Project portfolio management makes sure that all projects align with your strategy and vision as well as taking the capacity of your organization into account before committing to a specific project.
One of the biggest challenges facing enterprises today is how to effectively manage a portfolio of projects. Take any organization and look at the number of projects that are active at any one time and you will see that many are not aligned with their strategic goals, are likely to be over budget, or delivered late. This is where project portfolio management (PPM) can help. But what is project portfolio management?
Project portfolio management is the strategic process of evaluating and selecting which projects an organization should pursue. It involves assessing projects according to their potential for success, risk, and strategic fit. It also links to capacity planning and resource planning to ensure staff, resources, and schedule are optimized to deliver business objectives and ROI. PPM can also involve the centralization and standardization of project management processes, methods, and technologies.
In the last decade, businesses have started to realize that projects are the backbone of any business continuity. Project portfolio management has emerged as a best practice in project management that enables organizations to maximize their return on investment (ROI) by selecting and prioritizing projects that best support the organization's strategic business goals.
Whether the project is an IT upgrade or a human resources initiative, project portfolio management is used to evaluate the potential benefits and risks associated with each project.
Project portfolio management is included under the umbrella of project management techniques, which are used to help businesses manage all their operations and tasks effectively. This helps them increase their efficiency and meet their goals on time and within budget.
It is typically carried out by a small team that works with business leaders to develop short-term and long-term plans that will direct the future development of the organization. This could include business strategy, financial goals, and marketing targets.
These plans are then implemented by different teams responsible for individual projects or activities such as marketing campaigns, new product rollouts, or research initiatives. The specific steps involved with project portfolio management vary depending on what type of industry you're working in but there are some common characteristics:
Project portfolio management also involves ongoing monitoring and evaluation of project performance using metrics that are important to business performance.
A comprehensive PPM approach:
Project portfolio management is often - understandably - confused for project management. However, the two disciplines are distinctly different. Here's what you need to know about project portfolio management vs project management.
Project management and project portfolio management differ on a number of levels, including the nature of the task itself, the people and objectives involved, and the processes and software employed.
Project portfolio management is an important element of project management because it involves making decisions about which projects should go ahead - or even be stopped. But it doesn't get down into the detail of individual projects in the same way as project management.
Project portfolio management is higher level than project management. It focuses on resource allocation, prioritization, and strategy across multiple projects, not just executing a single project. It is more closely aligned with the strategic objectives of the organization.
A Project Manager is responsible for the day-to-day activities, timelines, and budgets of a particular project, while a Project Portfolio Manager deals with strategic planning and execution at an enterprise level.
When you're managing a single project, you can see the finish line clearly and manage each task that gets you closer to your goal. But it's harder to do so when you have to juggle several projects at once.
Where project managers oversee every detail of a single effort, a portfolio manager's job is to keep track of multiple projects across a company or organization. They ensure that the efforts underway are moving toward organizational goals, staying on budget, and getting the right support. The job of a portfolio manager is to make sure everyone on their team has the right information at the right time to make decisions about their projects.
A portfolio manager can be an individual, such as a project lead or someone who works with project managers in various departments to coordinate resources and priorities across an organization. It could also be a group of individuals working together as part of a dedicated project management office (known as a PMO - more on this later).
The portfolio management process involves identifying, selecting, planning, and tracking projects that deliver maximum ROI and strategic fit. This involves assessing projects against evaluation criteria such as how well the project matches the organization's desired direction of travel. It also employs management tools and techniques including:
To achieve this, portfolio project managers may use a range of software and analytical tools.
Project portfolio management tools give a high-level overview of multiple projects. This allows PPMs to see how they fit into strategic business objectives, as well as any dependencies between them. Whereas project management software tends to focus on a single project at a time.
Both types of software provide greater visibility, deeper insights and support data-informed decision-making. They just operate at different levels of oversight/granularity.
Program management sits between project portfolio management and project management.
