Project Portfolio Management or PPM is to execute your business strategy. Unfortunately, the project portfolio management process is a weak spot in many organization.
This ultimate project portfolio guide offers practical tips to help project, program and portfolio managers improve this crucial activity.
But first, let’s answer the question: “What is project portfolio management?”
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Project Portfolio Management definition
According to PMI (the Project Management Institute), portfolio management is “the centralized management of one or more project portfolios to achieve strategic objectives.”
Wikipedia says project portfolio management 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 honouring constraints imposed by customers, strategic objectives, or external real-world factors.
In short, it’s about making sure your have the right mix of project to realize your business strategy AND to make sure the project and program managers deliver those projects.
Let’s dive in:
Project Portfolio Management Process
Here’s a list with 32 tips to improve your project portfolio management process, organized in 5 steps:
- Step 1. Collect, select and prioritize the right project
- Step 2. Optimize your resource allocation and planning
- Step 3. Develop your project managers
- Step 4. World-class project and program management
- Step 5. Manage your strategic project portfolio
Project Portfolio Management: 32 tips
The following 32 project portfolio management tips will help kick-start your evaluation of your current project portfolio management and the potential improvements you can make during the next six months.
Four-to-six months after that period, you should repeat the exercise to evaluate progress and define future actions.
The first thing to do is to gather all the possible projects. Most of the time, there will be no shortage of project ideas from your project leaders and the rest of the organization. So spend the time tapping into them.
Once you’ve gathered all possible projects to support your business strategy, it’s time to make tough choices. Limited resources will force you to weed through all the projects, prioritize them and pick those that best fit your strategy and budget.
Here are some tips to help you with this process:
Tip 1: Aim for 100 percent connection
It’s crucial to link your projects to your business strategy. If the strategy cascade exercise has been done properly, you should have identified a list of projects and considered their contribution to your business strategy.
You should also feel satisfied that the project and program list is correct. And that all possible project ideas have been considered.
But what if you’re not sure?
Draw a simple strategy – project matrix. Put your business strategy topics on one axis and your projects on the other. Look out for ‘blanc’ spots. Don’t be satisfied with putting just X’s. Debate this with your team. And don’t stop until you all feel that everyone is satified with the outcome.
But be careful! You can link almost every project to every project. It just requires imagination 🙂
But that’s not the objective here, is it? Don’t be satisfied until you have challenged the outcome a few times.
The strategy – project matrix offers an extra value: it not only helps you to find the white spots or stimulate discussions. It’s also a great portfolio management communication tool at a later stage.
Tip 2: Do more than just mandatory projects
You’ve carefully selected a portfolio of project ideas which support your strategy. But as usual, a long list so-called ‘mandatory’ projects made it on the list as well.
You know the ones – projects which relate to regulations, tax changes or compliance. And they all seem to have top priority. And you know from experience that there are always new mandatory projects waiting to get on the priority list as well.
So what about your strategic project?
While most of the topics from the so-called ‘mandatory’ project are in fact mandatory, there’s almost always room for interpretation on how they need to be implemented. All too often, managers use the mandatory elements to push the project higher up the project list and inflate the project budget.
So make sure you challenge them and don’t let mandatory projects block your strategy execution.
Tip 3: Perform initial project management tasks first
Clarify the scope, fix deadlines and understand drivers before you set project priorities.
Make sure you have a process in place and experienced project managers who can deliver high-level resource estimates on short notice. These carefully considered estimates are essential to selecting the right projects and programs.
Tip 4: Watch out for pet projects
Everyone has their favorite projects. I’m sure you do too. And it shouldn’t be a problem. Unless, of course, it clouds the judgement and the selection process ceases to be objective.
Tip 5: Don’t try to do everything and end up doing nothing
Be selective. Reality shows that an organization can absorb fewer projects than most executives think. Better to hold off until some projects reach the next phase.
Prioritization doesn’t mean distributing all available resources to all known projects.
Rank your projects and pick the top 30 percent for immediate launch. Put the rest on hold. Repeat the exercise after three-to-six months. The picture will look different as new initiatives arise and projects in process have advanced to different stages.
Tip 6: Costs = 80, benefits = 0
When you prioritize new and existing projects, consider only the remaining costs and benefits. Projects which are 80 percent completed have 80 percent sunk costs. But usually all the benefits are yet to come. Focus on these projects that are 80 percent of the way there. Finish them and enjoy the benefits.
Optimize your resource allocation and planning is the second important project portfolio management process step you should focus on.
Once you are confident that you have selected the strategic projects and programs, it’s time to allocate the human and financial resources.
