Every business thrives on the successful delivery of projects, and this is especially true when several projects are managed simultaneously. However, this isn’t easy, as it requires significant effort, resources, and time to create a project portfolio management technique that works. Project portfolio management involves managing various interdependent projects based on a wider portfolio to attain strategic business goals.
Project management organisations (PMOs) and managers usually take advantage of project portfolio management’s vital elements to study every existing or new project plus its feasibility to achieve overall business objectives. These crucial elements enable businesses to link their strategic plans to project execution, providing leaders with a method to simplify project selection choices. Discussed below are seven key elements of project portfolio management.
Business objectives
For effective project portfolio management (PPM), you should first identify business objectives and clearly outline a strategy to meet these goals, which helps create an action plan. Each project in your portfolio should resonate with the company’s strategic vision. A common risk arises once businesses define their strategies but disregard individual projects. Taking time to determine the organisational strategy and analyse where each project stands in relation to company objectives can help avoid this pitfall. The process includes taking inventory of the current projects and resources, including:
- Resource inventory: Single out your skilled staff members and their future and current availability to determine who’s ready to work on prime value projects
- Project inventory: Assess stalled projects, current projects in the pipeline for any redundancies, and other possible areas for cost-cutting
Project portfolio management software
Tracking several active projects while remaining up-to-date with general portfolio performance isn’t easy. This is where PPM software and tools come in. They provide companies with a top-level, global view of the sustainability and progress of numerous projects.
The best PPM software merges cloud ideas with an enterprise solution that enables companies to operate more efficiently by providing multiple project data levels. Industry leaders, PMOs, and businesses use PPM software to oversee project portfolios with the help of data compiled from different systems into one. When taking on multiple projects, investing in effective project portfolio management software is imperative. This solution offers:
- Excellent tools for organising and visualising projects
- Centralised organisational goals and objectives
- Simple yet highly functional interfaces
- Powerful analytics and reporting
- Applications optimised for communication and collaboration
- Versatility and flexibility to achieve a broad range of stakeholder demands and company needs
Project portfolio prioritisation
Project portfolio prioritisation involves systematically assessing and ranking multiple projects based on predetermined criteria to discover their importance and ensure effective resource allocation. The process includes evaluating each project’s potential value, resource requirements, risk profile, and how the project aligns with the company’s strategic vision to make informed choices on the projects to defer, undertake, or eliminate.
Applying prioritisation tactics enables organisations to maximise their portfolios by concentrating on high-value ventures, maximising ROI, and mitigating risks. Effective portfolio prioritisation enables project managers to make informed choices regarding the projects that would guarantee an ROI and those that resonate with the organisation’s strategy. It also offers insights on how to:
- Mitigate risks
- Optimise resource allocation
- Increase the overall value the portfolio delivers
Resource management
Resource management in PPM involves planning, allocating, optimising, and scheduling resources across your company’s project portfolio. It refers to the strategic management of different resources, including time, money, equipment, and human resources, to ascertain that projects are successfully and efficiently executed. Resource management aims at:
- Maximising available resource utilisation
- Aligning resource allocation with company goals
- Preventing underutilization and overallocation of non-human resources and personnel
- Ensuring all projects have the requisite resources
Resource management is vital for businesses as it helps ensure they’re allocating and optimising resources to the correct undertakings (those that bring the highest value and are aligned with organisational strategy). It helps ensure projects are often delivered on budget and on time. To maximise resource efficiency, your organisation can leverage these resource allocation strategies:
- Resource allocation: This isn’t just about allocating resources to your projects. It takes into account your team’s skills and their availability
- Resource levelling: It helps balance supply and demand. It’s a crucial tactic for maximising resources across your project portfolio to ensure you’re getting the most out of the available resources
- Resource utilisation: This strategy gives you visibility into your team’s capacity over a particular period and helps you determine if resources are being over or under-utilised
- Resource forecasting: With this technique, you can plan ahead while keeping resources balanced over future and current projects
Project Management Office (PMO)
If projects are left to every team member or business unit, they can easily go off track, utilising resources and missing project delivery dates thanks to:
- Strategic misalignment
- Inefficiencies
- Poor direction
A PMO (project management office) is a group or department that develops, governs, and maintains project portfolio management standards across an organisation. The office offers value-based governance and supports project managers in ascertaining that teams adhere to standard organisational processes and best practices in organising and executing projects.
Risk management
Risk management helps companies safeguard investments while balancing the risk level in their portfolio. It involves identifying, evaluating, measuring, and managing risk in a project portfolio. Unlike project risk management, which focuses on events that might influence a project, portfolio risk management focuses on events that affect the achievement of strategic objectives. Managing portfolio risk proactively ensures your business is better equipped to:
- Raise portfolio value
- Take on more risk
- Have an excellent rate of successful project delivery
The portfolio risk management process involves:
Identifying portfolio risks: This may include going through every project in your portfolio and taking into account factors like technological challenges, resource availability, complexity, and more
- Assessing risks: Upon identifying potential risks, analyse them to understand the possibility of every risk occurring plus its impact on the project portfolio
- Developing an action plan: It should include specific steps to minimise the possibility of portfolio risks and how to respond in case they arise. This stage involves identifying the opportunities specific risks may bring. It also includes allocating resources and responsibilities for executing risk management strategies
- Controlling and monitoring risks: Since risk management isn’t a one-off task, you’ll have to constantly monitor and control risks to understand risk levels and adapt to new changes or challenges in your portfolio
Performance measurement
Measuring the performance or progress of your project portfolio management efforts is key to determining success. Tracking the right project portfolio management metrics can help:
- Enhance resource allocation
- Prioritise projects that contribute to your organisation’s long-term goals
- Mitigate risks
These metrics enable stakeholders to assess the project portfolio’s effectiveness and make informed choices regarding project portfolio prioritisation, risk management, and resource allocation. Measuring project portfolio metrics enables portfolio managers to prioritise the projects that offer the best value to the company while contributing to accomplishing organisational goals. Some of the crucial KPIs for project portfolio management include:
- Delivery/ portfolio execution metrics: They help analyse the performance and progress of the projects in your portfolio. Delivery metrics usually concentrate on measuring the successful and timely delivery of projects. Project completion rate, schedule variances, and on-time delivery rate are some of the portfolio execution metrics to measure
- Financial metrics: They involve metrics like net present value and budget variances that can help stakeholders optimise resources and make informed investment decisions
- Operational efficiency metrics: They offer insights into capacity allocation, resource utilisation, general operational performance, and productivity
- Risk assessment metrics: They assist in managing the possible risks linked with projects in a portfolio. You can use metrics like risk severity, risk exposure, and risk probability to spot and quantify risks so you can mitigate them early enough
Endnote
Understanding and implementing the critical elements of project portfolio management is essential for business success. Consider implementing these key elements for effective project portfolio management.