Project portfolio management (PPM) is how an organization achieves its strategy and related operational and financial objectives. Here is what you need to know about this important discipline that links strategy to results.
What is project portfolio management (PPM)?
A project portfolio delivers an organizational strategy, which addresses multiple objectives. This distinguishes PPM from program management and project management, which address one objective.
PPM is a discipline that ensures the expected business value is achieved and the investment in that business value is maximized.
“Portfolio manager” is typically a title for a role associated with investment management. I recommend using “project portfolio manager” to properly distinguish it from investment portfolio management.
Who developed the concept of PPM?
Modern PPM is based on the investment portfolio theory developed by Harry Markowitz, which he published under the title “Portfolio Selection” in the Journal of Finance in 1952.
When was PPM defined?
In the early 2000s, project management reporting evolved from aggregating project status reports for a related group of projects to the more robust functions that are present in PPM today. The first Wikipedia entry for PPM was created in 2005.
Who values PPM?
Executives value PPM due to improved decision-making and the maximized ability to achieve the organization’s desired strategy. When elements of the project portfolio (i.e., its programs and their projects) are properly managed, the project portfolio provides the quality data necessary to support more timely, informed and accurate decisions. Visibility into all projects in an organization is made possible, and performance reporting scope expands its reach across all aspects of an organization’s delivery. This is especially important in the world of digital transformation, where the window of opportunity is growing shorter, and project delays have a profound effect on an organization’s ability to produce results delivering strategy.
Program and project managers also value PPM because it increases project relevancy and success by providing an organizational perspective. It is a myth that a project is in control when the project manager is assigned; in today’s agile world, very little is known at project initiation. The project portfolio provides the context for connection to strategy. It also improves visibility and transparency of dependencies with other projects and organization milestones, reducing schedule risks and increasing collaboration.
Team members and Human Resource functions value PPM because it facilitates effective resource management. When performed correctly, resources are centralized and integrated with human resource management systems for a single source of truth about the status of an organization’s most valuable resource: its people. Morale improves when team members are effectively allocated and utilized, and when they can see exactly how they are adding value to the organization.
What are the steps to develop a project portfolio?
- Create an inventory. Collect, aggregate and categorize the organization’s project and organizational assets. In its most basic form, the inventory is a list of projects (remember the distinction between projects and ongoing work). This is typically the most insightful and revealing step, and best done in an enterprise PPM tool, but a spreadsheet could suffice in the interim.
- Analyze what has been inventoried. Summarize project schedules, costs, and resource information. Organize projects into programs.
- Align the project portfolio to the strategy it is designed to deliver. Eliminate duplicates and redundancies. Discretely prioritize. Balance resources. Draft portfolio processes. Ensure resources have the capabilities necessary to deliver the desired project results. Begin to mitigate risks.
- Manage the project portfolio. Pause, defer or complete projects. Add projects per the defined portfolio processes. Redeploy resources as indicated. Manage portfolio progress and apply project portfolio change management process as needed.
What are the most important PPM considerations?
Developing a project portfolio properly is crucial to its success, closely followed by the organization’s ability to define the scope of the project portfolio and prioritize the projects in the portfolio. Not every project deserves to live; therefore, it is important for an organization to be confident in their ability to say ‘no’ to some projects so they can favor the most important projects.
Find more content on Portfolio Management!
Jan Schiller, PMP, PSM1, FLMI, is a partner with Berkshire Consulting, LLC. She specializes in revealing the path from where an organization is to where they want to be. Over the past 30 years, Jan has been focused on linking strategy to results with project management in the financial services, investment, health, beverage, learning management and life sciences industries. She has helped her clients with the adoption of project management best practices; streamlining business processes; addressing regulations; achieving competitive advantage and much more. Jan writes about scope and portfolio management.