By Rosh Jay 17/06/2017

Project Portfolio Management (PPM or Portfolio Management) can mean a lot of different things to different people. What does it mean in practice? In my experience, Project Portfolio Management is the collection of processes, practices and tools that support an organisation to successfully deliver and demonstrate its strategy

Project Portfolio Management (PPM or Portfolio Management) can mean a lot of different things to different people. What does it mean in practice?

When I began working in this field I struggled to find a clear, comprehensive answer to this question. Every organisation I went to did things completely differently and had varying definitions for Project Portfolio Management.

I’ve now been in the field for a number of years and have worked with some of the biggest companies in the country in a number of different industries. Over the years I’ve developed my own realisations that I’d like to share with you.

To start with, let’s look at what some of the existing definitions are:

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’ (Wikipedia)

‘Portfolio management ensures that an organization can leverage its project selection and execution success. It refers to the centralized management of one or more project portfolios to achieve strategic objectives.’ (PMI)

These are both great definitions and cover various aspects of Project Portfolio Management that I’ve seen in the past. However, Project Portfolio Management has changed over time. I believe that it now means something much broader.

In my experience, Project Portfolio Management is the collection of processes, practices and tools that support an organisation to successfully deliver and showcase its strategy

To get a good understanding of what this means we need to look at how Project Portfolio Management is applied in an organisation.

Let’s start with how project work flows through an organisation

Organisations have ambitions, and usually visualise these ambitions in the form of a strategy.

The strategy will span multiple years and is usually made up of many objectives that can be measured using defined performance metrics.

For the organisation to meet these objectives they need to carry out a large amount of work and maybe purchase some new capability.

The cost of this is usually broken into budgets that are established yearly. To effectively manage this work, it is grouped into activities that are related. Usually this is related to delivering each outcome of the strategy, but it can be any logical grouping. These groups are usually what is known as a portfolio. Each portfolio usually has a budget associated with it.

Portfolios are made up of relatively large pieces of work. These are broken down into smaller blocks of work. These are given different names depending on the framework(s) that the organisation is using.

For example, in SAFE the work will be broken down into Epics, in traditional Portfolio Management work is broken down into Programmes and Projects.

Once the blocks of work are defined, they will be completed. This is usually done by people within the organisation or by third parties who are contracted to do the work. Sometimes a part of the definition is to purchase materials, hardware, software or a service offering. Either way, this activity consumes the budget that was allocated to that chunk of work.

Once the work is completed and the new capability is available, the organisation or intended customers can start using it. This will (hopefully) start to manifest itself as a benefit for the organisation and the customer.

Let’s have a look at this process using the following scenario:

Let’s assume we’re the board of directors at NASA.

Our overarching goal is as follows:

Enable humanity to colonise other habitable planets within 20 years

Simple, right? The path to achieve this can be quite complex but let’s break it down into simple chunks

To achieve this we’ll need to meet several objectives:

Identify suitable planets for colonisation
Be able to send humans safely to a given planet
Be able to sustain a human colony on a planet
How will we know when we’ve achieved these goals?

We’ll need to set up some tangible measures:

We want to identify at least 20 suitable planets for colonisation that are all within 5 years traveling distance from earth
We need to have a design for a spaceship that can hold fuel and last the trip to a planet and back (At least 10 years)
We need to identify any impacts on humans being in space for such an extended period and put in place some mitigations
We can create an artificial environment that can grow food and produce water regardless of the external conditions 
…we could go on

We now have goals and we have measures against those goals. This makes up our strategy.

The next step to consider is how would we fund and manage this work? It seems logical to fund each outcome as it would require a lot of related work.

Identifying suitable planets may require a specialist team of scientists, using specific software and analytical equipment. On the other hand, developing a way of sending people to the planet may require a team of engineers with a different set of skills with different resourcing and equipment needs.

Despite the differences, there would be interdependencies. Each team would need to rely on the knowledge and skillset of the other to achieve some objectives that require multiple areas of expertise.

Breaking work down into these groups is creating portfolios. Now we can split our budget into each portfolio. Let’s say we have 1 trillion dollars for this project. We could split it this way:

Let’s give this outcome $200b
Let’s give this outcome $400b
Let’s give this outcome $400b

We’ve now got portfolios.

