As firms attempt to increase their capacity in managing several projects effectively, project portfolio management (PPM) has become a critical component in integrating innovation projects with high-level organizational goals.
This process helps in enhancing an organization’s PPM performance by affecting how companies prioritize projects, allocate limited resources, and conduct other primary components to run projects successfully.
However, being able to perform project portfolio management requires comprehensive study. So in this article, you will learn the basics of implementing a PPM process and why applying one is essential to your business.
What is project portfolio management (PPM)?
The study, management, and optimization of budgets, resources, technologies, and procedures for all plans, programs, projects, and initiatives are collectively known as project portfolio management (PPM).
Project management teams utilize PPM to monitor and assess current and future projects based on a set of standards. They ensure that portfolio outputs contribute to the overall success and objectives of the company.
The portfolio manager leads project management teams in conducting strategic planning, industry analysis, expenditure assessment, and forecasting, along with limiting hazards and addressing the interests of stakeholders.
Why is project portfolio management important?
PPM seeks to determine the proper integration of resources for the organization to meet its goals while taking factors into consideration like consumer expectations, external market conditions, government restrictions, and even a competitive environment.
In addition, PPM also provides:
- Maximized success in selecting and executing projects
- Sufficient data that enables important stakeholders to create the most informed and appropriate choices regarding innovation activities, initiatives, agendas, and resources.
- Continuous organizational transparency in the essential project information
- Resolved gaps between strategy and execution
- Strategically aligned projects
- Prioritized projects and relevant resources
The reality that all projects require funds, time, other resources, and employees to be completed in an effective manner drives the necessity for project portfolio management. Sometimes, companies find themselves in short supply of the resources required to run a project.
Simultaneously, not every project is valuable to a company in terms of profitability and other factors.
As a result, stakeholders will need a system for managing projects and resources to guarantee that the most economically essential programs get the attention and resources they need for seamless execution.
What are the basic steps involved in the project portfolio management process?
There are six steps to follow in applying basic project portfolio management. Here are the following:
1. Define business objectives
Establishing corporate goals and identifying business strategies is what comprises the first step towards applying project portfolio management. A business plan must contain the necessary actions to accomplish these objectives.
Here are things to remember on this step:
- Companies tend to overlook specific initiatives sometimes. Hence, businesses should define their company’s strategies and assess where their programs and activities stand in relation to these objectives.
- Every member of the team must be on the same page. Everyone should understand what the organization’s goals and expected outcomes are so they can work in sync.
- One of the most common methods for management to achieve this is by developing objectives that determine what the team’s strategy map is all about. This map illustrates what initiatives the company wants to prioritize and how they plan to go on about it.
As a project portfolio manager, you’ll need to work with stakeholders to agree on the project portfolio’s strategic goals.
You also need to make sure that your project portfolio matches with your company’s plans and objectives — making sure that your financial goals and consumer values strategically align with it.
2. Collect ideas for potential projects
Gather project management data and develop appraisal criteria to choose the best. Now that you’re done determining your objectives, you need to start creating your portfolio.
But before you proceed, you need to begin gathering ideas for potential projects first. You need to identify project concepts that are either alike or interlinked to be handled and administered continuously. Acquire relevant data and develop your appraisal criteria.
Remember the following when executing this step:
- To make this a seamless procedure, compile prospective project ideas and study them.
- Research successful projects related to them. You can also ask for some ideas from your team members, or even from customers via feedback. Try to check on specific regulatory needs as well for some sources of inspiration.
- It is critical to have a systematic input procedure in place to gather these ideas. This way, you can monitor and assess potential concepts with ease.
You can opt for ideation tools to make this simple on your part, or you can choose to gather them manually or even via an online database.
Once you’ve collected enough ideas, you can go and proceed to the next step.
3. Create the proper criteria for the evaluation and selection of ideas
There are two primary things you must do on this step:
- Determine the commercial value of each idea via data-driven assessments. If possible, use both qualitative and quantitative measures. Furthermore, identify which ideas match your strategies and objectives well.
- Analyze the idea’s costs and benefits through your valuation criteria, which will determine how much value each project adds to your portfolio. Your project selection scoring criteria can include a number of factors, such as the payback duration, net present value, and hazard level.
