What is project portfolio management?
Virtually every organization or enterprise faces a growing need to manage several projects at the same time; let us call it our "cloud of projects".
For each individual project, the importance of project management is almost self-explanatory and the benefits of project management are obvious. So, we only have to train our human resources in the discipline of project management in order to improve our ability - as an organization - to work on a higher number of projects more successfully.
Is that right?
We do not think so.
Resources - especially the well trained - are significantly limited so that we cannot undertake all projects we would like to have. Usually, several projects have to share the same resources. This is like an internal competition that – in most cases we have seen – does more damage than good.
We reflect on the following questions.
The leading question in project portfolio management is: "How can we make sure that we are doing the right projects?" This question leads us into the area of strategy development. More precisely: How can we identify the right projects, i.e. those which are supporting our strategy or are in-line with our strategy? How can we evaluate and prioritize, initiate, and monitor them?
Any medium to large organization usually has a clear strategy in place that defines which of its divisions acquire and undertake what kind of projects. Thus, the selection of the right projects is given by the strategy. For example, a large construction company could have divisions like private housing, office buildings, manufacturing buildings, etc. For each of these divisions it is clear what contracts, i.e. projects they pursue.
They need to prioritize their projects on division level. This, we follow up in our sub-section on Project Prioritization.
There are different potential organizational setups of our resources to optimize project portfolio management. Since resources are limited we need to find the best one for each project under a given set of criteria. In this context, we introduce the concept of a project management office.
We discuss these aspects in sub-section Multi Project Management.
In case we have to deal with a number of similar projects we can pool or combine these projects into a program of projects. In that sense, program management is a special application of multi project management.
In sub-section Program Management, we present the characteristics of managing programs of projects.
Executives and higher level management of a project based organization needs a tracking system that allows for monitoring and controlling of multiple projects. It certainly depends on the key performance indices (KPI's) of the organization how that system will look like.
In sub-section Project Portfolio Dashboard, we present some examples of what we could use.
Emphasis here lies on the aspects of a learning organization. Primarily, the organization's members, the people do the learning. The organization learns through constantly re-organizing itself (including merging with or acquiring other organizations) and its processes in order to adapt to the changing needs of continuous learning of its individual members. This permanent change of organizational structures and processes has to be managed and facilitated.
Usually integrated into knowledge management, we discuss the IT aspects of project portfolio management separately. An information system that is supposed to support the management of multiple projects comprises a software environment for planning and controlling projects, collecting and filing data relevant for effort estimation and risk evaluation as well as a data base of templates for the most important project reports.
In sub-section Project Management Information System we present the most important elements of such a system. For general aspects of controlling a portfolio of projects, please refer to sub-section Project Portfolio Dashboard as well.
Getting an organization ready for project portfolio management is a project itself that needs a goal that is SMART. Here, we emphasize the fact that this goal shall be measurable: How can we measure to what extent an organization is prepared to manage multiple projects? Before answering this question we need to look into methods how to assess individual projects.
The sub-section Project Management Maturity Model summarizes the basics of project assessments and an organizations ability to manage multiple projects.
Ultimately, real people manage and carry out all our projects and the
related work. Thus, in best practice project portfolio management, we
need to care about how we want to hire and retain good project managers.
Key elements are: