Project Portfolio Management 101: Processes, Tools, and Examples

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Project Portfolio Management 101: Processes, Tools, and Examples on Smartsheet, August 11, 2017.

Project Portfolio Management vs. Project Management vs. Program Management

Before delving deeper into PPM, it’s important to understand the difference between this discipline and related fields, such as project management (PM) and program management (PgM). PMI defines project management as “the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements.” (Remember, a project is a temporary, unique effort to create a product or service, so project management is, therefore, also temporary and concerned with a unique effort.)

According to PMI, program management is “the application of knowledge and skills to monitor and manage a program — a group of related projects.” By contrast, project portfolio management is the zoomed-out, big-picture view of all potential projects. PPM is a strategic system of evaluating multiple projects so that project and program managers can make informed decisions when accepting, prioritizing, and triaging projects.

Alan Zucker is a project management professional with over 25 years of experience. He is a Founding Principal of Project Management Essentials and previously worked as both a Program Manager and Director of Project Management at Fannie Mae. When asked about the relationship between PM, PgM, and PPM, Zucker says, “Projects, programs, and portfolios are generally hierarchical. PPM usually refers to the highest level, where we are managing all of the efforts to ensure strategic alignment.”

Zucker gives an example of the difference between the three: “For example, an automotive company manages a project portfolio that includes all of the cars, trucks, and SUVs in its product line. There may be a separate portfolio dedicated to managing SUVs that includes managing the existing suite of products (operations) as well as developing new models. The effort to develop a new SUV model would be a program comprised of several interrelated projects that need to be coordinated. There would be individual projects to design the engine, interior, exterior, etc. that are part of the new SUV model program.”

Successful organizations will create a framework where PM, PgM, and PPM all work jointly. Rather than having project managers or program managers who only support their own projects or departments, everyone must work together in the organization’s best interest.

The Benefits of Project Portfolio Management

The high-level benefit of project portfolio management is creating a reliable system within which companies can consistently manage their projects and programs.

Zucker sums this up: “The expected benefit of PPM is that the enterprise can manage, control, and govern its project investments to maximize its return on investment (ROI) and ensure that all efforts are aligned with the corporate strategy.”

What Is a PPM Tool?

A project portfolio tool is a centralized management system to oversee the PPM process. To accomplish the many goals laid out by PPM, there are a variety of software tools that automate processes (to reduce manual calculations and labor).

Alan Zucker explains the recent popularity of software tools. “The software platform enables the ability to track the lifecycle of all projects from ideation to funding approval to execution to benefits realization,” he says. “If a software platform is not used, all of this information would not be tracked or would be tracked on incompatible and out-of-date spreadsheets.”

The main benefit of PPM software is that it grants visibility into every aspect of your PPM process, from the evaluated categories (budget, resources, risks, etc.) to status to the decisions themselves. PPM software can standardize processes and eliminate discrepancies by providing reliable documentation of all communication, decisions, and evaluations that occur in the PPM life cycle. Additionally, many tools like reporting, data analytics, or dashboards enable higher-level functionality to grant visibility into your data-driven decision making.

“The software can ensure that data is collected consistently for all projects,” Zucker says. “Workflow can be enabled to reduce the manual effort of tracking down approvals. Standard reports can be generated from the software, which eliminates the need for people to waste countless hours manually creating reports. The software also fosters standardized tools and practices.”

…However, both Pusz and Zucker warn against assuming that PPM tools will solve all process-related problems. In fact, both call attention to the many challenges of implementing project portfolio management software.

First of all, the sheer volume of projects and management activities that PPM is responsible for makes the entire process difficult to control. Zucker speaks to this. “In my experience…it [PPM software] establishes an orderly process for governing the allocation of investment dollars. It provides visibility into the projects and programs being executed,” he notes. “However, it is very difficult to centrally monitor and control a large number of projects or complex programs. Monitoring and controlling a portfolio of projects requires collaboration between the project and program managers and the portfolio managers,” he adds.