Portfolio managers can also collaborate with business executives in developing the proper assessment criteria that can thoroughly review, evaluate, and authorize projects to make sure that they correspond with the strategic objectives of the enterprise.
Here are some of the questions that can serve as your guidelines in reviewing new project ideas:
- Does the idea contribute to the overall achievement of your business objectives?
- What are its anticipated outcomes?
- Are these results already given by a project that’s in progress?
- What risks come with implementing it?
- What are the resources required to accomplish them?
Examine any of these ideas for evident concerns to prevent unnecessary headaches later on such as duplicate projects, complex interdependencies, and even over-allocation of resources.
4. Select and prioritize the best projects for your company’s portfolio
Once you have the proper criteria for evaluating the ideas, then all you need to do is select the prioritize the best projects that would benefit your company.
Here are some things you could do:
- Create a detailed list of the most useful and effective procedures or initiatives from the evaluation phase. Choose which ones to prioritize by ranking them according to particular strategic areas like cost savings, hazards, benefits, and competitive advantage, among others.
- You can also use a scoring model to analyze and differentiate potential projects better. Determine which initiatives provide the most value and prioritize them. Portfolio management is centered on determining the comparative “value” of every project.
Such a process decides which projects are implemented, where resources are assigned, and many others. To choose a winning project, everyone on the team must have a shared sense of what is vital to the firm.
However, each organization has a varying concept of value as businesses have distinct strategic goals, placing diverse emphasis on financial measures with varying levels of risk tolerance.
Furthermore, every department may interpret the company’s strategic goals in a way that is unique to them. As a result, “value” is not easily defined. Any business that maintains a project portfolio must identify and explain what type of project work is most valuable for them and why.
5. Validate the feasibility of the project portfolio and initiate when ready
It’s necessary for companies to determine whether a project has a high likelihood of success. Validating the feasibility of your project portfolio includes analyzing all the elements of a project (economic, technological, and legal).
Often, the cost and return of investment of a project are frequently seen as important factors in determining viability. However, whether or not the project generates sufficient income or sales is not the only issue to evaluate.
You must also decide if you have enough personnel on your team to complete a project from start to finish, and whether or not you have the necessary means and resources to carry your plans out.
In the case of other businesses, this may involve the proper type of technology to execute their projects.
Validating the feasibility of your project portfolio brings a number of benefits, like:
- Establishing the benefits and drawbacks of a project before spending substantial time and resources on it.
- Supplying critical information that determines a project’s potential bottlenecks.
- Defining how projects will most likely perform.
- Establishing marketing tactics to persuade prospective parties to invest in the project.
After studying the feasibility of your projects, you may begin launching them. Remember to conduct experiments first and start gradually to make the right decisions. If you find out that there is not enough value in a project, don’t hesitate to stop and proceed to the next.
6. Manage and monitor your portfolio
Now that the projects are underway, you may believe that your task is over. Unfortunately, it isn’t.
A project portfolio requires constant monitoring and review. Your project portfolio management (PPM) process should now record and measure the project’s real-time progress, and any adjustments in it should be shared with relevant parties, particularly stakeholders.
Disruptions in one project could create a cascading effect, which would delay everything that’s next in line. Aside from the timeline, it is also critical to check if the project is on track in terms of money and scope, as well as whether any significant challenges or risks have surfaced.
For initiatives that have entirely gone off the tracks, the monitoring mechanism should also specify when the project should be discontinued. People in-charge should also send status reports regularly.
Automating the development of an active project’s progress report will reduce the time and effort of making it.
Finally, when a project is completed, follow up to see if it gave its expected outcomes and whether it remained within the budget set at the start. Don’t forget to acquire valuable insights as to how the project review process could be modified to fairly assess the proposed project value.
Keep your goals aligned with a project portfolio management process
Project portfolio management has become an increasingly important activity for organizations of all sizes.
Organizations that are successful with their PPM have a greater chance of meeting goals, making sound decisions about innovation activities, and achieving continuous organizational transformation.
We do hope that this guide was able to help you create your own PPM process. If you’re interested in learning more, feel free to join us on any of our regular webinar sessions — no strings attached.