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Getting Started with Project Portfolio Management

A new year means a new line-up of projects to complete. If you spent much of last year juggling expectations, projects and priorities without having a solid plan in place, you know how challenging and exhausting it can be. The good news is, it doesn’t have to be that way!

Project portfolio management might sound like an intimidating concept, but it’s actually a straightforward way to organize projects and workflow. And it doesn’t have to be complicated; you don’t have to start off with a large team, an expensive tool or a complicated process. The key is to start, and sometimes starting small is just what you need to feel things out and adjust before investing into a larger strategy or tool. The important thing is to avoid procrastinating the process — know that it doesn’t have to be perfect and it will mature over time.

Here are some simple steps to get started with project portfolio management:

Determine Your Project Inventory — If you don’t currently have an inventory or a list of your projects, start one. Get a baseline project inventory by talking with project managers, department heads, business unit reps and anyone else responsible for initiating projects about their current projects and what they foresee for the year. If you can’t get a clear direction about the entire year, break it down quarterly and meet toward the end of one quarter to plan for the following. Gather basic information about each project like: project objective, estimated start and duration, who is requesting it, what resources are needed (e.g. a business analyst, project manager, developer, subject matter expert). You can use something as simple as MS Excel as your inventory tool.

Categorize Your Project Portfolio — Determine how your portfolio should be segmented. For example, will your projects be categorized by organizational strategy, by department, by budget category? Many organizations create portfolios that align their investments with their organizational goals such as grouping together projects related to growth, R&D or sustainability. There are a several ways to segment your portfolio, but find/create the categories that work best for your organization. To get you thinking, here are a few common ways to segment your portfolios:

  • Service-Based Portfolio Categories: Transform the Business, Grow the Business, and Maintain the Business. Projects in the ‘Grow the Business’ category, for example, are related to growth and expansion of products, services or locations.
  • IT Investment-Based Portfolio Categories: Infrastructure, Applications, Cloud, Research, New Products, New Processes, Maintenance and Support
  • Business Strategy Portfolio Categories: Sustaining, Cost Savings/Cutting, New Revenue
  • Department-Based Portfolio Categories: Accounting and Finance, HR, IT, Legal, Warehouse, Production, Marketing, R&D, etc.

Determine Weight and Priority Criteria – Once you know what categories fall within your portfolio, determine the investment weight of each category. The weight represents the percentage of the total investment you are allocating to a particular asset (or category of assets). The total weight of all the categories in the portfolio should equate to 100%, so if you have five categories, you must determine what percent is assigned to each category. Understanding the weight of your portfolio will help you make better decisions regarding which projects to invest in, how much risk to take, and help with prioritizing projects.

You should also define how you’re going to prioritize projects. Determine what factors will make a project a higher or lower priority than another. What business ‘drivers’ make up that decision? Drivers should tie back to the goals that your organization wants to accomplish. Here are a few examples of business drivers: Value to the business, Alignment to Organizational Strategy, Impact to the Business, Compliance, Health & Safety, Security, Reduction of Business Risk, etc.

Just like the categories, assign a rating scale for each driver so you can determine how projects score against each other for various drivers. There are several tools that can help you do this, but if you are just starting out, MS Excel can work just fine as a starting point.

For now, you are just establishing the criteria for how the portfolio is weighted and how projects are prioritized. It’s important to note that you should involve your management team in determining weight and priority criteria. This criterion should not be decided in a silo; otherwise you will not have buy-in when it’s time to prioritize the projects. We’ll talk about actually prioritizing the projects in a later step.

Determine Portfolio Entry and Exit Criteria –  Now that your portfolio weighting and priority criteria are defined, you must be clear about how a project qualifies for the portfolio, what criteria is required while the project is active in the portfolio, and how a project closes-out of the portfolio. As new requests come in, determine if what’s being requested qualifies as a project or is simply a one-off task. Finally, once a project is approved for inclusion in the portfolio, figure out the steps that need to happen to move it through the lifecycle until it can be classified as closed.

Designate the Responsible Party —Whether it’s one person or a team of people, it’s important to know who is taking on ownership of project portfolio management. A few key things to note: the person (or team) managing the portfolio does not necessarily serve as the project manager, nor do they unilaterally make decisions about projects or resources. They are simply the gatekeepers and provide governance for the portfolio management process. Define the role of the portfolio manager so he/she is clear on what’s expected of them. Likewise, define the role of all portfolio members who will be involved in portfolio reviews and decisions.

Establish Review Process and Success Metrics — Decide what metrics you want to capture about the portfolio, then review progress regularly to determine if you are meeting them. Reviewing, managing and adjusting the portfolio will be an ongoing process based on shifting organizational priorities. In fact, reprioritizing projects is a key aspect of project portfolio management.

Prioritize Projects — Once you know what the qualified projects are, you can prioritize them based on the criteria defined in the steps above.  Remember, not everything can be a high priority. For example, if this year’s initiative is to grow the business, anything related to that may have a higher weighting and value score, and by default, a higher priority. When assigning priorities, discuss what outcomes the project will affect, such as the bottom line, grants development, or fees or penalties if the project is delayed. Do not disregard the importance of discussing and reviewing the portfolio regularly with the portfolio management team. This discussion is a critical component of portfolio management. Your scoring may give you one result, but discussions and reviews with the portfolio team members may result in a slightly different result.

Remember, project portfolio management doesn’t have to start out complicated; you don’t need to wait until you have any special tools in place to jump in. As you become more experienced, the process will mature naturally and may grow to include other portfolios until there is one comprehensive, company-wide portfolio. Establishing and maintaining a project portfolio management process provides the organization with better visibility into projects, the project spend and budget, and resources needed to advance the company.

Chrystal Richardson

PM DNA Blog - by Chrystal Richardson Project Management