What is a project portfolio and how do you manage it?

What is a project portfolio?

A project portfolio is not just a tool; it’s a strategic asset for your organization. It is an essential tool to support strategic project management in an organization and is primarily useful for the company’s Board of Directors and the Project Management Office. Professional management of project portfolios requires the development of parameters for them, which the portfolios should achieve. Once the parameters or strategic goals of the portfolio are defined, the best projects are selected for a specific portfolio. Project portfolios are maintained in companies instead for a long time. During this time, some projects in the portfolio are completed, some are removed, and new projects are systematically added to the portfolios. Therefore, project portfolios have a dynamic nature and must be actively managed. Project portfolios are an excellent tool to support the company’s strategy. If a company’s strategic goal is innovation, for example, it should create a portfolio of innovation projects and actively manage it.

Why manage a project portfolio?

Project portfolio management is primarily overseen by the company’s board of directors and the Project Management Office (PMO). The board, or a dedicated portfolio management committee, sets the portfolio’s strategic goals and determines its composition. The active management of project portfolios is crucial for achieving these strategic goals.

1. Project portfolios are an excellent tool for supporting a company’s strategic goals. For example, if a company’s strategic goal is to improve its logistics processes significantly, it can establish such a project portfolio. Then, at a single meeting of the management committee of this portfolio, the entirety of issues related to the optimization of logistics processes can be discussed. Some of the projects in the portfolio are closely interrelated and constitute a program of projects.
2. The ability to take a global view of the roadmap of ongoing projects and quickly spot key milestones that require a management response
3. To quickly identify common project risk areas in ongoing projects. Individual project managers may try to solve the same risks individually. When the same risk co-occurs on many projects, addressing it will be the most effective solution.
4. Managing the budget allocated to the project portfolio globally. The same applies to the strategic management of project resources dedicated to implementing projects in the portfolio.

How to manage a project portfolio?

Project portfolios must be actively managed. In practice, this means carrying out the following activities:

Defining the parameters/goals to be achieved by the portfolio

These are not just targets but potential successes waiting to be realized. Typical parameters to be completed by the portfolio are the budget the projects can absorb, the additional sales generated by the implemented projects, the NPV to be achieved, and the level of savings from implementing optimization projects.

Selection of projects for the portfolio

Organizations overwhelmingly have more project ideas than practical implementation possibilities. Therefore, selecting the projects that benefit the portfolio most is crucial. This can be done objectively by using scoring models.

Systematic evaluation of the portfolio’s achievement of goals

At regular intervals (e.g., quarterly), the progress of the goals achieved by the portfolio should be analyzed. During such meetings, decisions are made to remove non-prospective projects from the portfolio and add new ones. It is also worth analyzing risks from the perspective of the entire portfolio.

Program management in the portfolio

Projects in a program are intended to achieve a common goal and are interrelated. A program is often part of a project portfolio.

Tools for managing project portfolios

At least a few good IT tools support project portfolio management. One of them is FlexiProject. FlexiProject is a comprehensive IT program that supports the management of projects and project portfolios. In FlexiProject, you can define any number of project portfolios and parameterize them accordingly. The projects in each portfolio are placed on a graphical roadmap showing the deviation of each project from the plan, the status of milestones, and the links between different projects. A significant advantage, especially for the company’s management, is that the attractiveness of individual projects in the portfolio is shown on a transparent matrix. Management immediately sees the projects that bring the most benefit to the portfolio and those whose elimination from the portfolio is worth considering. A separate section is devoted to the financial analysis of the projects in the portfolio. For each project, synthetic information on the plan and costs already incurred and projected to be incurred are presented. At any time, the company’s management has information on the status of the financial plans. FlexiProject also offers the possibility of independently building various reports on portfolio projects. A functionality that the program’s users very much appreciate is automatic project reviews. This is a functionality that automates the reporting of project statuses to the PMO and company management. It dramatically reduces the time to prepare cyclic reports for the company’s management.

The importance of project portfolios in strategic implementation

Project portfolios are excellent tools for supporting the implementation of company strategy. Focusing on both individual projects and entire portfolios of projects allows you to use valuable company resources effectively. It is worth using a professional IT program to increase efficiency in portfolio management.