Optimizing the Project Portfolio

Project portfolio management has five phases: portfolio inventory, analysis, planning, tracking, and review and replanning. These phases are dynamic, iterative, and ongoing (see Figure 10.5-4) and must be managed artfully depending on project life cycles as well as organizational issues, like budget cycles.

Initial project requests enter the portfolio inventory, where project data is captured and organized for portfolio analysis. The inventory includes active projects, proposed projects, and projects that are on hold or delayed. The inventory will have information about all projects in the portfolio, including schedule and cost estimates, budgets, dependencies, strategic initiatives, expected bene-

Figure 10.5-4 The Portfolio Management Process

Figure 10.5-4 The Portfolio Management Process

fits, risk, relative priority, value, and ranking. The inventory will also have information about available resources, roles, costs, skills, and other needed organizational information.

The portfolio is analyzed, periodically reviewing projects for their fit, utility, and balance: Do the projects fit the organization's strategy? Do they have value? How do the projects relate to each other, and how can the project mix be optimized? Portfolio analysis is crucial to prioritizing the portfolio and maximizing the value to the organization given its resource constraints. Organizations may prioritize projects based on a variety of criteria: financial, technical, strategic, and risk. Interactions among the projects in the portfolio are considered, including interdependencies, competition for resources, and timing. A variety of decision-making techniques and tools are used to help formulate the problem and facilitate the analysis of alternative solutions. Through multiple iterations, tradeoffs are considered and final adjustments made to arrive at the optimal project portfolio.

Once projects are selected and initiated, they begin the project planning phase. Here resources are allocated and projects are scheduled. This project management process is integrated with the portfolio planning process, where resource allocation and schedule decisions are made, taking into account the whole portfolio of projects.

In tracking the portfolio of projects, metrics are captured to assess the performance of each project. And depending on the type, these projects must pass decision gate evaluations to determine whether to continue with the project, put it on hold, or kill it altogether.

Reviews of the project portfolio involve a reverification of the projects' critical success factors—including resource availability and the continued validity of the business case—with the business sponsors. In addition, shifting business, technology, and market conditions can rearrange priorities. Those decisions also require a realignment of the project portfolio, which may or may not affect other projects in the portfolio. Replanning may be required, including changes in resource allocation and scheduling.

This iterative nature of portfolio optimization requires that project reviews, program reviews, and portfolio reviews be held on a regular basis. These reviews provide a forum for studying the alternatives and help to build organizational buy-in for the portfolio. Integrating project management and PPM is necessary for developing an optimal project portfolio. Figure 10.5-5 illustrates a conceptual model for integrating PM and PPM.

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Project Management Made Easy

Project Management Made Easy

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.

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