Project Portfolio Management: The Ultimate Guide

Here's everything you need to know about your project portfolio management process.
Project Portfolio Management: The Ultimate Guide
Here's everything you need to know about your project portfolio management process.

One of the most difficult parts of successful strategic planning is choosing the right activities to pursue to achieve your goals and objectives. Many organizations flounder when it comes to actually delivering on their strategy, often thanks to underdeveloped and underutilized project and program management practices within their organizations. But the good news is, it doesn’t have to be this way. With project portfolio management, you can strategically select and manage the projects that will help you achieve your goals and set the stage for your own success.

While the focus of this article is project portfolio management, it goes hand-in-hand with program management and project management. The more attention you give to these disciplines (and the better you become at carrying them out), the greater your chances of realizing your goals.

What is project portfolio management?

What organizations choose to do with limited resources is important. Projects that don’t directly contribute to your organization’s strategic goals don’t create value, and choosing to pursue too many things can lead to poor execution and stymied progress. Yet many companies (1 in 3) don’t consider value when implementing and taking on new projects, a fact that contributes to poor overall performance.

It’s crucial to ensure organizational resources are used as efficiently as possible to support the organization’s strategy. That’s where project portfolio management can help.

Project portfolio management is the practice of choosing the right projects and programs at the right time to ensure your resources are used as efficiently as possible to further your goals.

Even though it is referred to as project portfolio management, a portfolio could include both projects and programs. Here’s how they all fit together:

  • Project management is about managing the details around executing a specific set of tasks with a defined purpose (a single project).
  • Program management is about managing groups of different but related projects that are aligned with organizational goals.
  • Portfolio management takes a big-picture view of how an organization’s strategy will be executed, determining how resources will be deployed and which projects will deliver value and should be pursued. Once a portfolio of projects and programs to pursue has been selected, program and project managers take over to execute the necessary activities.

Done right, portfolio management should pave the way for organizations to successfully execute strategy, work efficiently, and achieve their goals.

The Project Portfolio Management Process

Making sure your activities produce the maximum benefit requires weighing resource capacity in combination with the strategic fit of proposed projects and programs. Below is a summary of the steps involved in how to create a project portfolio. Your organization’s process might deviate in the specifics, but the general overview should remain the same.

1. Identify your objectives or goals.

The first step is to make sure your organization’s goals are clear—what objectives do you hope to achieve in the next three to five years? These should be based on your overall strategic plan, which sets the priorities for your organization. Sample objectives are to “diversify and grow revenue streams” or “improve employee retention.” The steps ahead will outline how you plan to achieve those goals—in other words, which programs and projects will get the job done. If your goals aren’t defined clearly somewhere, pause the project portfolio management process until you can complete this step. If you can—excellent; you’re ready to proceed. (Note that, if you’re doing departmental project portfolio management, the goals you should refer to are the goals of your individual department.)

2. Make a list of all projects and programs you’re considering pursuing.

Many project ideas come from leadership, but oftentimes team members generate project proposals based on opportunities they see or problems they encounter. Wherever the ideas originate, create a complete list so they will all be included for evaluation.

3. Align projects and programs to your objectives.

The next step is to determine which of the proposed projects will help you reach your objectives. A matrix, like the one shown below, is a helpful tool for visualizing:

  • Which projects and programs support which objectives.
  • Which projects and programs support multiple objectives. Those that do might take higher priority.
  • Which projects and programs don’t align with any objectives. In general, those that don’t line up should not be pursued. (Keep in mind that some projects are not strategic but rather operational or tactical in nature.) But if a particular project stands out as important, it could be a sign that you need to rethink your objectives.

4. Narrow down your list with filtering.

You likely won’t have enough resources to pursue all the projects and programs on your list simultaneously, which means you’ll need to narrow things down. At this stage, filter them by priority, level of impact, and level of effort. These broad filters will prompt you to consider how you can use your available resources most effectively. You can do this filtering in Excel, but a performance management tool like ClearPoint makes it even easier.

Below, three high-priority projects came to the forefront as a result of filtering, two of which also have a high level of impact. These two projects might be the first to make the list:

In most cases, your aim would be to get the most out of your available budget with projects that have a high impact with a lower level of effort. But you can also create a customized scoring system in ClearPoint based on any other factors you deem most important, which is especially helpful if you need to make tough decisions between competing projects.

Keep in mind that projects and programs that don’t make the cut aren’t necessarily off the table forever—they can simply move to a “projects for later” or “parking lot” list for reevaluation another time.

