“Project portfolio management” is the latest trend in project management, with books, software, Web sites and conferences proliferating on the topic. But what exactly does it mean? For managers working on projects on a daily basis, it may be viewed as a euphemism for “more work.” But, in fact, this new way at looking at projects is designed to actually make projects work more efficiently to meet company goals and objectives, says Jim Joiner, director of the Project Management Program at the University of Texas at Dallas School of Management.
“As more projects and programs take up more time and capital in business, it is becoming critical that these projects are selected effectively by use of a portfolio system that attaches priorities to each project or program,” says Joiner.
Smart Business spoke with Joiner about the importance of creating a project portfolio management system in a business.
Could you define a project portfolio management?
Project portfolio management is often done in many businesses already — without the label. It is simply making sure that the projects and programs that are being done are in line with company’s goals. There is a hierarchical relationship among the various elements: projects form programs, and projects and programs form portfolios.
Project portfolio management exists to ensure the effective selection of projects and programs.
Why is all this important to a business?
Because businesses have limited time and resources. Project portfolio management adds a dose of reality to the whole process.
For example, projects can come from many sources. The task is to make sure the projects being implemented are in alignment with company goals and strategy. It is not uncommon for pet projects to be approved and implemented, whether in line with company needs or not. An effective portfolio management system will minimize the implementation of these nonessential projects.
Creating a project portfolio helps the business align the projects with reality — that is, with the resources available in the form of money, time, personnel and equipment, to get the project done.
Who should be responsible for the project portfolio management?
The portfolio management function is generally the responsibility of a senior manager or a management team. It’s a senior function and not something that can be done very well by a computer. This suggests the eventual creation of the job of portfolio manager, making it a complementary position along with marketing, engineering, manufacturing, and so on. The function of this portfolio manager position is to make sure the company is spending money on the right projects.
What are the first steps in creating a project management portfolio?
First, an inventory of projects and programs must be taken. It should be an actual index of the projects and programs that are happening or are in the planning phase. These projects and programs must be prioritized and some projects weeded out — or selected for a later date. You may have 150 projects, but you can’t do all of them this year; maybe you can do 50.
Someone has to decide which projects need to get done that the company can afford to do, and which support its strategy. A portfolio is a way to do that — it is an evaluation and screening function that takes a lot of judgment and experience, which is best done by someone in senior management.
What are the top advantages to creating a project portfolio management system in a business?
The business will know where it stands in terms of the projects that are going on. Without it, businesses are operating in the dark and are probably spending more of their money and resources on projects that may not be furthering corporate objectives.
It helps rein in costs and personnel time and helps company focus on the projects that are really important and have a good ROI or meet other strategic objectives.
Are there any disadvantages or reasons not to create a project portfolio management system?
A company may not be large enough to have a formal structure for it and no need to appoint a person as portfolio manager. But even in very small companies, someone somewhere needs to decide which projects need to get done. In small companies, that is usually the business owner. So it is helpful to go through this exercise (of taking an inventory of your projects and prioritizing them), even if a company only has a handful of projects.
JIM JOINER is the director of the Project Management Program at the University of Texas at Dallas School of Management. Reach him at (972) 883-2652 or [email protected].
