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Combine Projects into a Portfolio Database

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Solving the problems created by project-by-project decision making requires shifting the focus from the project to the project portfolio. The enabling step is to place information about projects into a common database.

Project portfolio management tools (Figure 9) put project data into an electronic database. This ensures that the information is readily accessible and facilitates keeping the data up-to-date. Tabular and graphical displays can be provided, and the tool makes it easy to aggregate project data and to create summary reports.

Figure 9:   Combine project data into a portfolio database.

The project portfolio provides a big-picture view. It enables managers to become aware of all of the individual projects in the portfolio, and provides a deeper understanding of the collection as a whole. It facilitates sensible sorting, adding, and removing projects from the collection informed by an all-inclusive perspective.

Single or Multiple Portfolios

A single project inventory can be constructed containing all of the organization's ongoing and proposed projects. Alternatively, multiple project inventories can be created representing project portfolios for different departments, programs, or business units. Since PPM can be conducted at any level, the choice of one portfolio versus many depends on the size of the organization, its structure, and the nature and interrelationships among the projects that are being conducted. Having just one, single, all-encompassing portfolio elevates portfolio management to the enterprise level, which provides improved visibility and opportunities for optimization. However, working with a single, very large portfolio is procedurally more complex and tends to constrain executives accustomed to exercising discretion over project selection. It might not, therefore, make sense to try to force a centralized project portfolio on an organization that practices decentralized decision making.

Similar projects that address similar problems and use common resources should be grouped so as to leverage the understanding and expertise needed for portfolio management. In particular, interrelated projects need to be placed in common portfolios. Portfolios of highly interrelated projects are often referred to as "programs"-groups of projects that must be selected and managed in a coordinated way in order to achieve success Figure 10 illustrates the relationships that may exist among portfolios in a large organization.

Figure 10:   Sample relationships among portfolios, programs, and projects.

Portfolio groupings should be organized so as to be as independent of one another as possible. Decisions about what projects to conduct within one portfolio should not depend in a significant way on the projects that are conducted within any other portfolio. The decision of how to allocate resources among the various project portfolios can then be made at a higher level, based on estimates of the how the value of each portfolio depends on the resources made available to it.

Project Classification Schemes

Since it is useful to be able to monitor and control the mix of various types of projects within the project portfolio, a project classification scheme should be established. Projects can be classified in many different ways. Examples include: size; type/purpose (e.g., maintenance, growth, productivity, innovation); geographic location; skills or technologies required; sponsor, client or market served; asset class addressed (e.g., infrastructure, IT); and stage of the project life cycle (e.g., R&D, commercialization). Multiple schemes can be used so that each project is classified in several different ways. No one approach is best for every organization. The key is to choose a classification scheme that will yield information and understanding most useful for decision making. Knowing the various categories to which a project belongs helps to characterize that project and enables the construction of charts indicating how spending is distributed (e.g., Figure 11).

Figure 11:   Sample chart for investment mix based on project classification.

Project Inventory

Many tools can be used to construct the portfolio; including a simple spreadsheet. The information entered depends on the selected project classification scheme and the project attributes important for assessing priorities. At minimum, project data will include the project name, type, responsible business unit , and a brief description; internal and external costs; and estimated time to completion. Dependencies among projects should be noted. In order to support project prioritization, the recorded information must also include some level of business justification and value assessment. What, exactly, is the need that is being addressed? What benefits are expected from doing the work? When will these benefits begin to accrue? Also, risks associated with successfully completing the project or securing the benefits should be identified. Finally, in situations where change is rapid, the time urgency of the project should be indicated. If the project is delayed, what will the consequences be?

Figure 12:   Sample information included in a project database (electric utility example).

If project information is standardized, a template can be provided for submitting project proposals. The template may be a paper form or an electronic form. Using a standardized project information template encourages complete proposals and more consistent proposal evaluations.

Data on proposed project phasing and resource requirements may likewise be entered. Depending on project types and duration, requirements may be specified by month, week, or even day by day. Most projects require contributions from staff with specialized skill sets. As described by the theory of constraints, capability to implement the project portfolio will be limited by some specific resource constraint. Accounting for resource requirements by skill set requires establishing a taxonomy of organizational skills, and each project must then estimate work needs by skill set. In the example of Figure 13, (an IT project to enhance a website) project phasing is represented by a simple Gantt chart. The numbers entered under the various months are the estimated percentage time requirements for the indicated task duration from staff with the indicated skill sets (e.g.,business analyst, program manager, HTML programmer, etc.).

Figure 13:   Sample project timing and resource inputs (IT example).

Most organizations opt to collect additional project data. Including more fields for characterizing projects results in more opportunities for sorting the data in various ways. However, there is little point to forcing project managers to generate information that won't be used. The purpose of collecting data is to support decision making, so the system should not be burdened by a requirement to collect data not useful for this purpose. For practical reasons, the task of generating data for the portfolio should be kept as simple as possible consistent with the goal of providing the information needed to support portfolio management.

Data Roll up

The project portfolio provides a concise summary of proposed work.

Figure 14:   Sample project inventory (pharma example).

A major advantage is the transparency that comes with a single, comprehensive view. Anyone with access to the software can see the entire collection. Awareness increases, relationships can be identified, and portfolio direction can be managed. The ability to sort and filter the data facilitates understanding about the focus and emphasis of proposed work.

To help identify resource constraints and aid scheduling, project phasing and resource requirements can be displayed on a common timeline. The example assumes that projects follow the generic lifecycle phases of define, design, develop, test, deploy and post-launch.

Figure 15:   Sample project inventory timing and resource needs (IT example).

If resource availability numbers are entered into the software, demand can be compared with supply. The results (Figure 16) aid the phasing of projects to meet resource availability constraints.

Figure 16:   Portfolio resource demand-supply comparison.

Benefits of the Project Portfolio

Once project opportunities have been characterized, with information entered into the portfolio 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, CIO Magazine [3] reports that when Schlumberger 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.

Figure 17 summarizes these and other benefits typically observed from implementing project portfolios.

Figure 17:   Some benefits of creating a project portfolio.

Problems with Project-by-Project Decision Making

The Portfolio Management Office