Here are some tips to help achieve this:
Tip 7: Align initiatives and budget
The project portfolio management and budget processes run separately in most companies. Make sure the financials are the same at both ends. Here are three points to watch out for:
— Make sure all your projects are included in the budget. At their outset, most projects are nothing more than a few lines in a PowerPoint presentation. At best, they have a rough plan and a high-level budget estimate. Avoid surprises and include them all in your budget.
— Make sure your projects do not remain budget bubbles. Strategic projects shouldn’t remain inactive solely as reserves of money to fund managers’ pet projects. Either detail them or cut them and make it a team decision to reallocate money where it fits best.
— Make sure your projects remain within the budget. When the going gets tough, management can be tempted to move in for the easy kill and reduce, reallocate or cut the budget of one or more strategic projects. And while this might solve a short-term burning issue, it undermines the future of the company. Kaplan and Norton, the founding fathers of the Balanced Scorecard, promote the use of a separate expenditure category to fund all strategic projects and by doing so avoiding the issue.
Tip 8: Reward the long-term
Let me be clear. Short-term focus is important. It can even be your only focus when the going gets tough.
But that’s not the point I want to make. Problems arise when managers constantly favor the short-term, no matter what the economic situation. These problems are often induced or reinforced by a reward system.
When this happens, the strategy exercise becomes a budget (read ‘bonus’) negotiation. And managers search to remove the risk in order to earn their next bonus. This often means that they neglect great initiatives and/or opportunities considering them too high risk, not for the company but for the achievement of their annual bonus.
Tip 9: Apply the ‘95 percent rule’
Depending on who you ask, a project budget, a timeline or a degree of difficulty, might be viewed quite differently. It’s a question of risk-awareness by the estimator.
Ask your estimator the following question: ‘What would it cost in terms of budget and schedule to have a 95 percent chance to realize the benefits within the planned budget and schedule?’.
Most people will, depending on their risk-awareness profile, review their plan (sometimes drastically) and provide you with a more realistic estimate. If all projects are estimated using the 95 percent rule, the risk is taken into account.
Tip 10: Make your capacity plan early
The successful realization of a project is closely related to the quality of the staffing. Knowing this, ensure that your capacity plan is made early in the game. And be realistic. You are sure to find resource bottlenecks, but as you started early, you will still have time to find countermeasures.
“I have never seen a successful project run by a bad project manager”
Tip 11: Appoint an architect to monitor the implementation
Imagine you are building a house. You have all the blueprints, made a great plan and all the contractors are ready to start. And then you go on holiday, right?
What’s the chance that things will get done without a substitute to oversee the project?
Make sure you have a caretaker!
Tip 12: Ensure resources are, and stay, committed
Not every project has the same priority in each department. A project that’s on the ‘A list’ in sales could well be insignificant to the marketing department. But without the marketing intervention, the sales team won’t be able to pull it off.
And a well-intentioned commitment – a ‘yes’ – at the beginning of a project could easily turn into a ‘no’ as other projects become higher priority. So when the marketing input is needed on the sales project, there are no resources available.
Make sure that doesn’t happen to your project. Small actions can help keep everyone committed to your project and make all the difference between success and failure.
- Keep all parties involved from the beginning and throughout the project, even if their intervention is minimal and planned for the final stages.
- Tell them regularly about the importance of their interventions.
- Build in a financial lever. Add an individual performance objective.
Tip 13: Assign your best project managers to your strategic projects and programs
Don’t use project size as the only element for planning staff resources. I’m always surprised when I see great project managers working on very large, but relatively risk-free, three-year ‘maintenance’ projects, while strategic projects are assigned to mediocre staff or outside consultants.
Put your money where your mouth is. Commit your best resources to the projects that deliver your company’s future performance. Afraid to move staff between projects? Read the next tip.
Tip 14: Don’t be afraid to reassign a project manager
‘He cannot be moved’, ‘She’s worked for three years on that project. Reassigning her would be a disaster’, ‘But he wants to continue’.
Ever heard these arguments before?
Probably. And yes, you will lose some vital knowledge, and yes, it will take some time for a new project manager to get up to speed. But that’s the micro view. As an organisation, you want the macro view. And with that helicopter view, you might be far better off reassigning.
There are no excuses to keep your best project managers blocked on those large, steady projects. Take a look at any consulting organisation: they are able to change project managers in a matter of weeks when clients demand it.
And for the record: good project managers love the rotation. It boosts their learning curve. Yet another benefit.
To Do: a simple project portfolio management exercise to get the right project manager on the right project
Make two lists. The first one ranks your projects. You can choose your own ranking criteria but avoiding using only the size of a project as the gauge. Also include, for example, strategic importance and complexity.
