S E C T I O N T W O
The Fundamentals
• There is a desire to develop a structured approach to select- ing projects, based on a fair and balanced ranking system. The projects that are selected will be aligned with business strategies and placed in portfolios that represent the tactical implementation of such strategies. (Any discussion in this book about a portfolio may also apply to one of several portfolios or subportfolios that are cre- ated to support the strategies.)
• After projects are selected for the portfolio, they will be man- aged to achieve two sets of objectives. One set consists of objectives that are associated with specific project goals and commitments. The second set consists of evaluating project performance so as to assess the ability of the project to continue to meet the original selection criteria (that is, to realize the expected benefits). A culture and prac- tices will be developed to consider delaying or terminating projects that no longer represent adequate value or efficient use of resources.
• New roles will be created to support PPM. This would in- clude the naming of a team responsible for portfolio governance.
This team will be able to act for senior executives (or may include the executives) to oversee the portfolios. In this section, the gover- nance team is referred to as the governance council.
• The PMO will review its current project management tool set for support of the new PPM functions. If the existing tool set has not added such support, the PMO will evaluate additional software capabilities to be integrated with the project management tools.
Discussion of a PPM process must consider five major areas:
• Selecting projects for the pipeline, that is, what goes in the pipeline (Chapter 2.1)
• Maintaining the pipeline, that is, what stays in the pipeline (Chapter 2.2)
• Executing PPM, that is, who does it (Chapter 2.3)
• Tools for data gathering and analysis and other PPM processes (Chapter 2.4)
• Implementing PPM (Chapter 2.5)
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Where Do We Start?
Getting started in implementing a PPM process is a bit like the chicken-and-egg question. Do we first attack the existing portfolio and then implement an improved project selection process? Or do we accept the current portfolio and go right after the selection of new projects? There is no prescribed order. However, reports from the field indicate that many firms have first reviewed their current portfolio, eliminating a significant portion of their project load (due to redundancy, nonalignment with strategies, poor value, or in- efficient use of resources), thus making room to add more valuable projects.
In reality, the two phases are inseparable. The processes form a loop: build the project portfolio; manage the project portfolio; ad- just the project pipeline, if indicated, based on project performance and reevaluation; consider proposed projects to fill availabilities due to completed, delayed, or terminated projects; update the project portfolio; and so on. Since we cannot address all of these parts at once, we will look at the process for selecting new projects first.
Then we’ll look at managing the pipeline, followed by discussion of issues of PPM execution, including adjustments to organizational roles and responsibilities.
Purpose and Types of Projects
When we talk about “projects” in a portfolio, what do we mean by projects? The flavor of a project portfolio management process will depend somewhat on the kinds of projects involved. Although most firms are now heavily involved in projects, the purposes and types of projects vary—for instance:
• The project is for the benefit of an external client. The pri- mary benefit to the project producer is income (profit). Secondary benefits may include making use of surplus resources, building a rep- utation in a new area, or creating reusable technology or knowledge.
Examples of these are architectural, engineering, and construction
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projects; consulting; temporary labor sources; and professional ser- vices organizations.
• The project is for the benefit of the performing company: to create new products and services that will be sold (at a profit). Ex- amples are manufacturing and process companies, software devel- opers, and pharmaceutical firms.
• The project is for the benefit of the performing company:
to improve or maintain capabilities required to operate the busi- ness effectively. These would include internal information tech- nology projects, manufacturing processes, facilities improvements, or expansions.
• The project is for the benefit of the performing company: to improve a competitive position. All of the previous examples apply here.
We can see that a project portfolio management process for Bech- tel or Halliburton, involved in architectural, engineering, and con- struction work, would have a different focus from the internal IT department at Citicorp.
Just as traditional project management can be effectively ap- plied to all types of industries and technologies, PPM has a univer- sal applicability. There will be variations in the process and the roles, but the fundamentals are similar. What follows here is equally applicable to new product development, information technology, and dozens of other business areas. With some modification, it is equally applicable to nonprofits and the public sector.
We can also see that the funnel of proposed projects could be filled from many sources. Project requests may come in through the firm’s opportunity management program, product managers or other internal requests, or senior management (to support strategic ini- tiatives). The challenge of PPM is to filter the project requests so that the projects that pass through the funnel into the pipeline best serve the long-term interests of the firm.
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