Database Case Study Project Portfolio

+++ What You Should Bear in Mind When Introducing Project Portfolio Management +++ Processes and Factors +++

By Johann Strasser and Achim Schmidt-Sibeth                                                                    Read article in German

The goal of project portfolio management (PPM) is to work on the right projects as a company. For the particular challenge of multi-project management in particular is: Resources such as budgets and employees tend to be required by several projects at once. What is more, projects are often interdependent or even mutually exclusive.

This is why we will provide you with valuable decision-making aids. In seven steps, you will learn how to achieve a project portfolio management in your company that meets two requirements:

Relevant factors for classifying your projects are:

  • What is the strategic relevance of the project?
  • What is the cost?
  • How high are the resource requirements?
  • What deadlines have to be met?

In addition, you will learn how to determine the optimal combination of projects in your portfolio. This will allow you to select the right projects to implement. The less important ones will have to wait.

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Step 1: Define Criteria for Projects

Not all undertakings are projects. Much can be handled as part of operations. The project-worthiness analysis determines from what point an undertaking is to be treated as a project.

It can help to differentiate projects based on the project type (minor/normal/major project). This will allow you to define the methods to be used.

Figure 1: The project-worthiness analysis determines from what point an undertaking is to be treated as a project.

Define from what point on an undertaking is to be considered a project. Only then, is it to be added to the selection process for the project portfolio.

Design your individual project-worthiness analysis according to your requirements. Possible criteria for this could be:

  • number of departments involved
  • size of the project team
  • staff costs
  • amount of investment
  • duration
  • inherent complexity
  • novelty for the project team
  • quality risk
  • external effect

Step 2: Define a Process for Project Initiation

At any rate, you should ensure one thing when selecting the portfolio. Incorporate all projects requested internally or externally. Therefore, define a uniform process for initiating projects.

It is best to use a central system for the standardized recording of tasks, ideas, and project requests. Specify a methodical approach including:

  • workflows
  • permissions
  • criteria for the steps of approval

And see to the appropriate quality of planning for new projects.

Find answers to the following questions in your project portfolio process:

  • How are project requests or ideas collected?
  • How are potential projects assessed?
  • How does the approval process work? And who is involved in it?
  • Which tools should be employed?
  • How do you ensure that all involved know about the process and actually live it?
  • How do you guarantee the quality of the new projects’ rough planning?

Tip: Make sure the process you design is as simple as possible. This will ensure acceptance.

A note for those who are performing project portfolio management as PMO members: Focus also on change management to further increase acceptance.

Step 3: Define a Method for Prioritization

Prioritization is not a one-off activity. Whenever the circumstances change, you have to adapt your priorities. You can determine the strategic relevance of the projects by assigning business drivers proportionally.

You might also like our Case Study on Integrated Resource Management at KARL STORZ.

These drivers have to be clearly separated and distinct in meaning. Possible drivers can be:

  • Increasing product quality
  • Achieving a higher customer satisfaction
  • Increasing staff satisfaction
  • Achieving higher cost efficiency
  • Expanding into new markets

What is more, the drivers need to be complete from a strategic perspective. In this case, complete means that the drivers should be as few as possible but as many as necessary.

Subsequently, you define the drivers’ importance among themselves.

Tip: Choose at least 3 drivers but fewer than 10. This will ensure a good handling and a meaningful overview on a sensible basis.

Step 4: Start with a Complete Overview of Running Projects

First, you record all running projects with their essential information. To do this, use a central, database-assisted list in your project portfolio management software.

Looking to introduce a PPM system? Find out about 3 different approaches.

The required  project information should include at least:

  • Start
  • Finish
  • Effort
  • Cost
  • Sponsor
  • Project manager

Assign the relevant strategic business drivers to each of the existing projects.

Proceed by checking whether the most effort actually goes towards the most important projects. To this end, compare the importance of the drivers with the corresponding efforts of the assigned projects.

Figure 2: Does the most effort actually go towards the most important projects? There is a discrepancy for B.

Identify unimportant projects it might be best to stop. This can liberate resources for more important new projects.

Tip: It is hard to present the financial value of a project that does not produce direct revenue.

So it is best to put the initial focus on the importance resulting from the strategic drivers. You can always add a financial evaluation later.

You can also divide the project portfolio into projects with revenue and those without.

Step 5: Compare the Planning of New Projects with the Remaining Capacity and Budget Available

In the next step, you add your list of desired additional projects to the portfolio of running projects.

Compare the new projects’ effort and cost planning with the remaining capacity and budgets available. This is about finding out which project could start when.

It will be necessary to roughly plan out the new projects. Thus, the resource requirements along the timeline become apparent. Planning should not be down to persons but to skills. This will keep the effort lower.

Struggling with resource management? Read our article about resource planning in project management.

Of course, you will have to assign the new projects to the strategic drivers. Otherwise, it will be difficult to prioritize the new projects with the highest strategic contribution.

Only include small projects with low strategic contribution at the end, to fill in the gaps.

Tip: Make your planning as rough as possible but as detailed as necessary. This step requires very little. The guiding principle is: Better to make your planning complete and rough than incomplete and too detailed.

In other words, it is preferable to have ALL projects show up in the overview, at least roughly. Leaving some out altogether is not advisable. In that case, an overall statement about the feasibility becomes impossible. You are dealing with incomplete data.

Step 6: Keep a Constant Eye on Project Handling

The PPM work does not end with the selection of the projects to be started. On the contrary, you should ensure at all cost that the data of all projects are:

  • updated regularly
  • reported back to the central system

The current data are the basis you need, if you ever want to determine:

  • whether new projects can be started in the future
  • when these projects could be started
  • what kind of projects they could be

You should monitor the portfolio continuously. Also, keep checking the priorities of running projects.

Whenever strategic guidelines change, there is one thing you should not rule out. Consider aborting projects if they are not in line with the new strategic direction.

Tip: Arrange for a monthly portfolio meeting. The latter has to be prepared well by the PMO.

The following goes for projects that need to be stopped: Rather a calamitous end than an endless calamity.

Step 7: Close Projects with a Regulated Project Closure Process

You should have every project undergo a closure process. The latter includes a final project review with a comparison between the original targets and the actual costs and results.

In addition, you should:

  • communicate the lessons learned
  • archive the project properly
  • discharge the responsible project manager officially (relieve him or her of the responsibility for the finished project)

After that, everyone is aware that a project has actually been declared closed. And that the staff can now be assigned to other projects.

Tip: In the interest of a good company culture and communication, consider this: Successfully completed projects could be a reason to celebrate.

Alongside the results and successes, you would be able to present lessons learned. The occasion would give you an opportunity to increase the responsible project managers’ motivation for future projects.

Conclusion – 7 Steps to Optimal Project Portfolio Management

This article has taught you how to:

  1. Define criteria for your projects
  2. Define a process for project initiation
  3. Define a method for prioritization
  4. Start with a complete overview of the projects
  5. Compare new projects to the remaining capacity and budgets available
  6. Keep an eye on project handling
  7. Use a regulated closure process for your projects

These practical tips will allow you to accurately determine the optimal portfolio of projects. Those projects should either 1) serve the implementation of your strategy in the long run or 2) bring improvements in the short run.

Is there anything you feel we have missed? What are your experiences in project portfolio management? We look forward to receiving your comments.

Final tip: Subscribe to the TPG Blog Newsletter now and never miss another blog post.

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