The second list ranks your project managers with the best on top. Is there a match between the two lists? Did you staff your best project managers on your most important projects? If not, take action.
You want to perform this exercise on a regular, even quarterly, basis. You will see that while the strategic importance of a project stays the same (unless you revise your portfolio), the project complexity indicator, for example, will shift as a project enters or leaves a certain maturity phase. Over time, your project managers ranking will change as well.
Tip 15: ‘IT’ is always late
And IT is often not to blame. But regardless as to whether the delay is caused by incomplete specification, changed business needs, underestimation of complexity, technical challenges, interfaces to other systems, lack of resources or problems with the outsourcer, it nevertheless remains a delay.
So get over the good guy/bad guy discussions with IT and tighten that relationship. Set up a professional, high-quality, business-IT partnership and tackle one of the main reasons why projects are delayed head-on.
Develop your project and program managers is the third important project portfolio management process step you should focus on.
I don’t need to tell you that a project manager can make or break a successful project. In fact, I’ve never seen a successful project run by a bad project manager. Project managers are key to project success.
So make sure you give your project managers – and their skills development – the attention they deserve as they are both key to your project portfolio management success.
Tip 16: Project managers need hard AND soft skills
A project manager isn’t a one-trick pony.
A project manager needs to master a variety of skills, not all of which are related to technical project management activities such as planning, risk management, reporting or financial control.
They also include soft skills, which for some projects are actually more valuable than hard skills.
So make sure you put soft skills such as communication, negotiating and coaching on your project managers’ development agenda.
Tip 17: A PMI certification doesn’t do the trick
All too often, project managers’ skills development is reduced to ‘get your PMI certification’.
And while having project management certification from the Project Management Institute (PMI), the Office of Government Commerce (OGC) or the International Project Management Association (IPMA), is undeniably useful, it should not be the development cornerstone.
Tip 18: Offer your project managers an interesting career path
If you are serious about project management, make sure you can offer project managers a great future within your organisation. A professional career path is a fantastic lever to help you hire, motivate, advance and reward your project managers.
Tip 19: Projects and programs: a great opportunity to develop future leaders
Appoint high potential staff to your strategic projects. It will give them valuable exposure to a new environment, offer them an interesting challenge and provide a fast-track learning experience.
And although most high potentials will more than have the ability to manage a crucial project, do make sure they have the right (read ‘soft and hard skills’) project management skills. You don’t want to ignore Tip 16. If they do, it’s a win-win situation.
Tip 20: Evaluate your project managers regularly
Each project has its own dynamics outside of the annual cycle that drives day-to-day operations.
Make sure you follow the logic of the project when it comes to evaluating performance.
Don’t wait until the end-of-year formal evaluation. Evaluate project managers at the end of each important phase. If you wait too long, you will have to chase project members who have long moved on to other assignments and clients who forgotten all about the details.
This doesn’t mean, however, that you have to cancel the end-of-year performance review. On the contrary. But regular reviews will provide you with the high-quality feedback you need for a proper evaluation at the year-end.
Tip 21: Build a community
You can find project managers spread throughout the organization. I call them ‘organisational nomads’. They travel from project-to-project, they don’t belong to a certain silo and don’t report to the same boss.
But they do all do the same job, face similar challenges and generally have the same career concerns.
Why not bring them altogether on a regular basis?
Give them the opportunity to create a sense of belonging that extends beyond their current project and let them share ideas with like-minded individuals. Not every week however, since your nomads need their freedom.
But organizing a lunch or an activity on a bi/monthly basis is a smart thing to do.
Tip 22: Make sure you have the right HR expertise on board
A professional, structured development approach for your project portfolio management demands specific skills and knowledge. Make sure you have – or get – that specific expertise onboard. It will save you time and money.
World-class project and program management is the fourth important project portfolio management process step you should focus on.
There is so much to say on the topic. There has been much already said on the topic. Project and program management are mature business activities that have been around for quite some time now.
I’ve selected seven tips that will help you overcome some of the more persistent project and program management problems.
Here we go:
Tip 23: Adopt a project standard
Research shows a high positive correlation between the use of a standardized project management methodology and project success.
Be careful, however. ‘Standardized’ does not mean ‘standard’.
Make sure you adapt terminology, project life and tools to your needs and project culture. If not, it can do more harm than good.
Tip 24: Provide a project starter kit
Each project needs to actually start. And it will go through the same activities and possibly the same launch mistakes as all the others.
Give your project managers and members a kick-start with a starter kit: a collection of steps, a to-do list, tips and examples that will help them succeed with that crucial first step in the project life cycle.
