Seven things you should know about Project Portfolio Management

In simple terms project management is about doing projects right, Project portfolio management (PPM) is about doing the right projects – and ensuring those are done well. PPM complements successful project management and ensures that not only individual projects become successful, but the entire organisation achieves success through its projects. If you want to know more what this is all about, then read further.

Table of contents

Do I need to be a project manager to run a good PPM?

PPM consists of various disciplines, some of those use data of individual projects as input for decision-making. Without project management as basis, project portfolio management becomes difficult if not impossible. However, there are additional data points required from “the top of the house”, financial controlling and other departments that determine standards and directions for the organisation to help in the selection process.

According to PMI – Portfolio Management Professional PfMP there are five domains required for a comprehensive PPM. Let’s look at those disciplines or domains one by one:

Strategic Alignment

This domain includes activities required for aligning portfolio components (initiatives, programs, projects) with organisational strategic objectives. For successful strategic alignment it is paramount that the PPM

• Knows the strategy and the strategic objectives of the firms
• Is able to express and capture this strategy in a way to align the portfolio to it, e.g. in strategy management plans or strategic objectives

Key tasks are

• Identify existing and potential projects or project ideas, those must be able to express their individual contribution towards the strategy
• Create different scenarios (what-if-analysis) and recommend for decision making
• Determine the impact of decision making on the portfolio (what if we need to reduce our investment budget, what if we can add additional funds, what if we’d exit Russia)
• Create a high-level portfolio roadmap

Governance

I like to describe this domain as the “key operating procedure (KOP)” for portfolio management. This domain includes activities related to establishing the governance model (how you run projects and the portfolio as a whole), developing a portfolio management plan and approving the portfolio.

Key tasks are

• Establish PPM standards, rules and best practises. These might be aligned to industry standards for project/program management like PMI, MSP, Prince2 or IPMA.
• Select, introduce and operate systems to structure the PPM
• Define processes and procedures for e.g. benefits realisation management, risk and issue management, stakeholder management, resource management, change management, dependency management, assumptions management
• Create the portfolio governance model, i.e. define roles and responsibilities of project manager, sponsor, SteeringCommittee with regards to escalation procedures, risk tolerances, (monetary) approval thresholds
• Define check-points for projects, e.g. tollgates or transition check points before projects move into execution or closure.
• Ensure awareness of stakeholders with portfolio governance, this includes providing documentation, training and information material

Portfolio Performance

In Portfolio Performance we manage the portfolio using the processes defined in the governance domain. There is continuous monitoring and evaluation of the components with heavy focus on structured reporting.

Key tasks are

• Collect and consolidate key performance metric data, e.g. achievement of milestones, financial performance, progress towards defined KPIs and measure progress against defined strategic goals and objectives
• Manage and escalate risks and issues and recommend actions to appropriate decision makers
• Analyse and monitor dependencies between elements of the portfolio or against particular units of the line organisation, vendors or other external bodies
• Manage portfolio changes using change management techniques
• Balance the portfolio and optimise resource utilisation (people, vendors, facilities)
• Provide reporting or make available data so that appropriate stakeholders stay informed
• Maintain records by capturing portfolio artefacts, like approvals or other decisions and ensure compliance with internal organisational policies, audit or legal or regulatory requirements

Portfolio Risk Management

This domain is closely related to Strategy Management: for every strategic objective there is a risk attached not to achieve it. In total the organisation defines its specific “risk appetite” and then we need to balance the portfolio against the risk appetite. We can recommend not to start or stop a project, analyse and aggregate project risks, establish a financial reserve and promote common understanding and stakeholder ownership of portfolio risks.

Communications Management

This domain is about continuously communicating with stakeholders, understanding their needs and expectations, fostering appropriate stakeholder engagement in portfolio decisions and activities, managing conflicting interests.

What is a PMO?

There are multiple meanings of the term PMO – all somewhat around project management:

• Project Management Office/Officer: here it is used to describe the guy(s) who is/are in charge of the project admin stuff, typically reporting to the project manager. Not accountable for anything but does all the work. Many projects would not work without the project management officer, she is in charge of the standards and quality and is often the go-to person for all sorts of queries about the project. They can also help with continuity, e.g. familiarise a new joiner-PM to get familiar with the PPM processes of the organisation or train the project team on key project processes.
• Program Management Office/Officer: same as above, but in charge of the admin work across a program, typically spanning multiple projects.
• Portfolio Management Office: this term is typically used for the (Enterprise) Project Portfolio Management. This teams brings it all together and runs the portfolio of the organisation. Bigger organisations might have one central PMO and then additional divisional PMOs.

Do I need to be a project manager to run a good PPM?