Program management is concerned with managing a particular group of projects within your portfolio - a 'program'. Programs typically focus on delivering strategic objectives and business transformation, through interlinked projects that straddle multiple departments or teams.
Within the program, individual projects will still be managed by separate project managers. But they'll collectively be overseen by a program manager, who coordinates the projects in the group.
It's about organizing people and teams to strategically work towards shared business objectives. This includes effective resource planning to ensure:
Compared to a less coordinated approach - program management achieves operational efficiencies and reduces the risk associated with large-scale strategic initiatives. Which translates into bottom-line business benefits.
According to the Project Management Institute (PMI):
'A program is a group of related projects managed in a coordinated manner to obtain benefits not available from managing them individually. Organizations with mature program management are far more successful than those without it, according to our research.'
As with project portfolio management, program management differs from project management on several levels. Project management is concerned with the operational delivery of individual projects, whilst program management takes a more strategic overview of an interlinked group of projects.
Also - thanks to their longer-term, strategic oversight - program managers and project portfolio managers may also concern themselves with continuous improvement, value realization, and business development/growth. This is something that falls outside the remit of individual project managers.
Organizations with a poor or immature project portfolio management process tend to underperform, according to the Project Management Institute.
Without the processes or tools to deliver effective project portfolio management, organizations can undermine their success through:
Project portfolio management can be challenging. PPMs examine quantitative and qualitative factors to answer questions like:
To do this, they need easy access to information and data to underpin their decision-making. This is why project portfolio management software is so valuable to PPMs.
Providing centralized access to data - and removing siloes between PPMs and their colleagues, Program Managers - ensures a holistic, enterprise-wide approach to selecting, planning, and executing high-value, high-priority projects.
As organizations grow and take on more projects, it becomes increasingly important to adopt project portfolio management practices. Here are five best practices to help your organization become high performers in PPM - and reap the commercial and financial benefits that brings.
Effective project portfolio management is based on alignment with strategic objectives. So PPMs must be kept up-to-date with any changes to the organization's strategy. This requires top-down communication from senior management to the Project Portfolio Managers / PMO about business objectives, priorities, and direction of travel.
However, it's also important to keep an eye on individual projects as slippage or bottlenecks can have an impact on capacity and resources for the rest. Project portfolio management ensures that initiatives don't go over budget or run past their planned deadlines, while still providing a high-level view of how these projects fit into the larger strategic goals of an organization.
'Gymnastic' is a term used by the Project Management Institute in their Pulse of the Profession 2021 report. It describes businesses that were able to pivot and thrive during the pandemic thanks to their project management approach.
Gymnastic organizations outperform 'traditional' organizations in terms of agility and productivity and share common traits - such as standardized risk management practices, project management maturity, and high benefits realization process maturity.
A PMO is a Project Management Office (sometimes 'Program' Management Office) that centralizes everything related to portfolio, program, and project management - from managers themselves to data, documentation, and strategy.
Its responsibilities might include multi-project management, resource management, process standardization, establishing best practices and governance, delivering training and support, and more.
A PMO gives businesses a formal entity to embed project management excellence across the organization. However, the PMO must add agility and value. Overly bureaucratic PMOs can face resistance, which can lead to underperformance.
As established by the PMI, standardized risk management practices are a common trait of high-performing organizations in the project economy.
Risk and reward are often interconnected, so one of the roles of a PPM is to assess the risk-return profiles of different projects. This involves using data to determine whether the balance of a project tips more towards reward or risk. PPMs also complete risk assessments that look into potential bottlenecks or project pitfalls.
It is important to standardize risk management - and, indeed, all project assessment criteria - and apply them to all of an organization's projects. Otherwise, there may be discrepancies in whether projects are approved - with some managers approving projects that others would have rejected.
A Project Portfolio Management solution makes it easier for PPMs to do their job - and do it well. It provides a centralized management platform where anyone involved in portfolio management can see the project data they need to make accurate decisions. They can see the entire portfolio in one place and assess portfolio feasibility via interactive dashboards and tools.
Project Portfolio Management software typically includes modules for:
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