flash sale banner

HomeBlogProject ManagementProject Portfolio Management (PPM): Meaning, Tools, Process

Project Portfolio Management (PPM): Meaning, Tools, Process

05th Sep, 2023
view count loader
Read it in
14 Mins
Project Portfolio Management (PPM): Meaning, Tools, Process

Project management is known by the 3 Ps - Projects, Programs, and Portfolios. Each of these align symmetrically to create the outlined deliverables at each level, and are necessary for an organization to achieve the desired outcomes. The purpose of each of these management activities is focused on the respective outcomes they aim to achieve - projects aim to organize and ensure the delivery of products and services to achieve quality deliverables; programs aim to align multiple projects to achieve stakeholder value; and portfolios aim to align and achieve business value and objectives.

Project portfolio management is led by business and is a high visibility function for any organization. With the increasing demand for project management, a growing number of individuals are turning to Project Manager online training to further their career prospects. These training provide a thorough grounding in project portfolio management principles, equipping students with the necessary skills to thrive in this industry. 

In this article, let us look at what is project portfolio management, what are its key functions and components, and what benefits, tools, and techniques are specific to the portfolio management function. 

What is Project Portfolio Management (PPM)?  

Project portfolio management also popularly known as PPM in project management is the centralized management of an organization’s projects and programs carried out by portfolio management or Project Management Office (PMO) to drive several benefits, viz: 

  • Uniformity of processes 
  • Management of dependencies 
  • Economies of scale 
  • Best practice sharing across projects 
  • Managed budgeting and spending across projects 
  • Collaboration & resource sharing across projects/programs 
  • Driving adoption of changes across projects/programs 

In short, PPM can be referred to as a larger umbrella to manage several projects and/or programs which may be either related or unrelated. Portfolio management in project management focuses on bringing in business leadership alignment in any organization for strategic alignment (sub-portfolio/program level) and tactical alignment (project level) to work thereby serving as an important bridge between strategy and implementation. According to the PMI's PMBOK definition, portfolio management aligns with organizational strategies by selecting the right programs or projects, prioritizing tasks, and providing the required resources.

Why Project Portfolio Management Is Important?  

Project Portfolio Management (PPM) is what keeps the teams and organization focused on larger objectives or the bigger picture to accept and select projects aligned with the larger goals. PPM not only acts as a centralizing mechanism but also works on improvising the functioning of the overall organization; a continuous and cyclical project portfolio management process aimed at driving uniform process adoption across the organization. With certified PMP training, professionals can gain a deeper understanding of PPM methodologies and enhance their skills to lead successful project portfolios. 

A well-established organization setup where everyone understands the meaning of project portfolio management yields several benefits such as: 

  • Visibility across projects to make informed decisions 
  • Improvement in the project selection methods to align projects to overall objectives 
  • Optimal resource utilization and collaboration aided by centralized decision making 
  • Accurate project performance data to facilitate robust planning and execution 
  • Better RoI, delivery, employee engagement, and customer satisfaction

5 Steps of a Project Portfolio Management Process  

Step 1: Define Business Objectives  

Portfolio management in project management aims at alignment and for alignment having a vision or business objectives is indispensable. Project selection methods and processes will depend on this alignment to ensure the right projects are being selected and post-selection, the metrics are being tracked appropriately to measure progress. Project progress, prioritization, viability, and allocation of resources will all be driven by the portfolio management on this very foundation of objectives and goals. 

Step 2: Collect Project Ideas for Your Portfolio  

Project Portfolio Management (PPM) involves actively researching and creating a list of projects to be taken up to achieve outlined goals. Managing a portfolio requires diligent review and rebalancing of tasks, activities, and projects to adapt to changes as well as take advantage of market opportunities. 

Step 3: Select the Best Projects for Your Portfolio  

The next step after project research is to utilize the outputs of the research and strengthen the project selection process by prioritizing and aligning projects to achieve desired results. 

Step 4: Validate Project Portfolio Feasibility  

This is an important and herculean step that a portfolio manager is tasked with, and involves maintaining a reality check on projects being planned or executed to stay the latest in the market and ensure a high return on investment, customer satisfaction, and organizational profitability. 

Step 5: Execute and Manage your Project Portfolio 

Managing a project portfolio involves all kinds of projects - the ones in execution, the ones being planned, and the ones that have been closed (to realize benefits); thus, a portfolio manager has to keep track of existing projects to avoid scope creep, ensure optimal allocations and keep variances within the planned thresholds of portfolio and project management. 

Industries that Benefit from Project Portfolio Management  

To understand how portfolio management benefits different industries, let's go back to the basics to understand what is portfolio management in project management. PPM aims to develop a model to ensure effective and efficient surveillance of projects and investments undertaken by the organization to maximize ROI and reduce costs/wastage. It employs historic data, analysis of metrics, and centralized reflection of operations to achieve the same. There is a myriad of benefits PPM brings across the organization - let us delve deep into its areas of focus by industry: 

1. IT 

The portfolio management function plays a paramount role in the information technology industry where there is a cutting-edge innovation that demands the organization to make quick decisions, minimize time-to-market and help client services engage effectively to avoid costly project overhauls or rework. It also aims to centralize operations and IT to maximize efficiency and achieve economies of scale. 

2. Construction 

The construction industry is witnessing humongous growth thanks to the infrastructure demands across various industries, regions, and geographies. In such a state, no longer are organizations focusing on one project or program, rather every organization is vying to live in this era by sharing resources on demand, minimizing escalating costs, and tracking projects to close on time within the planned baselines. 

3. Financial services 

Portfolio management plays a critical role in the financial industry by defining the science behind selecting the right investment fuse and balancing risks, returns, and rewards. It is a key application for the ever-exponential growth behind the financial sector of mutual funds, shares, and insurance. A portfolio management career is considered to be extremely risky yet a hot-cake industry-wide in the financial services sector. 

4. Project management teams 

Project management teams include a portfolio manager role as part of the project management office (PMO) setup which involves overseeing the projects, programs, and operations to ensure alignment, viability, and profitability of activities. PPM follows the PMO's tenets of improving governance and visibility across the organization. 

5. Professional services teams 

Professional services teams operate in different capacities, sizes, and models - portfolio management greatly benefits these kinds of teams by organizing their structure of operations, bringing in a uniform evaluation methodology, and centralizing implementations. 

6. Marketing teams 

Portfolio management is of larger importance in marketing teams than anywhere else as these teams focus on bringing in business across all verticals of the organization and need to be in sync for the organization to yield benefits of market conditions which ultimately requires active review and prioritization to be successful. Looking for a PRINCE2 certification in project management? You should only choose AXELOS & People Cert accredited PRNICE2 training providers! Take the training and get experienced in advanced tools and gain knowledge that can significantly improve an individual's career prospects and help organizations achieve their business objectives.

Best Tools for Project Portfolio Management  

1. Decision tree analysis 

A decision tree diagram is used by PPM to depict the probability of success for the initiatives to understand the value of positive revenue contributors as well as inspect sunk costs or costs of project failures. 

2. Cost-benefit analysis 

CBA or Cost-benefit analysis is one of the most constitutional and commonly used techniques by portfolio managers to get a glimpse of the feasibility, viability, and desirability of project activities. This kind of analysis is used to evaluate initiatives to ensure the profitability of the organization is met as well as keep an eye on the long-term goals of the organization. 

3. Objectives matrix 

Portfolio managers look at the bigger picture but it is not easy to track big items hence PPM works to decompose bigger strategies and objectives into smaller chunks of work to be aligned across various projects and initiatives. This break-up of items and tracking them by projects/initiatives is what is achieved with the help of an objectives matrix. 

4. Scoring model 

Utilizing the scoring model involves assigning weights and scores to various quantitative factors viz. Cost of operations, return on investment, and qualitative factors viz. Market conditions, the value of delivery, and customer satisfaction - to balance both factors to achieve overall portfolio growth and success. It provides concrete information in project evaluation and comparison across the portfolio. Get hands-on with project management in a short time, and explore KnowledgeHut’s best certification for Project Managers today! 

Techniques Used to Measure PPM  

It is imperative for a portfolio manager to actively measure portfolio success rate to align resources as well as create a culture of transparency in the organization, some of the techniques portfolio managers can use include: 

1. Heuristic model 

Heuristics or Heuristic models are useful to overcome critical situations which do not support comprehensive research or analysis. This model of analysis is based on the available information and involves working with loosely defined rules or environments to measure PPM progress and learn by hands-on management of projects/initiatives. Examples of heuristic models include - Fault tree analysis and Failure mode and effects analysis.

2. Scoring technique 

Scoring techniques are used by portfolio managers to create the right mix of activities to achieve the desired profitability, endure surprises and run initiatives as planned. Either of the scoring techniques - Simple Additive Weighting (SAW) or Weighted Product Method (WPM) involve adding numerical and comparable scores and weights to projects/initiatives to plan, execute and drive effectively. 

3. Visual or Mapping techniques 

As the name suggests, visual or mapping techniques involve depicting the overall portfolio and its attributes on a visual representation to plan and track -more as in an information radiator. Visual mapping also involves plotting risks/costs and rewards on the diagram to understand at a simple glance. Examples of visual mapping include - bubble diagrams or portfolio planning matrices. 

