What is Project Portfolio

Management? - Definition,
Process & Tools
Turning Chaos into Order
Let's take a look at the work life of Jordan, the Chief Executive
Officer of a company called Flags-For-All. Jordan's company has a
lofty goal: to produce flags of very high quality at very low cost for
everyone. However, the company hasn't defined a formal way to
select the projects that will help the company meet its goal. Some of
the typical problems Jordan faces every day include:

Too many projects being performed with no sense of direction

Not enough people to work on all the projects
New projects get started without justifying how they support the
company's goal
There are investments in projects that add little value to Flags-
For-All and to its customers

Project portfolio management can help Jordan turn this chaotic

situation into order.

Some Definitions
Before we get into the process of managing a portfolio of projects,
let's define some common concepts. Note that these concepts apply
to any organization of any size and type, no matter if they're for
profit, nonprofit, or government institutions.

Project portfolio management is the practice of selecting and

investing in the best projects and programs an organization
:
 performs. The best projects and programs are those that support the
goals of the organization and can be performed using the available
resources, such as people, money, facilities, and equipment.

A project is a unique activity that the organization performs that has

a beginning and an end, creates one or many products or services,
and consumes resources in creating deliverables. A program is a
group of related projects that are managed together to achieve
specific goals of the organization. You could view the relationship
between portfolio, programs, and projects as a hierarchy, as shown
here. Note that the portfolio can contain programs and individual
projects.

The Process
Now that we understand the key concepts, let's return to Jordan's
situation. What process should the people at Flags-For-All put in
place to help the company invest in the right projects?

The process Flags-For-All should use to manage the portfolio of

projects includes six steps:
:
 Step 1. Establish a Framework

Flags-For-All should describe the process clearly and communicate

it to everyone in the organization. The description includes the kind
of projects that can be considered, how the projects are described,
who makes the selection decisions, when the decisions are made,
and the criteria used to select or reject projects.

Step 2. Prioritize Potential Projects

They should score each potential project based on how well it meets
the selection criteria. The criteria should tie back to how well the
project will contribute to meeting the goals of the organization. It can
also include other factors, like how relevant the project is to the
company's customers.

Step 3. Take Resources into Account

Flags-For-All should evaluate the potential project based on the

resources each project requires. Remember, the term 'resource'
doesn't only refer to people, it also includes things like money, skills,
facilities, and equipment.

Step 4. Make Decisions

Flags-For-All should select the projects to be performed based on

how well the projects meet the criteria established and their ability to
complete the projects with the available resources. They should
reject projects if they do not meet the criteria or the organization
cannot work on them with the resources it has or can acquire. They
should place a project 'on-hold' if it could contribute to Flags-For-
All's goals in the future, but perhaps the organization is not ready to
take on the project at this time.
:
 Step 5. Manage the Portfolio

Flags-For-All should communicate the decision to select, reject, or

hold a project to all the people involved with the potential project.
They would then invest in the selected project by giving it the
appropriate resources to get started. Flags-For-All should constantly
evaluate active projects to ensure they continue to meet the criteria
with the resources that were assigned to it. They may cancel a
project if it no longer supports the goals or conditions change that
make the project irrelevant.
: