Eight to Late

Sensemaking and Analytics for Organizations

Project portfolio management for the rest of us

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In small organisations,  projects are often handled on a case-by-case basis, with little or no regard to the wider ramifications of the effort. As such organisations grow, there comes a point where it becomes necessary to prioritise and manage the gamut of projects from a strategic viewpoint. Why?  Well, because if not, projects are undertaken on a first-come-first-served basis or worse, based on who makes the most noise (also known as the squeakiest wheel).  Obviously, neither of these approaches serves the best interests of the organisation. The issue of prioritising projects is addressed by Project Portfolio Management  or PPM (which should be distinguished from IT Portfolio Management). This post presents a simple approach to PPM; one that can be put to immediate use in smaller organisations which have grown to a point where an ad-hoc approach to multiple projects is starting to hurt.

Let’s begin with a few definitions:

Portfolio: The prioritised set of all projects and programs in an organisation.

Program: A set of multiple, interdependent projects which (generally, but not always) contribute to a single (or small number of) strategic objectives.

Project: A unique effort with a defined beginning and end, aimed at creating specific deliverables using defined resources.

As per the definition, an organisation’s project portfolio spans the entire application and infrastructure development effort within the organisation. In a nutshell: the basic aim of PPM is to ensure that the projects undertaken are aligned with the strategic objectives of the organisation. Clearly then, strategy precedes PPM – one can’t, by definition, have the latter without the former. This is a critical issue that is sometimes overlooked: the executive board is unlikely to be enthused by PPM unless there are demonstrable strategic benefits that flow from it.
It is worth pointing out that there are several program and portfolio management methodologies, each appropriate for a particular context. This post outlines a light-weight approach,  geared towards smaller organisations.

Project portfolio management in three minutes

The main aim of PPM is to ensure that the projects undertaken within the organisation are aligned with its strategy. Outlined below is an approach to PPM that is aimed at doing this.

The broad steps in managing a project portfolio are:

  1.  Develop project evaluation criteria.
  2. Develop project balancing criteria. Note: Steps (1) and (2) are often combined into a single step.
  3.  Compile a project inventory.
  4. Score projects in inventory according to criteria developed in step (1)
  5. Balance the portfolio based on criteria developed in step (2). Note: Steps (4) and (5) are often combined into one step.
  6. Authorise projects based on steps (4) and (5) subject to resource constraints and interdependencies
  7. Review the portfolio

I elaborate on these briefly below

1.  Develop project evaluation criteria: The criteria used to evaluate projects are obviously central to PPM, as they determine which projects are given priority. Suggested criteria include: 

  • Fit with strategic objectives of company.
  • Improved operational efficiency
  • Improved customer satisfaction
  • Cost savings

 Typically most organisations use a numerical scale for each criterion (1-5 or 1-10) with a weighting assigned to each (0<weighting<1). The weightings should add up to 1. Note that the above criteria are only examples. Appropriate criteria would need to be drawn up in consultation  with senior management.

2. Develop balancing criteria: These criteria are used to ensure that the portfolio is balanced, very much like a balanced financial portfolio (on second thoughts, perhaps,  this analogy doesn’t inspire much confidence in these financially turbulent times). Possible criteria include:

  • Risk vs. reward.
  • Internal focus vs. External (market) focus.
  •  External vs. internal development

3. Compile a project inventory: At its simplest this is a list of projects. Ideally the inventory should also include a business case for each project, outlining the business rationale, high level overview of implementation alternatives, cost-benefit analysis etc. Further, some organisations also include a high-level plan (including resource requirements) in the inventory.

4. Score projects: Ideally this should be done collaboratively between all operational and support units within the organisation. However, if scoring and balancing criteria set are set collaboratively, scoring projects may be a straightforward, non-controversial process. The end-result is a ranked list of projects.

5. Balance the portfolio: Adjust rankings arrived at in (4) based on the balancing criteria. The aim here is to ensure that the active portfolio contains the right mix of projects.

6. Authorise projects: Projects are authorised based on rankings arrived at in the previous step, subject to constraints (financial, resource etc.) and interdependencies. Again, this process should be uncontroversial providing the previous steps are done using a consultative approach. Typically, a cut-off score is set, and all projects above the cut-off are authorised. Sounds easy enough and it is. But it can be an exercise in managing disappointment, as executives whose projects don’t make the cut are prone to go into a sulk.

7. Review the portfolio: The project portfolio should be reviewed at regular intervals, monitoring active project progress and looking at what’s in the project pipeline. The review should evaluate active projects with a view to determining whether they should be continued or not. Projects in the pipeline should be scored and added to the portfolio, and those above the cut-off score should be authorised subject to resource availability and interdependencies.

The steps outlined above provide an overview of a suggested first approach to PPM for organisations beginning down the portfolio management path. As mentioned earlier, this is one approach; there are many others.


Organisational strategy is generally implemented through initiatives that translate to  a number of programs  and projects. Often these initiatives have complex interdependencies and high risks (not to mention a host of other characteristics). Project portfolio management, as outlined in this note, offers a transparent way to ensure that the organisation gets the most bang for its project buck – i.e that projects are implemented in order of strategic priority.

Written by K

February 23, 2009 at 9:01 pm

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