What is PPM (Project and Portfolio Management)? Best Guide for 2023

Insight Amrit Sandhu 16-12-2022

What is PPM? Most people will understand what project management is. However, Project, Portfolio

Management (PPM) is less understood and can have a number of interpretations. In this blog we will describe what PPM is and how it can benefit most, if not all, organisations. Where appropriate, we will illustrate some of the PPM functional areas using our award-winning PPM tool, PM3.

What is PPM? A Definition and its Objectives

PPM is the centralized management of the processes, methods, and technologies used by project managers and project management offices (PMOs) to analyse and collectively manage current or proposed projects based on numerous key characteristics. (Source Wikipedia)

The objectives of PPM are to determine the optimal resource mix for delivery and to schedule activities to best achieve an organization’s operational and financial goals, while honouring constraints imposed by customers, strategic objectives, or external real-world factors. (Source Wikipedia)

Project management is concerned with delivery separate projects to scope, quality and time. Project management is a profession that delivers outcomes that the organisation expects.

PPM is much broader. It looks at the holistic view of all the projects and programmes in an organisation’s portfolio. The functions of PPM – more of which later – is often led or managed by the project management office or PMO. Project management tends to me more siloed, and no one is looking at the overall benefits, outcomes and resources.

PPM allows stakeholders see the holistic view or big picture of all the projects and programmes.

Why is Project, Portfolio Management important?

There are many roles and associated benefits of a PPM function and these include:

  • Construct the optimum portfolio for the organisation to meet its strategic objectives
  • Defining project and programme delivery standards
  • Defining common toolsets and templates
  • Ensuring resources across the portfolio are optimised
  • Ensuring dependencies are understood across the portfolio
  • Managing the change impact of the portfolio
  • Ensuring portfolio risks are understood and mitigated wherever possible
  • Identifying failing projects early
  • Providing C-suite executives with the ‘big-picture’ on the portfolio

Construct the optimum portfolio for the organisation to meets its strategic objectives

One of the key roles of the PPM or PMO function is to define the project evaluation process. There needs to be an agreed process whereby projects are evaluated against a set of organisational criteria. Each project is then compared and contrasted against other projects using these criteria which could include:

  • Net present value
  • Payback
  • Fit to organisational strategy
  • Risk of non-delivery of the benefits
  • Risk of non-delivery of the project
  • Regulatory requirements.

This evaluation approach allows the PPM function to recommend or agree the projects that pass the approval hurdles for delivery.

Without this centralised approach, projects can be initiated based on ‘decibel management’, i.e. which sponsor has the biggest voice and shouts loudest.

This decibel management approach is unlikely to deliver the optimum set of projects that the organisation needs delivered.

It helps that the PPM function is independent and can facilitate the evaluation process so it is done fairly and consistently.

The PPM function has a continuing role in evaluating projects. Not only is the PPM function key in selecting the projects that should be initiated, but they also have a role to keep assessing the active projects to ensure that they are still meeting the organisational hurdles required.

It could be that a project’s expected benefits have decreased since the original business case submission or the risks of delivery have become too great. The PPM function can add great value by stopping projects that no are no longer justified based on the agreed process.

Without a PPM function it is rare for a project manager or stakeholder to recommend that their project is stopped. Too often, without a PPM function, these projects will keep going to the bitter end – if they ever finish – instead of resources being reallocated to projects that are higher in priority.

 

Port Matrix showing what is ppm
Portfolio Priority Matrix in PM3

Defining Project and Programme Delivery Standards

Without a central PPM function, there is the danger that each project or programme use different processes, templates and standards. This is not only inefficient but also confusing for stakeholders and sponsors who receive project information in a variety of formats.

Non-standard processes can be detrimental to delivery success.

Without agreed standards, situations can arise where a project manager does not use any structured process or uses an approach because they want to try something new.

I have seen agile processes being trialled on a project which were totally unsuitable for agile processes with the inevitable subsequent delivery failure.

The PPM function needs to be the custodian of processes and standards. They can also advise and guide project managers as to which delivery process is appropriate for their particular project.

In summary, having a set of delivery standards and delivery processes is not only efficient and cost-saving, it also supports delivery success.

Defining Common Toolsets and Standards

This PPM function is similar to the previous role of defining delivery processes.

As it makes sense for an organisation to have a consistent set of delivery processes, it also makes sense to have an approved set of tools.

I must declare an interest here as Bestoutcome develops and markets an award-winning PPM tool, PM3.

It is very inefficient for project teams to use different toolsets to manage their projects and programmes.

The PMO or PPM function will have a very difficult job understanding whether the portfolio of projects will deliver the organisation’s expected outcomes if the data is in disparate delivery tools and spreadsheets.

Having one version of the truth is invaluable for a PPM function to carry out its role effectively. Spreadsheets do not cut it!

Ensuring resources across the portfolio are optimised

Capacity planning and managing resources are key areas that the PPM function need to manage. Individual project managers can’t and should not be expected to manage resources across a portfolio.

After projects have been prioritised by the processes outlined earlier, it is important that the PPM function reviews the resources needed by all projects against the capacity of the organisation.

There is no point in selecting a group of projects and programmes when there are not enough resources available to carry out all the project work.

Indeed, it may be that proposed projects which have passed hurdles to become projects need to be removed from the portfolio as there may be a conflict of resources or not enough resources.

