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So, your organization is ready to implement project portfolio management (PPM). Congratulations! PPM is widely recognized as one of the most effective business practices used by successful institutions. Be aware, though, that the road to PPM is often rocky. For many organizations, successfully implementing PPM is a difficult and time-consuming process. Also, establishing PPM is a high-risk initiative. Failures are not uncommon. There is no way to guarantee that you will be successful in implementing PPM. However, having observed many organizations at various stages of the process, I believe that there are 7 keys: (1) embrace the principles involved, (2) choose an approach that fits your situation, (3) secure executive support, (4) establish governance, (5) create a value-measurement framework, (6) institutionalize effective processes, and (7) follow a road map to success. |
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 Figure 1: Keys to implementing project portfolio management. 1. Embrace PPM PrinciplesPPM is not just another project management process. PPM is a philosophy — one that, in accordance with the analogy based on financial portfolio management, is focused on value creation. Getting the most from PPM requires your organization to fully embrace the following principles1:
Getting clarity on basic principles is important for two reasons. First, the principles promote understanding and agreement on what you are doing and why. Second, they provide the foundation for creating the structure, supporting processes, and tools that will enable you to put the principles into practice. 2. Choose an Approach that FitsPPM is not a "one-size fits all" solution. Despite the general applicability of the principles, there is not one, single, approach to PPM. The alternative approaches reflect different views on how best to accomplish PPM goals in light of the specific situation and practical realities. Different approaches reflect different assumptions, methodologies, models, structures, roles and responsibilities, reporting lines, resource demands, and levels of authority. The challenge is designing an approach that will work well for your organization. Why do different organizations need different approaches? An organization that conducts hundreds of projects each year has different needs than one that conducts a half dozen. A decentralized organization requires a different structure for decision support than one where decisions are centralized. A key function of PPM is to measure the risks and benefits of alternative project portfolios, but different kinds of projects produce different benefits in different ways, and the importance and nature of risk differs dramatically depending on the business. Also, your PPM solution should minimize necessary changes to those aspects of your current systems that are working well. Finally, the approach to PPM must be sensitive to culture. Your organization's ability to tolerate change is a key consideration in determining how quickly new procedures can be implemented. Don't make purchasing PPM software the first step. A software vendor will advise you to buy their software and implement a PPM process around it. There are more than 50 PPM tools currently on the market. Without first defining your requirements, how can you know which will work for you? It is tempting to imagine that there is a miracle tool that can quickly and painlessly resolve the difficulties of implementing PPM. Don't believe it. 'There is a "graveyard" of nightmare stories in which organizations waste millions … on cumbersome systems that were destined never to work, simply because they did not address the issue of what the business actually needed.' P. Rajegopal, P. McGuin, and J. Waller, Project Portfolio Management: Leading the Corporate Vision, Palgrave Macmillan, 2007. I often encounter organizations that have spent hundreds-of-thousands of dollars on PPM tools and are not satisfied because their tools are not being properly utilized, are not producing useful information, and do not seem to be improving efficiency or decision quality. Purchasing PPM software is risky, especially in the early stages when PPM needs to be established with the people, not imposed on them. My recommendation (more detail is provided later) is simple. First, define the PPM approach that will support your business need and obtain buy-in and team consensus for this approach. Without understanding and consensus, the subsequent steps will fail. Once the appropriate approach has been designed, use the requirements of the approach as a checklist for choosing the right tool. 3. Secure Executive SupportAccording to surveys, the biggest challenge for implementing PPM is lack of adequate executive support. Introducing PPM into an organization requires a significant investment of time and money. It requires learning new concepts and skills, instituting new processes, and achieving cultural change. Realistically, the deployment of PPM within the organization will not be popular with everyone. Support from the top is needed to lend credibility and authority and to drive the right behavior in the organization. For an initial, limited-scope implementation of PPM within a single department (e.g., a proof of concept), support and leadership from the department head might be sufficient to enable you to get started (assuming the department "owns" the resources to be allocated). However, don't expect to get very far without top-level, cross-functional executive support from finance, operations, human resources, and the impacted functional areas, as well as other executives who have major stakeholder responsibility. Ideally, the CEO or president should be your main champion. 4. Establish Governance StructureEffective governance starts with leadership, commitment, and support from the top. However, such leadership, while crucial, is not enough. You must define appropriate organizational structure and rolls and responsibilities for all participants. There are three main organizational components to PPM: executive leadership, the portfolio management team, and program and project managers. Table 1 defines some of the basic roles and responsibilities that may need to be established.
Note that PPM does not necessarily require defining new functional positions at a senior level. The basic responsibilities associated with PPM (e.g., selecting projects, managing the delivery of value, etc.) are not new. What is new is that these responsibilities are to be carried out in a formal, structured, and organized way. Typically, the PPM process can be added to the responsibilities of the participating senior members. Tiered organizational structures, based on a hierarchy of programs and portfolios, are common for PPM implementations of larger scope. In the example shown in Figure 2, the Executive Team consists of the VP's of four business and service organizational units that conduct or make use of projects within the enterprise portfolio. The enterprise portfolio consists of four sub-portfolios, two of which contain smaller portfolios. In such implementations, the managers of sub-portfolios are responsbile for verifying the input data needed to evaluate projects within their sub-portfolios. These managers may or may not retain ultimate authority over the priorities assigned to projects within their respective portfolios.  Figure 2: Example portfolio organizational structure. Note that, in general, it is not a good idea to have PPM organized under a project management office (PMO), should one exist. The PMO is typically a support function. PPM requires governance at the executive level.
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