The project portfolio management office manages the project portfolio to produce maximum value.
Suppose a family in your neighborhood wants to sell their house as quickly as possible. You know the house is a fixer-upper, but it looks like a great opportunity for you to snap it up, make a few improvements, and then sell it for a nice profit.
If you were to take on this challenge, you would want to manage your work on the house so as to produce the highest-value, remodeled house that you can for the time and resources you can afford to devote to the effort. You'd need project management capability.
Now, imagine that you accept the fixer-upper challenge and it goes well. You make a profit, and, what's more, you really enjoyed managing all the details of the project. At that point, you might think about turning your skills into an actual business. If your new business is successful, over time you'd want to buy, work on, and then sell more than one property concurrently. This means you would need to be good not just at managing each individual house project, you would need to effectively maintain and manage a portfolio of house projects. In other words, to run a successful project-based business you need both project management and project portfolio management capability.
Any organization interested in establishing PPM or advancing its PPM capability should establish a project portfolio management office (PPMO). A PPMO is an organizational unit staffed with people who have specialized knowledge of PPM practice whose function is to manage the organization's project portfolio(s) with the goal of producing maximum value for the organization . Some organizations elect to expand the responsibilities of an existing project management office (PMO) to include PPM responsibilities. However, the PMO is a support function whereas the PPMO has high-level decision-making responsibilities. As such, it needs to be located at the executive level of the organization.
As illustrated in Figure 20, the PPMO can be regarded as providing a bridge between project management and enterprise management. The organization's vision, mission, objectives, and strategy are actualized by the PPMO's decisions about what projects to conduct and how to allocate resources .
Figure 20: Portfolio management links project and enterprise management.
Organizations that establish a PPMO make evident a commitment to achieving PPM maturity. Having a PPMO confirms that executives recognize the benefits of PPM. The practical indications of PPM maturity include the establishment of a governance structure with clearly defined PPM roles and responsibilities, the consistent application of PPM processes, and, most importantly, increased advancement of portfolio and organizational objectives.
The Project Portfolio Manager and Project Portfolio Management Team
A PPMO is headed by a project portfolio manager who is supported by a project portfolio management team (PPM team) The first step for establishing a PPM function is to decide who will have lead responsibility for PPM.
The Project Portfolio Manager
The project portfolio manager is the individual who provides leadership, coordination, and management of all of the organization's PPM processes and functions. The position is a highly visible arm of executive leadership with responsibility for the overall success of the organization's project investments, as well as the advancement of the organization's PPM maturity. The portfolio manager's responsibilities include tracking and reporting the conformance of project outcomes to the expectations outlined in project proposals, defined in business cases, and clarified in the project prioritization and portfolio optimization process. The project portfolio manager is responsible ensuring that the work of the PPMO adds value, is relevant to and implements the strategy of the organization, and meets the goals set for the office by executive management. The portfolio manager regularly reviews best practices relative to PPM theory, processes, methods, tools, guidelines, and standards so as to identify and take advantage of opportunities to improve the organization's PPM capabilities. The portfolio manager builds understanding and consensus around the organization's mission and vision, fosters a project-management-oriented mindset focused on creating value, and provides ongoing coaching and mentoring to PPMO staff and project managers.
The position of project portfolio manager can be difficult to fill. The successful PPM leader has a rare combination of talents: solid analytic skills, strong people skills, detail oriented but comfortable dealing in abstract concepts, experienced but able to think outside the box. The table below summarizes some of the important qualities and capabilities of the project portfolio manager.
Ideally, the project portfolio manager should be given an estimate from executives of the total funding available for executing projects throughout the budget period, but it should then be up to the portfolio manager to determine how to allocate the funds within that cost constraint. It should be possible for the portfolio manager to suspend at any time further commitment of investment dollars to any project due to project cost increases, failure to make anticipated progress, changes in markets or economic climate, or shifts in business conditions or strategy. If the portfolio manager is not given full authority to choose which projects to fund, then, at the very least the portfolio manager should have responsibility for recommending projects and resource allocations for final approval by an executive review team composed of senior executives. In either case, senior executives should be enlisted to serve as a steering committee responsible for providing and updating (e.g., in response to changing business strategy) the value judgments and policy decisions needed to guide PPM .
The Project Portfolio Management Team
The project portfolio manager is supported by a PPM team. The number of members of the team depends on the size of the organization and the types of projects included within the project portfolio. In a small organization, serving on the PPM team may be only a part-time responsibility requiring participation at only certain times of the year. In contrast, a large organization might require a sizable number of people working in the PPMO full time.
Because managing the project portfolio requires having an understanding of all of the ongoing and proposed projects within the portfolio, the PPM team often includes department heads from organizational units that generate requests for projects, provide project resources, manage projects or programs, and/or use project deliverables. The Team should have responsibility for validating cost, performance, and risk estimates provided in support of project proposals and requests for resources. The Team is responsible for evaluating project proposals, accepting or rejecting proposals, accelerating and decelerating projects, allocating resources, and otherwise continuously managing the portfolio. One member of the Team should be designated as the primary contact person for the manager or proponent for each project in the portfolio.
The table below identifies the main PPM players and summarizes their activities in support of the PPM process.
More detail on the roles and responsibilities of the PPMO follow.
Responsibilities of the Project Portfolio Management Office
PPMO responsibilities relate to controlling, coordinating, and supporting the PPM process .
The PPMO as a Controller
The PPMO establishes the methodologies and processes used by the organization to identify and select value-maximizing project portfolios. This includes working with executives to specify portfolio objectives; defining the data to be submitted with project proposals, and enforcing the proposal process; determining and announcing the mechanism, algorithm, and/or model used to estimate the value of ongoing and proposed projects; recommending to executives project priorities and the composition of the project portfolio; and deciding how to allocate available project resources. The overarching role of the PPMO is to continually steer the project portfolio in such a way as to maximize the achievement of the organization's objectives and the successful implementation of the organization's strategy.
The PPMO as a Coordinator
Given that PPMO serves as a bridge between senior executives and project managers, the PPMO necessarily plays an important role in coordinating and facilitating activities within and across each level. This includes gathering, preparing, and providing information to support decision making, facilitating communication and interactions across departments and between business units and the executive level, and aiding resource managers and promoting effective resource utilization. In view of the PPMO's role in multi-project management, the PPMO must identify and head off problems and deliver corrective actions in support of project management, mitigate conflicts between project teams and line management, and mediate disputes over power and authority.
The PPMO as a Supporter
This role involves providing services to project team members and project leaders in support of project planning, proposal preparation, project valuation and prioritization, project implementation, monitoring of project results, and benefits realization. The PPMO collects and distributes data for reviewing, assessing, and managing individual projects to ensure that they are meeting their expected contributions to the portfolio . Supporting services include correcting errors in project performance estimation (e.g., scoring errors), providing feedback on project valuations, identifying project value drivers, and preparing project reports. The PPMO may provide training on the principles of PPM, value creation, and value measurement. The PPMO also provides coaching and guidance for producing and submitting project data and may support the design and planning of project proposals. The PPMO champions PPM and is a promoter of a value-creation culture that includes continuous learning.
Justifying the PPMO
Establishing an explicit logic for quantifying project value, in my opinion, is not only critical to obtaining accurate and consistent project priorities, it is also critical to justifying the role of the PPM office within the governance system for the enterprise. PPM is fundamentally different from project management with regard to its placement within the governance structure. Project management, primarily concerned with achieving project deliverables, is largely a tactical function. Delegating the function without providing formal systems to ensure compliance with executive preferences raises no issues.
However, PPM is focused on making project decisions intended to achieve the fundamental objectives and strategy of the organization. To justify the delegation of the portfolio management function to a team other than the organization's most senior executives requires a formal project valuation process that makes explicit what would otherwise be the implicit preferences of senior management. Senior executives, specifically the executive review team, establish these preferences by specifying the portfolio objectives, weights, and other value judgments that, when combined with project performance estimates, determine the value attributed to projects. Thus, it is consistent with the organization's governance structure to authorize PPM as a function executed by the PPMO because project priorities are established consistent with the preferences articulated by the organization's senior executives.
In summary, the PPMO should: