August 31 2010


Project Management and Processes

The best portfolio management practices

Welcome to the first PMLOGY®* article, in which we will tackle the very popular issue of portfolio management.

Portfolio management has become a priority for many businesses that have greatly improved their project management over the last few years.

In order to be successful, a company must be able to effectively manage its projects. First and foremost, however, it is important to choose the right projects—and that’s where portfolio management comes in!

Essentially, a company’s project portfolio should reflect its strategy to implement the changes required to meet the corporate objectives of its strategic plan.

PMLOGY definition

Portfolio management: dynamic decision-making process where a list of active (authorized) projects is continually updated and reviewed. The process involves:

  • New evaluated and prioritized projects
  • Existing projects that must be moved ahead, cancelled or postponed
  • Resources allocated and re-allocated based on active projects

This ongoing process can be broken down into 6 key steps:

  1. Identifying projects:

    This first step involves taking stock of the different projects (current or potential). A project file is created for each identified project.

  2. Categorizing projects:

    The second step involves classifying projects by type in order to facilitate the steps to be taken. For example, it might be helpful to group projects into categories such as major vs. minor, required vs. discretionary, etc.

  3. Evaluating projects:

    This step aims to document projects in order to be able to compare them. This assessment ultimately consists of building a business case that establishes a given project’s costs and deadlines, benefits, advantages/disadvantages, risks, etc. Business cases provide a common foundation for evaluating projects so that one can compare “apples” to “apples.”.

  4. Prioritizing projects:

    This step is very important. At this stage, projects are compared in order to set priorities. Using scoring models is recognized as being one of the best practices. The most commonly used criteria include: maximization of value (return on investment — ROI), strategic alignment, risk and urgency.

  5. Authorizing projects:

    After prioritizing projects, this step aims to determine which particular projects will be implemented. To successfully carry out this stage of the process, organizational capacity is assessed in order to make optimal use of the available resources (human and financial). This is the stage when project managers are assigned to the different projects that have been authorized.

  6. Reporting on and reviewing the portfolio:

    This final step involves consolidating progress reports for the different authorized projects. The goal is to provide upper management with an overall picture of the situation using dashboards that provide the project’s status and several performance indicators. This information is essential for helping upper management decide whether or not to continue with a given project.

As previously mentioned, these 6 steps are ongoing and highly iterative. As soon as new projects are identified, they are added to the list and may very well result in new priorities!

The concepts discussed in this article are addressed in more detail in the following course:

Project Portfolio and Multi-project Management (GE210)

*PMLOGY: [pee-em-lo-gee] noun. — the science of project management
PMLOGY and GPLOGIE are registered trademarks of Carl M. Gilbert.
©Carl M. Gilbert, All rights reserved.

Carl M. Gilbert is the initiator of the Project Management courses at Technologia, he was the obvious choice as a representative for four of the programs in this particular area of specialty. He has been involved with the Montreal chapter of the PMI since 1996 and has a thorough understanding of the various certifications and requirements for project managers.