Make sure the kit isn’t overly technical and do include some tips on the unwritten project management rules of your organization. And remember: the more project launches you do, the more you learn and the better your starter kit becomes.
I would suggest you organize a launch meeting to run through the starter kit whenever a larger program starts or several projects are due to start within the same time frame (a few weeks).
Tip 25: Use project portfolio management tools and software wisely
Maybe you know the expression ‘a fool with a tool is still a fool’. Well, it’s also a valid one in the project and program management environment.
Don’t think that tools or software will solve all your problems. Be careful that your tool isn’t a gadget, creating pleasure for the happy few who selected it but a pain for the others who have to work with it.
Tools and software can boost productivity, but need to be treated with care. Take an informed, rational decision.
Tip 26: Avoid immortal projects
This is a tip about project closure as many projects make a bid for eternal life.
Mysteriously, projects – temporary activities with ad hoc staffing – transform themselves gradually into jobs – structured activities with fixed staff. And as a result they keep going and going (I’m tempted to add another ‘and going’ but I’m sure you got my point). And before you know it, the whole organisation is overwhelmed with a host of never-ending corporate initiatives.
Plan your exit strategy!
Define upfront when and how the mission will end and capture the benefits in the day-to-day business operations.
Remember: it’s easier to close projects when the organisation has a clear career path for project managers and can offer other challenging assignments.
Tip 27: Establish project rituals
Human beings like habits. They provide structure and comfort. Use this knowledge to your advantage.
Develop your own project and program rituals. Keep this in mind when you are deciding on reporting structures, formats and steering committees. Anything that is repetitive helps ritual building.
Tip 28: Achieve results, not phases
Have you ever seen those impressive wallpaper-sized project plans decorating the director’s office, boasting how well the project is under control? I guess so.
And when you looked closely, you saw the project plan covered hundreds of activities neatly structured into phases such as ‘the preparation phase’, ‘the implementation phase’ and ‘the testing phase’. And you probably asked yourself: ‘But where are the benefits?’.
Most project plans are task-oriented when they should actually be results-driven.
The difference always shows in the project plan. Make sure that all activities in your project plan show a clear link with your deliverables. And use the progress towards these deliverables, not the action steps, as your real progress indicator.
Manage your strategic project portfolio continuously is the third important project portfolio management process step you should focus on.
Project and program management are temporary activities put in place to close a specific performance gap.
But once that gap is (hopefully) closed, you will start closing another one, as the competitive battlefield is constantly in motion. So no matter what, there will always be the need to perform the various initiative management activities.
Here are some tips to build permanent capability:
Tip 29: Create a permanent strategy office
And let the office take primary responsibility to manage your project portfolio. It’s something more and more companies do.
Tip 30: Build the right culture
You probably know project traffic lights – those three-colour caution signals often used in project status reporting.
Well, it’s your company culture that defines how a red traffic light should be read. It varies from ‘I need help from the steering committee to solve project problems’ to ‘I’m so sorry. I tried to hide the problem for as long as possible but now everything is in a total mess!’.
As long as you encourage project managers to address risks before they become issues, you still have a chance of manoeuvring the project out of the danger zone. However, project managers, operating in a culture that accuses and prosecutes problem identifiers, will conceal risks.
So your company culture has quite an impact on your project risk management.
Tip 31: Develop your decision-taking capability
Project portfolio management demands solid decision-taking skills at all levels. From selecting the right initiative to allocating resources, it all comes down to taking decisions. You need to be good at it. Here are some simple tricks I often use:
- Provide options. Useful when a group needs to consider a decision. Make sure you do your homework and detail each option.
- Make a yes/no list. Useful when you need to force a decision. Use it at the end of a steering committee, capture the outcome and communicate the decisions.
- Use a sounding board to prepare a decision. Useful when you have limited time with the final decision-makers. Select the right players, those who are trusted advisers of the final decision-makers.
Remember this one next time you take a decision. Best-selling author Paul C. Nutt did extensive research on decision making for his book Why Decisions Fail. He found that more than 50 percent of all decisions fail. They are either quickly abandoned, partially implemented or never adopted at all. Eighty-one percent of all managers pushed their decisions through persuasion and edict. And only seven percent were based on long-term priorities. Despite these shocking figures, 91 percent of the managers in Nutt’s study rated themselves as exceptional decision-makers.
Tip 32: Improving your project portfolio management process should be a strategic project
Are you serious about developing project portfolio management as a core competence? If the answer is yes, set up a new strategic project called ‘project portfolio management as a core competence in our organization’.
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