Project portfolio management: Why the right focus determines success
Many companies fail, not because of the implementation of individual projects, but because they take on too many projects at once. Without clear prioritisation, each project is pursued half-heartedly, resulting in insufficient use of resources. This is where project portfolio management (PPM) comes in. It ensures that companies focus their efforts on the most important projects.
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What is project portfolio management?
Project portfolio management involves the strategic management of multiple projects in parallel, to best implement the corporate strategy. To this end, resources are allocated to serve corporate goals. This is an ongoing, cyclical process that aligns individual projects with these goals. While multi-project management focuses on the operational management of multiple projects, project portfolio management (PPM) takes a more strategic perspective. As well as operational management, PPM evaluates the contribution of projects to corporate strategy. This ensures that projects are uniformly coordinated and linked to daily workflows and corporate goals.
Unlike classic project management, which focuses on planning and implementing individual projects, PPM aims to select the right projects for the portfolio. Furthermore, PPM differs from programme management in that programmes have a defined end point, whereas portfolio management is an ongoing process involving the constant integration of new projects.
Key roles in PPM include the project portfolio manager, who creates and maintains the portfolio, and the programme manager, who oversees related projects within a programme framework. The project manager, in turn, manages individual projects. They are supported by the project team, which often works across functions, and by the portfolio board, which is the key management body. A Project Management Office (PMO) with standardised methods and templates is also often employed.
Unlike classic project management, which focuses on planning and implementing individual projects, PPM aims to select the right projects for the portfolio. Furthermore, PPM differs from programme management in that programmes have a defined end point, whereas portfolio management is an ongoing process involving the constant integration of new projects.
Key roles in PPM include the project portfolio manager, who creates and maintains the portfolio, and the programme manager, who oversees related projects within a programme framework. The project manager, in turn, manages individual projects. They are supported by the project team, which often works across functions, and by the portfolio board, which is the key management body. A Project Management Office (PMO) with standardised methods and templates is also often employed.
Creating a project portfolio
To create an effective project portfolio, it is first necessary to establish clearly defined decision-making structures. A key element of this is the portfolio board, which regularly assesses the status of all projects and makes informed decisions about whether to start, continue or terminate projects. However, this requires an up-to-date project portfolio. To achieve this, the project portfolio manager must communicate continuously with the project managers. This involves checking that projects are running according to plan, identifying risks at an early stage, and determining whether countermeasures are necessary. At the same time, this exchange enables ongoing projects to be consistently aligned with the company's strategic goals, allowing the progress of strategy implementation to be tracked transparently.
1. Definition of corporate goals
Corporate goals provide orientation and meaning. They give the team clear direction, boost motivation and clarify what they are working towards. Only on this basis can the company achieve its strategic goals in a targeted manner and select projects in line with those goals.
2. Project selection
Decision-makers must first compile a comprehensive list of potential projects. This should include project ideas, requests for projects, new projects, and projects already in progress.
Ideally, this should be done using a standardised system for collecting ideas and project proposals. In addition, a clearly defined process involving fixed workflows, checklists, roles and permissions, as well as clear evaluation criteria, should be established. This process should regulate how ideas are submitted, the criteria by which they are evaluated, and the approval process.
Existing projects should also be evaluated using the same criteria. This allows projects whose continuation is no longer worthwhile to be identified, freeing up resources for projects that are more strategically important.
Additionally, relevant key figures such as costs, resource requirements and projected revenues must be recorded for each project.
3. Project prioritisation
Prioritisation is crucial in determining the strategic importance of individual projects for the company. Since resources are limited, not all projects can be started at the same time.
In order to select the right projects, the following questions should be asked:
How important is the project in terms of corporate strategy or defined OKRs? Can the benefits of the project be determined based on return on investment or a comparable monetary indicator? How do the project risks compare to the expected benefits in terms of ensuring the stability of the overall portfolio? Are the necessary personnel, capacities, and budgets realistically available to avoid overload?
Methods such as utility analyses or multidimensional evaluation models can be used to make objective comparisons. Projects with high benefits and comparatively low risk are given higher priority.
4. Transparency and stakeholder involvement
The project portfolio should be shared with key stakeholders. The aim is to collaborate closely to coordinate project dependencies, resource capacities, the distribution of competencies, budget requirements and existing restrictions. Once approved, projects are entered into the project management system as binding.
