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Project Selection and Portfolio Management

Project portfolio management involves allocating limited resources to projects that provide the greatest benefits. An organization's project portfolio should be linked to its business strategy. A project portfolio management framework includes four phases: pre-screening projects to ensure they are justified and have minimum requirements, analyzing and rating projects, selecting the right portfolio of projects based on rankings, and adjusting the portfolio over time based on changes. The goal is to funnel in many project ideas but strictly filter out all but the highest quality projects.

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Abdiqadir Osman
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155 views13 pages

Project Selection and Portfolio Management

Project portfolio management involves allocating limited resources to projects that provide the greatest benefits. An organization's project portfolio should be linked to its business strategy. A project portfolio management framework includes four phases: pre-screening projects to ensure they are justified and have minimum requirements, analyzing and rating projects, selecting the right portfolio of projects based on rankings, and adjusting the portfolio over time based on changes. The goal is to funnel in many project ideas but strictly filter out all but the highest quality projects.

Uploaded by

Abdiqadir Osman
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Chapter 03

Project Selection and


Portfolio
Management
Project Management for Business,
Engineering, and Technology
Project Portfolio Management
 Organizations have limited resources to devote
to projects
 Like an investment portfolio, resources should
be assigned to projects that promise the
greatest “return” or benefit
 Less important projects should not siphon
resources away from more important
projects
Project Portfolio and Strategy
 Common Problems in Project Portfolios
 No link between business strategy and
project selection
 Poor quality portfolio (weak, mediocre
projects)
 Lack of focus (weak projects get resources;
best projects starved for resources)
 Project trivialization (projects selection based
on “low hanging fruit” – modifications,
extensions, updates; nothing breakthrough or
innovative)
Project Portfolio Management
Project Portfolio Management
 Project proposals are assessed for costs, risks, benefits,
and contributions to objectives
 Decisions are made to authorize some projects, retain
some on the “back burner,” and dispose of others
 Scarce resources are allocated effectively to insure
that
priority projects get adequate funding and support
 Projects are "balanced" in terms of high vs. low risk,
large vs. small size, long-term vs. short term focus, etc.
 Projects are continually tracked, compared, and
managed collectively
Process for Selection and Management of
Projects
Process for Selection and Management of
Projects
Strategic management: focus the organization.
 Top management articulates organization vision and
mission, defines objectives and initiatives, decides on
budget, allocates resources to business units.
Portfolio management: select the right projects.
 Business unit managers develop goals, strategies, and
initiatives consistent with corporate objectives and
initiatives. These become criteria for selecting projects.
Gating methodology: nurture or get rid of projects.
 Managers assess performance of projects: important,
struggling projects are allocated more resources; poorly
performing projects are put on hold or cancelled.
Project management: manage the projects right.
 Projects are managed using principles and practices of
project management.
Projects Review
Board
Project Review Board (aka Portfolio Management Team,
Project Governance Board, Project Steering Committee,
Project Council)
 Responsible for project selection and portfolio management
 Membership includes
 portfolio manager (PRB chairperson)

 chief financial officer (CFO)

 chief risk manager (CRO)

 chief human resource officer (CHRO)

 project management office (PMO) director

 chief technical officer (CTO) (from IT, engineering, or

product development)
 For research and engineering projects PRB includes group of
technically competent "peer reviewers"
Framework for Project Selection, and Portfolio
Management

Adapted from N. Archer and F. Ghasemzadeh, "An integrated framework for project portfolio
selection." International Journal of Project Management, Vol. 17, No.4, pp. 207 - 216, Elsevier
Science.
Framework for Project Selection, and Portfolio
Management
Phase I
Pre-screening stage: to “pass”
 Projects must be justified in terms of either organizational
survival or growth.
 Survival projects: necessary for health and viability of
the organization
 Growth projects: offer organization opportunity for

prosperity and expansion


 Projects might require:
 feasibility study

 champion and sponsor

 documented expected benefits

 Sometimes, simple checklist is employed to rate each


proposal as excellent, good, poor, etc.
Framework for Project Selection, and Portfolio
Management
Phase I (cont’d)
Proposal analysis stage
 Employ a combination of quantitative and qualitative
models and scoring methods.
 Rate the proposal using diverse criteria, e.g.,
 link to strategic objectives
 financial value
 compliance to constraints
 Proposal must exceed minimum cutoff value or
score

Proposal screening stage


 Assess and eliminate projects that do not meet requirements for
expected benefits, risk, or other specific criteria.
Framework for Project Selection, and Portfolio
Management
Phase I restricts the pool of projects entering Phase II to those
that are the right projects.

Phase II
Portfolio selection stage
 Review proposed projects and existing projects
together
 Compare projects in terms of analysis scores or
current performance
 Rank-order projects
 Rank-ordering: to ensure that resources and
funding
are allocated to higher-priority projects.
Framework for Project Selection, and Portfolio
Management
Phase II (cont’d)
Portfolio adjustment stage
 Decide which projects to accelerate, delay, or cancel
 to satisfy changing objectives, opportunities (new
strategies develop, new RFP's or proposals arrive), and
resources,

Gating process: evaluate current projects


 Reassess projects underway for expected benefits,
performance, and costs
 Terminate projects in trouble and not meeting minimal
requirements
 Pool remainder with new projects, rank-order, and
reconsider which projects for portfolio (i.e., perform
screening and selection stages).
Framework for Project Selection, and Portfolio
Management
 Selection process: analogous to a funnel and a filter:
 funnel takes in project ideas, proposals, and concepts
 filter precludes all but the best from proceeding.
 Goal: design the process so funnel takes in lots of ideas; filter
screens poor projects yet allows constant flow of quality projects

Adapted from Steven Wheelwright and Kim Clark, Revolutionizing Product Development, New York: Free Press, 1992

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