Companies are increasingly using projects to manage most of their activities. Managing single projects can produce a loss of transparency and efficiency of the project outlook. To be more effective, companies need to use a management approach, such as Project Portfolio Management (PPM). PPM is an efficient way to manage projects and evaluate project proposals. It must be a key capability for companies handling numerous projects simultaneously.
The right attitude
To establish PPM in a company, the interested parties need to have a positive attitude. In addition, new thinking must be adopted by the senior management team that drives the implementation of the new process.
To be effective in Project Portfolio Management, it is crucial to choose an appropriate framework to evaluate project proposals and to select projects that are best aligned with the organization’s strategic priorities.
The PPM process
There are many frameworks from which to choose. The PPM process, as put forth by Jonas (2010), includes four interdependent management tasks:
- Portfolio structuring
- Resource allocation
- Portfolio steering
- Organizational learning
The portfolio structuring phase deals with tasks that identify the desired portfolio based on the company’s strategy. This phase includes all the activities that will build the project portfolio, such as the evaluation of projects and proposals, prioritization, and selection that should be aligned with the strategic plan.
To increase the chances of project portfolio success, it is important to have high information quality. PPM is a tool for senior management to define the market, products, and technologies to operationalize the business strategy (Cooper et al., 1999).
The resource allocation phase is about the distribution of resources across the organization and projects based on the business strategy and portfolio structure. This phase has the objective of finding the best way to use the company’s resources, which is one of the major challenges.
Resource allocation also addresses resource competition within the organization in order to move from the structuring phase to the steering phase. The portfolio structuring phase is closely linked to this phase by providing initial resource allocation, but this has to be constantly managed and reallocated.
The portfolio steering phase is an ongoing process where the portfolio is constantly evaluated in order to determine if resources fit within the portfolio structure. The third phase is about managing tasks to coordinate the projects in the portfolio.
This is the moment when resources can be redistributed based on the current portfolio or based on changes in the strategy of the organization. Moreover, this phase includes:
- Monitoring the portfolio’s strategic alignment
- Developing corrective actions for the portfolio if the portfolio deviates from the initial objective
- Identifying the synergies within the portfolio
- Coordinating projects across business lines
To do that, management needs to stay constantly informed about the status of all activities.
The last phase (organizational learning) is useful to address the activities that are at the end of the project’s life cycle:
- Portfolio exploitation
- Organizational learning
- Securing project success
Based on the evaluation of project and business results and how they support the strategic objectives of the organization, this phase incorporates assessment and learning.
In addition, the fourth phase includes (Jonas, 2010):
- Project results evaluation
- Post-project reviews
- Maintain and store relevant knowledge at project closure
- Utilize the lessons learned from earlier projects
These activities are crucial to contribute to the advancement of project management practices and, ultimately, to the success of projects.
Keep in mind
There are many frameworks to choose from. To be effective in Project Portfolio Management, companies should choose the right framework to evaluate project proposals and select projects that are best aligned with the organization’s strategic priorities. It is important for organizations to ensure that the balance of the project portfolio is achieved through efficiently comparing project proposals by the same criteria, tools, and techniques.