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Adopting a Successful Project Portfolio Management Process
June 19, 2009 | Author: PM Hut | Filed under: Project Portfolio Management
Adopting a Successful Project Portfolio Management Process
By Miley W. Merkhofer
The successful project portfolio management process includes four major components (Figure 1). First, a structured process is used to acquire key information about all projects and to organize the data into one or more project portfolios. Second, consistent and objective methods are employed to analyze projects and compare their risks and benefits. Third, resource demands are compared with capacity so that the subset of projects that make best use of available resources can be selected. The final component consists of tracking portfolio performance for ongoing assessment and adjustment. The management of these components is the responsibility of the project portfolio management team.
More detailed responsibilities of the team are illustrated in Figure 2. On a regular basis tied to the planning and budgeting cycle (i.e. annually, biannually, or quarterly), the portfolio team reviews all projects that are seeking funding, including ongoing projects and new project concepts. Projects are screened to determine which proposals require formal evaluation. Projects exempted from formal evaluation include obvious “non-starters,” very small projects, and projects that are more appropriately funded from other budgets. Ongoing projects and “mandated” projects (i.e., projects that the organization is legally required to conduct) may or may not be exempted (see below).
Project managers with projects that pass the initial screening are authorized to use resources to complete additional analysis necessary to provide the data required for entry into project proposal templates. In some instances, the necessary resources can be fairly large. For example, a proposed construction project may require some minimal level of engineering analysis to determine feasibility, set project scope, provide cost estimates and estimate project effectiveness at addressing needs. Alternatively, a feasibility study for a large project might itself be a project that competes for funding within the project prioritization process.
Be aware that, in most cases, project portfolio management forces an increase in the effort spent on analyzing project opportunities. The extra effort is justified by the need for better information to support decision making. To be as efficient as possible, screening systems may be used to select a different level of data requirements and analysis for different types or sizes of projects.
Miley W. (Lee) Merkhofer, Ph.D., is an author and practitioner in the field of decision analysis who specializes in assisting organizations in implementing project portfolio management. He has served on advisory panels for several government agencies and has received grants and research awards for work in the area. Lee is an editor of the journal Decision Analysis.
Prior to becoming an independent consultant, Lee was a Partner of PriceWaterhouseCoopers, where he founded that organization’s capital allocation and project prioritization business practice. Lee is a founding partner of Folio Technologies LLC, a provider of web-based, project portfolio management software.
Lee received his Ph.D. in engineering economic systems from Stanford University. He is the author of the book Decision Science and Social Risk Management and co-author of the book Risk Assessment Methods..
Additional papers on project portfolio management can be found on Lee’s website, www.prioritysystem.com. E-mail: lmerkhofer@prioritysystem.com.
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This is a good description of process flow. As an enhancement to the description, it is essential that the PMO regularly, perhaps once per quarter, ensure review and revision of the business case underwriting the project both in terms of the business case’s continued validity and its fit with the potentially changing business environment.