5. Project status updates and portfolio management
If strategic priorities change or issues arise, targeted adjustments may be necessary for projects, resources, budgets, or the entire portfolio. Changes in corporate goals may mean that individual projects no longer fit the strategy, in which case they must be adjusted or terminated accordingly.
These decisions are based on reliable, up-to-date data and regular portfolio meetings, where the status is reviewed, and necessary control measures are decided upon.
6. Project completion evaluation
After project completion, a structured evaluation is carried out based on a comparison of the actual and target costs, results, and goal achievement. Additionally, lessons learned should be systematically documented to make experiences, insights and results usable for future projects, thereby continuously improving the quality of project portfolio management.
1. Definition of corporate goals
Corporate goals provide orientation and meaning. They give the team clear direction, boost motivation and clarify what they are working towards. Only on this basis can the company achieve its strategic goals in a targeted manner and select projects in line with those goals.
2. Project selection
Decision-makers must first compile a comprehensive list of potential projects. This should include project ideas, requests for projects, new projects, and projects already in progress.
Ideally, this should be done using a standardised system for collecting ideas and project proposals. In addition, a clearly defined process involving fixed workflows, checklists, roles and permissions, as well as clear evaluation criteria, should be established. This process should regulate how ideas are submitted, the criteria by which they are evaluated, and the approval process.
Existing projects should also be evaluated using the same criteria. This allows projects whose continuation is no longer worthwhile to be identified, freeing up resources for projects that are more strategically important.
Additionally, relevant key figures such as costs, resource requirements and projected revenues must be recorded for each project.
3. Project prioritisation
Prioritisation is crucial in determining the strategic importance of individual projects for the company. Since resources are limited, not all projects can be started at the same time.
In order to select the right projects, the following questions should be asked:
How important is the project in terms of corporate strategy or defined OKRs? Can the benefits of the project be determined based on return on investment or a comparable monetary indicator? How do the project risks compare to the expected benefits in terms of ensuring the stability of the overall portfolio? Are the necessary personnel, capacities, and budgets realistically available to avoid overload?
Methods such as utility analyses or multidimensional evaluation models can be used to make objective comparisons. Projects with high benefits and comparatively low risk are given higher priority.
4. Transparency and stakeholder involvement
The project portfolio should be shared with key stakeholders. The aim is to collaborate closely to coordinate project dependencies, resource capacities, the distribution of competencies, budget requirements and existing restrictions. Once approved, projects are entered into the project management system as binding.
5. Project status updates and portfolio management
If strategic priorities change or issues arise, targeted adjustments may be necessary for projects, resources, budgets, or the entire portfolio. Changes in corporate goals may mean that individual projects no longer fit the strategy, in which case they must be adjusted or terminated accordingly.
These decisions are based on reliable, up-to-date data and regular portfolio meetings, where the status is reviewed, and necessary control measures are decided upon.
6. Project completion evaluation
After project completion, a structured evaluation is carried out based on a comparison of the actual and target costs, results, and goal achievement. Additionally, lessons learned should be systematically documented to make experiences, insights and results usable for future projects, thereby continuously improving the quality of project portfolio management.
Use as resource management
The central problem is almost always a shortage of resources, particularly employee working hours. PPM ensures that the most important projects receive the necessary attention and capacity. It provides an overview of who is working on which projects and when, thereby highlighting bottlenecks. Realistic planning and prioritisation prevents employees from taking on too many tasks simultaneously. If necessary, resources from less important or soon-to-be-completed projects can be redirected to high-priority projects.
Tools
To keep track of a large number of projects, PPM tools can provide transparency by offering dashboards and real-time insights into each project's status, budget and risks. Visualisations such as Gantt charts, which illustrate timelines and facilitate cost-benefit comparisons, can be employed for this purpose. The software can also help with what-if scenarios to support decisions about project continuation. Operational tools focus on individual projects.
Conclusion
Project portfolio management involves balancing long-term goals with day-to-day project work, allocating resources effectively and maximising benefits for the company. Efficiency and effectiveness go hand in hand. PPM ensures not only that projects are implemented correctly, but also that the right projects are implemented. The result is greater transparency, better coordination, more holistic planning, real-time insights and greater freedom for creative, goal-oriented work. This represents a clear competitive advantage in an increasingly complex business world.
Author: IAPM internal
Keywords: Project management, Project portfolio management