What is project portfolio management?
The PMI defines a project portfolio as a set of projects and programs that are grouped to achieve strategic objectives more easily thanks to an easier and more effective management of these projects.
Project portfolio can include other portfolios, programs (group of projects) as well as projects. They have a very wide range and can cover several strategic objectives.
Project portfolio management is defined as the centralized management of portfolios conducted to ensure a better resource allocation between your different programs according to your company's strategic objectives and resource availability. This leads to choosing the projects that are aligned with your organization’s strategy and that have a high potential in terms of profit.
Project portfolio management has to be used in complement with traditional project management methods to take advantage of a more effective multiproject management. As a consequence, you’ll get a better overview of all your projects, their profit potential and risks, while being able to effectively manage each of them individually.
Why use project portfolio management?
Project portfolio management has several objectives :
- You’ll be able to easily identify high-priority projects that’ll bring the most value for your company
- You’ll balance the budgets allocated to each of your projects more easily to ensure that each one has enough resources to succeed
- You’ll ensure that the projects you’re working on are aligned with your company’s strategic objectives
- You’ll be able to evaluate whether you have sufficient resources to take care of your projects or if you can start new projects
The dangers of project portfolio management
If you want to get started with project portfolio management, you will have to pay attention to several obstacles:
- Capacity management: it’s essential to select the right indicators (those linked with your strategic objectives) and to assign them a weight that’ll help you prioritize them.
- Resource waste: you’ll have to take care not to assign far more resources than needed on a project while they could and should be used on another initiative.
- Project cannibalisation: some projects may have conflicting objectives. This means that achieving the objectives from one project will prevent you from operating the other one successfully.
Project portfolio management steps
First, you’ll have to precisely identify the strategic objectives of your company. This preliminary step will help you choose the right projects that’ll help your organization prosper.
Project portfolio management then follows these steps:
- Identify the projects to include in your portfolio
- Group these projects using common criteria (for example, size or type of projects)
- Evaluate the projects by collecting all the information that’ll help you compare them (for example, their profit, cost, or risk)
- Select the projects you want to carry out by using the data collected in the previous steps
- Prioritize the projects according to the the strategic axes you’ve selected. For this step, you should use the project prioritization matrix.
- Identify the projects for which you’ll achieve your objectives more easily.
- Evaluate the risks that are associated with your portfolio.
- Allocate the resources needed to achieve the objectives of the projects.
- Track the performance of your project portfolio and how you achieve your objectives.
How to use project portfolio prioritization matrix
Projects portfolio management requires a prioritization processe to separate the low-importance activities from the high-priority projects aligned with your strategy that contribute directly to your organization’s profitability.
The matrix lets you order these projects using two main axes: the importance of a project to your company and your ability to implement it successfully. Each of these axes is measured using a scale from 0 to 10 scale (10 being the maximum value).
The importance of a project to your company is directly linked to the benefits it’ll bring if it succeeds. An important project is most of the time the one that will greatly help you achieve your strategic objectives, or the one that must be accomplished because of regulations. A project with an importance of 0 implies that its success will have absolutely no impact on reaching your objectives. On the contrary, marking a project as being 10 in importance means that you won’t be able to achieve your objectives without this project being a success.
The ability of your company to implement the project evaluates if you have sufficient resources to conduct run projects, whether it’s in terms of financial, material, or human resources. This concept considers several factors such as associated risks or your teams’ skills to determine whether they’ll be able to carry out your projects and cope with the unexpected successfully. An ability to implement set at 0 means that it will be a failure because of a lack of resources. A project set at 10 in ability to implement implies that you’ll have no problems because you have all the resources you need to launch it.
After identifying these projects and their relative scores, they’ll be grouped on the matrix in 4 different quadrants, each of them implying a particular strategy to handle your projects:
- Nurture and support: these projects are most of the time the one you’ll do in priority because they are really important for your company and you’ll be able to implement them very easily.
- Easy wins : even if these projects have no to little importance for your company, you’ll be able to implement them easily, which is per se an easy and quick win for your company. Naturally, you won’t conduct these projects to the detriment of higher-priority initiatives.
- Solve issues: these projects are the harder to prioritize because they are important for your company but you don’t have sufficient resources to implement them successfully. Because they are essential for the success of your organization, your strategy will require you increase your capacity, for example by hiring new employees to handle them.
- Bury: these projects have little to no importance and you’ll have difficulties implementing them. Don’t spend efforts on these projects as you should keep focus on the ones that are important and aligned with your company’s objectives.
How to conduct project portfolio management
Unfortunately, there are no universal rules in projects portfolio management to determine which projects should be launched in priority. Would you rather launch a non-important but easy to implement project or a more important project that’ll imply implementation difficulties? This choice will depend on your strategic objectives and the weight you give to each axis.
Great project portfolio management can have a direct impact on your organization’s results. Managing your project portfolio isn’t limited to simply prioritizing your initiatives. You may have to make radical decisions to ensure the success of your portfolio, such as reorganizing your resources, limiting the number of projects or giving up on some of the ongoing projects.
Thus, both your project management process and the ongoing management of your operations will be impacted by the prioritization choices you’ve made. By aligning your projects portfolio management with your initiatives, you’ll improve your capacity to create value in your ongoing operations.
In case you wish to create your own project prioritization matrix using other axis than importance of the project to your company or your ability to implement it, you can download an Excel spreadsheet to create your own matrix using custom axis by filling in the following form.
*PMI: The PMI (Project Management Institute) is a professional association composed of project management specialists.
Source: The matrix we use in this page is directly inspired and adapted from "Connecting the Dots: Aligning Projects with Objectives in Unpredictable Times", from Cathleen Benko et Franklin Warren McFarlan.