Why to Implement Project Portfolio Management (5 Reasons)


Are you looking for arguments for project portfolio management? In that case, this article may be just right for you. When defining the optimal combination of projects to implement in the portfolio you are probably juggling with the classic factors that need to be considered:

  • Strategic relevance
  • Costs
  • Staff requirements
  • Deadlines to meet

No mean feat. For project portfolio management (PPM) is not only about selecting the projects that make sense from an economic perspective.

What you will learn about in this article:

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Parameters of Project Portfolio Management

In most cases, various projects are competing for resources, such as budgets and staff. What is more, the projects have an impact on each other. Often, they are interdependent. They may even rule each other out.

5 arguments for project portfolio management – Project vs. project portfolio management

The difference between portfolio management and project management

Hence, it is all the more important to keep track with professional project portfolio management. And to plan in accordance with corporate strategy.

But does your management agree with you on this point?

This article will provide you with 5 arguments for project portfolio management that illustrate why it is so central to corporate success.

PPM Definition

To avoid any misunderstandings: Microsoft uses the acronym “PPM” for its solution “Project & Portfolio Management”, which is based on Microsoft Project Server. This platform is primarily used for operational project management. Since Version 2010, it has also included portfolio management capabilities.

However, this article uses “PPM” solely as an acronym for the term “project portfolio management”.

Argument 1: Deciding on the Right Projects

An integrated PPM has a decided advantage. It supports you in selecting the “right” projects. The challenge is to select and implement feasible and economically viable projects.

Special Download: 5 Arguments for Portfolio Management (PDF file)

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Thus, you select the projects promising the best results per Euro spent. At the same time, all selected projects must also be aligned to business strategy.

With arbitrary project selection, on the other hand, you would risk implementing the wrong projects.

The Benefit for Your Decision-Makers:
They will always have the best possible decision-making basis available. It will allow them to determine which additional projects can be started and actually carried out. The likelihood of successful project completion will increase considerably.

Project selection usually happens in the Project Portfolio Meeting. Find out more.

Argument 2: Complete Overview of the Project Portfolio

Project portfolio management enables you to find quick answers to the following questions:

  • Which projects are currently in what phase?
  • What new projects are up for decision?
  • What is the resource utilization?
  • How high is the budget depletion?
  • What dependencies are there between projects?

Find out how to introduce a project, portfolio and resource management solution.

In addition, you will have an overview of the states and responsibilities. And you will get an insight into the “health” of your portfolio and its projects.

The Benefit for Your Decision-Makers:
A complete overview of all planned and running projects in a capable Project Portfolio Management Software ensures decision-makers are always up to date regarding the portfolio. They recognize budget and resource bottlenecks in good time. By changing the priorities and the portfolio, they can react to them according to your corporate strategy.

5 Arguments for Project Portfolio Management – Optimizing resource utilization with appropriate tools (in this case TPG PortfolioManager)

Optimize your resource utilization in the project portfolio with the aid of appropriate tools (in this case TPG PortfolioManager)

Watch this related video: Ad-hoc Optimization of Resource Utilization in a Microsoft Project Portfolio (TPG PortfolioManager)

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Argument 3: Standardized Project Initiation

You want to ensure all project ideas and orders are properly considered in the portfolio selection. Nothing ought to be forgotten. Thus, you are best off with a central and standardized method of registering ideas and projects.

The best way to guarantee completeness is by:

  • A methodical approach with processes and workflows
  • Permissions and criteria for the steps of approval
  • Ensuring the planning quality of new projects

The Benefit for Your Decision-Makers:
They have a sound and transparent preparation for selecting the projects at their disposal.

Argument 4: Optimum Investment Decisions

Portfolio decisions are controlled by priorities. Project prioritization can occur in various ways, for example by:

  • A direct statement of the importance and urgency or the strategic contribution per project and calculation of the priority
  • Defining prioritized strategic criteria and determining the strategic contribution by weighting them and assigning them to the projects accordingly
  • Personal selection of the projects by decision-makers

To be able to prioritize investment decisions objectively, you should make sure the project portfolio really is aligned to corporate strategy. By setting clear priorities, you should show all stakeholders what is important and urgent.

The Benefit for Your Decision-Makers:
They decide on the right projects. And they have an optimal and well-founded budget use.

Criteria Operation Minor Project Project Selection
Number of areas involved 1 area Up to 3 areas Over 3 areas Up to 3 areas
Size of entire project team 2 – 5 people Over 6 people Over 12 people Over 6 people
Resource requirements 10 – 30 man-days 30 – 100 man-days Over 100 man-days 30 – 100 man-days
Capital expenditure Under 10.000 € 10.000 – 50.000 € Over 50.000 € 10.000 – 50.000 €
Duration 1 – 3 months 4 – 10 months Over 10 months 4 – 10 months
Inherent complexity Low Medium High High
Novelty for project team Low Medium High Low
Quality risk Low Medium High Medium
External impact Low Medium High Low
Recommendation: Minor Project

The clear distinction between project and operations is an important basis for creating a project portfolio (in this case the project-worthiness analysis)

Argument 5: Strategic Capacity Planning

An integrated PPM enables you to identify the actual availability of resources for projects. You can see the resource requirements for running and new projects.

Interested in Strategic Capacity Planning? Find out 4 Important Success Factors.

Scenarios can help you optimize the the order in which projects are undertaken. This allows planning for optimum resource utilization.

Moreover, PPM permits the long-term adaptation of capacities to future requirements. You can deliberately regulate the provision of your capacities. Depending on the forecast, different steps could be wise. You might need to build additional capacities and skills, move them to other projects, or reduce them.

The Benefit for Your Decision-Makers:
They ensure the due availability of appropriate resources. This helps them avoid resource conflicts when implementing projects.

5 Arguments for Project Portfolio Management – Capacity planning with business drivers

Capacity planning based on project prioritization will reduce resource overload or underload

Conclusion – Arguments for Project Portfolio Management

This article has introduced you to the five most important arguments for project portfolio management. Once you will have implemented PPM, you will:

Professional project portfolio management helps you stay on top of things. Plus, you will plan in accordance with corporate strategy.

Have you won over the decision-makers already? This article explains how to introduce project portfolio management successfully.

Are you using project portfolio management? And how advanced are you in this respect? Do our arguments for project portfolio management ring true? Please, leave a brief comment below.

Johann StrasserAbout the author: Johann Strasser, a certified engineer, has been a managing partner at TPG The Project Group since 2001. After many years as a development engineer in the automotive and energy sectors, Johann Strasser spent a decade as an independent trainer and consultant in the field of project management. During his tenure, he also served as project manager for software projects in the construction industry and provided scheduling and cost management support for large-scale construction projects. At TPG, he applies his expertise in product development and consulting services for international clients. His special focus is on PMO, project portfolios, hybrid project management, and resource management. For many years now, he has shared his knowledge through presentations, seminars, articles, and webinars.

You can read more about Johann Strasser on LinkedIn and XING.

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