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Beginner’s Guide To Project Portfolio Management—Critical Steps, Tools, Benefits

Beginner’s Guide To Project Portfolio Management—Critical Steps, Tools, Benefits

Project portfolio management (PPM) describes how we manage the often-confusing mix of interrelated, dependent, and connected projects. PPM considers the big picture of all projects grouped together—past, present, and future—and calculates the optimal prioritization and sequencing of projects to maximize ROI.

In this post, we’ll cover everything you need to know to get started with PPM, the best tools, and how to successfully implement PPM to achieve maximum returns from projects.

What Is Project Portfolio Management (PPM)?

Project portfolio management refers to the centralized management of one or more project portfolios to achieve strategic objectives. It is a way to bridge the gap between strategy and implementation and ensures that an organization can leverage its project selection and execution successfully. Here are some of the use cases of PPM:

PPM is generally used by organizations to identify the potential returns on a project. It makes it possible for companies that want to invest in new projects (and often competing projects) to forecast risks inherent in each and make an informed decision.

It also facilitatesteam communication and ensures that all parties involved in projects are on the same page.

When done properly, PPM is a valuable tool for obtaining buy-in from all stakeholders in an organization and enabling them to see the bigger picture and understand, manage, and mitigate risks, there’s much less likely to be discord, which can often be the bane of successful project management. PPM also enhances transparency, governance, and accountability with stakeholders.

What Are The Objectives Of Portfolio Management?

The primary objective of PPM is to maximize the benefits a company accrues from the projects it undertakes. This necessarily involves selecting only those projects that offer the right amount of value, taking into consideration the resources that need to be allocated vis-a-vis the available resources, as well as the strategic fit with the company’s goals.

Other objectives include achieving balance in the project portfolio by ensuring an appropriate mix of high and low risk and long and short-term projects. By establishing an optimal mix of projects, PPM ensures a company is better placed to achieve its operational and financial goals.

What Is The Role Of The Project Portfolio Manager?

As the person with oversight of an organization’s project portfolio, the portfolio project manager is integral to successful execution of the organization’s strategy. Often, the role of a project portfolio manager revolves around managing one or more portfolios and working with different financial algorithms and financial models to align projects to the company’s strategic objectives. Portfolio Managers often develop management standards to guide the portfolio and they keep a high level overview of everything within the portfolio.

Often, project portfolio managers are part of a Project Management Office (PMO). The PMO’s role involves portfolio management and setting project management processes and standards for the whole department to follow.

The PMO might also set out which methodologies are being used in the organization, such as Agile or Scrum methodologies, and ensure that they are being followed in individual projects.

What Is The Difference Between Project Management And Portfolio Management?

Project and portfolio management do require some of the same general skills, but despite their similar-sounding names, project management and portfolio management are actually quite different.

Project management, as you know, is the application of knowledge, skills, tools, and techniques to project activities in order to meet project requirements. Its importance cannot be over-emphasized.

The operative word in project portfolio management, on the other hand, is a portfolio. PPM is not primarily concerned with running projects, rather its focus is on choosing which projects to be involved in and how to fund them, based on whether or not they support the goals and objectives of the company. Projects that do not fall within the scope of the company’s objectives are removed from contention.

If you were managing a technology company’s portfolio for example, you would most likely reject a proposed building project, because it doesn’t align with the company’s stated strategy of focusing only on some predefined type of tech projects.

What Is The Difference Between A Program And A Portfolio?

A program is composed of a set of related projects. For example, a program led by a nonprofit to provide clean drinking water in a rural area might comprise an infrastructure project, a research project, and an education or PR project.

Put simply, a program is often the driving and managerial force behind a set of projects. Not every project needs to be part of a program, but if it is, the success of a project is also considered on a program level—did it help achieve the overall program goals?

A portfolio is concerned with the organizational strategy and how it affects the business itself. Goals set at the portfolio level will give shape to different projects, programs, and operational activities.

Of course, the interpretation of these titles depends on the organization. For example, there’s program portfolio management, which assesses programs from a portfolio level.

What Does Information Technology Portfolio Management Look Like?

This is a common question, so here’s an example of what portfolio management looks like in IT. An IT portfolio manager will generally look at three main things:




The purpose of IT portfolio management is to ensure that the individual IT investments embedded in the organization’s processes, people, and technology are on track, bridging the gap between the organization’s overall strategy and the execution of that strategy. An IT portfolio manager examines the financial portfolio, determines potential returns of different IT investments, determines a project’s fit with strategic objectives, and assesses risk on a portfolio level.

IT portfolio management and project portfolio management in IT are similar, however, in some cases IT portfolio management will step beyond projects and initiatives to also examine the applications and infrastructure related to those projects.

In a large organization, IT or software portfolio management will draw not only from technology portfolios themselves, but also from related disciplines including enterprise architecture, business case analysis, program management, and performance management. Even so, IT portfolio managers will still follow the same types of portfolio management processes listed above.

Project Portfolio Management Software

Choosing the right project portfolio management software and tools is often the key to successful PPM. Our list of the best project portfolio management software will help you find the best one for your situation and how many projects you have.

Before diving into PPM software or project portfolio management tools, check out the demos and free trials offered by many portfolio tracking software providers. And if you realize you don’t need a PPM tool but just a PM tool, you’ll find there are simpler project management tools that let you do many things like manage tasks and teams across multiple projects.

The Project Portfolio Management Process

A strategic portfolio management system requires a portfolio management process. This usually involves a step-by-step process which includes:

1. Create An Inventory And Establish A Strategy

First, identify all the projects in the pipeline, including potential projects, by gathering key project and organizational information. Categorize these, consider where projects are in their lifecycle, identify your company’s strategic goals and business objectives, and determine if these projects support those strategic objectives, and if so, which ones.

