- As opposed to the management of individual projects, which focuses on delivering within deadline, budget and scope, Strategic Portfolio Management is all about maximizing value against strategic goals.
- This requires the support of a sound process to assess project value and risk accurately, to monitor the evolution of the portfolio over time, and to make sound trade-off decisions based on objective facts and data.
Successfully managing a portfolio of projects requires skills and tools that go beyond the realm of traditional Project Management. After all, a project portfolio is more than the sum of the projects it comprises: it is a self-supporting business entity that harnesses the connections between a group of related projects to support specific business goals and directions. Accordingly, Strategic Portfolio Management aims to maximize high-level organizational value and benefits. Although the process for managing portfolios of projects may differ from one firm to the next — to match the organization’s specific configuration, priorities and culture — this blog post provides an overview of Project Portfolio Management standards and best practices.
The Purpose of Project Portfolio Management
The Project Portfolio Management discipline should help businesses maximize the value they derive from their project activity. The rationale is quite straightforward: grouping individual projects into an overarching portfolio structure to exploit synergy and facilitate management generates considerable efficiency at the organizational level.
Portfolios aim to support and achieve targeted strategic goals and priorities. They need monitoring and management over time in order for the organization to ensure that they’ll deliver the expected outcomes and value.
The use of Strategic Portfolio Management practices and methods usually translates into reduced inefficiency due to conflicts or interdependencies between projects, improved success rates of individual projects, better allocation and utilization of critical resources and budget, and increased alignment of projects with the business strategies.
However, organizations and PMOs should define and implement a formal PPM process in order to reap all these benefits.
Strategic Portfolio Management
1: Building Your Portfolio of Projects
Everything starts with project selection — and this is perhaps the most critical step in the Project Portfolio Management process.
You need to establish data-based criteria and evaluation methods that’ll enable you to assess the respective strengths, weaknesses, challenges, and opportunities of the various project ideas that your firm has the opportunity to pursue, to identify the most promising ones, and to group them together based on strategy alignment and risk profile.
At this stage, it is essential to have a crystal-clear understanding of the goals and strategies of your firm. You should also leverage the data consolidation and analysis capabilities of industry-grade digital tools in order to gain perfect visibility into candidate projects. The potential strategic benefits, financial ROI, resource needs, and risk levels of the various candidate initiatives must be taken into account.
2: Monitoring Value and Risk
Once they have put together sound and consistent portfolios of projects, PMOs and Portfolio Managers need to review them on a regular basis to ensure proper management and relevance. Strategic Portfolio Management is an ongoing process that requires real-time monitoring of portfolio risk and value over time.
Roadblocks, unexpected challenges or changes in the business environment may alter the portfolio’s balance and value/risk profile, forcing you to revisit the initial assumptions based on which you built it. It is key to be able to detect such distortions early on in order to make timely adjustments and preserve your portfolio’s ability to deliver the expected benefits. Professional PPM tools with automatic alerts and notifications capabilities can significantly improve the efficiency and productivity of portfolio monitoring activities and help you anticipate issues ahead of time.
3: Optimizing the Make-up and Management of Your Portfolio
This monitoring effort enables Project Portfolio Managers to oversee the portfolio over its life cycle and to perform the required adjustments to make sure it remains both competitive from a business perspective and relevant to the strategic goals of the company.
Strategic portfolio management can be viewed as a continuous decision-making process to maximize return while managing expectations and risk. This involves reviewing resource and budget allocation across projects to make sure they are optimally distributed and utilized (based on both resource attributes and task value-added) and analyzing the overall value and risk throughout the whole life cycle of the portfolio.
This ongoing analysis will empower you to make informed reallocation or re-prioritization decisions and possibly to change the make-up of your portfolio if needed (for example moving some projects to a different portfolio or simply terminating them, adding new projects to the portfolio, etc.). Another option is for you to take action at the level of individual venture in order to correct their courses. In any case, it is important to keep in mind the fact that the various projects in a portfolio are usually interrelated and that any alterations to the scope or schedule of one initiative will likely impact the rest of the portfolio.
This is yet another reason why PMOs need professional PPM platforms: their data analytics capabilities (for example in the field of predictive modeling) prove invaluable when it comes to making complex decisions at the level of a portfolio.