The 2017 PMI Pulse of the Profession Report claims that organizations investing in proven project management practices save 28 times more money because a greater number of their strategic initiatives are completed successfully. It is no surprise then that project portfolio management (PPM) has emerged as one of the key functions of a project management office (PMO) in the last decade.
PPM is the discipline of evaluating potential projects by accounting for each project’s anticipated successes and risks and its alignment with organizational strategy.
Let us look into a few benefits that PPM brings to organizations.
1. Improved project selection process
Project portfolio management emphasizes selecting the right set of projects according to business goals, risk, resource availability, and other criteria. The goal of processes #1 to #5 in the PPM lifecycle is to evaluate and pick the project that will deliver maximum value to the organization.
By using a combination of qualitative and quantitative techniques, such as ranking methods, scoring models, and other heuristic methods, PPM ensures that go/no-go decisions are based on relevant and well-defined criteria rather than ambiguous factors.
2. Better view of the big picture
Often, organizations tend to lose focus on their long-term roadmap in the chaos of fixing issues and executing short-term projects. For example, large infrastructure projects take months or years to complete. During that time, many things could change. For example, the assumptions at the start of the project may no longer be relevant, resources may dwindle, and so on. It’s possible to get pulled into these issues and forget the larger picture.
PPM helps put things in perspective and supports making tough decisions based on the company’s long-term objectives.
3. Focus on objective business goals
37% of executives report the primary reason for organizational failure is a lack of clearly defined goals and objectives without the necessary targets and milestones to measure progress. If the company gets sidetracked by a pet project or the hype around an appealing but ultimately fruitless industry trend, this may be reflected in the company’s financial returns or unclear strategy.
Project portfolio management creates an open culture where managers can ask questions to ensure that business always comes first. With clearly defined goals and a strategy to get there, organizations can use PPM to ensure all approved projects meet the needs of the business.
4. Collaboration over competition
In large enterprises, different project groups with different goals can end up functioning as competing units vying for financial and human resources. For example, one group may focus on research and the other on execution of on-going projects.
PPM tackles this challenge by ensuring alignment of projects with overall strategy and using a meticulous, standardized approach to evaluate demands from different functions. It also eliminates redundancies in projects and encourages project managers to leverage mutual teams for a more collaborative environment.
5. More efficient use of resources
In recent research, 26% of executive leaders mentioned that resource dependency was a factor in project failures. Resource planning and demand management can be difficult.. Should you decide on projects based on availability of resources, or hire/allocate resources based on chosen projects?
The portfolio view enables a more rounded approach. By considering enterprise resource availability right at the beginning when choosing projects and then continuing to review them periodically, it provides the clarity to use resources optimally across projects.
6. More accurate project performance data
One of the core tenets of portfolio management is continuous monitoring and controlling.
PPM tools help connect high-level portfolio data with on-the-ground project indicators and assess if the portfolio performance is as expected. Establishing performance thresholds and tolerance levels help to identify potential trends that could have a negative impact on the portfolio and ultimately prevent meeting objectives. Gathering real-time metrics make it possible to adapt quickly to strategic or “environmental” changes.
7. Increased timely project deliveries
Despite the best estimates and efforts, the struggle to complete projects on time is real. Unforeseen factors tend to influence project parameters.
As per the 2017 PMI report, champion organizations complete an average of 88% of their projects on time in comparison with underperformers, who only manage a meager 32%. It’s also interesting to observe the strong correlation of timely completion with costs—champions complete 90% of their projects on budget whereas only 25% of underperformers are able to do so.
One of the reasons attributed by the report to these metrics is that successful organizations aim to bridge strategy formulation and execution, which is one of the core principles of PPM.
8. Decreased organizational risk
While project management looks at an individual project’s risks, PPM gives a more holistic view by looking at the risk versus return profile of the entire project portfolio. This ensures that organizations can prepare for contingencies with backup plans. This helps lay the foundational framework for an evolved risk management strategy.
9. More informed decision-making
Senior leaders have tons of decisions to make every day. It’s important to get these right, as a great decision could serve as an inflection point in your organization’s history. For example, does this major investment transform the business or ultimately lead it to a destabilization of the share price? Groundbreaking decisions can only be made when backed by accurate, objective data.
Portfolio management constantly questions the status quo. It also encourages the use of data-centric tools, enabling leaders to make the right decisions.
10. Increased ROI
Ultimately, the goal of any organization is to achieve increased returns. This usually means financial goals, but it can center around operations, service, or regulatory/compliance, as well. By investing in portfolio management tools and training your people to wear the “portfolio hat,” it becomes possible to improve the probability of projects’ success, increase predictability, make cost-saving decisions more quickly, and gain better ROI on your efforts.
Getting Started with PPM
To reap the benefits discussed above (plus many more), organizations need to mature their PPM practices. You can do this by empowering and training those with the correct mindset for PPM. Then, by providing them with effective PPM tools, which give clear, real-time insights for project performance across the organization.
See how EcoSys Portfolios can be a solution that can help bring PPM benefits to your business.