Lee Merkhofer Consulting Priority Systems
Implementing project portfolio management

Software Helps You Manage the Project Portfolio

As illustrated in the presvious section, you can practice project portfolio management (PPM) without software. However, software makes it much easier and much more rewarding. If you have lots of projects, using software is a practical necessity.

PPM software puts project data into an electronic database (Figure 14). This allows the information to be easily accessible, facilitates keeping data up to date, and enables analysis and reporting. Tabular and graphical displays can be provided, and the tool makes it easy to aggregate project data, drill down from high-level to low-level portfolio views, and create summary reports. With software, you have the ability to define, organize, and align information in such a way that you can view different types of information simultaneously, at different levels of detail.


Project portfolio database

Figure 14:   Combine project data into a portfolio database.


Using software allows you to more easily create project portfolios and to populate them with much more project data. You can establish various project classification schemes and create multiple, interconnected project portfolios.

Single or Multiple Portfolios

A single project portfolio can be constructed containing all of your organization's ongoing and proposed projects. Alternatively, multiple project inventories can be created representing project portfolios for different departments, programs, or business units. The choice of one portfolio versus many depends on the size of your 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 accustomed to decentralized management and 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, referred to as programs, represent groups of projects that must be selected and managed in a coordinated way in order to achieve success. Figure 15 illustrates the relationships that may exist among portfolios in a large organization.

Relationships among portfolios

Figure 15:   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 16).


Project investment mix

Figure 16:   Sample chart for investment mix based on project classification.


Project Inventory

There are many software tools that can help you construct and manage your project portfolio, including Excel. The information entered into your portfolio database depends on your selected project classification scheme and the project attributes important for assessing priorities. useful data includes the project name, type, responsible business unit, a brief project description; internal and external costs; and estimated time to completion. In order to support project prioritization, the recorded information should 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? 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?


Project investment mix

Figure 17:   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, but electronic forms are easier. Using a standardized project information template encourages complete proposals and more consistent proposal evaluations.

Data on proposed project staffing, 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. In accordance with the theory of constraints, capability to implement the project portfolio will be limited by one or more specific resource constraints. 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 18, (an IT project to enhance a website) project phasing is represented by a 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.).


Timing and Resource Needs

Figure 18:   Sample project timing and resource inputs (IT example).


Most organizations using software for PPM 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

A concise summary of proposed and ongoing work can be generated by having the software display a high-level view of the project data.


Project inventory

Figure 19:   Sample project inventory (pharma example).


A major benefit of such displays is the transparency that comes with a single, comprehensive view. Anyone with access to the software can see the entire collection. Awareness increases, relationships are identified, and portfolio direction can be better 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 against a common timeline. The example assumes that projects follow the generic lifecycle phases of define, design, develop, test, deploy and post-launch.


Inventory timing

Figure 20:   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 21) aid the phasing of projects to meet resource availability constraints.


Resource demand-supply comparison

Figure 21:   Portfolio resource demand-supply comparison.


Benefits of Establishing an Electronic Project Portfolio

Using software, even simple spreadsheets, expands and enhances the benefits of working with project portfolios. Whereas previously various individuals could see a piece of the picture, no one could easily access the complete view of ongoing and upcoming work. Software facilitates sensible sorting, adding, and removing projects from the collection informed by an all-inclusive perspective. Displays can quickly be created that allow project teams and managers to better understand the work and to make the necessary tradeoffs for deciding which work to start and finish now, what to do later, and what to do never. Summary measures conveying data related to cost, risk, and benefit can be instantly computed and used to create graphics and comparative analyses that allow decision-making teams to collaborate on project-selection decisions. Individuals throughout the organization with understanding of the business can review project data and assessments to provide "reality checks." Processes can be instituted to allow users to correct errors and misunderstandings, thereby ensuring that project information reflects current and best-available understanding.

Larger organizations, in particular, typically find that creating their first portfolio 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 people and other resources. The initial project inventory often uncovers significant duplications and mismatches. For example, CIO Magazine [4] 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.

Adopting PPM creates a shift away from one-off, ad hoc approaches to project management. The portfolio establishes practices based on visibility, standardization, and measurement as a means for process improvement. By emphasizing the goal of creating the greatest value for the resources available, the portfolio promotes a culture of lean operation, with goals like eliminating waste as you work your way through projects; discovering and eliminating roadblocks to throughput; evening the workload for people and teams; optimizing for the entire organization, not just one piece of it; obtaining desired results in the shortest time and for the least cost; and avoiding the creation of an inventory of partially completed work.

Figure 22 summarizes these and other benefits of working with a project portfolio.

Benefits of the project portfolio

Figure 22:   Some benefits of creating a project portfolio.