What is Project Portfolio Management?
If you’re a project manager who’s constantly juggling multiple projects, stakeholders, team members, and business goals, you know just how easy it is to get wrapped up in the smaller details of your day-to-day work. While these details are definitely crucial to a project manager’s role, it’s important to not lose sight of the bigger picture. This is where Project Portfolio Management (PPM) comes in.
In this guide, we’ll define project portfolio management, provide examples of industries that use it effectively, outline some key benefits of PPM, and walk you through the five core steps of project portfolio management.
What is project portfolio management?
Simply put, project portfolio management is a process where project managers prioritize and manage groups of projects in one place, at a high level. With PPM, project managers will receive project requests from stakeholders and evaluate where the project falls in the level of importance according to the business’ overall goals and needs. Once this is decided, the project managers will allocate resources and manage the project as needed.
For example, a CEO at a software company may request an internal video project to celebrate the birthday of another member of the C-Suite. Around the same time, a director of IT requests an urgent project to fix a security issue in the company’s software. The process of PPM means that the project manager(s) will have to weigh the benefits, resources available, timelines, and strategic importance of the requested project in order to decide what’s feasible and which project takes priority.
Overall, the main purpose of PPM is to offer a big-picture overview that provides transparency in decision-making, helps stakeholders and team members across the organization stay on the same page, and ensures the projects being worked on are always in alignment with the organization’s key goals and objectives. Basically, project portfolio management makes sure that the best and most impactful projects are being worked on at the right time.
Industries that use project portfolio management
Thanks to its versatility and effectiveness, project portfolio management is a process used across numerous industries and organizations. Some of these include:
- Software and tech: PPM can help software and tech businesses manage and boost the efficiency of resources such as developers, designers, copywriters, and other key team members involved in projects. Plus, by offering a central place and source of truth for projects, PPM can help encourage collaboration and communication amongst team members — something that’s often a challenge for tech companies with hybrid working styles.
- Construction: With construction companies often managing multiple complex projects at once (ie. residential builds, infrastructure improvement, etc.), those in the industry can use PPM to help keep things on track, on time, and on budget. From contractor schedules to the cost of materials, there are so many elements of construction projects that benefit from PPM.
- Government: With strict regulations, potential public scrutiny, and laws in place, it’s crucial that government agencies have a solid project portfolio management process. As the Government of New Zealand explains, “The Treasury uses [PPM] to help agencies align their projects with their strategic goals, using resources effectively and within the current operating environment.”
- Marketing and ad agencies: With such an emphasis on client relations, marketing and ad agencies can benefit from the increased visibility into project progress and risks provided by PPM. This allows account executives to get ahead of any potential roadblocks before they happen—and keeps clients happy.
5 benefits of project portfolio management
By providing a top-down approach to project management and delivery, PPM offers numerous benefits for organizations of any size. These include:
Better decision-making
With PPM focused on clearly defined and objective business goals, emotion is taken out of the decision-making process. Rather than simply deciding to move forward with a project because it was requested, the PPM framework uses both quantitative and qualitative tools, criteria, and evaluation methods to ensure that the project supports the business’ core objectives.
Plus, by offering a centralized view of all projects in one place, PPM lets decision-makers easily understand the potential value and resources required of each project — something that helps streamline the decision-making process even further.
Greater return on investment (ROI)
A successful PPM program can reduce the number of unsuccessful projects, improve budget management, increase team member efficiency, and reduce risk — all elements that contribute to a better return on investment.
Using a PPM approach helps optimize the resources (budgetary and people-powered) a project needs, while avoiding duplicate work or unnecessary costs. Plus, with clear and real-time insights into the overall project portfolio performance, decision-makers can quickly pivot to avoid delays, going over budget, or any other issue that could negatively impact ROI.
Improved long-term planning
While it’s easy to get caught up in projects that may provide quick, short-term wins, project portfolio management helps organizations focus on long-term growth and success.
With a high-level perspective of the organization and all projects, PPM ensures that a project’s viability is evaluated based on its extended and lasting impact on the business. Decision makers involved are provided the bigger picture information they need to understand exactly how a certain project can work — or not work — with other projects either already underway or in the pipeline.
