The Benefits of Project Portfolio Management For Your Business
Project portfolio management is a term that is often heard in the world of project management, but what does it actually mean?
In short, portfolio management is the centralized management of all the projects your business is involved in. It allows for consideration of the bigger picture and optimizes and priorities based on return on investment.
PPM allows for a more strategic approach to project prioritization and can lead to increased ROI. There are pros and cons to implementing portfolio management. Still, it can be an excellent tool for businesses looking to optimize their projects.
This can be contrasted with standard project management, which focuses on a single project at a time. Let’s take a closer look at what portfolio management entails and some of the benefits it can bring to your business.
What Is Portfolio Management in Project Management?
Project portfolio management (PPM) is a process that allows an organization to make better decisions about which projects to undertake, based on the potential benefits that each project offers. It differs from standard project management because it considers the bigger picture rather than focusing on individual projects in isolation.
By considering the potential benefits of each project, PPM helps organizations optimize their resources and prioritize projects based on their return on investment. This can be critical in today’s competitive business environment.
Every decision needs to be weighed carefully against the potential benefits and risks.
In addition to helping organizations make better decisions, project portfolio management can also help improve communication and collaboration among team members. By consolidating all of the organization’s projects into a single system, PPM creates a central reference point for everyone involved.
This can make it easier for team members to share information and collaborate on projects, improving efficiency and accuracy. By sharing resources via portfolio management, the business can save on costs and waste.
It will be necessary to hire a project portfolio manager, who is needed to oversee the portfolio of projects. The project portfolio manager will be responsible for ensuring that all of the organization’s projects are properly prioritized and that resources are allocated accordingly.
What Does The Project Portfolio Manager Do?
The Project Portfolio Manager is responsible for assessing and ranking projects based on their potential benefits. They then make recommendations to senior management about which projects should be funded and what order they should be undertaken.
The Project Portfolio Manager is also responsible for communicating with project teams and keeping them updated on the status of projects in the portfolio. In addition, the Project Portfolio Manager may be involved in providing training to project teams on how to use the PPM process effectively.
How Do Project Management and Portfolio Management Differ?
Project management is focused on individual projects, while portfolio management looks at all of the organization’s projects as a whole.
Portfolio management is about deciding which projects to undertake, based on their potential benefits, while project management is about actually implementing those projects.
In addition, project management is typically reactive, while portfolio management is proactive. That is, project management typically begins after a project has been approved. In contrast, portfolio management may be involved in the decision-making process that leads to a project being supported in the first place.
The team working on the project portfolio will need an entirely different skill set than the team working on the project. They need to be critical thinkers who can look at every angle and work out the best way forward for the company.
A good team will spot where resources can be saved or shared. They’ll also be the ones to spot how completion of project A will positively affect the timeline for project B.
Meanwhile, the project team will require more creative skills as they will be the ones working on the deliverables. The exact skills required will vary heavily between projects, whereas the portfolio management skillset will stay the same.
Portfolio Management Pros and Cons
There are both advantages and disadvantages to using portfolio management in your business. Not every company will benefit from implementing a project portfolio management system as they will have no need.
Businesses that will benefit the most are large companies that always have many plates spinning. Smaller businesses in a growth phase will also likely benefit from having a portfolio management strategy and manager.
However, if you are just managing a single project, setting up an entire portfolio team would be overkill. Even if you’re conducting two projects simultaneously, you may not necessarily benefit from the greater oversight.
The Pros of Portfolio Project Management
- A single system to manage all projects
- Greater oversight leads to better decision making
- Can save on resources
- Improved communication and collaboration among teams
- Helps identify and minimize risk
- Consideration for the bigger picture at the company
- It’s an objective look at company goals
- Enhanced analytics of past project performance
- Better forecasting for future projects
- Leads to increased return on investment
The Cons of Portfolio Project Management
- It can be bureaucratic and slow-moving
- Requires a different skillset than project management
- Not every business needs it or will benefit from it
- It can be expensive to set up and maintain
- Prioritizing projects may mean difficult decision-making
- Less input from project managers and experts
- Increases administrative time on projects
One important thing to note is that portfolio management should not replace good old-fashioned project management. It should rather be seen as an extension to project management, which can help you take your business to the next level.
In order for portfolio management to work effectively, it must be supported by a good PM process. Without this foundation, things can quickly go downhill.
How To Implement Project Portfolio Management
If you’ve decided that your business could benefit from portfolio management, the next step is to actually implement it.
