TL;DR
Project Portfolio Management (PPM) connects strategy with execution. It helps organizations evaluate, prioritize, and manage projects for maximum value. Key takeaways:
- Continuously review performance to improve ROI and resource use.
- Align every project with strategic goals.
- Use data-driven evaluation and prioritization.
The Growing Importance of PPM
“Portfolio management is the crucial link between strategic intent and the initiatives that deliver strategy. It’s essential to implementing an organization’s strategy, and it’s a practice that every organization can do well.”
—Mark A. Langley, former Project Management Institute (PMI) president and CEO
In the age of digital transformation and hybrid work, strategic alignment has become increasingly essential. Project portfolio management has an important place in complex, fast-changing organizations.
PPM is a strategic discipline, not just a project tracking function. Through a solid portfolio management approach, the right tools, and a forward-thinking PMO, you will be well equipped to align strategy, resources, and execution.
In this guide, you will learn all about project portfolio management, why it matters, and how you can execute it to dramatically improve your entire enterprise.
What Is Project Portfolio Management?
Project portfolio management (PPM) is a big-picture strategy of aligning your organization’s projects with your goals. A series of projects forms a portfolio, but in contrast to individual projects, portfolios are more about strategic project execution, ensuring that individual projects are aligned with larger organizational goals.
PPM encompasses task management, which involves identifying, prioritizing, delegating, and tracking tasks. But tasks are discrete entities that act as steps towards a project’s completion and aren’t connected to the holistic strategy, while portfolio management ensures that all activities align with organizational objectives.
PM and PPM are both important. However, one focuses more on the day-to-day, while the other focuses on the overarching plan and strategy.
Why PPM Matters: Strategic Benefits
A solid PPM strategy offers numerous strategic benefits to your organization, including:
Strategic Alignment
You will achieve strong strategic alignment with a PPM approach. That’s because you have clear goals in place that correspond to the organization’s goals. This means linking every project to one or more enterprise goals. You’re undertaking the right projects at the right time by prioritizing and properly aligning your projects with these overarching objectives. This leads to greater harmony within the organization.
Risk Reduction
A solid PPM strategy allows you to spot risks early on. This, in turn, means that you can take action to guard against risks that could threaten your overall portfolio. You’ll be well-equipped to prepare, anticipating obstacles and making stronger decisions. Using predictive analytics from a PPM platform, you can surface potential challenges and take steps to resolve them before they escalate and affect your business.
Better ROI
By more effectively prioritizing the projects that offer the greatest impact and value, you will achieve a better return on investment. PPM ensures that you are investing in the projects that will positively affect the organization the most. You will also spend less time and fewer resources on projects that have a low ROI.
Resource Optimization
When executing a PPM strategy, you must properly manage and allocate your resources, which typically include people, time, materials, and money. An organization that better manages its resources is more efficient and performant.
Stronger Governance
There is greater accountability and transparency—the cornerstone of good governance—with PPM. By connecting projects with organizational goals, you are demonstrating the portfolio AND PMO’s value. Through stronger governance, you achieve better oversight, ensuring leadership and teams are committed to the portfolio’s progress and success.
How PPM Works: Process Overview
A typical PPM process involves idea intake → evaluation → prioritization → execution → review. Let’s take a closer look at each of these stages.
Idea Intake
All project ideas should be carefully reviewed before any team begins working on them. The project intake process is a standardized approach for reviewing and approving projects based on established criteria.
This process ensures proper prioritization and allows you to time projects correctly so that they deliver the greatest value at the best time. It also prevents you from neglecting important projects or overallocating resources to lower-priority initiatives. Your PMO should customize its intake process based on factors like organization size, field, and types of projects.
Evaluation
The evaluation process is a critical subset of the intake process. You must create a comprehensive assessment that will apply to all project ideas. Your criteria will be customized based on your organization’s priorities and may include factors such as alignment with company goals, strategic value, and/or resources required.
Make sure you inform all stakeholders and project managers, as well as any other key team members, about how you will be evaluating each idea. Continue to reassess your evaluation to respond to organizational changes and feedback from everyone involved.
Prioritization
Project prioritization is important for completing the projects that will deliver the greatest value. It’s the natural next step after intake and evaluation. Ranking your projects based on the value they deliver allows you to execute them thoughtfully and efficiently.
Once you’ve established how to evaluate projects and perform a thorough assessment, you need to decide when to tackle the initiatives. Prioritization is an acknowledgement that you’re not completing projects in a vacuum; the organization is undertaking multiple projects, often simultaneously, so you need to know when ones deserve the most resources and attention at a given time.
Execution
Which brings us to execution. This is when you launch the various projects in the portfolio. Of course, it demands careful planning, resource allocation, and more. You also need to ensure you’re balancing the different projects within the portfolio, adjusting resources accordingly.
