Differentiating between Project Management and Project Portfolio Management

by Francesco Pecoraro

Project portfolio management (PPM) helps companies manage and control projects within an organization. Companies use PPM for several reasons, such as maximizing the outcome of projects, balancing risks, and, most importantly, aligning projects to the strategic objectives of the organization. In fact, the final goal is to achieve companies’ strategic goals by effectively managing the projects included in project portfolios. In this article, we will discuss the difference between Project Management and Project Portfolio Management.

Project and portfolio management differences

PMI defines Project management (PM) as the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements. In addition, PM brings a unique focus shaped by the goals, resources, and schedule of each project.

To achieve success and beat the competition, companies need to have a PM process in place.

Over the years, project management has become a recognized expertise as companies have understood the importance of well-managed projects that are increasing in scope and complexity. In addition, experts report that project management is not only useful to deal with uncommon tasks but also to complete companies’ everyday operations.

Organizations use project management as a way to reach their objectives. It has been proven that companies that are used to managing their projects have better planning capabilities, control of their activities, and management of their resources. Moreover, organizations that use tools and methods for managing projects are able to improve operations efficiency.

Nevertheless, when project complexity increases, effective management is not enough to secure success. The fact that organizations have more parallel projects increases the importance of coordinated management in the form of PPM (Killen, Hunt, & Kleinschmidt, 2007).

Project portfolio definitions

Organizations can have one or more portfolios. An organization can have one overall portfolio and several portfolios for different areas of the business, such as IT or Marketing.

Below are some definitions of a project portfolio that can help us clarify its meaning and characteristics.

A PPM is a group of projects that share and compete for the same resources and is carried out under the sponsorship or management of an organization (Mueller, Martinsuo, & Blomquist, 2008; Archer & Ghasemzadeh, 1999).

Artto, Martinsuo, & Aalto (2001) define project portfolios as collections of projects performed in the same business unit that share strategic goals and resources.

Turner and Mueller (2003) define a portfolio as an organization (temporary or permanent) where projects are managed together to coordinate interfaces, prioritize resources between projects, and thereby reduce uncertainty.

A portfolio represents the collection of all active programs, projects, sub-portfolios, and other work of an organization at a certain time (PMI, 2006).

A portfolio exists in the frames of an organization, and it consists of a set of current components and planned or future activities; in which portfolios are not temporary like projects or programs (Kristjánsson, 2012).

Having said that, we can introduce the concept of project portfolio management, which helps companies manage projects as a group. It is treated as a set of activities where risk and returns need to be balanced.

Project Portfolio Management

To be successful, companies need to be sure that all projects add value to the organization by taking into account their resource capacity. Project Portfolio Management (PPM) can help companies reach their strategic objectives.

Project Portfolio Management (PPM) was born from the need to make rational investment decisions that would result in benefits for the company and to optimize the use of resources by executing projects in an effective and efficient way.

Project Portfolio Management (PPM) deals with the coordination of projects and programs in the frames of an organization with aims to optimize the results, balance the portfolio risk profile, govern the alignment of projects with the organization’s strategy, and deliver the projects within the planned budgets (Skenderovic & Burcar Dunovic, 2008).

PPM operates at a strategic level and represents a continuous process that requires regular efforts to guarantee portfolio balance and regular alignment with the strategic objectives of the company. In addition, PPM helps companies increase the return from project investments and expand their competitive advantage.

Experts consider project portfolio management as a tool for supporting decision-makers in investing in the projects that will position the company most competitively in their markets.

Keep in mind

Over the years, project management has become a recognized expertise. Organizations use project management as a way to reach their objectives. When project complexity increases, effective management is not enough to secure success. Project Portfolio Management operates at a strategic level and helps companies expand their competitive advantage.


Similar Content:

You may also like