But, we’ll need to break these down further to actually get people to a planet.

This is where projects come into play.

Identifying suitable planets is too big, we need to start somewhere. This is where it’s broken down further.

One piece of work may be to simply define the conditions that would make a planet suitable; another could be to define how you would measure that. Another could be developing a programme that scans a radius and finds suitable planets within a 5 year travel distance.

Only once work has been broken down to this level can our NASA engineers, scientists and personnel get into it and start analysing and building things.

Now you will notice that this example is a simplistic view of the world. Everything rolls down nicely through the breakdown of work and everyone is clear on who’s doing what.

In reality things aren’t so simple.

Why does project portfolio management seem so complex then?

Projects inherently have complexities.

Often you’re working on ideas that are complex with a lot of unknowns and assumptions so answering the questions of ‘How much will it cost?’ and ‘How long will it take?’ are an educated guess at best.

Everyone has a different way to solve these problems and everyone has their own way of working through them. The path to achieving something is often a long winding road instead of the ordered, linear way presented in the textbooks.

If you had to collect together hundreds of these projects and execute them all with military precision within a fixed budget and to a set time-frame… well you start to see the complexities.

These can cause waste (e.g. delays, extra cost etc.) and in turn heavy losses for organisations.

To give you an idea of the impact that this has, KPMG’s PMO survey for 2017 uncovered that:

  • only 31% of organisations are likely to deliver projects on time and only
  • 29% of organisations are likely to deliver projects on budget
  • 33% of all organisations deliver projects that are likely to meet original goals or business objectives.

Who keeps it all together?

Several organisations have a department called the Portfolio Management Office (PMO) or Enterprise Portfolio Management Office (EPMO).

PM Solutions State of the PMO 2016 Study found that world-wide, 85% of organisations have a Project or Portfolio Management Office. This number climbs year on year (80% of organisations have a PMO in 2014 as per the PM Solutions State of the PMO 2014 Study).

In the past the EPMO had a certain job. They maintained the practices, processes and tools that were required to deliver projects within budget and schedule. They ensured that all the projects that were chosen by the organisation would work together without creating unmanaged dependencies.

This is best explain use an analogy:

Think of a company as a busy intersection. All the cars are projects and programmes. The EPMO is the traffic officer. They keep the traffic flowing and stop the cars from crashing into each other.

But things have changed over time.

The job of the EPMO is quite different now.

Organisations are no longer busy intersections, they are more like football teams.

Teams deliver outcomes that support the overall strategy.

The EPMO is more like a coach, they help the players to become better at their game, work closer together as a team and to understand the rules of the game. They also ensure that their players work well together.

Essentially they have a wider role. They don’t just keep projects from delivering to budget, schedule, scope etc. They now coach the organisation on the entire outcome of delivering a strategy. This starts at selecting the ideas that best align with the company’s strategy right through to development of funding strategies and coaching teams on how and when to use agile vs waterfall.

How do I manage a Project Portfolio?

There are several practices and procedures that have been developed over time to support organisations with managing these large levels of work. The frameworks and tools can be broadly grouped into a set of capabilities:

  • Investment Governance
  • Risk and Issue Management
  • Organisational Change Management
  • Portfolio Composition and Prioritisation
  • Financial Management (Cost and Return)
  • People Management (Sometimes known as Resource Management)
    Project delivery practice

I’ll discuss each of these capabilities in more detail in future articles.

All of these practices are geared to do one of two things:

  • Select the right initiatives to invest in | DO THE RIGHT THINGS
  • Deliver the initiatives to realise the desired value or identify if the value is unachievable as early as possible | DO THINGS RIGHT

These practices and the relevant data is often managed by PMO’s using Microsoft Excel.

However, this leads to massive inefficiencies.

High performing organisations will often use a Project Portfolio Management system to gain full visibility of their project portfolios and to manage these capabilities.

This makes reporting easier and removes a whole lot of manual work.

In Conclusion

Project Portfolio Management can be a wide array of things. The traditional definitions don’t do it justice. I hope this article has provided you with some information that will help you.

I’d love to hear your opinions and feedback so please feel free to comment away.

I will continue to write articles on this and other topics so keep checking back.

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