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Project Portfolio Management in Ten Minutes
By Kailash Awati

Let’s begin with a few definitions:

Portfolio: The prioritised set of all projects and programs in an organisation.

Program: A set of multiple, interdependent projects which (generally, but not always) contribute to a single (or small number of) strategic objectives.

Project: A unique effort with a defined beginning and end, aimed at creating specific deliverables using defined resources.

As per the definition, an organisation’s project portfolio spans the entire application and infrastructure development effort within the organisation. In a nutshell: the basic aim of PPM is to ensure that the projects undertaken are aligned with the strategic objectives of the organisation. Clearly then, strategy precedes PPM – one can’t, by definition, have the latter without the former. This is a critical issue that is sometimes overlooked: the executive board is unlikely to be enthused by PPM unless there are demonstrable strategic benefits that flow from it.

The main aim of PPM is to ensure that the projects undertaken within the organisation are aligned with its strategy. Outlined below is an approach to PPM that is aimed at doing this.

The broad steps in managing a project portfolio are:

  1. Develop project evaluation criteria.
  2. Develop project balancing criteria. Note: Steps (1) and (2) are often combined into a single step.
  3. Compile a project inventory.
  4. Score projects in inventory according to criteria developed in step (1)
  5. Balance the portfolio based on criteria developed in step (2). Note: Steps (4) and (5) are often combined into one step.
  6. Authorise projects based on steps (4) and (5) subject to resource constraints and interdependencies
  7. Review the portfolio

I elaborate on these briefly below:

  1. Develop project evaluation criteria: The criteria used to evaluate projects are obviously central to PPM, as they determine which projects are given priority. Suggested criteria include:
    • Fit with strategic objectives of company.
    • Improved operational efficiency
    • Improved customer satisfaction
    • Cost savings

    Typically most organisations use a numerical scale for each criterion (1-5 or 1-10) with a weighting assigned to each (0

  2. Develop balancing criteria: These criteria are used to ensure that the portfolio is balanced, very much like a balanced financial portfolio (on second thoughts, perhaps, this analogy doesn’t inspire much confidence in these financially turbulent times). Possible criteria include:

    • Risk vs. reward.
    • Internal focus vs. External (market) focus.
    • External vs. internal development
  3. Compile a project inventory: At its simplest this is a list of projects. Ideally the inventory should also include a business case for each project, outlining the business rationale, high level overview of implementation alternatives, cost-benefit analysis etc. Further, some organisations also include a high-level plan (including resource requirements) in the inventory.

  4. Score projects: Ideally this should be done collaboratively between all operational and support units within the organisation. However, if scoring and balancing criteria set are set collaboratively, scoring projects may be a straightforward, non-controversial process. The end-result is a ranked list of projects.

  5. Balance the portfolio: Adjust rankings arrived at in (4) based on the balancing criteria. The aim here is to ensure that the active portfolio contains the right mix of projects.

  6. Authorise projects: Projects are authorised based on rankings arrived at in the previous step, subject to constraints (financial, resource etc.) and interdependencies. Again, this process should be uncontroversial providing the previous steps are done using a consultative approach. Typically, a cut-off score is set, and all projects above the cut-off are authorised. Sounds easy enough and it is. But it can be an exercise in managing disappointment, as executives whose projects don’t make the cut are prone to go into a sulk.

  7. Review the portfolio: The project portfolio should be reviewed at regular intervals, monitoring active project progress and looking at what’s in the project pipeline. The review should evaluate active projects with a view to determining whether they should be continued or not. Projects in the pipeline should be scored and added to the portfolio, and those above the cut-off score should be authorised subject to resource availability and interdependencies.

The steps outlined above provide an overview of a suggested first approach to PPM for organisations beginning down the portfolio management path.This is one approach; there are many others.

Original article can be found at http://eight2late.wordpress.com/2009/02/23/project-portfolio-management-for-the-rest-of-us/.

Kailash Awati currently manages IT development at a multinational in Australia. Over the last several years, he has managed IT projects at companies ranging from startups to established firms. He has also worked as a business and technology consultant for companies in Europe and the US.

On the technical side, he is a seasoned database architect and administrator with wide experience in designing, implementing and administering databases for transactional and analytical applications.

Earlier, in what seems to him like another life, he did research in fluid dynamics and other areas of physics.

For what it’s worth, he holds doctoral degrees in physics and chemical engineering together with assorted certifications in project management and database administration. An admittedly strange mix, which he sometimes finds hard to explain.

He blogs at eight to late, where he writes about project management and other (at times distantly) related topics. Oh, and he also maintains a web presence at www.orafusion.com where he publishes longer articles on his professional interests and the occasional cryptic crossword.

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