Project Portfolio Management (PPM)

Project Portfolio Management (PPM) is the centralized management of the processes, methods, and technologies used by project managers and project management offices (PMOs) to analyze and collectively manage current or proposed projects based on numerous key characteristics. The objectives of PPM are to determine the optimal resource mix for delivery. Schedule activities to best achieve an organization’s operational and financial goals ― while honoring constraints imposed by customers, strategic objectives, or external real-world factors. Portfolio management ensures that an organization can leverage its project selection and execution success. It refers to the centralized management of one or more project portfolios to achieve strategic objectives. Research has shown that portfolio management is a way to bridge the gap between strategy and implementation. Project Portfolio Management is about more than running multiple projects. Each portfolio of projects needs to be assessed on its business value and adherence to business strategy. The portfolio should be designed to achieve a defined business objective or benefit. Project management authority Bob Buttrick summarized it when he said, "Directing the individual project correctly will ensure it is done right. Directing 'all the projects' successfully will ensure we do the right projects."

Project Portfolio Management (PPM) as a Business Process
Organizations have difficulty planning and executing the right initiatives because project portfolio management (PPM) is not deployed as a business process. With an increasing need and desire to innovate and change the way we do things, one would expect that organizations are keen on project portfolio management (PPM). In an ideal state, PPM is managed as a business process, equivalent to the more traditional process like finance, marketing and sales, procurement, and human resources management. The following steps may be taken to deploy PPM as a business process:

• Align leadership: Implementing PPM as a business process is a game changer and requires adequate change leadership. Part of that is executive alignment. A key element of the alignment process is visualization. Senior leaders must be able to envision what the future-state looks like and how that improves their business area and the organization. An introduction to the high-level process design, a demonstration of the PPM application, and a walkthrough of a few use cases are instruments to get them all on the same page. Once the alignment is there, a change leadership committee should be established, tasked with delivering the PPM solution.
• Implement and deploy: PPM is an enterprise application, which means that the implementation and deployment must be managed as such. The project team is a balanced representation of the organization with functional and technical resources. If these two principles are violated, the likelihood of end-users not adopting the PPM solution as intended is high. The focus of the implementation must be on business processes, analytics, application, and governance. These four components comprise the integrated PPM solution, and all need to come into play simultaneously. PPM projects tend to fail when the focus is primarily on the application. Organizations rush through the software product capabilities, make design decisions on the go and forget the importance of the business process, governance, and analytical requirements. Mobilize a team with internal and external resources. It is imperative that the vendor can provide the expertise in all four areas of the PPM solution and can assist the change leadership committee with manifesting the future-state
• Execute, learn and adjust: When the PPM solution goes live, it’s the start of a new beginning. The primary focus of the project team and business must be on user adoption and tying the experience back to the original business case. It is a good idea to have super user representation in all business areas. The super user is a functional expert in the PPM solution, and an evangelist pur sang. It is the first line of support for all the end-users. The PPM business process has a natural cadence where certain activities must be completed at set times and gates. It is not uncommon that this is a one-year cycle. As a consequence, the learn and adjust cycle is at least equal to that period. The organization must go through all the hoops and loops and complete lessons-learned sessions and optimization steps before the project can be declared successful and closed.

Project portfolio management (PPM) must be perceived as a business-critical process for organizations intending to grow, accelerate and improve. Those organizations who want to be an outlier and exception in their marketplace out serious effort into implementing and deploying a robust PPM solution. It is part of innovation and getting better than your competition.

Components of a Project Portfolio Management Process
Discussion of a project portfolio management process must consider four major areas. These are:

1. Selecting Projects for the Pipeline (What goes in the pipeline): Getting started implementing a project portfolio management process is a bit like the chicken and egg question. Do we first attack the existing portfolio and implement an improved project selection process? Or do we accept the current portfolio and go right after selecting new projects? There is no prescribed order.
   • A ranking of value and benefits
   • An appraisal of risk (in achieving these benefits)
   • An inventory of resource availability and allocation
   • An idea of the optimum or acceptable size of the project pipeline
2. Managing the Pipeline (What stays in the pipeline): Project and business environments are not concrete. These are not static environments. Projects don’t always go as planned. The assumptions may become less valid with time. Windows of opportunity close – sometimes unpredictably. Once the projects are in the pipeline, assumptions need to be updated. On the projects side, project status and performance need to be periodically measured. On the business side, the assumptions about value, opportunity, and need must be periodically validated or adjusted.
   • Periodic measurement of status and performance
   • Evaluation of status & performance against critical parameters
   • Reporting of items outside of Targets/Limits/Thresholds
   • Stage Gate and Bounding Box Concepts
3. Executing PPM (Who does it): is an enterprise-wide process involving a wide range of participants. PPM is also an extremely visible and sensitive process. How well this process is executed will have the greatest possible impact on the viability and success of the firm for an extended time. PPM has a wide breadth across the organization, requiring a wide range of participation, and has a large depth through the hierarchy. At the upper end, the leadership and direction must come from the very highest levels of the enterprise. Titles such as Chief Executive Officer (CEO), Chief Operating Officer (COO), and Chief Financial Officer (CFO) are common. In an organization where IT is a primary business, we can expect the Chief Information Officer (CIO) to play a significant role. Certainly, the VP-Projects or Chief Projects Officer(CPO) is a key player. Implementation of the PPM process will involve three groups of people. These are:
   • Senior management – providing leadership and direction and designating their representatives to the PPM Governance Council
   • The members of the PPM Governance Council – who will manage the selection of projects for the portfolio and review projects for possible de-selection
   • The Project Management Office – who monitors approved projects and advises the Governance Council where projects are deviating from expected benefits/value
   • Tools for Data Gathering and Analysis

The PPM process will cause improved integration of projects with:

• Strategic and Tactical plans
• Financial projections and reporting
• Opportunity management

The Project Portfolio Management (PPM) Life Cycle
As with any business process, PPM has a lifecycle that demands applying appropriate management skills and disciplines, as shown in the figure below.

source: IBM

As the figure implies, PPM lifecycle activities include:

• Identifying, qualifying, and funding projects/programs that address the business strategy. Managing organizational resource demand, capacity, and capability.
• Measuring performance to ensure that projects/programs collectively meet the portfolio strategy.
• Identifying and taking corrective actions on projects/programs, not in compliance with portfolio objectives and commitments.
• Establishing effective communication and reporting mechanisms that enable timely, fact-based decision-making regarding projects, programs, and the overall portfolio.
• Implementing a process to improve the portfolio continuously.

At a minimum, any comprehensive PPM approach should include the following generalized processes:

• Project selection
• Project prioritize / re-prioritize
• Portfolio monitoring
• Portfolio assessment
• Corrective action management
• Project termination and removal

Benefits of Project Portfolio Management
Five major types of benefits can be gained by adopting an effective Project Portfolio Management/PMO strategy. These include:

• Better Decision Making/ability to drive better business decisions: To make good decisions, you need good data, and that’s why visibility is so crucial, both from a strategic, top-down perspective and a tactical bottoms-up perspective. Having a good handle on past project metrics makes it much easier to predict future factors like resource utilization. And when you have a good handle on what is happening in your current project portfolio, you can find out which projects are not contributing to corporate objectives. As part of the project portfolio management team, you should discover this rather than hear about it from the line of business managers or, even worse, from the executive suite. In resource utilization, a good PMO strategy will help you understand how what you change on one project impacts the delivery of other projects. It will also help you re-prioritize and reallocate as necessary. And finally, a good PMO strategy, backed up by solid technology, will allow you to model multiple scenarios to ensure the projects you add will contribute to corporate objectives and not bog down other projects.
• Minimize Risk/ability to avoid or reduce exposure to risks: There are several categories of risks, including financial, governance, resource utilization, and misdirected efforts. On the financial side, good PMO policies will help you calculate the benefits vs. cost of canceling a poor-performing project and identify projects that are not contributing to corporate objectives. The sooner you identify these wayward projects, the sooner you reduce your risks. As for reducing governance risk, the goal is to build an accountability framework that ensures compliance is followed through every project lifecycle.
• Maximize Resources: As mentioned earlier, a greater degree of visibility. Both the macro and micro level allows you to gain the type of control over your projects that is impossible in a non-PMO environment. A centralized approach also allows you to reduce your project costs, primarily by reducing or eliminating duplicate efforts. Since human resources are the greatest cost of implementing projects, this can be a substantial benefit. Nothing increases the frustration and cost of a project more than skills shortages, especially during peak demand periods. With a good capacity planning tool, you can see your overall and specific project demand and redeploy your resources accordingly. With a resources database, you can quickly find the right resource for each project, keep skills profiles up to date, and then manage resource demand, allocations and capability.
• Prove the Value to Stakeholders: One factor that separates the super-successful PMO from the rest is the ability to prove its value to the stakeholders. A stakeholder is anyone interested in the PMO or individual projects. This group includes line-of-business managers, project managers, financial analysts, and the executive team. Remember that the actual value of what you are doing and what you accomplish and the perception of value counts. And when you can achieve the reality and perception of a well-oiled and functional PMO, many benefits accrue. You can greatly expand external and internal morale and reduce the time it takes to produce executive and board-level reports. An effective PMO and PPM strategy allows relevant stakeholders to access the project status. It generates the needed data without bogging them down by sorting through reams of irrelevant and confusing data. The net result of this greater transparency is that stakeholders gain a much greater comfort level and appreciation for what you are doing in terms of project execution and results.
• Enable Repeatable Success: As mentioned above. It is important to prove the value of the PMO to all stakeholders. One of the best ways to do this is to demonstrate how the PMO creates an environment that leads to repeatable and predictable project success. While not discounting the skills of the PMO leadership, an effective PMO provides a process framework and technology infrastructure that allows you to meet your business objectives continuously. Repeatable success is gained by establishing best practices and proven project management methodologies and enforcing their use throughout the organization. You need to leverage the processes and lessons learned from previous projects and capture this information in the project repository. This allows you to continually use past and real-time data to improve your project operations and results. In this way, you will be seen as a proactive, not reactive, organization. Finally, you need to ensure that you have a single version of the truth to enforce consistency in evaluating past projects and guiding the prioritization and execution of future projects.

Challenges of Project Portfolio Management
Businesses often face many challenges when managing their project portfolio effectively. Here are a few challenges that can make managing your project portfolio difficult:

• Too many projects at once: One of the biggest challenges in portfolio management arises when multiple projects must be taken care of simultaneously. Sometimes, the lack of a PMO leaves the responsibility of project portfolio management on the individual project managers. Sometimes, one project manager is left to handle multiple projects simultaneously, resulting in a lack of focus and a failure to deliver.
• Lack of senior management support: At times, the lack of senior management buy-in of the requirements, as stated by project managers, can also lead to poor portfolio management. Senior management’s lack of understanding of the benefits of having a PMO or necessary resources, manpower, or budget can make it difficult to manage the organization's project portfolio. Also, support for one project and none for another can make it difficult for project managers to manage their project portfolios efficiently.
• Misallocation of resources: Lack of resources or sharing of the same resource for multiple projects can also create trouble for project managers in an organization. Misallocation of resources, especially when a project manager is handling more than one project at a time, can lead to misallocation of resources – under or over-allocation of manpower, tools, etc. – to the project. This can prevent one team from delivering results and hamper the project manager's overall productivity.
• In-house politics: The biggest challenge that a project manager or PMO can face with project portfolio management is in-house politics and the company culture. These two things can prevent the adoption of new and innovative strategies and technologies that can make project management easier and the management of multiple projects efficiently. Resistance to new technology or strategies, basically change, can prevent the progress of a project or more, making it hard for the organization to handle its project portfolio efficiently.

What Happens Without Project Portfolio Management?
What happens if a company does not have a sound portfolio management methodology? Some of the symptoms attributed to organizations not properly analyzing, selecting, and managing their projects are:

• Project and functional managers often clash over resources
• Priorities of projects frequently change, with resources constantly reassigned
• Senior managers have the authority to singlehandedly approve and release projects
• Projects begin as soon as approved by senior managers, irrespective of the availability of the resources
• Senior managers regularly complain about how long the projects take and/or how expensive they are
• Even if the strategic proposal is implemented, the organization frequently does not achieve the desired improvement
• There is no comprehensive document that links all of the company's undertakings to the strategic plan
• There is a significant turnover at the senior management level, right up to the executive level
• Strategic plan is created as a list of projects. The cause-effect logic tying those projects to the strategic organizational goals is missing
• The list of projects is not properly prioritized. Therefore, it is presumed that all ideas should be implemented simultaneously

Reluctance to kill projects and maintenance of an ever-widening tunnel rather than funnel of the project pipeline leads to a chronic lack of resources, poor product quality, missed deadlines, and, most importantly, high commercial failure rates of the products or services created as a result of these projects. The short and long-term effects of no PPM are illustrated in the figure below.

source: Moustafaev

See Also

• Project Portfolio Rationalization
• Stage-Gate

Further Reading

• A business guide to project portfolio management
• How to Prioritize your Company's Projects
• Impact of Applying Project Portfolio Management on Project Success
• Improving Results of Project Portfolio Management in the Public Sector Using a Balanced Strategic Scoring Model