Establish KPIs to track and manage progress, ensuring your projects are going as expected. Maintain strong communication and collaboration throughout, and have protocols in place for challenges and disruptions.
Review
Projects don’t truly end with completion. They require thorough and ongoing review. After a project has been executed, reflect on how it went. Consider both the good and the bad: What went well? What could be improved? Look at your KPIs as part of your review, and use this information to inform future projects and portfolios.
Core Components of Project Portfolio Management (PPM)
While project portfolios different across industries and unique organizations, they typically share several important commonalities.
Project Prioritization
By now, you probably understand just how essential project prioritization is in PPM.
Some questions to ask yourself when selecting projects for the portfolio are:
- Does the project solve one or more organizational problems?
- What are the resources it will require?
- What type of value does it offer to the portfolio and wider organization?
- What are the risks involved with undertaking this project?
- Do the benefits outweigh the risks?
KPIs
Establish key performance indicators (KPIs) to have a clear idea of what success looks like. Tracking these KPIs allows you to assess the status and progress of your projects and holistic portfolio in real-time. You’ll achieve greater control and have better insight into project health. Strong KPIs also help you justify decisions to stakeholders and attain buy-in.
Resource Management
Resources are the bread and butter of any project. You can carry out any project in any portfolio without the core elements. In order to properly manage portfolios, you must allocate resources efficiently. This requires taking a holistic look at your portfolio and determining how and where to delegate them most effectively. Resource management means proper staffing and budgeting and is integral to the entire PPM process.
PPM Methodology/Approach
Whether you’re using an agile, waterfall, or hybrid approach, you must employ a consistent methodology. Your portfolio must be standardized, and that means following the same metrics and processes for every project. It also means applying the same evaluation criteria and tools to each initiative.
PPM Tools
Utilize a platform built for project portfolio management to handle your PPM efforts. A tool like Prism PPM makes it simple to facilitate the process from start to finish. Use your platform to track and manage resources, KPIs, prioritization, data and reporting, and all other elements of PPM. With the software, you can balance your portfolio, make adjustments quickly and easily, and evaluate performance in real-time.
Project Portfolio Governance
Establish a governance framework for aligning your portfolio and individual projects with company goals and expectations. As part of this, use governance templates to streamline the process.
Maintain consistent communication, keeping stakeholders informed every step of the way. This fuels better and more consistent decision-making and ensures that everyone is kept up to date. It also ensures proper engagement from all team members and leadership.
Adaptability
Unexpected situations will arise. You need to be prepared when they do. When changes happen or obstacles occur, you should be ready to respond and pivot. Scope creep may happen, project timelines may need adjustment, or you may face staffing or resource shortages. In any case, have a plan in place for how to adapt, staying flexible.
PPM Best Practices for Modern Organizations
Any successful enterprise—whether it’s a financial, governmental, or healthcare organization—should follow best practices when transitioning to a PPM approach or refining their existing processes.
Standardized Governance
Governance means creating a set of consistent protocols and procedures for carrying out your PPM strategy. By standardizing governance, you ensure that projects and portfolios are aligned with company goals and with one another.
The framework should be scalable as your needs and responsibilities change. It also ensures that roles and responsibilities are clear and everyone knows what they need to do. Establish a standardized governance structure to ensure transparency and real-time visibility, along with more informed decision-making.
Visibility
On the subject of visibility, this is also essential for PPM. Stakeholders should have a clear understanding of the portfolio’s status at any given time. To implement or improve visibility, deliver consistent and regular status updates. Implement reporting (it’s included with a tool like Prism PPM) to understand the various effects of your decisions and actions. Conduct risk audits to maintain control and guard against threats to your portfolio.
Visibility also concerns the future. You should be able to anticipate problems and establish procedures for handling them.
Agile Integration
You’re probably familiar with an agile PM approach. In project management, agile methodologies break down projects into smaller components and facilitate feedback cycles at every step. It’s helpful to integrate an agile philosophy into PPM to make the portfolio more manageable.
You will spot errors and mistakes soon after they occur, rather than at the end of a long, complex process. You will also get quick feedback and be able to adjust problems seamlessly. This ensures continuous improvement, a key concept in agile methodologies. Agile isn’t the only approach to PPM. Some organizations may follow a hybrid approach, blending agile with waterfall, for example. But agile can benefit your workflows enormously.
Tool Adoption and Data-Driven Decisions
You need an abundance of accurate data to progress your portfolio. Platforms like Prism PPM provide enormous amounts of data via dashboards and reporting features. Using this data, you can make sounder and more informed decisions. These decisions may affect the entire organization, not merely individual projects.
Common PPM Challenges (and How to Overcome Them)
Project portfolio management is a sound approach to prioritizing and aligning projects at your organization. However, it’s not always seamless. Here are common challenges you might encounter and how to overcome them.
Alignment Issues
Some PMOs face resistance from leadership and stakeholders. They may be committed to their current ways or want their projects prioritized, even if they are not high-value. But attaining executive buy-in is necessary for adopting PPM. Making the case for PPM requires outlining the benefits and tying unique portfolios and projects to organizational goals. You’ll need to do so by aligning these projects to company objectives.
Resource Conflicts
Many organizations face resource conflicts and constraints. Consider a team working on several software solutions. Without properly managing resources, you might face shortages like too few senior developers working on a higher-priority project. To address this challenge, you must forecast your resource requirements. A PPM platform can help with this process, providing ample analytics that allow you to better understand how you need to delegate resources for the health of the entire portfolio.
Tool Fragmentation
If you’re using multiple tools to manage different aspects of your portfolio, things could get a bit chaotic. Team members will have different views and may be grappling with incorrect or incomplete data. Instead of attempting to utilize a wide range of tools, try a comprehensive PPM platform that consolidates all your portfolio information into one view, centralizing various technologies so that everyone has access to the same data.
Improper Project Balance and Prioritization
Balancing projects successfully is complex. Without careful monitoring, assessment, and adjustment, you risk failing to achieve the benefits and returns portfolios can offer. Prioritization requires a standardized approach. It should be as objective as possible, without pressure from stakeholders. Some approaches include:
- MoSCoW
- Eisenhower Matrix
- RICE
- Weighted Scoring Models
- Project Prioritization Matrix
A PPM platform helps you manage and balance portfolios.
Lack of Performance Measurement Protocols
If you carry out a project without reviewing how it went, you’ll be going in blind the next time around. Without performance measurement protocols and metrics in place, you have no way of evaluating how you did.
You need KPIs to know where you want to go and determine whether you got there successfully. Fortunately, you can easily manage and track KPIs and other performance metrics via a PPM tool like Prism PPM. That allows you to both assess performance and inform future projects.
Limited Risk Management
Imagine what would happen if a pharmaceutical company failed to account for risks such as dangerous side effects when introducing a new drug. There would be a loss of money, reputational damage, and potentially even dangerous products on the market. This is an extreme example that underscores the importance of a robust risk management strategy.
PPM Maturity: From Tactical to Strategic
A PMO must move from tactical to strategic. Each maturity stage looks something like this:
- Initial/Basic
In the earliest phase, you are moving away from individual project-tracking. However, KPIs may not be in place at all. If they are, they’re not as well-managed as they could be.
- Developing
This is the beginning of KPI adoption. You’re still solidifying your processes and establishing a foundation for a more mature PMO. You’re moving toward predictive analytics, although you’re still relying on previously collected data.
- Established
KPIs are well defined, and you have a more solid strategy. Data-collection practices are more carefully honed. You have more reliable data, too.
- Well-Established
You have a well-established data collection system and are closely and proactively monitoring your KPIs. You’re thoroughly evaluating data. You utilize predictive analytics to make informed decisions and achieve greater efficiency.
- Optimized
In a well-optimized organization, you are managing and comprehensively using KPIs. You’re committed to long-term success and processes in place for continually improving, and you’re fully utilizing data to make informed decisions.
Tools & Technology That Enable PPM Success
How can you manage your project portfolios efficiently and successfully? It’s difficult to do it all on your own.
That’s why many organizations leverage software to help. Prism PPM is an enabler of your project portfolio management strategy, providing dashboards, resource management, and reporting features. Gain insight into your data, collaborate with team members, access reporting features, track KPIs, manage roles, and much more. Surface risks and challenges and track the entire project and portfolio lifecycle. A PPM platform allows you to address challenges and assess progress in real-time.
Getting Started with PPM: A Practical Framework
Want to implement PPM at your enterprise? Here is a checklist of first steps to get you started.
- Define your strategic goals.
- Establish an intake process for evaluating projects, including criteria for assessment.
- Map out every project you consider taking on to at least one strategic goal.
- Prioritize projects based on their alignment with your most important goals.
- Allocate and manage resources based on project priority.
- Monitor the portfolio and refine as needed.
Conclusion: Building a PPM Practice That Scales
Project portfolio management is essential to delivering value for your entire enterprise. But how do you implement PPM successfully?
Prism PPM is a practical tool for operationalizing project portfolio management and making it an integral practice in your organization. Book a 30-minute consult or a 60-minute demo today to learn more.
Relevant resources:
Enterprise Project Portfolio Management: A Complete Guide
5 Main Challenges of Project Portfolio Management
Portfolio Reporting: How To Create a Project Portfolio Report
Effective Resource Forecasting: A Guide for Project Managers
Beyond Task Lists: Why Strategic PMOs Need True Project Portfolio Management