Project Portfolio Management (PPM) does not involve making project-by-project choices based on fixed acceptance criteria. Instead, decisions to add or subtract projects from the portfolio are based on the four goals of PPM:
1) Maximizing the value of your portfolio
2) Seeking the right balance of projects
3) Creating a strong link to your strategy
4) Doing the right number of projects
But how does this help your organization? Why does it makes sense to implement it? Below you will find ten clearly measurable benefits that you can expect when implementing PPM in your organization. Let’s explore each of these benefits in detail.
1) More Insightful Decision-Making
The first benefit of PPM concerns its ability to drive better business decisions. To make good decisions you need good data, and that’s why visibility is so crucial, both from a strategic, top-down perspective and from a tactical, bottom-up perspective.Anything that can be measured can be improved. However, organizations don’t always do sufficient monitoring. Few organizations actually track project and portfolio performance against benchmarks. Worse, strategic multiyear initiatives are the least likely to be tracked in a quantitative, objective manner. For smaller organizations, the absence of such a process might be understandable, but for a large organization, tracking is a must.
Not monitoring project results creates a vicious circle: If results are not tracked, then how can the portfolio management and strategic planning process have credibility? It is likely that it doesn’t, and over time, the risk is that estimates are used more as a means of making a project appear worthy of funding than as a mechanism for robust estimation of future results. Without tracking, there is no mechanism to make sure initial estimates of costs and benefits are realistic.
When you have a good handle on past project metrics, it makes it much easier to predict future factors like complexity, duration, risks, expected value, etc. And when you have a good handle on what is happening in your current project portfolio, you can find out which projects are not contributing to your strategy, hindering other more important projects, or not contributing enough value.
Reviewing the data of your project portfolio gives you project history that reflects the symbiotic relationship between money, time, people, value, and projects. Informed decision-making forces you to draw findings based on organization-wide benefits rather than personal interest, contributing to overall portfolio success.
High-value projects are those that align strategically with the organization’s long-term objectives. Effective portfolio management collects information from those project initiatives that performed well in the past and successfully delivered business value. It explores the probability of similar projects flowing in the pipeline, preparing your people to obtain the appropriate briefing and training beforehand.
Your organization is as good as the data you have. The longer you rely on outdated or irrelevant information, the more you just guess and operate in the dark. PPM gives you a reporting and monitoring strategy that will help you get the insights you need. See “How to monitor your portfolio” for more details.
2) Better Risk Management
It is important for organizations to create portfolios that reduce risks, but at the same time, it is necessary to take enough risks to move forward and stay competitive. You must target a point on the scale between playing it so safe that you never reach your full potential, and taking too much risk and losing everything.Where this point is depends on your appetite for risk, the stage of your organization, your industry, and many other factors that you know better than I do. After you have decided on this point, your project portfolio needs to be balanced in such a way that the combined set of projects have the risk profile and upside potential you want.
PPM helps you create this balance by making the risk vs. value balance visible, transparent, and part of the decision-making process. See “How to evaluate your portfolio” for more details.
3) Optimized (NOT Maximized) Resource Utilization by Doing the Right Number of Projects
Traditional project portfolio management is all about value optimization and optimizing resource allocation. Both are designed in such a way that, in my opinion, it will result in the opposite. As we have seen time and again, running projects at hundred-percent utilization is an economic disaster. Any small amount of unplanned work will cause delays, which will become even worse because of time spent on re-planning, and value is only created when it is delivered and not when it is planned. Hence, we should focus on delivering value as quickly as possible within our given constraints.This brings us to lean thinking. Lean is sometimes described as focusing on smaller batch (project) size, shorter queues, and faster cycle time. The focus is on delivering value quickly. In truth, lean is much more than this. The pillars are respect for people and continuous improvement resting on a foundation of manager-teachers in lean thinking. Queue management is just a tool that is far from the essence of lean thinking. But it is a very helpful tool that can have a very positive impact on your project portfolio management process.
PPM gives you a framework and guidelines to help you do this. See “Doing the right number of projects” for more details.
4) Alignment With the Strategy of the Organization
One of the biggest mistakes organizations make is not linking projects with strategic goals. Many organizations have a well-defined and well-scoped strategic process. This can be augmented by better and broader idea capture to provide supportive tactics, but the execution of it is the critical challenge. Indeed, as is widely recognized, weakness in execution, not a weakness in strategy, is a primary reason for organization failure. Knowing this, it is important to link the strategic theory governing the organization to the experience of project management. Without this linkage, either the project portfolio is blind to the needs of the organization or the strategic goals are empty, with no support at the execution level. It is clear that this is an area that organizations must get right for long-term success.Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat. – Sun TzuPPM makes this linking part of every step of the process. See “How to categorize your project backlog“ and “How to evaluate your portfolio” for more details.
5) Increased Project Delivery Success
One of the best ways to demonstrate the value of PPM is to show how it creates an environment that leads to repeatable and predictable project success. While not discounting the skills of the Portfolio Team, the essence of an effective PPM is providing a process framework and technology infrastructure that allows you to continuously meet your organization’s objectives. Repeatable success is gained by establishing best practices and proven project management methodologies and enforcing their use throughout the organization.PPM consists of methods that factor in the scale, complexity, duration, and deliverables of a project. With an effective PPM strategy, you can leverage the processes and lessons learned from previous projects. A central repository of historical and real-time data helps you prioritize projects, preventing them from being wrecked by ‘guesstimations.’ This way you can be a proactive organization, not a reactive one.
Unsuccessful project delivery leads to project failure. Project failure can be caused by many factors such as cost overruns, schedule delays, poorly defined requirements, mismanaged resources, lack of strategy alignment, unresolved issues, or technical limitations. PPM allows organizations to ensure these risk factors are transparent and minimized within project delivery.
