Why Project Portfolio Management is Important

The 21st century has seen infinite growth in all the sectors. Development is at its peak and organizations have been emerging like members in the gym after the New Year. Most of them quit too soon and the ones who try to stick to their resolutions quit a little later due to various factors, competition and success of others being the top ones. The same goes for organizations in every industry.

If you are too eager to get into the competition, one key factor deciding your fate is the project you choose and its impact on the organization. The benefits of undertaking a certain project and managing the current ones define the growth and success of the organization. This brings a crucial question to the surface, how to decide which project to take and which ones to continue? This is where project portfolio management comes in.

What is project portfolio management

According to Wikipedia “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. The objectives of PPM are to determine the optimal resource mix for delivery and to schedule activities to best achieve an organization’s operational and financial goals, while honoring constraints imposed by customers, strategic objectives, or external real-world factors.”

In other words, to maximize the return on investment and identify the potential benefits of undertaking a project, project managers and project management offices perform certain analyses. This includes analysis of the past, present and future projects of the company and identifying the best suitable projects to undertake and management of the current projects to generate more revenue for the organization to meet its strategic goals.

To further understand how project management can transform your organization’s structure, let us see its benefits and how to perform project portfolio management.

Benefits of Project Portfolio Management

● Better project delivery

● Better strategies

● Flexibility to change

● Better decision making

● It helps in identifying the high priority projects

● Helps in following the budget by avoiding overspending

● Better efficiency

● Improved risk management

● Resource management and optimization

The process of project portfolio management

According to the project management institute, the process of project portfolio management is carried out in 4 steps

1. Inventory

Information is the key to create the optimum project portfolio for your organization. Having the proper inventory will ensure that you have the required information to carry out your process of portfolio management.

For this inventory, you need to collect data of the projects completed or under development in your organization along with the resources allocated. You also need to define the organization’s goals and milestones. This inventory will further be used to define the structure for project selection.

2. Analyze

Categorize the data in your inventory on the basis of potential ROI, resource allocation, time limits and other factors that you deem important. This categorization will help you in the prioritization of projects and identifying the strengths and weaknesses of each project. Most importantly, the prioritization of projects should be based on the risk analysis as well as the skills it adds to the company.

You have to consider the bigger picture. A project, similar to one done in the past may seem a viable option but it will not contribute to the growth of the organization in the long term. You should consider which project adds diversity and lets you explore more areas.

3. Align

Your projects should be aligned to fulfill the organization’s goals and objectives. This includes aligning the project timelines and milestones in such a way that a resource, which plays a crucial role in multiple projects, is used in the best possible manner.

This not only ensures that the resource is not overused but also ensures greater efficiency of each project. Alignment is done by individual project assessment. This assessment is used to determine the fate of the project that is, should the project be completed, should it be canceled, or should it be postponed. This decision making is based on the importance of the project and the critical resource consumption.

4. Manage

This phase is also called the reallocation or reprioritization phase. In this, the team or the portfolio manager examines the project portfolio prepared so far and then formulates the action to be taken by a collaborative effort of the team to achieve the required goal.

This action includes revision of the budget, critical resource allocation, prioritizing the projects based on new information, and rescheduling the projects if need be. This is where the actual portfolio management takes place.

What happens if you don’t perform project portfolio management

Growth. That is one word that your organization cannot achieve if you don’t perform project portfolio management. Let’s see what are the few obvious problems that might occur.

● Inefficient resource management leading to quarrels among project managers and team members.

● Fixed priorities of projects restricting the growth of the company

● No structure followed to undertake projects hence it becomes a decision of senior management, exclusively.

● More chances of over budget or under budget projects.

● Simultaneous execution of projects resulting in inefficient deliveries.

● Critical resources are exhausted.

● Slow development of new and beneficial skills.

● The inability of an organization to move into new domains.

The practice of project portfolio management is key to a better future of the organization. Collecting the data of all your projects and analyzing it seems a hefty job which is why it is suggested that you should have a project management office. This office should comprise of a team consisting of appropriate members of the organization only.

Although we have defined the process of portfolio management, it is advised to use a portfolio management tool. There are plenty of such tools available in the market which can help you in incorporating project portfolio management and adhere to the standard practices without wasting much time on research. Don’t let your organization’s future be like the gym membership on new year’s eve, adopt the right practices and explore new horizons.