Business strategies are the basis of project portfolio management and as such, it is important to have a strategy in mind before proceeding. Preparing answers to common questions you expect to get during this phase is also advisable.

Common questions can be anything from “What is project portfolio management?” to “How much will this cost the company?” to “How will this benefit us?” and even “Why do we need project portfolio management?”. It’s always good to be prepared. Establish a process for prioritizing projects.

After you’ve set a strategy, you need to build an implementation team. Your implementation team should include technical team members (to help with new systems) and portfolio managers, to name a few. Your implementation team may need a governing body, which is typically made up of senior management.

2. Analyze

Next, analyze the current strengths and weaknesses of your project portfolio. Evaluate each project individually – project milestones, potential ROI, reporting schedule, and resource allocation.

After collecting data, it’s generally a good idea to organize it by category. These categories can be anything you think is necessary, but generally, include completed and canceled projects and growth and survival categories.

In conducting this analysis, you should ask questions that aim to reveal whether there is duplication or whether some existing projects might not be better combined for the sake of efficiency or even halted completely.

You should also assess the overall risk of the project portfolio as a whole by comparing the probability of technical success against the anticipated benefit from the project. Remember to have a good communication process in place so that all the key variables are thoroughly discussed.

3. Ensure Alignment

Next, perform an alignment analysis that will show you whether your critical resources are working on critical projects and whether the projects you do decide to carry on with really align with all the strategic initiatives the company wants to undertake. Some of your guiding principles should include:

The degree of the strategic fit between the portfolio and the company. You need a balance between near-term growth opportunities, long-term goals, and the quest for long term innovation.

Ensuring the distribution of projects, including the number and nature of the projects, are aligned to different strategic goals in a way that makes economic sense.

The probability that the end product will deliver the return expected.

An evaluation of associated risks. It is important to take a broadly inclusive approach to risk and not only measure in financial terms, but include schedule, scope, resources, and technology risks.

4. Management

Next comes the management aspect of the process. At this point, you need to view the project portfolio and make necessary decisions about the reallocation of budgets and resources or reprioritize based on the information you uncovered during the previous legs of the process. Processes to consider during this phase include resource management, risk management, and change management.

You may also need to reschedule projects which you may have decided to keep, but first, ensure the rescheduling risk aligns with your strategy. Obviously, collaboration is absolutely critical before making these decisions to make sure you end up with the right portfolio.

In the end, your portfolio should have a healthy mixture of risk and reward and should meet internal requirements.

5. Test And Adapt

Lastly, test and adapt. There is no guarantee you will get your PPM process right immediately, and in fact you shouldn’t expect to. You will need to adapt and make changes in real-time. What adaptation means is quite different for every company, as it should be, but it’s generally a good idea to test your new portfolio with a few stakeholders, taking feedback as needed.

PPM can be quite a complex process, especially in the beginning. There are project portfolio management templates and portfolio and project management software that can help. logo white on transparent background

The project management software that keeps teams going. Collaborate as if you were right next to each other.

Tips To Achieve Project Portfolio Management Success

Once your portfolio has been rolled out, it can be difficult to see where to go from there. Here are a few tips for achieving success:

Accurate identification of risks and associated remediation strategies is critical and should be prioritized.

Don’t be afraid to cancel projects if they no longer align with company strategy.

Enable architects, IT planning teams, and C-suite to align execution with business strategy

Simplify time and task management for project team members, ensuring they have the freedom and flexibility to capture task and time data as necessary.

Accurate data is absolutely critical and should be prioritized. So should access to data, as a delay in getting data can impinge on your decision-making ability, as well as your ability to comply with regulatory requirements.

Utilize the right tools to keep on track and simplify the process. For example, giving your project team the ability to submit timesheets remotely or giving stakeholders the ability to keep track of project status could save you a lot of time.

Don’t micromanage.

Benefits Of Project Portfolio Management

Project portfolio management has many benefits, which include:

increased success in project delivery

better decision making

the ability to prioritize high-value projects

avoid overspending

manage change more effectively

remove inefficiencies

Regardless of how high value and successful a project may be, it could still be a victim of overspending. Again, PPM helps a company to avoid this; it allows managers to nip overspending in the bud as it is easy to see where resources are being over-allocated.

PPM can also be a veritable tool in organizational change management; with an effective PPM strategy, a company can restructure and improve its methods for project execution as part of a larger process to change the company’s operational or strategic direction.

In the process, it will remove inefficiencies and be better able to focus on appropriate strategies for achieving goals. Lastly, PPM also makes a company more nimble and able to adapt to change with minimum fuss or disruption.

I have attempted to give you a concise breakdown of what, in reality, can be quite a complex process. An efficient and effective PPM process obviously isn’t going to happen overnight, but with the right tools and internal commitment to the process, it will happen. In the end, what is required to be successful at PPM is commitment and adaptability.

A Real Life Example: Why PPM Is Important

You know the score—your agency has got 50 projects on the go. They’re all overlapping, some of them for the same client, all are using the same resources. Some of them you’re doing to keep the lights on, others for the prospect of awards, and others just for pure innovation. But as an Agency Owner, Program Manager, or Project Director, how do you know if you’re focusing your teams and their projects on the right things? We’re all asking the same questions:

Is this really a good idea?

What should we really be doing?

What projects should we be prioritizing right now?

How can we focus our resources most efficiently?

How can we run these projects concurrently, and profitably?

These are the questions that project portfolio management (PPM) enables us to answer. With many competing projects and priorities stretching resources in different directions, good PPM is the only thing standing between us and bad project decisions that offer nothing but the poor return on investment.

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