Project Portfolio Management

What is Project Portfolio Management?

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. According to PMI (2006) “The PPM is the management of collection of projects and programs in which a company invests to implement its strategy in order to maximize value.”

All components (projects, programs) of a portfolio exhibit certain common features

• They represent investments made or planned by the organization;

• They are aligned with the organization's strategic goals and objectives;

• They typically have some distinguishing features that permit the organization to group them for more effective management;

• The components of a portfolio are quantifiable; that is, they can be measured, ranked and prioritized;

The authors, in the PMBOK, depict the project management context as follows: “Project management exists in a broader context that includes program management, portfolio management and project management office. Frequently, there is a hierarchy of strategic plan, portfolio, program, project and subproject, in which a program consisting of several associated projects will contribute to the achievement of a strategic plan.” The important factor to take from this extract is the recognition of a hierarchy linking strategy to projects.

Project Portfolio Management Process

According to PMI (2006), project portfolio management processes are aggregated into two groups,

1) aligning group, and

2) monitoring and controlling croup, as presented in Figure below:

Aligning Process Group

– how projects will be categorized, evaluated, and selected for inclusion, and managed in the portfolio. The processes within this group are most active at the time the organization refreshes its strategic goals and defines short-term budget and plans for the organization.

Identification

The purpose of this process is to create an up-to-date list, with sufficient information, of ongoing and new projects that will be managed thought portfolio management. Key activities within this process include:

• Compare ongoing projects and new project proposals with predetermined project definition and related key description;

• Reject projects that do not fit within the predetermined definition;

• Classifying identified projects into classes, such as project, program, portfolio and other works;

Categorization

The purpose of this process is to group identified projects into relevant business groups to which a common set of decision filters and criteria can be applied for evaluation, selection, prioritization, and balancing. Key activities within this process include:

• Identify strategic categories based on the strategic plan;

• Comparing identified projects to the categorization criteria;

• Grouping each project into only one category;

Evaluation

This is the process for gathering all relevant information to evaluate projects, with the purpose of comparing them in order to facilitate the selection process. Key activities within this process include:

• Evaluating projects with a scoring model comprising weighted key criteria;

• Producing graphical representations to facilitate decision-making in the selection process;

• Making recommendations for the selection process;

Selection

This is the process necessary to produce a short list of projects based on the evaluation process recommendation and the organization’s selection criteria. Key activities within the process include:

• Selecting projects based on the evaluation results;

• Comparison to selection criteria;

• A final result is a list of components for prioritization; Final Degree Project, Rasiha Delilbasic Project Portfolio Management 

Prioritization

The purpose of this process is to rank projects within each strategic or funding category (e.g., innovation, cost savings, growth, maintenance, and operations), investment time frame (e.g., short, medium, and long-term), risk and return profile, and organizational focus (e.g., customer, supplier, and internal) according to established criteria. Key activities within this process include:

• Confirm the classification of projects in accordance with predetermined strategic categories;

• Assigning scoring or weighting criteria for ranking projects;

• Determining which projects should receive highest priority within the portfolio;

Portfolio Balancing

The purpose of this process is to develop the portfolio project mix with the greatest potential, to collectively support the organization’s strategic initiatives and achieve strategic objectives. Key activities within this process include:

• Adding new projects that have been selected and prioritized for authorization;

• Identifying projects that are not authorized based on the review process;

• Eliminating projects to be suspended, reprioritized, or terminated based on the review process;

Authorization

The purpose of this process is to formally allocate financial and human resources required to either develop business cases or execute selected projects and to formally communicate portfoliobalancing decisions. Key activities within this process include: • Communicating portfolio balancing decisions to key stakeholders, both for projects included and those not included in the portfolio;

• Authorizing selected projects and inactivating or terminating projects of the portfolio;

• Reallocating budget and resources for inactive and terminated projects;

• Allocating financial and human resources to execute selected portfolio projects;

• Communicating expected results (e.g., review cycle, timeline performance metrics, and required deliverables) for each selected project;

Monitoring and Controlling Process Group

– how to review performance indicators periodically for alignment with strategic objectives. The purpose of this process group is to ensure that the portfolio as a whole is performing to predefined criteria determined by organization as ROI and NPV.

Portfolio management is accomplished through processes, applying knowledge, skills, tools and techniques (methods) based on received inputs and generating outputs PMI (2006). The standard presumes that the organization has a strategic plan, along with mission and vision statements as well as strategic goals and objectives.

Portfolio Reporting and Review

Aim to helping the organization to effectively monitor its portfolio to ensure that it is still balanced as a whole and that its individual projects stay aligned and perform as expected.

Strategic Change

The purpose of this process is to enable the portfolio management process to respond to changes in strategy.