This requisite communication introduces the second key challenge: forcing employees to collaborate across management levels. “Individual project, program, and portfolio managers tend to have their own preferred practices for managing projects,” Zucker continues. “Enterprise PMOs and Finance organizations also have their own expectations and requirements for the tool. Coming to a shared, common set of expectations and processes across these groups can be challenging. Often, there is an imbalance in which one group’s requirements prevail over another’s,” he emphasizes. This can lead to disputes and stalled performance.

These challenges should not deter you from adopting PPM software, but you should be aware of the limitations before you begin implementation and actively work to combat them. Done intentionally, implementation of a software tool can be very effective. After all, as Zucker points out, “In general, these challenges do not arise because the tools have intrinsic limitations. The challenges are often caused by how the enterprise decides to build or configure the software.”

How to Choose the Right Project Portfolio Management Software

While each tool will tout unique features that you can tailor to your organization, you shouldn’t choose software based on functionality alone. As Zucker and Pusz point out, a fancy software program will not solve all of your process problems overnight. In some cases, it might introduce more issues. Instead, you must first ensure that you have the internal bandwidth to both implement and maintain a software tool of this size and gravity.

The basic framework for choosing a tool is simple in theory, but often complex in practice. To find the right PPM software for your company, you must consider two key factors: organizational fit and cost.

Concerning this first step, organizational fit, you need to determine the specific needs of your company and if and how a software tool can meet these needs. Think of fit as an umbrella term that includes size, capabilities, support systems, and other cultural factors.

“The first step when choosing a PPM tool is understanding your enterprise and organizational needs,” says Zucker. “Most of the tools have their own strengths and weaknesses. The key question is: How will the tool work in your environment?

Pusz agrees, saying that it is necessary to ask the question, How will the tool fit the culture of the organization?

Here is a list of questions, from Pusz and Zucker, that can guide your investigation into PPM software fit:

  • How do you plan to use the tool?
  • What features and functions are important to you?
  • Is compatibility with other programs a key requirement?
  • Is your organization using a certain PM methodology (such as Agile or Scaled Agile)?
  • If so, will the tool work in that environment?
  • Is workflow an important consideration?
  • If the teams are distributed in multiple locations, does the tool provide proper collaboration capabilities?
  • Does the tool provide different levels of access and information for leaders vs. project resources?

Regarding the second key factor of cost, expenses go far beyond the sticker price of the new software. As Pusz and Zucker explain, there are many hidden and qualitative costs that take your organization’s budget, resources, and health into account.

As Zucker says, “Don’t just look at the initial cost of purchasing or licensing the software. Look at the total cost of ownership.”

Use the following questions, again paraphrased from Pusz and Zucker, to guide your investigation into product cost:

  • What is the initial cost of purchasing or licensing the software?
  • What is the effort and cost of configuring the software for your environment?
  • What are the per-seat or licensing costs?
  • What are the ongoing costs for maintaining the application? How big of a team will you need to maintain and enhance the application?
  • What are the organizational tools, such as project scheduling, accounting solutions, or reporting solutions?
  • What is the maturity level of the staff using the tool? What (ongoing or intermittent) training will be necessary?
  • If you are using a software as a service (SaaS) model, does the vendor meet your security, reliability, and scalability needs?

An in-depth investigation into organizational fit and cost is imperative to finding a tool that will suit your organization’s needs, especially over time. Because PPM is inherently process oriented, you’ll need a tailored, robust, and adaptable program that also fits within your company’s constraints. Without taking the time to isolate your specific needs, a PPM software tool will likely fail and potentially erode your existing processes.

“Most organizations fail to recognize the value and importance of organizational change management,” says Zucker. “They implement a new software package without understanding how it fits into the organizational context and culture, and then they wonder why there is resistance to its use.”

Zucker offers two examples where organizations overlooked certain internal criteria, which led to ineffective PPM tool use:

  • “One of the PPM tools was configured so that resource-level cost estimates had to be entered into the tool. Most project managers developed their cost estimates on a spreadsheet and then entered them into the tool. It would generally take a minute to enter a single estimate (one person for one month). It would literally take hours to re-enter data into the tool.
  • One enterprise PMO organization implemented a set of project health indicators using an internally developed algorithm. The algorithm created a lot of false positives. The indicators were abandoned until a new set could be implemented.”