For example, project x may need the same system architectural resources in June 2023 as project y and there are only so many architects available.

Due to subject Matter Expert(SME) knowledge required by these architects, it may not be possible in the timeframe to recruit the people with the skills needed.

Without a PPM function doing this resource planning across the portfolio, an organisation may initiate a number of projects that have to be paused or halted due to a lack of resources at a certain time.

This is clearly sub-optimal for the organisation and a waste of resources.

The balancing of resource demand versus capacity is not a one-off activity but needs to happen at least every month.

Good resource forward planning can also highlight an ongoing shortage of, for example, business analysts.

In this scenario HR can be informed and a recruitment plan put in place. This will prevent the organisation from stopping projects and /or recruiting expensive contract resources.

This function of resource / capacity planning is one of the most important roles the PPM function can undertake. It has the advantage of demonstrating ‘value for money’ of the PPM function in a very visible way.

PM3 Screen Resource Demand v Capacity

Ensuring dependencies are understood across the portfolio

All projects will have intra-dependencies between tasks and tasks, and/or tasks and milestones and/or milestones and milestones.

However, some, if not all, projects will have inter-dependencies, i.e., dependencies between milestones and/ or tasks between different projects. For example, a milestone in project x may be dependent on a milestone in project y.

Without a holistic view from the PPM function, it can be hard for project managers to manage these interdependencies.

A PPM function would track all interdependencies and highlight delays within these dependencies that may have knock on effects on the ‘dependent projects’.

Managing the Change Impact of the Portfolio

Each project will have a change impact on part(s) of an organisation.

Many studies have been undertaken which shows that people can only absorb a certain amount of change in a given time.

If this level of change impact is exceeded the most likely impact is that some or all aspects of the change are not delivered or accepted.

Each project should plan to ensure that the change they are delivering in the organisation is delivered so that the change is accepted, works and more importantly, sticks.

The PPM function, however, needs to coordinate all the change impacts from projects.

They should have a change impact ‘heat-map’ and track the level of change on different parts of the organisation.

As projects’ timelines shift, the timing of the change impacts shift.

PPM needs to track these movements and they may have to tell a project team that the project team has to delay the implementation because too much change is impacting a group of resources.

In some organisations, change is not allowed in certain busy periods, e.g. most retailers have a change freeze during the run-up to Christmas.

Ensuring Portfolio Risks are Understood and Mitigated

As you can tell from the roles of PPM function that we have already described, PPM differs from project management as it takes an overall holistic view instead of a project-by-project view.

Projects will have their own risk registers that they hopefully manage by ensuring the risks are mitigated or avoided wherever possible. Each project manager will try and avoid a risk becoming an issue but this is not always possible.

The PPM function needs to assess the risks in projects and, from these, identify project risks that impact the wider portfolio. Senior stakeholders need to assess these portfolio risks and potential impacts.

Some risks may be at the portfolio level and could be external factors, e.g., a potential change in the regulatory environment which may affect the whole portfolio and not the just one or two projects.

The PPM function needs to understand and report on these portfolio risks.

The PPM function also needs to assess what level of risk does the organisation believes is acceptable to manage in the overall portfolio.

Some organisations would be happy for a high risk in the overall portfolio especially if the potential benefit of the portfolio was very high.

Other organisations would not be happy with a high-level of portfolio risk; they would only accept a low-level of portfolio risk.

For each portfolio risk the PPM function needs to develop risk responses or mitigations.

This is an ongoing activity and portfolio risks need to be controlled throughout the life of the portfolio.

Example of overall portfolio level risks include:

  • External events, e.g. Covid-19
  • Business environment changes, e.g. a new supplier enters the market
  • Economic changes, e.g. a new tax regime
  • Quality of delivery of the portfolio

Identifying failing projects early

It can be rare for project a project manager to hold their hands up and say that the project they are delivering is failing and help is needed.

The PPM function needs to objectively assess each project in the portfolio in order to work out whether the project is failing or underperforming.

It may also be that the project delivery is not up to the required standard of the organisation. PPM needs to conduct stage gate reviews that essentially asks three questions:

  1. Should we still be delivering this project, i.e. is the business case still valid?
  2. Is the project being delivered to an acceptable level of quality?
  3. Should the project be stopped?

These questions, which are usually conducted as part of a stage gate review, will be able to identify failing projects and this will allow the PPM function to intervene to either bring projects back on track or stop the project(s) entirely.

This early intervention will save a lot of valuable resources as the quicker a failing project is stopped or brought back on track, the greater the cost saving.

Providing C-suite executives with the ‘big-picture’ on the portfolio

Project and Programme managers will naturally be providing highlight reports for their individual projects and programmes.

However, C-suite executives also need to have an overall view of the portfolio. This is a key role of the PPM function, i.e to provide a comprehensive overview of the overall portfolio.

PM3: Example of a Portfolio Report
PM3: Example of a Portfolio Report

Summary

As you will have seen from the descriptions above of what the PPM function in an organisation does, it is very different from the project management function.

The PPM function takes an overall holistic view of the portfolio and can deliver great value to the organisation.

If you would like any more information on the PPM function or how our PPM Tool, PM3,can deliver benefits to your business, please contact us on info@bestoutcome.com.

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