Six Essential Capabilities for Practicing Project Portfolio Management
Six Essential Capabilities for Practicing Project Portfolio Management
By Miley W. Merkhofer
The basic capabilities you will need to practice PPM are:
- Capability to collect, store, and access project data. You’ll need to create one or more standardized templates for collecting data for proposed projects (you might want different templates for different types of projects) and establish a centralized database for storing the collected data. You’ll want to make it as easy as possible for the appropriate parties to access project data and to keep it up to date. Simple spreadsheets may be adequate, so long as they can be accessed from the network and you can avoid multiple copies that get out of sync.
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Capability to evaluate project proposals. Assuming your project valuation framework is a quantitative model, you’ll want it implemented in software so that projects can be evaluated quickly and consistently. Software allows virtually instantaneous analysis of submissions, helping to identify data input errors (which may be prevalent at the beginning when people are still getting used to the new data requirements). Quick analysis also allows for feedback in situations where changes in concept, scope, or workplan are needed in order to make a proposal competitive. Being able to quickly acknowledge, respond and provide guidance to submitters helps establish credibility for the PPM process.
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Capability to prioritize projects and identify value-maximizing choices. If your project proposals are independent from one another in the sense that neither the value nor cost of any project depends strongly on what other projects are conducted, then you will want to prioritize projects based on the ratio of project value to project cost. Again, if spreadsheets are adequate, you can easily add such project prioritization capability to your spreadsheet value model.
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Capability to collect and manage project documents. Projects typically generate lots of documentation (charters, plans, status reviews, reports, etc.). PPM is likely to add to the burden because it generates more project information and encourages greater use of that information. The simplest approach is to organize all project documentation into a big binder, but if your documentation is in electronic form you should link the documents to the projects in your PPM database. In either case, you will need a process to ensure on-going update and maintenance of your project documentation.
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Capability to track and report project/portfolio status. Managing the project portfolio requires the ability to determine the status of projects at any point in time. You’ll need to be able to monitor and report where each project stands with respect to PPM workflow (proposal submitted, awaiting data verification, pending, approved, etc.). You will also need to track progress for those projects that are approved and underway (planned versus actual progress, spend rates, issues tracking, milestones, etc.). You’ll want a system that ensures that project managers take responsibility for updating information in the project database. Again, spreadsheets may be adequate, but be sure to include dashboard views that roll-up and summarize project data to help identify where attention is needed.
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Capability to monitor, learn and improve. PPM’s promise is increased value from project investments. You’ll want to evaluate and measure the contributions of projects (Did each project complete on time and on budget? Did it produce the anticipated benefits?). You’ll also want to evaluate and critique the PPM process (Did the process work smoothly? What do participants think worked well and not so well? What can we do better next time?) Establish mechanisms and capability to regularly mine the experience gained from applications both to refine and improve the project valuation framework and the PPM process.
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.
Hi Miley,
You made some great points! I think companies tend to see dollar signs BEFORE they evaluate proposals AND prioritize projects. This is such a mistake on so many levels. Why don’t they learn from it?
Hi Laura,
Thanks for the compliment and the great question: “Why don’t companies learn from their mistakes?” Benjamin Franklin said insanity is “doing the same thing over and over and expecting different results.” I don’t know the answer, but would love to hear if others have some theories about this.