The first step is to put together a portfolio management team. This team will be responsible for deciding which projects to undertake and how best to utilize resources.
You’ll need to assign someone to be the portfolio manager and then build a team around them of people with the necessary skillset.
Once you have your team in place, the next step is to develop a portfolio management process. This process should be tailored specifically to your company’s needs, but there are some common elements that all processes should include:
Defining what a project is for your business
A project can be defined as a temporary endeavor undertaken to create a unique product, service, or result. It is important to note that a project should have a specific goal and a set timeframe.
When defining a project, it is important to consider the following factors:
- What is the goal of the project?
- What are the deliverables?
- Who are the stakeholders?
- What is the timeline?
- What is the budget?
- What are the risks?
- What are the dependencies?
By considering these factors, you can ensure that your project has a clear purpose and that all stakeholders know what is expected of them.
Classifying projects into categories
Projects can be classified into different categories based on their purpose or goal. The most common categories are:
Operational projects: These projects improve the business’s day-to-day operations and include things like process improvement projects, system upgrades, and marketing campaigns.
Innovation projects: These are projects that aim to introduce new products or services or to improve existing ones. They can be risky but also have the potential for high returns.
Strategic projects: These projects help to achieve the business’s long-term goals and may include initiatives like launching a new product line, entering a new market, or acquiring a competitor.
There is no right or wrong way to categorize your projects. It is simply a way to help you better understand and manage them.
Assessing the value of each project
One way to assess the value of a project is to use a weighted scoring system. This system assigns a score to each factor and then gives them a weight according to how important they are. The scores can then be totaled up to provide an overall score for the project.
Another way to assess the value of a project is to use return on investment (ROI) calculations. This takes into account the costs and benefits of a project and calculates how much money is made or saved as a result.
The final decision about whether a project should be undertaken should not be based on just one criterion but rather a combination of factors, including the value to the business, the risks, the costs, and the benefits.
Evaluating and selecting projects
Once you have a process in place for assessing the value of projects, the next step is to select which ones to prioritize. This can be a difficult task, especially if there are a lot of projects to choose from.
There are a few things you can do to make the process easier:
- Use a decision matrix: This is a tool that helps you compare and contrast different projects. It can be helpful for quickly narrowing down the options.
- Rank projects based on ROI: The highest-ROI projects should be given priority over those with lower ROIs.
- Consider the business goals: Make sure that all proposed projects align with the long-term goals of the business.
- Weigh up the risks: Projects with a higher risk should be given lower priority.
- Consider the timeframe: If a project is due to be completed in a short amount of time, it may be prioritized over those with a longer timeline.
The planning stage is the initial phase of a project. All necessary steps must be taken during this stage to ensure a successful outcome. The main tasks that need to be completed during the planning stage are:
You’ll need a project plan, which is a document that outlines the goals, objectives, and activities of the project. It should be tailored to the specific project and should be approved by all stakeholders.
The project plan should include the following:
- Project overview: This should include a brief description of the project, its purpose, and its goals.
- Stakeholder analysis: This should identify all stakeholders and describe their roles and expectations.
- Risk assessment: This should identify any potential risks and how they will be managed.
- Project schedule: This should outline the timeline for the project and all milestones that need to be met.
- Resource requirements: This should identify how many people and what type of resources will be needed for the project.
- Budget: This should list all costs associated with the project.
Executing and monitoring the project
Once the project plan is in place, the next step is to put it into action. This involves assigning tasks to team members, monitoring progress, and making any necessary adjustments along the way.
The main tasks that need to be carried out during this stage are:
- Managing team resources: You’ll need to make sure that everyone has what they need in order to complete their tasks. This includes things like access to information, equipment, and materials.
- Monitoring progress: You’ll need to track the progress of the project and identify any areas that are behind schedule. This will help you make the necessary adjustments.
- Communicating with stakeholders: It’s important to keep all stakeholders up-to-date on the progress of the project. This includes things like sending out status reports and holding meetings.
Reviewing and closing projects
The final stage of a project is known as the project close. This is when all activities are completed, and the project is considered to be finished. The main tasks that need to be carried out during this stage are:
Final report: This should outline the final results of the project and what was learned from it.
Closing tasks: These are the administrative tasks that need to be completed in order to officially close the project. This includes things like submitting final invoices, archiving documents, and updating records.
Project portfolio management processes
The final step is to put these processes into action. This can be a difficult task as it requires changes to how your business operates. It’s important that everyone in the company buys into portfolio management and understands why it’s being implemented.
