PPM is a way of facilitating the integration of several critical enterprise functions. Without PPM, the business of managing projects is conducted with the sense that the ultimate objective is to achieve project success. That is, if the schedule, cost, technical, scope, and quality objectives of a project have been met, then it is assumed that the project is of value. Yet early implementers of PPM have frequently found that many projects that are approved and allocated scarce resources do not fit very well with the strategic objectives of the firm, do not contribute (as well as other projects) to the cash flow, and do not represent the best use of resources.
The project portfolio represents part of the tactical planning that is implemented to support the strategic plan. Therefore, the governance council, in selecting projects for the portfolio and in managing what stays in the portfolio, is in fact an integral part of the strategic and tactical planning process.
The projects that comprise the project portfolio have a significant impact on the financial condition of the firm. Most projects incur costs during their execution and generate revenue (or reduce costs) on completion (or during execution, in the case of progress payments). Projects thus have an impact on the cash flow and the projection of financial condition. Today's regulatory atmosphere demands that financial reports represent a current and true picture of the asset value of projects.
Traditionally, project reporting has focused on costs (ignoring other financial items such as revenue and cash flow). Therefore, the PMO has to integrate with the financial function to update revenue and cash flow data based on project status and performance. The tools employed to support the PPM process either have to add revenue and cash flow capabilities or be integrated with tools that can fill the void.
Decisions on the makeup of the project portfolio should take into consideration not only the projects at hand but also prospective projects, which may be represented by marketing initiatives or as a result of top-down initiatives coming out of the strategic plan. Forecasting, based on data furnished by the strategic planning committee and the opportunities management system, should be integrated with the PPM process.
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What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.