Best Practices for Project Portfolio Selection
Almost any larger company nowadays must have a succesfull Project Portfolio Management (PPM) in order to preserve a positive revenue. PPM is essential to ensure that a company chooses the right projects to pursue, however it is not always as straightforward as it might seem to choose the best fit projects. In fact is it very challenging to choose which projects to have in a company's portfolio. Coopers et al. (2001) analysis has concluded that there are five dominant methods or tools that a larger amount of organisations uses to ensure a good Project Portfolio Management. These methods or tools consists of [1]:
- Financial methods, includes financial key figures.
- Business strategy, defines the strategy for allocating financial ressources.
- Bubble Diagram, plots project in a X-Y coordinate where several factors are relevant for determine a projects worth.
- Scoring Models, sums up a projects score from a range of criteria.
- Checklists, uses yes/no questions related specifik to the company.
A combination of one or more of the methods and tools can be seen as best practices within Project Portfolio Management.
The aim of this article is therefore to enlighten the Project Portfolio selection methods and tools and their best practices. Furthermore will this article describe the limitations and benefits of these best practices and how they can complement each other.
Introduction
Projects are everywhere today, no matter where you look you will see a project. The variation of projects is almost impossible to describe. They can be everything from small, non-profit and private projects to large, expensive and global projects. Hence projects are the foundation of organizations, the ability to manage them becomes more and more essential for surviving in the business. Larger organizations with many projects rely heavily on managing their projects in order to ensure that the projects are beneficial for them. This is where Project Portfolio Management (PPM) plays an important role. So what is Project Portfolio Management? PPM has several reasons for its importance; financial – to maximize the return, to maintain competitive advantage, to properly and efficiently allocate resources, to ensure the link between project selection and business strategy, to achieve balance and focus in projects and to provide a better objectivity in the selection process. A shorter description is that PPM is the process of evaluating, selecting, prioritizing and managing an organizations projects with the end goal to have the best fitted projects for the organization.
The selection process is one of the more important areas of PPM since it is the process where the projects gets chosen for the portfolio. This process can be very difficult to control due to the tremendous amount of methods and tools which can be applied. However Cooper’s (2001) [1] studies shows that five methods and tools are more commonly used by Senior Portfolio Managers and are his definition of ‘best practices’ within the selection process of PPM.
