Between stockholders who demand higher share prices and government regulators who breathe down management's neck with compliance issues, organizations are stuck with too many projects and not enough resources. Adding to the project management dilemma are the urgent requests of diverse departments, each of which claims its problems and projects should take priority. So how can companies really get a handle on selecting the most critical projects for execution? The answer is project portfolio management, but not the way it is currently practiced in most organizations.
So, what is the problem? Many companies still do not practice project portfolio management at all. Sometimes old-fashioned power struggles still determine whose projects are implemented - the group or individual who has the most money, influence or status wins. Secondly, if multiple departments clamor for new computer systems, for instance, the one that provides the most money to IT or that has the "pushiest" people gets its project approved. Alternatively, the projects that address the biggest "hurt" are sometimes the ones that are funded and implemented most promptly, even if they do not align with corporate strategies.
Companies that do practice project portfolio management usually have five types of projects feeding the portfolio:
While there is nothing inherently wrong with the first four types of projects, the problem is that most organizations prioritize them incorrectly. Information extracted from several presentations at the PMI Research Conference June of 2005 in Montreal provides some insight to the typical mix of projects. The typical portfolio today contains 50 to 60 percent reactive projects, each of which implies that something has already gone wrong. Another 30 percent are projects that fine-tune specific business unit processes; another five percent are pet projects and the remaining five percent are strategic projects.
1. Project Management Research Conference, 2006, "New Directions in Project Management". The conference was held in Montreal, Canada, July 16-19, 2006.