Benefits of the Project Portfolio

Benefits of the Project Portfolio
By Miley W. Merkhofer

Once opportunities have been identified, with relevant information normalized and made easily accessible, individuals throughout the organization with broad understanding of the business can provide “reality checks.” Summary measures conveying data related to cost, risk, and benefit can be used to create graphics and comparative analyses that allow decision-making teams to collaborate on project-selection decisions.

Organizations invariably find that creating their first inventory of ongoing and proposed projects is revelational, “I didn’t know we had so many things going on, no wonder we can’t get anything done!” Counting projects produces instant value. If you schedule 130% of your human resources to projects, for example, you can be assured that some things won’t be done. Reducing the number of projects eases the strain on common resources, giving remaining projects the resources they need and eliminating time spent by managers in negotiations over the people and other resources.

The initial project inventory often uncovers significant duplications and mismatches. For example, when Schlumberger (a major energy company) first grouped IT projects, they found that 80% overlapped. Duplicate efforts should be eliminated, obviously, and similar projects combined into a single project. Schlumberger reportedly saved $3 million just by eliminating project redundancies.

Looking at projects from the perspective of the portfolio makes projects look less like discrete efforts and more like a connected suite. Information and understanding is improved. Interdependencies among projects can be noted. New requirements can be evaluated against current commitments. Portfolio analysis allows investigating questions like, “How are resources for Project A impacted if Project B is delayed?” The portfolio extends the focus beyond individual project management and highlights objectives and goals.

Recognizing project portfolio management as an ongoing activity creates a shift away from typical one-off, ad hoc approaches to project management. The portfolio establishes a philosophy and culture that enables visibility, standardization, and measurement as a means for process improvement.

The following hierarchically summarizes these and other benefits typically observed from implementing project portfolios.

Benefits of the Project Portfolio for Executives and the Business

• Supports optimization of resource allocation
• Standardizes metrics/methods for project forecasting and tracking
• Improves communication throughout the organization
• Promotes accountability for project investments
• Forces executives towards consensus on policy level issues

Benefits of the Project Portfolio for Program Managers

• Fewer redundant and overlapping projects
• Promotes objectivity for project selection and prioritization
• Faster access to project data
• Consistent tracking of project time and expenditures
• Facilitates inter-project coordination

Benefits of the Project Portfolio for Project Managers

• Helps level the playing field
• Facilitates communicating needs, rationale for projects
• Promotes leveraging reusable project information
• Clarifies project objectives and goals
• Forces executives/sponsors to accept responsibility for some project risks

Miley W. (Lee) Merkhofer, Ph.D., is an author and practitioner in the field of decision analysis who specializes in assisting organizations in implementing project portfolio management. He has served on advisory panels for several government agencies and has received grants and research awards for work in the area. Lee is an editor of the journal Decision Analysis.

Prior to becoming an independent consultant, Lee was a Partner of PriceWaterhouseCoopers, where he founded that organization’s capital allocation and project prioritization business practice. Lee is a founding partner of Folio Technologies LLC, a provider of web-based, project portfolio management software.

Lee received his Ph.D. in engineering economic systems from Stanford University. He is the author of the book Decision Science and Social Risk Management and co-author of the book Risk Assessment Methods..

Additional papers on project portfolio management can be found on Lee’s website, www.prioritysystem.com. E-mail: lmerkhofer@prioritysystem.com.