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Embracing Project Portfolio Management Principles

February 17, 2010 | Author: PM Hut | Filed under: Project Portfolio Management

Embracing Project Portfolio Management Principles
By Miley W. Merkhofer

Project Portfolio Management (PPM) is not just another project management process. PPM is a philosophy — one that, in accordance with the analogy based on financial portfolio management, is focused on value creation. Getting the most from PPM requires reshaping thinking. Your people should fully embrace the following principles1:

  • Projects will be managed as a portfolio of investments.
  • The goal is to create the greatest possible value (considering the resources available and accounting for risk and organizational risk tolerance).
  • For the purpose of decision making, projects will be defined to include the full scope of activities necessary to generate value.
  • Value delivery practices will recognize that there are different types of projects that will be evaluated and managed differently.
  • Value delivery will be managed throughout the project life-cycle and the life-cycle of any products, services, or assets created or enhanced by the project.
  • Value delivery practices will engage all stakeholders and assign appropriate accountability for the delivery of project benefits and the realization of value.
  • Value delivery practices will be continually monitored, evaluated, and improved.

Getting clarity on basic principles is important for three reasons. First, decisions at all levels of the organization affect value creation. If only project-acceptance decisions are made consistent with value maximization, the gain can easily be undone if countless, day-to-day, apparently simple choices aren’t in tune. The principles must be applied universally. Second, getting clarity on the principles promotes understanding and agreement on what you are doing and why. They provide the compelling argument for overcoming inertia and the status quo. Third, the principles provide the foundation for creating the structure, supporting processes, and tools that will enable you to put the principles into practice. They translate readily into design specifications for your PPM implementation.

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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