Project Portfolio Management Best Practices  

Managing a portfolio is no mean feat, especially with the nature of the environment that projects and programs operate in; every organization has its own set of practices that work uniquely to the kind of governance and way of handling projects. However, some of the common best practices around portfolio management include: 

  • Getting an understanding of the overall vision and strategy 
  • Identify stakeholders and document their requirements 
  • Build a governance model and establish workflows top-to-bottom 
  • Definition of a risk management and change management strategy 
  • Definition of an information sharing and communication model 
  • Creating the right mix of projects and initiatives 
  • Setting up evaluation metrics and defining baselines 
  • Establishing a Project Management Office 
  • Determine standards and guidelines for uniformity 
  • Take the help of PPM software customized to meet the organization's needs 
  • Regular reviews of projects, programs, policies, and procedures 

Why Project Managers Must Focus on PPM?  

So far we have seen what PPM is in project management, its benefits, steps, tools & techniques, and what kind of industries it aids. Now, let us look at why project managers must pay attention to PPM in particular across any organization/industry. PPM is one management focus area that helps planning and coordinates project/program level planning to come under one single umbrella to take thoughtful decisions which may have a larger essence on the organization and impact the costs/revenues.

Project managers must ensure to align with portfolio priorities to secure allocations as per the portfolio plan and must in particular ensure regular communication with portfolio managers to help alter plans and include changes earlier in the cycle. Not all projects being undertaken may be the top priority for the portfolio manager or some projects due to customer issues may suddenly assume a higher priority - it is really important for the project manager to handle such sensitivities thoroughly and for this have an active view of the portfolio management updates is necessitated. Project managers also need to work in tandem with portfolio managers to ensure regular tracking of activities to maximize profits, minimize escalations, and manage pipelines, resources, and budgets to ensure the efficiency and effectiveness of operating policies, processes, and procedures.

Benefits of Project Portfolio Management  

The project portfolio management function is a harbinger of benefits and yields a larger customer confidence, satisfaction, and organic growth for the organization. A survey conducted by PMI - the Project Management Institute states that a mature PPM process has both quantitative as well as qualitative benefits and contributes to approximately 35% more successful projects in the organization.

PPM propagates a collaborative and data-enabled decision-making process, thereby leaving little room for discrepancies, empowering practices, and improving efficiencies across the organization. An organization running projects in harmony and having a centralized decision-making structure is proven to make big wins in terms of customers as well as operational accomplishments. 

Develop leadership skills, drive innovation, and achieve success in today's dynamic business landscape with certified product owner certification. Don't miss this game-changing opportunity!

Are You Ready to Become a Portfolio Project Manager?  

Project portfolio management acts as an important consolidation and centralization mechanism with the rationale to improve the organization's processes and optimize the way of working across projects. It acts as a risk deterrent to mitigate or eliminate potential risks that may materialize due to a lack of information or systems in the org. Hence, it not only works to align projects and initiatives to goals but also acts as an important risk management strategy to minimize the impact and occurrence of risks.

Maturing the organization's portfolio management function cannot be achieved in a short time and is a journey that the org must embark on at the earliest to yield quantitative as well as qualitative benefits. A mature PPM process helps the organization maximize ROI by not only actively tracking and monitoring projects but also by ensuring control of projects in execution, knowing when a project/operation has to be called off, and finally, how to ensure a smooth transition from project closure to benefits realization. The PPM methodology and tools should also work towards building a portfolio-centric culture with processes being continuous and adaptable to be successful. 

Frequently Asked Questions

1What Is the Difference Between Project Management and Portfolio Management?

Project management focuses on alignment in individual projects whereas portfolio management focuses on alignment across the business unit/function. Also, project management’s area of focus will always be on “doing projects right” whereas, portfolio management always focuses on “doing the right projects”. 

2How to manage resources across multiple projects in a portfolio?

To manage resources across challenging projects with overlapping priorities effectively, the portfolio manager must plan for overlapping priorities and define dependencies to sequence them appropriately, decompose project plans into smaller chunks of work to get rid of blockers, and keep an active view across the portfolio to ensure smooth sharing and require trade-offs when necessary. 

3How to ensure that projects within a portfolio are completed on time and within budget?

Tracking projects closely with the help of a robust portfolio project management tool comes in handy to ensure optimal tracking and review of projects to complete them following planned baselines as well as minimize variances where they occur. 


Rohit Arjundas Sambhwani


Rohit Arjun Sambhwani is an IT professional having over a decade and half of experience in various roles, domains & organizations, currently playing a leading role with a premier IT services organization. He is a post graduate in Information Technology and enjoys his free time learning new topics, project management, agile coaching, and writing apart from playing with his naughty little one Aryan

Share This Article
Ready to Master the Skills that Drive Your Career?

Avail your free 1:1 mentorship session.

Your Message (Optional)

Upcoming Project Management Batches & Dates

NameDateFeeKnow more
Course advisor icon