The document discusses project portfolio management (PPM). It defines PPM as how an organization influences the direction of its project portfolio to achieve specific outcomes. Effective PPM provides benefits like better competitive positioning and lower project costs. The document then outlines 10 practical recommendations for effective PPM, including having single project managers contribute to the portfolio, using formal processes, applying strategic management theories, establishing project portfolio management offices, managing risks and uncertainties, employing negotiation and structural changes, balancing manager roles, exerting portfolio control, and using portfolio mapping and strategic methods.

1. Project Portfolio Management
James Groh
Introduction
The Project Management Institute (PMI) defines a portfolio as, “a collection of projects or
programs and other work that are grouped together to facilitate effective management of that
work to meet strategic business objectives (PMI, 2008_a).” A portfolio consists of both current
and future initiatives, and thus, is not a temporary endeavor like a project or program (PMI,
2008_b). An organization can have either a single portfolio or multiple portfolios with each
representing one of the organization’s divisions. A single portfolio is more complex, but
elevates portfolio success criteria to reflect the needs of the entire organization (Rad et al., 2008).
Project portfolio management (PPM) is the way an organization influences the direction of its
portfolio to achieve specific outcomes. Using PPM in addition to project management (PM)
adds a level of complexity to managing projects, but effective PPM provides “better competitive
positioning, an improvement in the effectiveness of the project teams, and a lower overall cost of
projects (Rad et al., 2008).” Effective PPM aligns projects in the portfolio with the strategic
business goals of the organization.
PPM involves the dispersion of an organization’s annual budget to the portfolio. Funds can be
distributed evenly or to groups of projects, with funding constraints applied to each group.
Grouping can be based on the features of the projects, including cost, schedule, and scope, or the
goals of the organization, whether they be financial, strategic, or divisional in nature (Rad et al.,
2008) An organization uses the techniques described below to identify, select, prioritize, govern,
monitor and report on its portfolio and how it relates to organizational objectives.
Practical Recommendations for Project Portfolio Management
1. Single Project Management
How can individual project managers contribute to PPM efficiency? Martinsuo and Lehtonen
showed that single-project management is associated with portfolio management efficiency
directly in the form of information availability and project management efficiency, and indirectly
in the form of information availability, goal setting, and decision making. The occurrence of
information availability as both a direct and mediating variable implies that upper management
should inform project managers of the impact individual projects make on the portfolio. Project
goals should be expanded towards wider business goals and have broader success criteria than
those in the ‘‘iron triangle’’ (Martinsuo and Lehtonen, 2006). Upper management should build
linkages between single-project management capabilities and PPM efficiency and identify
practical single-project level factors that organizations can analyze and modify to cover
portfolio-level interests (Martinsuo and Lehtonen, 2006).
2. Formalization

2. Both PM formalization and PPM formalization are directly connected to portfolio success.
Simultaneous formalization of both results in an increase in portfolio success that is more than
additive (Teller et al., 2012). Both types of formalization improve transparency through
increased availability and comprehensiveness of information. Formalization also increases the
speed of resource allocation, the reliability of commitment, and the willingness of project
managers to help fellow project teams; it reduces conflicts in resource endowment.
Formalization is especially important for success in complex portfolios, whether complexity is
measured by portfolio size or project interdependency. Therefore, formalization is not an end in
itself but rather “must correspond to the specific requirements for the complexity of the
individual project portfolio to achieve an optimal level of success (Teller et al., 2012).”
3. Strategic Management Theories
The Resource-Based View (RBV), Dynamic Capabilities (DC), and Absorptive Capacity (AC)
concepts provide solid theoretical foundations for PPM. RBV views PPM as a strategic-level
capability as it allows an organization to respond and adapt to changing environmental
conditions by monitoring and altering the project portfolio (Killen et al., 2012). DC and AC
align with the learning and change observed in an organization’s environment and outline
mechanisms through which PPM can contribute to competitive advantage.
4. Project Portfolio Management Offices (PPMOs)
PPMOs are a subset of project management offices (PMOs) that handle portfolios. PPMOs can
adopt three roles. The coordinating role allocates resources to projects in the portfolio; the
controlling role maintains a sound information base, thus increasing project transparency; the
supporting role cultivates project management standards, facilitates single project management,
improves knowledge transfer between projects, and stimulates communication (Unger, et al,
2012). The coordinating and controlling roles have shown to impact PPM quality. The
coordinating role positively influences both cooperation and resource allocation in PPM, while
the controlling role only influences information quality. Understanding the roles a PPMO should
take to improve portfolio success clarifies its duties and prevents overlapping responsibilities For
example, an organization with multiple portfolios may have multiple PPMO’s, with one PPMO
performing the coordinating role and another PPMO performing the controlling role. All
PPMOs need to be aware of their foci to avoid conflicts of competence.
5. Risk Management
Portfolio risks are known unknowns. They are events or conditions that if they occur have either
positive or negative effects on at least one strategic business objective of the portfolio (PMI,
2008_b). In PPM, risk management processes focus on analyzing the probability of the success
or failure of projects and on analyzing risks generated by the selection of a collection of projects
during the balancing of a portfolio (Sanchez et al., 2009). The project portfolio manager must
pay special attention to risks that come directly from portfolio processes such as project
selection, project alignment or project prioritization.

