The world of project management knowledge can sometimes feel stodgy and pedantic to a practical business person looking for answers. If you’re that person, and if you’re looking for answers about portfolio management, you’ve come to the right place. While a blog post certainly isn’t a substitute for the entire PMBOK textbook, some things are just better served straight up (i.e., the quick and dirty version).

Portfolio management—synonymously referred to as “project and portfolio management,” or PPM—isn’t as complicated as you might think. In fact, it’s a lot like regular project management, only with a 30,000-foot view.

Portfolio management is the practice, the science and the art of balancing investments and resources between a group of multiple projects. This could mean half a dozen projects at one company or several hundred projects across another enterprise-level organization.

Portfolio management methodologies and specific PPM solutions tend to see the most use in large companies. Recent findings by PM Solutions indicated that 60 percent of firms use PPM processes and practices at the enterprise level. This correlation is probably due to the fact that enterprises have a higher quantity of demanding projects. But it doesn’t mean PPM is only for the enterprise. Regardless of size, there are a number of signals that might indicate the need for a PPM methodology or a specific PPM solution, such as:

● Your company is innovative and product focused.
● Your business regularly juggles multiple projects at the same time.
● Your projects require collaboration from dispersed teams and groups of stakeholders.
● Your projects are asset-intensive and involve a high degree of risk.

The aim of portfolio management

Individual projects are contained environments, meaning they exist outside the realm of “business as usual” and have their own internal goals. But without proper governance, a project can spin out of control, and could even take your business down with it. According to the Project Management Institute, project-focused organizations lose almost $110 million for every $1 billion spent on projects and programs.

Portfolio management helps organizations minimize loss by aligning individual projects with larger business strategies. There are a few ways this happens:

• Through prioritization: This is where project managers and execs decide which projects have the highest potential for profit; which pose the greatest risks; which should receive the largest share of resources, etc., and then allocate investments accordingly.

• Through understanding interdependencies: The top-down perspective of portfolio management affords decision-makers better visibility into the areas where projects overlap and connect. Portfolio managers can also use modeling techniques to predict the impact of specific changes.

• By making sacrifices: Keeping projects aligned with larger business strategies means that, occasionally, you’ll find some that aren’t. Rather than letting these project slowly atrophy, a portfolio mindset will help you decide when to cut the cord—i.e. stop committing resources, or discontinue projects altogether.

Core practices

Beyond the theoretical aspects, PPM accomplishes its work through five core practices.

Resource planning and allocation: Project managers specify which resources and what quantity are required, monitor these resources for availability, utilization, and cost, and allocate or re-assign them to the right projects at the right times. A resource is basically any ingredient required to complete a project—labor, skillsets, equipment, materials or even IT assets.

Project pipelines: Similar to sales pipelines, project pipelines track projects as they move from conception to planning, progress, and completion. This end-to-end visibility helps management draw better insights and set accurate capacity limits based on time and resources.

Risk management: Risk management involves data-driven analysis of the dangers and potential failures within a portfolio, or in future projects. “No risk, no reward” is an exciting way to think, but in general it’s a bad idea to have a portfolio that’s dominated by high-risk projects. Typically, asset-intensive projects need to be constantly reassessed.

Change management: Since every project is accountable to some kind of stakeholder—whether a group of customers, a vendor, or senior management—very few projects have static requirements. Change management techniques build flexibility into the portfolio by letting managers incorporate new specifications, regulatory constraints, or features into existing workflows, and matching requests with available time and resources.

Portfolio accounting: At the project level, financial management is usually focused on localized impact: tracking expenses and staying under budget. Portfolio accounting, however, is the continuous process of making sure projects add value to an organization. This can include forecasting revenue, making investment decisions based on profitability, and preventing loss by scaling back efforts or resources.

PPM software

As we mentioned earlier, the use of a PPM methodology is fairly prevalent among larger companies. However, many still aren’t using a specific PPM solution, and PPM is even less common among small or mid-sized businesses. This presents a problem because it means project managers are trying to solve complex problems and tasks manually, without a centralized system.

PPM software offers tools for navigating some of the most challenging aspects of portfolio management. There are a wide variety of systems available, ranging from simple, cloud-based project management software to entire enterprise suites. PPM solutions give managers better visibility and control of project pipelines, tasks and teams, resource allocation, scheduling, change request repositories, and access to powerful analytics.

According to 2012 findings from the Aberdeen Group, projects managed with PPM software are 44 percent more likely to finish on time, 38 percent more likely to finish under budget, and 52 percent more likely to reach their expected ROI.

Closing thoughts

It’s easy to underestimate the complexity of project and portfolio management, but it’s also easy to overcomplicate things by going without the right tools. If you’re still relying on email, spreadsheets, sticky-notes, and dry-erase boards, then you aren’t keeping a balanced portfolio. Effective project and portfolio management requires a keen eye for what your business needs most, a willingness to cut what you don’t, and a strong foundation comprised of the right technology.

Tell us how you manage a portfolio of projects in your organization.