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What is Project Portfolio Management?

By Jeany Miller
Updated May 16, 2024
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Unlike traditional project management, which focuses only on each individual project of a company, project portfolio management (PPM) considers the whole of an organization’s projects. PPM is therefore the controlled analysis and coordination of a company’s projects. With the use of tools, software and processes, PPM often allows for resource allocation and optimal sequencing of projects. It may also analyze the greatest returns to a company by identifying those projects that are most meaningful. Ultimately, project portfolio management may incorporate all of an organization’s business objectives and reduce the incidence of overlapping or resource-draining projects.

Project portfolio management (PPM) is the coordinated analysis and control of a company’s projects. Although considered by many business professionals to be relevant to information technology, PPM can be successfully implemented by most industries. Companies often undertake multiple projects simultaneously that may constrain such resources as money, time, people and capacity. One likely objective of project and portfolio management is to allocate those resources to help the company derive the greatest profit. PPM may also help managers determine the optimal mix and sequencing of proposed projects while considering real-world factors.

When organizations undertake projects, they often commit to substantial levels of investment. Project portfolio management is sometimes likened to portfolio management in that both require the oversight of investments. PPM often allows managers to optimize, balance and continually fine-tune their portfolios, thereby achieving greater returns while reducing overall risk.

Specific tools, software applications and processes often provide the foundation for project portfolio management. For example, the use of decision trees with branching nodes may detail each potential project in relation to a single portfolio’s budget. Managers are thus likely to use that information to decide what projects can and cannot be afforded. Another tool may build a centralized circular view of projects whereby unhealthy, low-value or duplicate projects are relegated to the outside of the circle. Members of the project management team may then calculate the estimated returns on investment for all projects and publish a snapshot of the portfolio’s anticipated performance to gauge which projects are most meaningful.

The various measurements and strategies afforded by PPM may help managers achieve specific business objectives. For example, rather than focusing just on project marketing and development, the principles of PPM usually incorporate additional crucial factors such as financing, the demand of customers and consumption of the company’s resources. Thus, the decision to invest in and the processes to proceed with a project can reflect comparisons of benefits with costs.

Another clear characteristic of PPM is its ability to evaluate and prioritize projects. Each project selected by a company often needs to be assessed in terms of its business value and adherence to policy. As a company’s business outreach capabilities expand, its portfolio will likely grow as well. Thus, project portfolio management often helps companies decline tasks that drain resources and accept projects that make sense in terms of time and money.

While knowledge of each project’s individual performance is important, the impact of every project on the portfolio itself is equally important. A project manager is thus likely to determine how each project contributes to the overall achievement of the portfolio, if any project may induce a negative impact on projects to come and what projects in the portfolio are dependent on others. Working at this level may require summarizing key data to avoid information overload. Project portfolio management may thus provide a synopsis of performance and progress as well as a measurement of estimates against actual costs.

The processes of project portfolio management are often considered valuable during times of economic hardship, but some companies implement these strategies as everyday practices. Without PPM, an organization may experience overlapping or redundant projects, projects that work at cross-purposes or those that are not aligned with business strategies. Such pitfalls are likely to occur because every project may look good on paper, but real values may not be visible until analyzed with results-driven tools.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.

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