Project Portfolio Management: The Ultimate Guide

One of the hardest parts of strategic planning is choosing which activities to pursue to reach your goals and objectives. Many organizations struggle to deliver on their strategy, often because their project and program management practices are underdeveloped and underused. It doesn’t have to be this way. With project portfolio management, you can select and manage the projects that will help you achieve your goals and set yourself up for 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.

You need to use your resources as efficiently as possible to support your 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 helps organizations execute strategy, work efficiently, and achieve their goals.

The Project Portfolio Management Process

To get the most benefit from your activities, weigh resource capacity against the strategic fit of each proposed project and program. Below are the steps to create a project portfolio. Your organization’s process might differ in the specifics, but the general outline should stay the same.

1. Identify your objectives or goals.

The first step is to make sure your organization’s goals are clear. Know which objectives 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 outline which programs and projects will get you to those goals. If your goals aren’t defined clearly somewhere, pause the project portfolio management process until you can complete this step. If they are, 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 team members often 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, filtering brought three high-priority projects to the top, 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.

Projects and programs that don’t make the cut aren’t necessarily off the table forever. They can 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, you might use a five-point scale, with one the lowest and five the highest. Also spell out what earns a one, three, or five score, and what makes something a “five.”

Finally, define weights for each element to set 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, take stock of your resources and assign them.

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 such as infrastructure & mobility, community amenities, or neighborhood quality. If infrastructure & mobility is the highest-priority goal, it may warrant a larger share of the available resources, for example 40%, with the remaining resources split 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 capture your immediate attention, but your portfolio also needs projects that drive improvement over the long term. For municipalities, urgent service needs can tempt you to create a portfolio that is heavily skewed toward immediate fixes. 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. Check the assumptions you’ve made along the way with those owners: whether your estimates of level of effort and timeline are feasible, and whether projects will compete for attention or resources. After you’ve made any needed adjustments, 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. Sometimes changes are needed. Resources may need to be reallocated, or new projects added to the mix. Portfolio managers must be flexible and willing to adapt, while keeping the right balance of projects through these changes.

Information-gathering is essential at this stage. You need to know how projects are proceeding and whether they actually helped 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 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 automates many parts of the process, which makes reporting simple and saves a lot of time.

• 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.