Project Portfolio Management

Project portfolio management treats each project as a part of an organization's activities rather than as an independent entity.

Most organizations treat each project proposal as an individual yes/no decision based on its merits.  The treatment will vary depending on who makes the proposal; who the proposal is made to; and the area of the organization to which the project relates.

Organizations which run a lot of projects or who must deal with a lot of project proposals might use project portfolio management(PPM) to manage the process of considering which projects go ahead with do not.

Companies which use PPM will typically have a Project Portfolio Management group who meet regularly to consider project proposals and review the case for projects already underway.  When considering a new project proposal the group will typically consider the following factors...

Factors considered

Return on Investment (ROI)

Project portfolio management analyses projects as if they were investments. It attempts to quantitatively asses ...

Return - the potential earnings from the project
Investment - the cost of getting that return
Risk - the likelihood of getting the potential return

By assessing these things for all their projects the organization seeks to compare like with like.  The presumption is that these factors can summarize all other factors which might feed into a case by case ad hoc decision process.  This kind of analysis is often referred to as a return on investment or ROI.

Strategic Factors

As well as the ROI comparison portfolio management also considers strategic factors.  I.e. a project which offers a low return on investment may still be adopted if it takes the company in a direction which the leaders think will be important in the future.    Strategic control must come from the centre so portfolio management makes a big contribution in this area.

Alignment with Company Values

Some projects may make sense in terms of ROI and strategy but never the less be rejected because they contravene some explicit company policy or general company ethical principle.  A central decision making body can apply these filter criteria thoroughly and consistently to all projects.

Resource Allocation

The final factor affecting project decisions is the availability of resources.  There may be many projects which give sufficient return on investment; have strategic value and are consistent with company policies but in the end you can only do what is possible with  the resources you have.   Clearly an ad-hoc decision making process would be constrained in the same way but the difference is that under PPM a strategic view can be taken.  Decisions are made as a choice between options rather than simply isolated yes/no decisions.

PPM After a Project has Started

The PPM group will still take an interest in a project after it has been given the go ahead.    They are not primarily interested in the running of the project but rather periodically reassessing the project using the same criteria that were used in the first place.  If circumstances change it may no longer make sense to carry on with a project so it has to be scaled down or canned. 

Of course it is also quite possible that a change in circumstances means a project has to be expanded or speeded up.

It is also possible that resources are just shifted between one project and another to reflect a more subtle change in conditions.