Project Portfolio Management

A Practical Guide to Selecting Projects, Managing Portfolios, and Maximizing Benefits

Harvey A. Levine

• Publisher: Jossey-Bass
• Year: 2010
• Print ISBN: 9780787977542
• eBook ISBN: 9781118002568
• Edition: 1
• Topic: Business
• Subtopic: Project Management
• Index: Business

Project Portfolio Management (PPM) goes beyond the typical project management approach to offer a set of proven business practices that can help executives, program managers, and project managers bring projects into alignment with the strategies, resources, and executive oversight of the overall enterprise.Step by step, this book shows how to take a project from the inception of a vision to the realization of benefits to the organization. Project Portfolio Management draws on project management expert Harvey A. Levine's years of research and distills the knowledge and best practices from dozens of leaders in the field to show how to select and implement the projects that will garner the best results. Throughout this important resource, Levine tackles the many challenges associated with PPM, including

• Ranking value and benefits
• Determining the size of the portfolio pipeline
• Assessing the impact of uncertainty on projects and portfolios
• Understanding the benefit and risk relationship
• Establishing a portfolio governance capability
• Managing the portfolio to maximize benefits
• Implementing PPM

PART ONE

A Practical Guide to Project Portfolio Management

The thirteen chapters in Part One offer my personal view of PPM based on over forty years in the field of project management as a practitioner and a consultant. I am very exited about what PPM is bringing to the projects community in both the public and private sectors. I am especially pleased with how PPM serves the executives of any organization, providing a means of synchronizing the vast effort in projects with the expressed mission of the enterprise. I’m very upbeat about the benefits that are being realized by early adopters. But what I like about it the most is how practical it is.

Project portfolio management is not a highly scientific, theorem-oriented concept. It is just plain common sense. It is easy to implement and practical to employ. Practical is a key operative word here, and this is the approach that I take in bringing PPM to you.

First, we discuss what PPM is and why we need it. Then we get into the fundamentals of PPM: project prioritization and selection, maintaining the project pipeline, organizational considerations, integrating PPM tools with traditional project management tools, and implementing PPM. Finally, we cover some special issues and provide further guidance on how to make PPM work.

SECTION ONE

What Is Project Portfolio Management, and Why Do We Need It?

The project portfolio life span extends well beyond the project life cycle to include identification of needs and opportunities on the front end and the realization of benefits at the other end. PPM recognizes this, bridging the traditional gap between the projects and operations functions and delivering maximum value from limited resources. Every executive should demand that PPM practices be put in place, and they should lead in their development and execution.

The first three sections of this book cover the topic of PPM in increasing detail. Section 1 introduces PPM, discussing why it is so valuable and providing an overview of what PPM is. Section Two goes into the meat of PPM, providing complete coverage of what it takes to create a PPM capability and to implement it. Section Three covers some of the finer points pertinent to PPM.

When you read Chapter 1.1, it should become readily apparent that something has been missing in how we view the place of projects in the enterprise. It will also come as no surprise that PPM is growing exceptionally fast and that virtually all of the software vendors that support the project management discipline have revamped their offerings to support PPM.

I’ll introduce you to the project portfolio life span. You’ll learn why PPM is much more than just an extension to project management. You’ll start to question whether your firm is working on the right projects. You’ll discover that there is a significant gap between the projects function and the operations functions of most firms, and I’ll show how to use PPM as a means to bridge that gap.

In Chapter 1.2, you’ll see specifics on how to do just that. You’ll get your first look at the things that you can accomplish with PPM and the processes that support these accomplishments. In addition, you’ll find an overview of how to organize for PPM.

After four decades of being completely engrossed in project management, I thought that I fully understood its power and value. But as I learned about PPM, it opened an entirely new world of capabilities to exponentially increase our ability to use projects to build business value and fully integrate the projects environment with the ongoing business. After reading this section, I hope that you will feel the same way.

1.1

Why Do We Need Project Portfolio Management?

Do traditional measures of project success miss the true business objectives? Scope, Time, Cost and Quality are only components of the objective, rather than independent measures of success.

Harvey Levine, June 2000

Could what I said five years ago be considered blasphemous? Imagine going against conventional wisdom at a time when project portfolio management (PPM) was just emerging as a body of thought. Project management was finally getting its well-deserved recognition, and everyone was focusing on spreading the gospel of bringing projects in on time, within budget, and meeting scope and quality objectives. Well, almost everyone.

Why would anyone want to shoot holes in the acceptance of project management? No one is suggesting that project management is wrong. However, limiting our focus to the critical measures of project success confuses the means to an end with the end itself.

Almost everything written about measurements of project success dwells on the four pillars of success: scope, time, cost, and quality. We have been taught to identify the goals for success in each of these areas and then to create plans that balance these objectives. Then we implement practices and use computer-based tools to measure how well we are accomplishing these objectives. When we meet these objectives and satisfy the project stakeholders, we consider the project to have been successful.

However, most executives are not interested in these areas of measurement. Instead, they talk about profitability, return on investment, delivery of benefits, and taking advantage of windows of opportunity. We used to say that executives are interested in just two things about projects: when they will be finished and what they will cost. Not anymore. Now (in the for-profit arena) they ask:

• What mix of potential projects will provide the best utilization of human and cash resources to maximize long-range growth and return on investment for the firm?

• How do the projects support strategic initiatives?

• How will the projects affect the value of corporate shares (stock)?

Similar issues apply to the nonprofit and government operations where optimizing the use of limited funds and resources and support of missions and strategies is vital. While PPM can be effectively applied to both the public and private sectors, most of the examples in this book use a for-profit enterprise as the model. With minor adjustments, PPM can be adapted to nonprofit and government operations.

Perhaps this is an oversimplification. However, if we start with this premise and examine its meaning, we can begin to realize the tremendous impact of this observation on the way that we conduct project management and even in the way that we select and implement project management tools.

The Emergence of Project Portfolio Management

Certainly it is not news to anyone that the basic concept of project management has evolved to what we call enterprise project management. At first, many people in the PM community thought that this shift was more of a way of aggrandizing project management—sort of a pompous elevating of project management to a higher level of importance. Later we came to realize that enterprise project management was a reflection of the importance of consolidating and integrating all of the organization’s projects—for universal access and evaluation. Now we come to find that enterprise project management entails consideration of potential projects as well as approved projects. We also find that the emphasis has shifted from traditional project-centric objectives to higher-level operational objectives.

Projects, executives have come to realize, are the basis for the future profitability of the firm. Hence, they have a growing interest in how projects are selected and managed. They are precipitating an increased demand for more standardization and automation of project management. But what they are asking for is different from the requests from traditional project management sources. And what they are calling this emerging project management protocol has also changed. It is no longer just project management or even enterprise project management. It is now called project portfolio management.

Bridging the Gap Between Operations Management and Projects Management

Project portfolio management is the bridge between traditional operations management and project management (see Chapter 3.1). For organizations that will be depending on project success for the success of the overall enterprise, a well-structured bridge, built on a good foundation, is the preferred way to overcome the traditional gap between operations and projects management.

In PPM, it is assumed that the enterprise positions itself for increased strength and profitability through its selection and execution of projects and ensures that it continues to thrive in a world of constant change and the threat of competition.

The basic elements of PPM are not new, nor is the environment in which it is applied. However, before the emergence of PPM as a defined discipline, these elements were the responsibility of two distinct groups: operations management and projects management, each with its specific role:

Operations Management	Projects Management
Strategies	Schedule/time
Objectives, goals	Project cost
Business performance	Project performance
Stockholder satisfaction	Stakeholder satisfaction
Project selection and mix	Scope/change control
Resource availability	Resource utilization
Cash flow, income	Cash usage

The Traditional Organization

When the execution of projects is a normal part of the organization’s business, typically the organization establishes, in parallel with the operations function, a function to manage the projects. This normally includes a central project office or project management office (PMO) and specialized personnel to manage projects. The PMO, under a chief project officer (or similar title), develops standards and practices directed at the effective execution of projects and the attainment of schedule, cost, scope, and quality objectives. In doing so, a project management planning and information system is put in place, and periodic measurements of project progress and performance are conducted.

In traditional organizations, responsibility for determining and achieving the organization’s goals is assigned to the operations function. Senior managers with titles such as chief operating officer, chief technology officer, chief information officer, chief financial officer, and strategic planner establish objectives and goals and develop strategies to achieve these. When there are projects associated with these goals, these senior managers are expected to select from a menu of proposed and pending projects. The objective is to create the mix of projects most likely to support the achievement of the organization’s goals within the preferred strategies and within the organization’s resource (people and funding) constraints.

A problem common to many organizations is that there is no connection between the operations and projects functions and no structured, consistent, and meaningful flow of information between these two groups. The organization’s objectives (enterprise-level goals) are hardly ever communicated to the project office, and the periodic measurements made by the projects group cannot be related to these objectives.

What a waste! Both groups are off in their own world, working to do the best that they can but not knowing if their efforts are effective or efficient. Are the projects that are being worked on (assuming that they were properly selected in the first place) still the best ones to support the objectives? How well are they supporting the objectives? Are there performance issues associated with meeting the objectives? How would the operations people know?

And over in the project office, when the project performance data is evaluated, what knowledge is available to influence the corrective action decisions? If the individual project objectives are in danger, what should the project manager know to work on balancing schedule, cost, scope, and quality parameters? Can this be effectively done in the absence of operations inputs?

Bridging the Gap Between Portfolio Planning and Portfolio Management

There is a second gap with which to contend. Our traditional approach is to separate the function of project selection from that of managing the project pipeline. The traditional assumption is that once a project is approved, it is sep...

Table of contents

• Title Page
• Copyright Page
• Foreword
• Acknowledgments
• The Author
• Introduction
• PART ONE - A Practical Guide to Project Portfolio Management
• PART TWO - Contributed Chapters and Case Studies
• Notes
• Index