A project manager’s guide to portfolio management
Project portfolio management (PPM) is a means of strategically aligning project portfolios with business objectives. It makes it easier to identify the risk-reward per project or portfolio, forecast returns, and ultimately make smarter business decisions.
In essence, portfolio management helps you diplomatically allocate and leverage resources to maximize benefits and outcomes.
Sounds good on paper, but how does it affect project management, specifically?
Turns out, eight out of ten project managers claim PPM is crucial for business success. Without it, organizations can focus their efforts too heavily on minimum-value, on short-term projects, and goals that don’t contribute to big-picture growth and ROI.
Let’s dive more into what portfolio management looks like on a day-to-day basis, and how it can make you a more effective project manager.
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What is portfolio management?
Portfolio management is all about aligning projects with goals. And we don’t mean aspirationally as in “let’s work on projects that help us scale”.
Rather, it requires a deep analysis of where you are vs. where you want to be, and how you plan to get there. Every project’s potential risks, rewards, and actual performance must be weighed to determine if it’s worth green lighting. Or, in the case of a project that’s already launched, if it’s worth continuing to fund and throw resources into.
As such, portfolio management is a ranking system to help you determine projects by value, risk, budget and resources required, desired and realistic outcomes, forecasted revenue, and so on.
Monitoring project portfolios is similar to how financial managers keep an eye on stocks and market trends—it’s a constant ebb and flow.
Creating a process for prioritizing projects helps organizations establish standard governance that can be applied to existing and future efforts.
Say, for example, an organization has seven projects in the pipeline, but only has the resources to carry out five. How do they choose which ones to work on first? How do they plan what projects will take place and when?
This all comes down to PPM.
The day-to-day portfolio management
On a granular level, portfolio managers collect data and monitor the performance of all existing projects. They track trends in the market, identify patterns, and decide which projects need to take precedence.
At the same time, they are on-hand to oversee in-progress projects and uncover any risks that might result in a project being pulled entirely. Monitoring projects collectively allows you to keep a finger on the pulse and track movements at both a high level and on a project-by-project basis.
It also means you can map out projects against your strategy and ensure visibility for key stakeholders. By balancing risk and reward, organizations can improve their performance and, ultimately, their ROI.
The steps involved in portfolio management
The PPM process will look different depending on company size, industry, and the type of projects you deliver. But, for the most part, PPM involves a strategic series of steps:
Identify and clarify business objectives
Collect inventory and establish a strategy
Analyze your current portfolio and assess for strengths and weaknesses
Ensure the portfolio aligns with overall business objectives
Manage budgets and resources
Tweak and optimize the process and implement stakeholder feedback
Why portfolio management is crucial to project success
Managing a handful (or even hundreds) of projects at one time is difficult in itself.
But worse, imagine that half of the projects you’re spending valuable time and resources on actually don’t align with business goals? Or, don’t move the needle in terms of revenue, growth, brand awareness, conversions, customer satisfaction, and more?
This is precisely why portfolio management is crucial. If you don’t have an overall strategic outlook, it’s easy to get caught up on a project treadmill without stopping to think: is this actually contributing to our success?
PPM primarily helps organizations:
Prioritize projects and make data-backed decisions: PPM provides clear and relevant criteria for selecting projects and ensures you’re allocating the right resources to the right projects.
Align projects with business objectives: Good PPM helps organizations align projects with their strategic direction and ensure they’re focusing on the bigger picture rather than short-term goals.
Facilitate communication and collaboration: Projects are made up of many moving parts that require transparent communication between teams and stakeholders. PPM provides a network of information-sharing and gives teams an insight into the organization’s current workflow.
Analyze and gain insight: Understanding what’s working and what’s not in existing projects fuels the strategic direction of future projects. PPM helps predict the best upcoming opportunities based on past successes.
Portfolio management vs. project management: How they fit together
While they sound very similar, portfolio management and project management are two different beasts.
Project management involves implementing and managing individual tasks and resources for each project. Portfolio management oversees projects collectively and makes sure they’re hitting the strategic goals of the organization.
A project manager will assign activities to team members on a project level, while a portfolio manager will dig into data to determine whether a project in its entirety aligns with the businesses’ objectives.
For example, a project manager on a web design project will outsource brand assets to a freelancer, but the portfolio manager will decide whether the web design project as a whole is worth moving forward with.