While it is easy to see how your projects perform in the present, what matters more is ensuring this success repeats itself in the future. Aggregating your projects gives you a consolidated view. This leads to your demands being captured in order to evaluate and prioritize your projects. Individual roles and responsibilities can be allocated to workload, which structures your workflow.
Repeatable success is achievable with a framework that sets boundaries to tightly control the project. It mandates the usage and effectiveness of technical infrastructure and establishes practices that improve governance. Repeatable success equals progress toward your organization’s objectives when the projects were aligned with those objectives in the first place. Many projects fail to deliver benefits even if they’re executed successfully.
6) Faster Project Turnaround Times
Too many organizations try to save money on projects (cost-efficiency) when the benefits of completing the project earlier far outweigh the potential cost savings. You might, for example, be able to complete a project with perfect resource management (all staff is busy) in 12 months for $1 million. Alternatively, you could hire some extra people and have them sitting around occasionally at a total cost of $1.5 million, but the project would be completed in only six months.What's that six-month difference worth? Well, if the project is strategic in nature, it could be worth everything. It could mean being first to market with a new product or possessing a required capability for an upcoming bid that you don't even know about yet. It could mean impressing the heck out of some skeptical new client or being prepared for an external audit. There are many scenarios where the benefits outweigh the cost savings (see "Cost of delay" for more details).
On top of delivering the project faster, when you are done after six months instead of 12 months you can use the existing team for a different project, delivering even more benefits for your organization. So not only do you get your benefits for your original project sooner and/or longer, you will get those for your next project sooner as well because it starts earlier and is staffed with an experienced team.
An important goal of your project portfolio management strategy should be to have a high throughput. It’s vital to get projects delivered fast so you start reaping your benefits, and your organization is freed up for new projects to deliver additional benefits.
There are many reasons why PPM can reduce project turnaround times by an average of 10 percent. Lean governance, workflow, and standardization tend to reflect repeatable, proven processes. The defined processes aligned with PPM technology allow team members to keep the work flowing and will typically increase productivity because it answers two important questions: “What do I stop doing?” and “What do I do next?” As we all know, strategically aligned projects should always result in value for the organization. With shorter time to market, this value can be realized sooner and in many cases can give organizations a head start on their competition. See “Project portfolio throughput: Faster is better” for more details.
7) Maximized Organization Impact
You will maximize the impact of your projects for your organization when you follow the process of PPM. Since PPM is built around the four goals below, you will do the right projects—namely, the ones that push your strategy forward and deliver actual value whilst fitting your appetite for risk.1) Maximize the value of the portfolio.
2) Seek the right balance of projects, thus achieving a balanced portfolio.
3) Create a strong link to strategy, thus the need to build strategy into the portfolio.
4) Do the right number of projects.
See “How to evaluate your portfolio” for more details.
8) Reduced Sunk Costs
For large or high-risk projects (what is large depends on your organization) it should be mandatory to do business case validation before you dive head-first into executing the project. In the Project Portfolio Funnel below you will see a phase called "Validation" after selection of a project has taken place. In this phase you typically have a business case validation and/or a technical validation in the form of a proof of concept.
We will distinguish between four different kinds of validations. Depending on the project that you want to validate the business case for, you do only one, two, three, or all four of them. When your project is about launching a new product or service I would advise you to do all four validations before executing the project. The results of these validations form your business case validation. Or the opposite, of course; they can also show you that you should not do this project.
A. Validate the problem: Is this a problem worth solving? If users don’t think this is a major problem, your solution won’t be appealing.
B. Validate the market: Some users might agree that this is a problem worth solving. But are there enough of them to make up a market for your product or service?
C. Validate the product/service/solution: The problem might exist, but does your product/service/solution actually solve it?
D. Validate the willingness to pay: There might be market demand and a great product or service. But will people actually be willing to reach into their wallets and pay for it?
As you can see, these validations focus on the introduction of a new product or service for your clients. But you can easily reframe them for all of your projects. Your market can be your employees instead of customers. For example, when you think about implementing a new CRM, but only a very small but vocal number of users see the benefit of it, and are actually quite happy with what they currently have, your market is too small. Or how about the willingness to pay for the accounting department for a new solution that triples the yearly operational costs? See “No validation? No project!” for more details.
9) Transparency
Project Portfolio Management relies on transparency. Decisions to optimize value and control risk are made based on the perceived state of the artifacts. When transparency is complete, these decisions have a sound basis. When artifacts are incompletely transparent, these decisions can be flawed, value may diminish, and risk may increase. See “How to monitor your portfolio” for more details.10) More and Better Ideas
Although there is clearly no shortage of ideas within organizations, most organizations unfortunately seldom capture these ideas, except in the few cases where a handful of employees are sufficiently entrepreneurial to drive their own ideas through to implementation. This can happen in spite of the organization, rather than because of it.Organizations are effective at focusing employees on their daily tasks, roles, and responsibilities. However, they are far less effective at capturing the other output of that process: the ideas and observations that result from it. It is important to remember that these ideas can be more valuable than an employee’s routine work. Putting in an effective process for capturing ideas provides an opportunity for organizations to leverage a resource they already have, already pay for, but fail to capture the full benefit of—namely, employee creativity.
To assume that the best ideas will somehow rise to the top, without formal means to capture them in the first place, is too optimistic.Providing a simplified, streamlined process for idea submission can increase project proposals and result in a better portfolio of projects. Simplification is not about reducing the quality of ideas, but about reducing the bureaucracy associated with producing them. Simplification is not easy, as it involves defining what is really needed before further due diligence is conducted on the project. It also means making the submission process easy to follow and locate, and driving awareness of it. PPM defines exactly such a process. See “Demand management” for more details.
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