In this edition of EPM Live’s Project Portfolio Management (PPM) Briefing Series, Harvey Levine looks at the benefits of properly executed PPM.
Project Portfolio Management PPM is the management of the project portfolio so as to maximize the contribution of projects to the overall welfare and success of the enterprise. This is the main point that I made in the opening blog on this PPM Series. If I had to reduce this statement to a single word it would be “benefits.” We invest in PPM so as to increase the likelihood that our projects deliver the maximum benefits to the firm.
The Triple Constraint
Students of Project Management are taught to focus on the PM “triple constraint.” These are: Schedule, Cost, and Scope. This is sort of the golden rule of PM. We are taught to balance the management of projects so as to best meet the combined objectives of time, cost and deliverables. In Project Portfolio Management (PPM) there is also a triple constraint, but it is entirely different. It is this difference that helps to separate PPM from PM as having two aligned but different sets of focus.
Our portfolios stand on a three-legged stool. We attempt to maximize the benefits within a portfolio by selecting projects that balance three constraining factors:
- Strategic Alignment
- Resource Capacity & Demand
It was the shift in focus, to this new triple constraint, that first attacted me to the then emerging concepts for PPM. It presented a new framework to be more structured in our way of choosing projects. It gave us a roadmap for filtering out the “bad” projects that always seem to find their way into the workload – projects that deplete limited financial and human resources and do not fit in with where the firm wants to go.
It should be a no-brainer – that projects should support strategic objectives, that they should provide value, and that they should efficiently and effectively utilize resources. But the fact is that many, many projects find their way into the mix that do not score high in these key areas.
In PPM, the Strategic Planning function is fully integrated into the mechanisms for evaluating and selecting proposed projects. Projects must support the Tactical Objectives defined in the Strategic Plan.
Of course, project value is always considered. At least I hope that the project business case presents a good picture of the project return on investment and other value metrics. However, the Achilles Heel of project return computations is the tendency to overlook risk when developing these numbers. This is a fatal flaw that is allowed to exist in many business case models, where potential risk is at least downplayed, if not altogether ignored.
Certainly, the big investment lesson of the past decade is that the downside CAN happen. The dynamics of risk have changed and it is essential to increase sensitivity to uncertainty. All ROI-type calculations must consider risk.
And, finally, consideration of resource demand is vital to building an efficient portfolio. Specific attention must be directed to critical and strategic resources – those resources that are either in limited supply or represent the special skills upon which the firm depends to build the business and deliver its products and services.
Let the PPM triple constraint be the foundation of your PPM process, and guide your way to building a portfolio of projects that deliver the maximum benefits to the firm.
Harvey A. Levine, with 50 years of service to the project management industry, is a pioneer in the field of Project Portfolio Management (PPM). Mr. Levine is the author of three books, and over 275 articles, whitepapers and videos on Project Management. His 2002 book, “Practical Project Management: Tips, Tactics, and Tools”, is still available from John Wiley & Sons. Mr. Levine’s 2005 book, “Project Portfolio Management, A Practical Guide to Selecting Projects, Managing Portfolios, and Maximizing Benefits”, Jossey-Bass, is a Wiley best-seller. Mr. Levine is past president and chair of the Project Management Institute (PMI®) and a PMI Fellow. For more information on Harvey please visit http://theprojectknowledgegroup.sharepoint.com.