Project Portfolio Management (PPM) – Are we using the wrong Terminology?

I believe that clear terminology and efficient communication are important to have effective operations. I also believe that the term “project portfolio management” is an excellent term to describe the function because it explains what the managers should already be familiar with: maximizing value for the organization through optimizing human and financial resources.

When I explain the concepts of project portfolio management, I point out that our projects help accomplish our strategic objectives and that those projects represent investments by the company both in terms of financial resources and human resources. I go on to explain that our project portfolio is also analogous to a financial portfolio where we balance our investments (long-term and short-term, high risk and low risk) and have the same goal—to maximize value.

The key then is to drive maximum value out of those project investments and PPM helps us do that. I finish by discussing our portfolio management lifecycle which consists of four major steps:

1) Selecting the right projects (selected projects must align with the business strategy and meet other important criteria. The result: the portfolio will contain a higher percentage of winning projects)

2) Optimizing the portfolio (All the steps necessary to construct an optimal portfolio given current limitations and constraints)

3) Protecting the portfolio’s value (During the execution of an optimized portfolio, the aggregate project benefits (portfolio value) must be protected. This occurs by monitoring projects, assessing portfolio health, and managing portfolio risk)

4) Improving portfolio processes (Higher portfolio maturity translates into a greater realization of the benefits of project portfolio management)

I have not had any trouble presenting the concepts of PPM, but communicating concepts and getting increased participation are two different things.

I think the problem could be somewhere else however. In a classic portfolio management article by Rachel Ciliberti <>, she points out that PPM is a blend of management disciplines that combines:

1) A business management focus to ensure that all projects and programs align with the portfolio strategy.
2) A general management focus for managing an organization’s resources and risks.
3) A project management focus for reviewing, assessing, and managing projects and programs to ensure they are meeting or exceeding their planned contribution to the portfolio.

Most good managers will not have any trouble with the first two points. However, a number of managers may not understand the project management language well enough and that may be a stumbling block.

Book Review—Death by Meetings by Patrick Lencioni Part 2

This post is a continuation of the previous book report on Patrick Lencioni’s book, Death by Meetings. He recommended four types of meetings, three of which are briefly discusses in relation to portfolio management.

2) Weekly tactical meeting: these meetings are focused on tactical issues of immediate concern. There should be discipline to this meeting and structural consistency. A quick lightning round allows everyone to share their top two or three priorities for the week. The next component is a review of key metrics without lengthy discussion. The third component is a real-time agenda, not one created prior to the meeting. Disciplined spontaneity is important for those leading the meetings who can allow the meeting to shape itself based on the most urgent matters.

PPM application: this meeting would allow project and program managers to provide quick status and then address current issues affecting their projects.

3) Monthly strategic meetings: allows managers to wrestle with, analyze, and debate important issues that affect the organization. It is important that they occur regularly so that it serves as a parking lot for strategic matters that get brought up in other meetings. “This gives executives confidence to table critical issues knowing that they will eventually be addressed.”

PPM application: These meetings are particularly relevant to the portfolio management team to actually discuss current strategies and provides time for them to develop clearer strategic criteria. These meetings could also be used for longer-range phasing plans for strategic completion.

4) Quarterly off-site: “provides executives an opportunity to regularly step away from the daily, weekly, even monthly issues that occupy their attention, so that they can review the business in a more holistic manner”. These off-sites should include a comprehensive strategy review, team review, personnel review, and even a competitive industry review.

PPM application: this get away allows the portfolio management team adequate time to consider the strategic direction of the organization and develop future goals.

Welcome to PPM Execution-A New PPM Knowledge Center

This website is a new knowledge center for portfolio management practices and tools. It is difficult to find a PPM knowledge center with a single source of good portfolio management information. There are a lot of good sites with good information, but no single site that could be considered a PPM knowledge center. I plan to post links to other websites with good information, active PPM blogs, good articles, white papers, and other information relevant to the PPM community. I would like to make this as useful as possible, and welcome any feedback.

Thank you.

The Efficient Frontier Will Get You to the Green

According to Merkhofer, “the efficient frontier is the bounding curve obtained when portfolios of possible investments are plotted based on risk and expected return. The efficient frontier shows the investment combinations that produce the highest return for the lowest possible risk. The goal for selecting projects is to pick project portfolios that create the greatest possible risk-adjusted value without exceeding the applicable constraint on available resources.”

In both the PPM literature and portfolio tool brochures, one would be led to believe that the application of the efficient frontier will provide the final answer of which projects to select. While doing more research on efficient frontier techniques, I started considering the work that still needs to be done once an ‘optimal’ solution has been developed that maximizes value under current constraints. Unless skill sets are included in the optimization, more time will be needed to determine if resources are available to execute the “optimal” portfolio. Additionally, the efficient frontier does not help with project sequencing, therefore further analysis will be required to properly sequence the ‘optimal’ portfolio. This is not to say that the efficient frontier technique should not be used, only that it still takes a little more time to complete the optimization exercise once the ‘optimal’ list of projects have been selected.

In fact, the efficient frontier approach can actually save management a lot of time and discussion by pointing to a set of projects that delivers maximum value for a particular level of spending. Instead of fighting for what should be included, the discussion can be focused on those projects that bring the portfolio off of the efficient frontier (such as mandatory projects that don’t provide much value). To use a golf analogy, using the efficient frontier will not give you a ‘hole in one’, but it will get you to the putting green nearly every time in one stroke. Every golfer would like that.