This analysis is grouped according to key elements of portfolio management, the organizational hierarchy of the portfolio, key aspects of executing the portfolio management process and measuring value.
Key Elements of Project Portfolio Management (PPM)
- Defining: The product portfolio manager develops an overall strategy for organizing and managing the portfolio of products, which includes identify common markets, common sales forces, related production and logistics resources and common cultural aspects.
- Aligning: Based on the strategy, the management of the project portfolio involves prioritizing, selecting and optimizing the portfolio’s projects to maximize performance. Resources supporting each of the product lines are aligned strategically based on available capacity, relationships among the projects, and the opportunities for optimization.
- Authorizing and Controlling: The management of the portfolio of projects must define and facilitate ongoing processes for making decisions; reviewing and approving; and tracking changes, status and progress, making sure to keep all stakeholders involved.
Organizational Hierarchy of the Portfolio
The project portfolio is organized according to this generic hierarchy:
- Portfolio – There is an overall portfolio for the various projects. This will likely include grouping the projects into groups supporting the same strategic elements, supporting the same program initiatives, or supporting the same business segments.
- Sub Portfolio – This is a grouping of projects within these overall portfolio groupings. For example, there might be a sub-portfolio of specific projects in a particular geographic area, such as Europe.
- Program – A particular program could initiate a strategic change that threads across the business, such as a cost saving initiative.
- Project – This would be a piece of the program with a specific objective, such as a project to save money on shipping.
- Ongoing Operations – These are the operational functions of managing the portfolio of projects.
Key Aspects of Executing the Portfolio Management Process
A project portfolio manager focuses on the following key aspects of portfolio management:
- Strategic Drivers – What are the goals of the company with its portfolio of projects? What are the strengths, weaknesses, opportunities and threats of the organization?
- Budgeting – What resources can be brought to bear on the project portfolio management effort?
- Optimization – What costs can be shared, risks reduced, and economies realized by choosing and organizing the projects in various ways in the portfolio?
- Guidance, Oversight, Consistent Processes – What discipline needs to be added to the PPM process to optimize and add value?
- Metrics and Reporting – What reports and when need to be provided to stakeholders to help them keep abreast of performance and developments?
- Communication and Feedback – What lines of communication need to be open and managed on an ongoing basis?
The most important question is how to measure value of the PPM effort. The answer surely relates to measuring performance in part based on expected benefits of the particular combination of projects. The key is that, however it is measured, that the project portfolio is more valuable than the sum of the value of each individual project or program.
This post is part of the series: Portfolio Management
A series of four articles on portfolio management – a facet of management that applies in many areas, not just project management. The articles look at how it has long applied to managing investments, the practice of managing a portfolio of products and much more.