Key Elements Of Project Portfolio Management

Understanding the key elements of Project Portfolio Management (PPM) and how they work together is essential to maturing your project management office (PMO) and project management practices. While there are many benefits to continual improvement of PPM, the biggest ones tend to be:

• Alignment with strategic goals
• More efficient resource management
• Better project governance & risk management
• More effective cost controls

In the simplest terms, the components of project portfolio management focus on ensuring that goals are realized and risk is minimized across all projects. While it is often referred to as a “top-down” approach to management, the most effective project portfolio management also has a “bottom-up” approach to managing data and status to stakeholders.

The importance of Project Portfolio Management

The key benefit of project portfolio management is aligning projects with strategic organizational goals to understand and manage risk in the aggregate. As companies grow, or their projects get more complex, the need for more efficient and effective project management grows. That is often when a company will establish a Project Management Office (PMO) in to manage projects at scale, implementing project portfolio management to ensure projects are managed well and delivering the value expected. Project portfolio management helps to:

• Prioritize initiatives based on factors like resource capacity, risk assessment, and potential return on investment
• Facilitate better risk management throughout the project lifecycle
• Foster  a culture of continuous improvement that helps the PMO to mature and become more efficient at driving better outcomes

10 Key Elements of Project Portfolio Management

There are common elements of portfolio management across all types of PMOs and organizations. Each serves to help create the alignment necessary to drive better results across the business:

1. Project prioritization and selection – Doing the “right” projects is a key element to PPM. Which projects align with company goals or organizational mission? What about ROI, risk, and resource availability? And how does accepting a given project balance or unbalance your entire portfolio to maximize risk and minimize risk?
2. Resource management – Proper allocation of budget, people, and time is most efficient at a portfolio level. Take a “whole person” look at your staffing and capacity planning to ensure your teams are on the right projects, not over booked, and your hiring plans keep pace with demand.
3. Project monitoring and control – Efficiently managing multiple projects and running a Project Management Office (PMO) requires establishing key performance indicators (KPIs) and achieving real-time visibility into project health to track them.
4. Governance and reporting – Establishing a framework for managing a project and reporting on it regularly ensures alignment with stakeholder expectations and allows the PM to manage and responsibly make decisions.
5. Portfolio balancing – PMOs that have a complete picture of their portfolio avoid staffing shortages, burnout due to overworked teams, potential blockers to success, and are agile enough to react to changes as they happen. Balancing and rebalancing examples might include recasting a timeline, adjusting staffing levels, or even prioritizing projects to start based on risk.
6. Defined business objectives – Understanding what success looks like helps managers and teams stay focused on the work that delivers value and drives the organization forward.
7. Change management – Project timelines shift, scope creeps; staying adaptable and able to adjust strategy and execution as change happens is a critical element of project portfolio management.
8. Communication and stakeholder engagement: Keeping stakeholders informed and involved is where a strategic PMO really shines.
9. Methodology – Regardless of whether you are an agile PMO, or employ a hybrid model, standardizing ways of working, and incorporating the right tools, is essential for aggregated data and reporting.
10. Purpose-Built Tools – Using PPM software like WorkOtter makes it easy to measure and manage all the elements of PPM.

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Challenges in Implementing PPM Components

Moving from a distributed project delivery model to aggregating projects under one umbrella is challenging. There are three main areas you need to consider when thinking about how best to work cross-functionally to establish a PPM process:

1. Executive buy-in – Getting leadership on board with PPM implementation is key to success; tying KPIs to project performance is difficult, and made more so if executives are not on-board with the procedures the PMO puts in place
2. Team structures and internal processes – Establishing project governance and processes involves cross-functional coordination and collaboration
3. Accurate data and reporting – Better outcomes start with better inputs – ensure you have a system that can easily aggregate data and accurately report on project status, financials and the KPIs that matter most to your organization

Additional challenges can arise in the project portfolio management components:

Element	Benefit	Challenge
Portfolio Balancing	Ensures a well-distributed portfolio that maximizes returns while minimizing risk.	Achieving the right balance can be complex and requires constant monitoring and adjustments.
Prioritization	Helps in focusing resources on the most valuable and strategic projects.	Determining the true priority of projects can be subjective and may lead to internal conflicts.
Define Business Objectives	Aligns the portfolio with the overall strategic goals of the organization.	Ensuring that all projects consistently align with evolving business objectives can be difficult.
Portfolio	Provides a clear overview of all projects, aiding in resource allocation and decision-making.	Managing a large portfolio can be overwhelming, and maintaining visibility can be challenging.
Manage and Monitor the Portfolio	Allows for real-time tracking of project progress, enabling timely interventions.	Continuous monitoring can be resource-intensive and requires robust tools and processes.
Investment Management	Optimizes the allocation of financial resources to ensure maximum returns.	Balancing short-term and long-term investments can be challenging, especially with limited resources.
Selection	Ensures only the most valuable projects are included in the portfolio, improving overall outcomes.	Selecting the right projects requires accurate data and can be influenced by biases.
Resource and Risk Management	Enhances the efficient use of resources and mitigates potential risks.	Accurately forecasting resource needs and risks can be difficult, leading to potential shortages or oversights.
Performance Measurement	Provides metrics to evaluate the success of projects and the portfolio as a whole.	Setting up relevant and accurate performance metrics can be complex and time-consuming.

Use of Technology in PPM

Increasingly, companies are turning to software solutions to help them manage and report on their project portfolio performance more effectively because these tools can help a number of  common PPM challenges including data visibility and ineffective collaboration. But the future of PPMs tools are ones that create more strategic opportunities within the organization. According to PWC’s 2023 Global Risk Survey, 41% of companies reported that poor data integration and management limits their wholistic view of risks. A PPM tool structured to aggregate project data up to the portfolio level effectively allows an organization to understand the risks inherent in their projects, and address them throughout the project lifecycle. Realizing more value from your projects, and risking less, is the essential value proposition of project portfolio management. The adoption rate of PPM tools designed to address the key aspects of project portfolio management speaks to their effectiveness.

WorkOtter is here to help you understand your choices for Project Portfolio Management.

Our Buyer’s Guide breaks down the various options in the software marketing and provides checklists to help with needs assessment and vendor selection. We are also available to show you how WorkOtter PPM can help you improve your project outcomes, empower your PMO, and align every project with organizational goals. Book a demo with us to learn more.