3. 6. Uncertainty Management
Portfolio uncertainties are unknown unknowns. It is important to address uncertainty in
individual projects, but even more so in the project portfolio due to the regular adjustments to the
portfolio that can occur because of changes in the environment. The organization’s business
strategy might remain the same but its translation into the project portfolio must be modified in
response to new external conditions (Petit, 2011). A portfolio level change control board and
change control process should be utilized when making alterations to the portfolio. When new
project requests are submitted in the organization, the portfolio manager should create and
analyze the scenario for consequences on other projects, access to resources, and uncertainties;
project managers of the current projects should conduct an impact analysis for their projects.
7. Negotiation and Bargaining and Structural Reconfiguration
Most PPM models portray project selection as a rational decision making process. Because the
assumptions underlying these models are poorly satisfied, Martinsuo proposes two alternative
perspectives to complement the rational decision making process: PPM as negotiation and
bargaining, and PPM as structural reconfiguration. Studies of PPM in practice have shown that
managerial decision making involves intuition, negotiation and even bargaining not accounted
for in rational decision making models. Negotiation and bargaining implies influence between
people and the organization, which is little discussed in rational decision making models. “If a
lot of portfolio managers’ attention goes to prioritizing between different projects, surprisingly
little is known about how managers influence each other and bargain with resources and timing
to compromise some priorities (Martinsuo, 2012).” The environment in which a portfolio is
being managed is not stable but uncertain and evolving and influences the possibilities for
project success with certain practices. This contextually is not well accounted for in rational
decision making models. Structural reconfiguration implies increased attention to various inter-
project issues, interplay between the projects and the parent organization, and changes that drive
reconfiguration (Martinsuo, 2012).
8. Project Portfolio Managers
How does the interplay between portfolio, line, and senior managers impact the project success?
It is necessary to balance a portfolio manager’s empowerment with necessary interventions by
senior and line managers (Jonas, 2010). Senior managers should commit themselves to
reasonable and transparent rules for intervention. Portfolio managers should relate decisions to
corporate strategy and make their decisions credible and comprehensible to the line managers.
9. Project Portfolio Control
An organization exerts control over its project portfolio through portfolio selection, portfolio
reporting, portfolio decision making, and its organizational governance style. Successful
organizations have an organizational-level practice of selecting and prioritizing projects in line
with strategy, a shared reporting approach to channel information flows from projects to the
portfolio level, and shared responsibilities for decisions at the portfolio level (Muller et al.,