What portfolio management involves
Portfolio managers wear a number of different hats. They’re risk assessors, strategists, and financial advisors all rolled into one. As such, the role requires managers to draw on several different skill sets and processes:
Change control management: Portfolio managers are tasked with identifying change requests and prioritizing the most important ones based on financial constraints and available resources.
Risk management: Portfolio managers must assess the risk of each project and implement contingency plans if things go wrong.
Financial management: Portfolio managers are in charge of project financial resources and ensuring they can demonstrate how the portfolio relates to the organization’s financial and strategic goals.
Pipeline management: Portfolio managers must assess project proposals and monitor the project pipeline to decide if upcoming projects are worth executing and whether they tie into the overall business objectives.
Resource management: Portfolio managers are tasked with effectively using resources to carry out the selected projects.
5 tips for portfolio management success
As you can see, there are a lot of spinning plates involved in portfolio management. It’s hard to say “no” to projects, especially if you’re a small startup. But, it’s crucial for selecting the right projects to work on at the right time.
Otherwise, you run the risk of carrying out surface-level projects that don’t add value to the organization or move it any close to its key objectives.
If you’re dipping your toes into the world of PPM, here are five tips to keep you on track:
Tip 1: Prioritize risk assessment
Carrying out thorough and accurate risk identification and implementing relevant remediation strategies is crucial to long-term success. It's always smart to be ready for what "could" and "should" happen with every project.
This is why it helps to have a holistic view of your entire project timeline, so you can monitor its entire progression from start to finish.
Tip 2: Don’t be afraid to pull projects
If a project isn’t meeting its objectives or bringing value to the organization, don’t be scared to pull the plug on it entirely. A canceled project is better than one that sucks all of your finances and resources but adds nothing to the company.
Instead of running over budget and pulling a project, use a Financial Budget tool that lets you assign a certain budgeted amount to a project. Teamwork's financial budgeting feature allows project managers to track users' billable and non-billable logged time.
This makes it simple to get a complete view and breakdown of the available funds left in the budget that was originally planned.
Tip 3: Simplify tasks for team members
Give team members the freedom they need to complete their assigned tasks and monitor time spent on project activities. Complicating the process confuses everyone and can lead to projects running longer than anticipated.
But not all task management solutions are the same. Sometimes it helps to simplify a project by breaking it up into multiple tasks.
While general tasks can tell you a lot about the project, sometimes there's a need for subtasks. This allows stakeholders to go further into detail about the task without having to create an entirely new one.
Tip 4: Make sure data is easily accessible
Digging around in the bowels of an Excel spreadsheet for relevant data can hinder the decision-making process. Make sure accurate data is easy to get your hands on by using project management software.
If your team is still using multiple spreadsheets to manage projects and tasks, there's an easier way. Check out our guide on how to break up with Excel for good.
How to break up with Excel: A better approach to project management
It's not you, it's the spreadsheets. Stop managing projects across multiple spreadsheets and get your team to end it with Excel once and for all.
Tip 5: Don’t micromanage
No one likes to feel like their boss is breathing down their neck. Give team members the freedom to do what they do best, but keep a finger on the pulse of what’s happening at all times.
Project management software like Teamwork has the resource management features you need to monitor the progression of your projects and users without giving the feeling of micromanagement. It's simple to spot bottlenecks and give a sense of transparency to everyone working on the project.
By tracking the time each team member spends on a task, you get a much clearer overview of who still needs to do what. It also lets you spot those who are under or overused on your team.
Speaking of project management tools, let’s take a look at how you can leverage them to improve portfolio management workflows.
Using project management software for portfolio management
Portfolio management and project management are two separate activities. But project management software can be an incredibly helpful tool for providing greater transparency as well as real-time data and project statuses.
A tool like Teamwork collects project information on a granular level which can then be accessed by higher-level portfolio managers in a visual dashboard. It eliminates the need to do clunky tasks, like exporting insights from Excel or keeping track of endless email threads.
Get a top-level view of your project inventory and project progress, keep track of funding rounds and project proposals with visual Kanban boards, and create custom dashboards to gain a quick snapshot of your portfolio profitability.
Want to see Teamwork in action? Get a free 30-day trial today and see why so many teams use our platform for portfolio management.