PPM is no longer new. In recent years, it has not only become a popular topic in books and articles, but many companies have implemented a function they call "project portfolio management". But the question is: Do all of these functions really manage project portfolios? The following examples of PPM practices that we ran across in several companies of different sizes and from different industries, during the last five years, rather suggests that the answer is "no".
In many cases, the portfolio management function administered project data reactively and produced nice after-the-fact reports but did not manage and control the project landscape proactively. For example:
- Responsibilities of project portfolio boards and steering committees were not clearly spelled out, the efforts of the two bodies were partially duplicated or the portfolio board actually acted as a steering committee for most projects, and some decisions were taken at the wrong management level.
- "Prioritizing" was about assigning a priority of 1, 2 or 3 to each project and was basically a classification effort rather than an aid for selecting the right projects based on ranking. There was no filtering or funneling and as a consequence, more or less all in-coming project requests were approved.
- Resource capacity was used as a criterion for prioritization, rather than for scheduling.
- In the absence of any "skills management", the sufficiency of resources was treated as the key constraint, resulting in an upward "delegation" of project-specific resource decisions to the project portfolio board.
A key misconception that we encountered several times was the assumption that the portfolio view is merely an extension of the single project view. This quickly resulted in the adoption of the life span of a single project as the basis for portfolio management. Figure 1 illustrates such a bottom-up understanding:
Figure 1: An Interpretation of a Portfolio Management Process
If PPM is based on the single project view and too much focus is put on the single project life span, it is likely that the project landscape will be administrated as a list of projects on micro level. That is, by maintaining a laborious "master plan" with allocation of resources down to 0.1 full-time equivalents. Instead, it should be managed proactively as a portfolio of projects on macro level i.e. encompassing prioritization, synergies, dependencies, escalation and exception handling.
It is obvious that a gap exists between the existing theory of PPM and the observable practices in enterprises. One reason may be that the existing theory is not sufficiently practical. If so, what then is needed to use PPM as a strategic instrument to control the project landscape? Let us have a look at what PMI's "Standard for Portfolio Management" says.
1. This Figure is taken from the "Portfolio Governance Handbook" of AlphaComp, a large IT service provider (company name changed).