the visibility offered by Project Portfolio Management methods.

The Importance of Project Portfolio Management for Foresight

Project Portfolio Management does not only propose to provide visibility into the current state of project portfolios, but also into their future conditions. The goal is to anticipate events and issues ahead of time in order to respond more swiftly and more appropriately. In a word, Project Portfolio Management is designed to help the organization move from a reactive to a proactive approach to the management project and portfolios.

To that end, Project Managers, Portfolio Managers or PMO Managers leverage predictive or even prescriptive capabilities and engage in the modeling and simulation of what-if scenarios. They strive to anticipate future costs and expenditures, or to match critical resource availability with expected project needs. Based on ongoing monitoring and oversight, they watch out for weak signals that might indicate that a project is about to deviate from its intended course.

Another key facet of Project Portfolio Management is a structured approach to risk. It is always tempting to pretend that risk just doesn’t exist. But, in fact, allowing for risk is instrumental in the successful management of portfolios of projects, especially in the case of complex, high-stake initiatives. PPM-minded organizations define and implement a sound process to identify, manage and mitigate risk in order to prevent projects from derailing and maintain value at the scale of the portfolio. Accordingly, Portfolio Managers map out all possible threats; they perform detailed, quantified assessment and analysis of risks and they devise mitigation and contingency strategies in order to protect the business from threats.

The Importance of Project Portfolio Management for Cohesion and Alignment

As we already mentioned, Project Portfolio Management takes a step back to consider portfolios of projects as a whole instead of solely focusing on the execution specifics and day-to-day progress of individual projects. And this involves making important cross-functional decisions — such as the selection of projects — that require coordinating with a variety of stakeholders across different corporate departments and geographies.

With PPM, the Project Management Officers or Portfolio Managers are empowered to bring leadership and direction to project activity across the organization. They will create a vision for successful project portfolios, hold the different teams together, secure stakeholder support for key initiatives, and get everyone on the same page at all times to make sure that the company is moving forward with control and purpose.

The PPM process assists in clarifying roles and responsibilities across functions and teams by establishing clear lines of accountability using methodical tools such as RACI charts. It helps bridge the gap between teams with different cultures, approaches and priorities — for example bringing together creative and developer populations, who typically pursue diverging agendas, around a common vision. It ensures that everyone across the enterprise is doing the right things, at the right time.

As part of this cohesion-building role, PMOs typically provide training or coaching services and strive to inspire teams at the organization level. Project Portfolio Management also provides frameworks to ensure consistent quality of project outputs and deliverables.

Strategic Alignment

In addition to driving increased horizontal alignment across business lines, departments and teams, Project Portfolio Management also fosters improved vertical alignment by reconnecting project execution to the strategic goals and objectives of the organization.

Centralized management of portfolios enables leaders and managers to ensure that there is a proper plan in place for delivering real value on business opportunities and for executing on strategic goals. This involves selecting and prioritizing those projects that are most likely to deliver strategy-aligned benefits, revisiting project portfolios over the course of their life cycle to ensure adherence, and correcting the course if needed. With a bird’s eye view on all project and portfolio activities, executive managers can make efficient decisions in order to align projects, programs, and operations with the strategic goals of the business — even though this might entail making strategic cuts when warranted.

The Importance of PPM Enablers

Effective, consistent and successful deployment of the Project Portfolio Management process across the enterprise requires the support of key enablers, among which are a formal PMO (Project Management Office) and a robust, industry-grade PPM tool.

For organizations who do not already have one in place, setting up a Project Management Office can facilitate the implementation of PPM methods and processes significantly.

A Project Management Office is responsible for establishing and maintaining sets of consistent standards and best practices for managing projects, programs and portfolios. The PMO is traditionally in charge of overseeing project activity at the level of the company, including the selection of projects and their placement into portfolios. Overall, a PMO acts as a central hub for PPM-related activities.

Because of that central role and supervisory capacity, the PMO is in the best position to spearhead and orchestrate the introduction and dissemination of the PPM methodology.

PMOs and PPM tools

Another key part of a Project Management Office’s role is to manage the change induced by the process improvement. Accordingly, a PMO will engage in user training and coaching activities. It will also make sure that Project Managers and project teams have the information, resources and tools they need in order to perform their duties.

For that reason, one of the first moves of newly-established PMOs is usually to acquire a professional Project Portfolio Management tool. PPM software centralizes and consolidates project-related information in order to enable the PPM process. It provides the invaluable data that is needed to track progress, assess project and portfolio health, and run analyses and simulations. Intelligent analytics capabilities augment the ability of PMO leaders to make smart and informed decisions and to take the organization’s PPM process to the next level.

Long story short, the support of a powerful platform is instrumental in the successful implementation of Project Portfolio Management methodology in a company.

In Summary

Project Portfolio Management is a discipline and process that can significantly improve the chances of success of project-oriented organizations — especially of those running large numbers of critical projects.

By bringing clarity and consistency to Project Management activities, PPM helps define and pursue clearer objectives, make planning operations more realistic, optimize the allocation of resources, improve the quality of deliverables, and most of all ensure the strategic alignment of projects. In fact, a Project Management Institute study found that the organizations that don’t acknowledge the importance of Project Portfolio Management as a strategic competency report 50% more project failures on average.

Key Takeaways

  • Project Portfolio Management has a much wider scope than traditional Project Management — which primarily focuses on delivering individual projects within deadline, budget and scope.
  • As an enterprise-wide process, Project Portfolio Management involves a wide array of various participants.
  • Proper implementation of PPM processes will bring better visibility, foresight and alignment to the management of project portfolios, thereby driving measurable improvements across many business outcomes.
  • For organizations looking to implement Project Portfolio Management, it is a good idea to consider setting up a Project Management Office and acquiring a professional PPM software tool.

For more information on PPM we suggest reading:

importance of project portfolio management
why do we need project portfolio management?

Share the article


Isabelle Bouscatie

With many years as a EMEA Marketing Manager under her belt, Isabelle is presently in charge of Sciforma’s customer marketing and global events. She thrives in Sciforma’s dynamic, fast-paced digital environment and she enjoys working in direct contact with customers, who help her keep abreast of PPM challenges across organizations.