There is a German saying “you do not need to be a chicken to tell a good egg from a bad one”. So, in principle you do not need to be a project manager to run a PPM. In particular if an organisation has got a bigger PPM office not all members need to be trained/qualified/experienced project managers themselves. However, there are several activities within a PPM where project management expertise is a key factor of success:

Challenging project managers

The governance domain will define various check points where inevitably you will find some “bad eggs”. The higher your personal experience with doing it better, the more likely the stakeholders will buy into your findings and observations.

SWAT Team / Intensive Care Unit

Some organisations establish special teams of highly qualified individuals to step in when extra help is needed, this could be

• Help jump-start special or challenging projects
• Step in when things turn sour, e.g. help a failing project to recover
• Interim management of projects until the first or replacement PM is found

Promoting best practises

More often than not the PPM office is seen as some kind of internal police or audit function. To establish better perception, it is helpful to also promote best practises for project or program management. Effective training is best provided from experienced professionals to professionals.

My organisation does not have a PPM – are we doomed?

First of all, this obviously depends on the size of the organisation or and the complexity of the project portfolio. Small organisations will not need a dedicated PPM or PMO office. Other disciplines, like performance management of the project portfolio could also be covered by (financial) controlling, but when size and complexity grows organisations without PPM loose effectiveness in their change operations.

From my experience there are specific aspects where a professional, dedicated PPM is essential:

• If you leave financial controlling to the accountants, they will focus on costs only. Underspend is good. In a project context however, underspend could be slow start, under delivery or under-resourcing of projects.
• Standards in the organisation: a central PPM can define standards (e.g. what is “amber” or “red” in status reporting) that all projects must follow. Only these standards can ensure that management information is objective and comparable.
• Professionalisation of the project manager profession: some train to become a project manager, some learn it by doing, some are simply appointed. A PPM function can promote minimum standards, require certifications or provide professional training. It can also ensure that the best project managers are put on the most challenging projects.

I thought portfolio management is about investment theory?

True, and there are a lot of similarities between investment portfolio management and project portfolio management

• Projects are also investments: there is risk (of project failure) and return (if the project delivers its benefits). A balanced portfolio of projects should include some risky, speculative projects, but should not put the entire organisation at risk.
• In investment and project portfolios the items are by-and-large independent but to some extent correlated. In investment portfolios there is correlation (“beta”) between investments, in project portfolios there are dependencies – so performance of one investment/project to some degree depends on the performance of the others.
• There is a selection process: you want to get the most bang for your buck by either finding the best investment opportunities or the best project proposals. Funds are always limited so investing in everything or doing every project idea is not possible.

Is it true that every project manager hates the Enterprise PMO?

Yes (mostly). Who wants to be hold to account to their promises from the project start when even their line manager has already forgotten? Who wants to be asked awkward questions about compliance with standards and (not) having provided minimum required information? Who wants to be told that they cannot proceed this toll-gate as their project is not ready for execution?

However, if the PPM / EPMO does its job well, they become respected. They will never be loved (nor should they).

We are becoming an Agile organisation; do I now lose my job?

It depends. When the organisations change, the Enterprise PMO has to change too. If you stick to annual budgeting of projects and focus on milestone tracking and change request approval you will soon be seen as a prohibitor of the Agile transformation of your organisation.

There are lots of challenges to the traditional PPM / Enterprise PMO. With more and more projects becoming Agile product development cycles and the traditional toolset of the Enterprise PMO has to adapt. This means processes like project approval, tracking of project progress, annual demand management, review and approval of change requests need to change. If it doesn’t, the Agile community can rightly claim that they are tracked with the wrong tools.

Change request management has its own challenges when budget and resources and often release dates are fixed, but scope and approach is flexible.

The PPM must evolve and focus on tracking what really matters – achievement of business outcomes rather than project milestones. Help with solving risks, issues and resource requirements the Agile project team cannot solve alone. And translate information from Agile projects into language that senior management understands and can act upon. Project management – or better – the structured development of software – has evolved, so must the project portfolio management.

To keep your job, I recommend the following:

1. Engage with the Agile community and learn from them. Understand their language so that you know what they are talking about.
2. Review if any of your processes (or even your language) have waterfall bias and change it.
3. Agile produces a lot of data that can be used to demonstrate progress and provide transparency. Often the terms used (e.g. burn-down chart, story points, velocity, MVP – minimum-viable-product) are difficult to grasp by senior management (unless they are Agilists themselves). You can help translate this data so your senior management can understand it.
4. Whilst Agile very much focusses on the availability and capacity of resources the traditional PPM tools and processes can help with the structured management of resources – especially with shared resources (e.g. IT Architects or testers) that are required to work across teams.
5. Read about how to coordinate large Agile portfolios – e.g. the Scaled Agile Framework (SAFe). Agile teams will do a lot of coordination within their framework, even without your help. Coordination beyond – say with waterfall projects, financial cycles, prioritisation of business value etc. is where the new Agile-supporting Enterprise PMO can add value.