There are a few key tips that you can take to ensure a successful implementation of portfolio management:
- Educate employees: Make sure that everyone in the company understands what portfolio management is and why it’s being implemented.
- Communicate goals: Share with your employees the goals of the project and what they are expected to do in order to achieve them.
- Define roles and responsibilities: Tell your staff exactly how they fit into the plan. Make sure that everyone knows their role and what is expected of them.
- Create templates and standards: Establish templates and standards for project documents, communication, and processes.
- Implement change management: Make sure that everyone understands how the changes will impact them and what they need to do in order to adapt.
- Monitor and adjust: The final tip is to monitor the implementation of portfolio management and make any necessary adjustments.
Example of Portfolio Project Management
Let’s say you have a restaurant and business is going well. You’ve got an underserved market, the name is getting recognized, and you’ve got enough money in the budget to think about expanding.
Here’s the list of goals you’ve set for the business and the projects that accompanies them:
- Open a second location. You’ll need someone to find a suitable location, conduct market research, enter negotiations on the site, find a contractor, hire staff, etc.
- Offer delivery. This will require someone looking at the delivery options available in your area. There will be a need to source marketing materials and takeaway containers. You’ll also need to decide whether you hire your own delivery drivers or outsource to a rider system like Ubereats or Doordash.
- Sell recipe kits. Your food is so popular people want to cook it at home. Selling DIY kits through a website is a great way to serve your community. However, it requires a website and web-store – someone needs to make this.
- Event catering. A whole new revenue stream could be expanding into events, whether you can host at your premises or if you will travel to third-party locations.
- Street food van. You’ve seen the rise in popularity for street food, and you want in. You’ll need to buy a van, convert it to hold a portable kitchen that meets your need, find out where you can pitch up, and spread the word.
- Develop an online presence. You want to continue to raise brand awareness by jumping online and getting involved with social media. You’ll need someone knowledgeable in social media marketing who enjoys this kind of work.
Adding these projects to a portfolio and assigning a manager will make deciding the next steps more straightforward. If you want to increase revenues quickly, you may wish to start on the delivery project first, as this will open up a new income stream relatively quickly. Opening a second location will drain your cash reserves and take a significant amount of time to be revenue-earning.
If you want to increase brand awareness, then an online presence will be the way to go. However, buying a street food van can help you travel to new locations and market yourself through word-of-mouth. You may need to wait on the street food van because this will require more cost investment to get set up.
And that’s how quickly portfolio management becomes important. It doesn’t matter how many good ideas a business may have. They need a plan in place to help them be realized. By setting up a portfolio management team, you’ll have experts who can look at things objectively.
Portfolio Management Best Practices
There are a few essential best practices that you should keep in mind when implementing portfolio management:
Projects must be aligned with company goals
Projects must be aligned with company goals in order to be included in the portfolio. This means that the purposes of the project need to be clear and fit in with the company’s overall strategy.
Projects must be prioritized based on their strategic importance
Not all projects are created equal. Some projects are more important than others and should be given priority based on their strategic importance to the company. If your main goal is to increase revenue, you should prioritize the projects that will bring in money.
On the other hand, if your goal is to decrease employee turnover, you should prioritize the most beneficial projects for your employees.
The portfolio should be reviewed on a regular basis
The portfolio should be reviewed regularly in order to ensure that the projects included are still aligned with company goals. This also allows for new projects to be added and old ones to be removed based on changes in the business landscape.
Resource availability needs to be transparent
The portfolio manager needs to have a clear idea of what resources are available in order to make the best decisions for the company. This includes things like people, money, and equipment.
Regular reviews of all active projects must be conducted
In order to ensure that projects are on track and meeting their goals, regular reviews must be conducted. This allows for early detection of problems and course correction if necessary.
The portfolio management process should be flexible and allow for changes to be made as needed
The portfolio management process should be adaptable to allow for adjustments when things change, as they inevitably will. This includes things like adding or removing projects, changing priorities, and adjusting resource allocation.
Projects that are no longer aligned with company goals should be removed from the portfolio
If a project no longer serves the firm’s goals, it should be discarded from the portfolio. This allows for resources to be allocated to projects that align with what the company is trying to achieve.
Portfolio management is a vital part of the overall project management strategy, wherever multiple projects are on the table. It allows you to take a holistic view of all the projects your business is involved in and make decisions based on what will have the biggest impact.
By following the tips and best practices outlined in this article, you can ensure a successful implementation of portfolio management in your company.