5. Narrow further with scoring.

Even after filtering, you may still need to narrow down your list. Scoring helps differentiate the remaining projects and programs by evaluating them against a certain set of criteria. Once you’ve scored each project, only those that have passed all the “tests” should be pursued.

To set up your scoring system, first build a scoring rubric to include the elements important to you, such as:

  • Cost
  • Strategic impact (the number of objectives impacted)
  • Time to implement
  • Interdependencies
  • Risk

Then, define your scoring criteria for each element. For example, will you use a five-point scale, with one being the lowest and five the highest? You’ll also want to define the criteria for a one, three, or five score; what makes something a “five”?

Finally, define weights for each element; what is their order of importance?

Then you can start scoring each project and program on your list.

6. Allocate resources based on priority.

Now that you have a list of worthy projects or programs, it’s time to take stock of your resources and assign them out.

You may want to allocate resources by objective or theme. A good project portfolio example for a local government would be one that has five strategic objectives, each with a central theme—infrastructure & mobility, community amenities, neighborhood quality, etc. If infrastructure & mobility is the highest-priority goal, it may warrant a higher percentage of the available resources—for example, 40%—while the remaining resources are divided at 15% each among the other themes.

7. Ensure the portfolio supports both short- and long-term goals.

Short-term goals—and the projects that support them—may be capturing your immediate attention, but your portfolio also needs to include projects that will drive improvement over the long-term too. For municipalities, COVID-19-related issues are pressing at the moment; you might be tempted to create a portfolio that is heavily skewed toward projects that will improve your services in this area now. Those projects are important, but your portfolio should also include some longer-term projects that will help keep your city on track for future progress.

8. Assign ownership.

Finally, it’s time to assign people and/or teams to the different programs and projects you’ve decided to pursue. You’ll also want to check any assumptions you’ve made along the way with those owners. Are your estimates regarding level of effort and timeline feasible? Will projects compete for attention or resources? After you’ve made any necessary adjustments, it’s time to pass the baton to your teams, who will carry out each project to its completion.

Managing the portfolio

Once the portfolio has been created, it’s time to implement those projects and programs, and manage the portfolio on an ongoing basis.

While the projects themselves are handed off to teams for execution, the portfolio manager continues to stay involved by overseeing progress and managing the overall performance of the portfolio. Occasionally changes need to be made—resources need to be reallocated for some reason or new projects are added to the mix, for example; portfolio managers must be flexible and willing to adapt, but ensure they maintain the right balance of projects even amidst these changes.

Information-gathering is essential in this stage, to determine not only how projects are proceeding but also the outcome of the portfolio—did the projects actually help the organization achieve its goals? Project portfolio management tools like ClearPoint are invaluable for both assessing performance data and reporting on it.

Assessing Performance Data

Because your projects can only be considered successful if they support organizational objectives, your project project portfolio management tool should clearly show the links between them.

ClearPoint users can easily link projects and programs to goals, and evaluate performance in a variety of ways:

  • Using its hierarchical scorecard system, you can see how projects and programs are dependent on or contributing to one another, and how they are contributing to the overall goals. It’s easy to roll everything up and get a view of the portfolio’s aggregate performance, or drill down and evaluate projects and programs individually.
  • You can set up automatic calculations to stay on top of portfolio performance data. Aggregate status and series calculations quickly add or average data across multiple measures, projects, objectives, or other elements.
  • You can visualize your performance data on a customized dashboard, so you can see at a glance how things are going. A gauge dashboard (shown below) quickly shows the relative performance of each project or program; a project status dashboard shows a high-level view of the progress of projects and programs using green, yellow, and red pie charts. Both offer quick ways to drill down and measure progress on individual project KPIs.

Reporting On Performance Data

Reporting is typically a burdensome task, but it doesn’t have to be! ClearPoint makes reporting simple—and saves tons of time—because it automates many aspects of the process.

  • It automatically gathers data and organizes it appropriately with measures, charts, calculations, and evaluations.
  • It creates reports from a single set of underlying data, and automatically updates reports if new data is entered.
  • It builds reports automatically for different audiences, depending on what data they need to see.
  • It can automatically send the right reports to the right people on a schedule you choose.

With ClearPoint, the information you’re working with is always current, clear, and accurate, helping you improve your portfolio’s chances for success.

Project Portfolio Management: The Ultimate Guide

RJ Messineo

Account Executive & True Crime Fanatic

RJ drives new business for ClearPoint, guiding prospective clients through the sales process.

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