This document discusses portfolio management and the project management office (PMO) value model. It describes two models - the cost containment model which focuses on reducing costs, and the throughput model which aims to meet objectives by eliminating waste. The document also covers portfolio selection techniques like triage, prioritization, sequencing and optimization. It discusses the challenges of managing multiple related projects and how various approaches, standards, roles and maturity models help address these challenges.

2. PMO VALUE MODEL
• Cost Containment Model: Focus on Containing Cost
• Throughput Model: Meeting organisation Objectives. Any cost that is
not contributing to throughput is considered a waste.
• Options
• There is a limit to cost cutting or cost containment.
• There is no limit to throughput. Faster Completion aster ROI and less
interest accrued on the project investment until the return is
achieved

3. Portfolio Selection
Triage
Prioritisation
Sequencing
Optimisation
Portfolio Monitoring
and Controlling
Verification
Performance
Benefits
Risks and Issues
 Economic drivers –
NPV, ROI, etc
 Non-economic drivers
– value creation and
capability
improvement
 Resource limitations
 Logical interdependency
 Mandatory imperatives

4. PPM process model

5. Links with delivery management
Comparative
Dimension
Project
Management
Program
Management
Portfolio
Management
Key imperative Doing things right Doing things right Doing the right
things
Delivery scope A set of specific
deliverables
A business problem
or opportunity
Organizational
strategic objectives
Management focus Task performance Project performance Aggregate
performance
Management tools Detailed schedules
based on work
products
High level schedules
based on projects
Value indicators
based on
aggregations of
performance, risk
and benefits data
Success measures Within budget, on
time, to specification
New business
capability
Strategic objectives
and value

6. Shifting strategic focus
• Innovation and differentiation versus
standardisation and repeatability
• Investment versus cost containment
• Flexibility and responsiveness versus size
and stability
• Knowledge assets versus property, plant
and machinery

7. 7 multi-project challenges for PMO
1. Demand exceeds capacity
2. Competition between projects
3. Complex interdependency
4. Autonomy and control
5. Innovation and predictability
6. Accessing project knowledge
7. Disruption of traditional structures

8. Area Response Problem Addressed
Delivery methods Program management, change
management disciplines
Coordinating and
marshalling project-based
activity
Governance Project portfolio management (PPM) Investment oversight
Functions Steering Committees, PMOs Driving cross functional
integration
Structure Matrix organisations, skunk works,
project based organisations (PBOs)
Managing both dynamic
and static contexts
Roles Project managers, change managers,
business owners, sponsors, etc
Performing project activity
Standards PMBOK, Prince2, MSP, P3M3, etc Improving predictability and
performance
Maturity models OPM3, PMMM, CMMM-I, etc Making change business as
usual
New methods, standards, roles etc

9. Types of approach
• Intuitive – management judgment, “gut feel”
• Reactive – reacting to external influences,
contingencies and constraints
• Proactive – strategic marketing to identify
projects to develop new products, etc
• Analytical –
– financial return
– multi-attribute models
– optimization models

10. Barriers to adoption
• Too complex and require too much input
data
• Inadequate treatment of risk
• Failure to recognize interrelationships
• No framework for organizing techniques
within an easily useable and flexible
process
• No consensus on which techniques are
most effective

11. • Strategic investment selection process
groups comprise:
– Triage
– Prioritisation
– Sequencing
– Optimising (or Risk Balancing)
Process groups

13. Essential techniques
• Portfolio matrices –
– Quadrant approaches –
– Banding approaches –
• Strategic alignment measures
• Financial hurdle rates

14. Quadrant approaches

15. Banding approaches

16. Strategic alignment measures
0
5
10
15
20
25
30
35
Customer
Score
Cost Score
Cross Sell
Score
Revenue Score
Employee
Score Strategic Priorities
Project A
Project B

17. Financial hurdle rates
• Based on initial high level cashflow
estimates
• Examples include Internal Rate of Return
(IRR) and Accounting Rate of Return (AAR)