Why Project Portfolio Management is Essential for Large Businesses

Project portfolio management or PPM is definitely a must for any large business or company. Big businesses undertake projects that carry a lot of risks, which can have a huge impact on investment returns. A company's project portfolio is made up of a series of projects or investments. These investments represent funds allocated for your business with the goal of getting great returns. 

When you are investing, you want to know as much of the factors as possible. These include how big the risks are and how worthwhile the returns can be. If you don't get to knows these, you are pretty much gambling on your chances and that's not the smart way to operate a business.  

Surprisingly, a lot of organizations have little idea on the importance of PPM. According to Easy Projects, "around 45% of organizations admit they don’t fully understand the value of project management and the direction their company needs to head in for a specific project, even though healthy PM practices significantly boost the success rate of strategic initiatives of the company. This data is twice as surprising if we consider the fact that 89% of high performing organizations use project portfolio management in their day-to-day work." 

The study further revealed that "as it turns out, around 31% of companies still rely on paperwork to streamline their projects and manage their processes, investment and risks." 

What is PPM? 
It's the process used by company management in studying the possible returns from certain investments, in this case, projects. It allows them to compare projects with the help of real metrics. After careful analysis, the management will choose which one to launch, one that presents the best return of investment with the least amount of risk. 

Mark A. Langley, CEO of Project Management Institute, project portfolio management is "often referred to as simply portfolio management, is forward looking. If you can’t see the future of your organization by looking at your portfolio, you have no chance of getting there." 

The task is anything but straightforward and this is obviously easier said than done. Here's an in-depth look at PPM in order for you to understand why it's important for all businesses, especially large ones. 

The Right Questions in Risk Management 

The best ideas are useless if there is no proper planning in place. When it comes to planning, you need to be aware of the possible pitfalls and its effect on your business. Asking the right questions in managing project risks is essential in order to minimize risks and make good decisions.

The main question is always "Do we invest in this project?" While looking into that, you are considering the possible rewards of taking the risk. You have to identify the hurdles that you may encounter when achieving your goals. Project portfolio managers consider the following questions: 

* Do we have adequate resources? By this, we mean not just money, but also time, physical facilities, external support, and human resources. 

* Have we done something like this successfully in the past? Which aspects worked well with that project and which are the ones we can improve on? 

* Will there be conflict between the need to continue existing projects and the launch of the new one? 

* Are we setting realistic expectations and how we can verify this? 

* Will this project contribute towards the organization's objectives? 

Importance of the Process 

The process here involves the management team and the support staff analyzing each detail of the project proposal. This entails calculating budgets, laying out timelines, checking on the availability of resources, and identifying the milestones needed as the project progresses. 

After all this, the team may still decide that the project is NOT worth the risk. It doesn't mean that the process was a complete waste of time. Identifying the risks is part of making informed decisions, whether the proposal gets approved or not. 

Project Portfolio Management and Project Management - The Difference 

The latter involves guiding individual projects to completion, the former entails checking every project that the organization is involved with plus the new ones that might possibly come onboard. The PPM team is responsible for making sure that the project portfolio is well-balanced and harmonious and that this will contribute to the goals of the organization. 

This means that the PPM team's scope can also include revisiting existing projects and evaluate them again using the more current information. The team then prepares a roadmap which will serve as guide for project managers.   Tallyfy lists the following inclusions in making a project roadmap:

* Expectations such as desired outcomes and time frames 

* Project priorities and focus areas 

* The resources, including human and budgetary resources, at the project manager’s disposal 

* The budget allocated to each aspect of the project 

* Potential pitfalls and problems, the indicators that imply a need for action, and the recommended course of action should these issues arise 

It should be noted that however careful the planning is, unexpected things may still happen, which may lead to project failure. In this situation, the team should know when to quit in order to minimize the impact to the organization. Looking at the worst case scenario is also part of the PPM process.