4. 2008). Firms in portfolio management-driven governance structures are more advanced in
decision-making practices than less mature multi-project organizations (Muller et al., 2008).
10. PPM Methods: Portfolio Maps and Strategic Methods
Portfolio maps, such as bubble charts and portfolio grids or matrices, have a strong positive
influence on portfolio performance. Portfolio maps aid group decision-making by providing a
display of the projects in relationship to factors that need to be balanced. Research has shown a
positive correlation between the use of portfolio maps and developing existing technologies and
technological competencies, alignment with strategic objectives, and the portfolio containing
high value projects (Killen et al., 2008). Business strategy methods, such as using strategy to
drive top-down allocation of resource bundles, also have a strong positive influence on portfolio
performance. “A portfolio manager must understand the organization’s strategic goals and
priorities, and how the portfolio supports them (PMI, 2008_b).” The use of business strategy for
resource allocation correlates positively with performance measures relating to alignment with
strategic objectives, enabling the business to enter new markets, bringing new technologies into
the business, balancing the portfolio, the portfolio containing high value projects, and spending
reflecting business strategy (Killen et al., 2008).
Conclusion
Effective PPM requires commitment from project, portfolio, line, and senior managers. All
stakeholders in the portfolio must ensure projects are properly selected and prioritized and that
the overall portfolio is balanced. Once formed a portfolio must be methodically managed,
adding and terminating projects when necessary. Only through effective PPM can the
organization’s portfolio be aligned with its strategy and add value to the organization.
References
Jonas, Daniel, Empowering project portfolio managers: How management involvement impacts
project portfolio management performance, International Journal of Project Management,
Volume 28, Issue 8, December 2010, Pages 818-831, ISSN 0263-7863,
10.1016/j.ijproman.2010.07.002.
(http://www.sciencedirect.com/science/article/pii/S0263786310000980)
Killen, Catherine P., Jugdev, Kam, Drouin, Nathalie, Petit, Yvan, Advancing project and
portfolio management research: Applying strategic management theories, International Journal
of Project Management, Volume 30, Issue 5, July 2012, Pages 525-538, ISSN 0263-7863,
10.1016/j.ijproman.2011.12.004.
(http://www.sciencedirect.com/science/article/pii/S026378631200004X)
Killen, C. P., Hunt, R. A., & Kleinschmidt, E. J. (2008). Project portfolio management for
product innovation. The International Journal of Quality & Reliability Management, 25(1), 24-
38. doi: http://dx.doi.org/10.1108/02656710810843559

5. Martinsuo, Miia, Lehtonen, Päivi, Role of single-project management in achieving portfolio
management efficiency, International Journal of Project Management, Volume 25, Issue 1,
January 2007, Pages 56-65, ISSN 0263-7863, 10.1016/j.ijproman.2006.04.002.
(http://www.sciencedirect.com/science/article/pii/S026378630600069X)
Müller, R., Martinsuo, M. and Blomquist, T. (2008), Project portfolio control and portfolio
management performance in different contexts. Proj Mgmt Jrnl, 39: 28–42.
doi: 10.1002/pmj.20053
Parviz, F. R., & Levin, G. (2008). What is project portfolio management? AACE International
Transactions, TC31-TC34. Retrieved from
http://search.proquest.com/docview/208182202?accountid=7122
Petit, Yvan, Project portfolios in dynamic environments: Organizing for uncertainty,
International Journal of Project Management, Volume 30, Issue 5, July 2012, Pages 539-553,
ISSN 0263-7863, 10.1016/j.ijproman.2011.11.007.
(http://www.sciencedirect.com/science/article/pii/S0263786311001530)
PMI, 2008_a, A Guide to the Project Management Body Of Knowledge (PMBOK® Guide),
Fourth Edition
PMI, 2008_b, The Standard for Portfolio Management, Second Edition.
Sanchez, H., Robert, B., Bourgault, M., & Pellerin, R. (2009). Risk management applied to
projects, programs, and portfolios. International Journal of Managing Projects in Business, 2(1),
14-35. doi: http://dx.doi.org/10.1108/17538370910930491
Teller, Juliane, Unger, Barbara Natalie, Kock, Alexander, Gemünden, Hans Georg,
Formalization of project portfolio management: The moderating role of project portfolio
complexity, International Journal of Project Management, Volume 30, Issue 5, July 2012, Pages
596-607, ISSN 0263-7863, 10.1016/j.ijproman.2012.01.020.
(http://www.sciencedirect.com/science/article/pii/S0263786312000282)
Unger, Barbara Natalie, Gemünden, Hans Georg, Aubry, Monique, The three roles of a project
portfolio management office: Their impact on portfolio management execution and success,
International Journal of Project Management, Volume 30, Issue 5, July 2012, Pages 608-620,
ISSN 0263-7863, 10.1016/j.ijproman.2012.01.015.
(http://www.sciencedirect.com/science/article/pii/S0263786312000233)