Decreased internal competition
When different teams within the organization all have their own goals and are all competing to secure the same resources (budget, design support, etc.), internal employees can naturally feel like they’re in competition with one another.
With a solid project portfolio management program in place, teams across the organization have full transparency into the decision-making process and can clearly understand how the allocation of resources works to support the business’ overarching goals and objectives. PPM ensures that a standardized approach is used when evaluating project proposals, meaning there is little room for subjective decision-making that could be deemed unfair or in favor of certain teams.
More effective risk management
While no project is completely free from risk, PPM helps organizations reduce the amount of risk involved with not only each individual project, but the portfolio of projects as a whole.
Thanks to a structured approach to risk management that takes the organization’s overall risk susceptibility into account and makes sure that mitigation strategies are in place, PPM helps protect businesses from negative outcomes that can result from disorganization and a lack of visibility into projects and initiatives.
From improving ROI to reducing risks and internal competition, a solid PPM approach provides countless benefits to organizations across a variety of industries.
5 core steps of project portfolio management
While this process might look slightly different from organization to organization, the high-level foundations of project portfolio management are pretty consistent across all businesses. These main steps are:
1. Identify the objectives of the overall business
As project viability is measured and evaluated according to the degree to which the project aligns and supports the overall business objectives, it’s important to establish these goals beforehand.
While different businesses may have different ways of sharing this information, some key places to start include:
- The company’s mission statement and values
- The organization’s strategic goals and quarterly/yearly forecasts
- The business’ financial standing and performance
- Stakeholder conversations and feedback
- The competitive landscape, market trends, and the industry
Once the business objectives are clearly defined and understood, decision-makers can confidently identify and evaluate projects in alignment with these goals.
2. Identify requests and ideas for new projects
With the business objectives in place, it’s time to identify and collect potential projects for the portfolio. This step often includes gathering a list of proposals, requests, and ideas for new projects through processes like market research, client feedback, stakeholder discussions and guidance, and the analysis of industry trends and data.
A vital part of this step is collecting and including relevant data and insights, along with a general plan outlining resources needed for each project — and the potential payoff. With all of this information in place, organizations are ready to make informed decisions about which projects they’ll actually move forward with.
3. Evaluate and choose the best projects
As possibly the most important part of the project portfolio management process, evaluating and choosing the best projects involves analyzing each project’s potential value and ROI, risk factors, and overall alignment with the organization’s goals and objectives.
Some ways this can be done include measuring each project against a set of standardized criteria or scoring systems, performing a cost-benefit analysis, or conducting a feasibility study.
Using a systematic approach can help organizations make sure that the selected projects complement each other, are closely aligned with the business’ key objectives, and contribute to the overall development of a dynamic project portfolio.
4. Validate overall portfolio and kickoff projects
At this stage, an organization will need to dive deeper into the data collected earlier in the process to validate the feasibility of the selected projects. This includes looking into the resources needed, project timelines, budgets, and any possible blockers. By validating all of the projects together in the portfolio as a whole, the organization can ensure that it is well-balanced and optimized for the best possible outcomes.
Once the portfolio of projects is validated, planning for each individual project can begin. Here, project milestones, goals, and assigned resources will be planned and established. This is where, if it wasn’t before, the actual feasibility of each project will become crystal clear.
5. Manage portfolio
As soon as projects get underway, it’s important to continuously monitor their progress (or lack thereof) and make adjustments and pivots as needed. This involves tracking project timelines and milestones, monitoring performance and metrics, keeping track of resources, managing risks, consistently reviewing the portfolio, and communicating with and reporting to relevant stakeholders.
By keeping a close eye on all projects within the project portfolio, organizations are able to make any necessary changes as quickly and effectively as possible to make sure the portfolio is always aligned with the business’ overall goals.
Check out this portfolio!
Project portfolio management helps organizations across multiple industries stay focused on the bigger picture. By identifying, evaluating, and monitoring a collective group of projects as a portfolio rather than individually, PPM provides a systemic way for business’ to make sure every project works to support the organization’s most important goals.