The basics of project portfolio management

June 12, 2023

I. Introduction

A. Definition of Project Portfolio Management

Project portfolio management is at the intersection of three disciplines: activity management, general management and project and program management. Project portfolio management is the more strategic dimension of project management. It is the process which aims to evaluate, prioritize and select the most relevant projects for an organization , taking into account their strategic objectives, their available resources and their constraints. Project portfolio management also involves monitoring and controlling ongoing projects , as well as evaluating their performance to ensure their continued alignment with the organization's strategic objectives.


Effective project portfolio management requires the company to be aware of several basic postulates.

Postulate n°1 : projects are the basis of the execution of a company's strategy.

Postulate no. 2 : it is necessary to gain perspective by moving away from a project-by-project vision, to adopt a global view of the project portfolio.

Postulate n°3 : each project represents an investment

Project Portfolio Management applies financial management methods to project management, that is to say, it takes into account the following concepts:

  • Investment strategies
  • Risk management
  • ROI (Return on Investment)
  • Growth and profitability
  • Diversification
  • Alignment with objectives


B. Importance of Project Portfolio Management

Good project portfolio management addresses crucial and strategic issues. It provides answers to the following questions:

  • What are we working on?
  • Are we working on the right projects?
  • How are our money and our people invested?
  • How do we perform?
  • Do we have the capacity to absorb future projects?
  • Is our project portfolio optimized?
  • Have the expected results of the projects been confirmed?
  • Can we concretely and correctly deliver current projects?


The contributions of the project portfolio management methodology are numerous. First of all, this management provides:

  • Better returns on project investment
  • Less risk on project organization
  • Better execution of strategic plans
  • More realistic management of capacity and project load
  • Faster delivery of projects
  • Greater customer satisfaction


II. The benefits of project portfolio management

The comprehensive vision of a project portfolio provides unique visibility, which helps improve business performance thanks to four main advantages that this methodology brings:


A. Optimization of resources and capacities

Businesses must grow within capacity constraints. Resources, particularly personnel, are limited and planning and optimizing employees' time on projects is therefore a strategic issue.


Project portfolio management provides a holistic view of ongoing projects in an organization, making it easier to plan and allocate resources more efficiently. By identifying the projects that contribute most to strategic objectives, portfolio management helps focus resources on the most important initiatives.


Furthermore, it promotes collaboration and coordination between teams and departments. It makes it possible to better share resources between departments and to arbitrate optimally by avoiding planning conflicts and promoting the exchange of information and skills.

Capacity planning in Stafiz: easy and powerful matching between profiles and needs
Capacity planning in Stafiz: easy and powerful matching between profiles and needs

Finally, thanks to visibility on the progress of different projects, future projects that are about to start and the indicators from which project portfolio managers benefit, they are able to make better project allocation decisions for place resources where they will be most strategic. This global visibility also makes it possible to determine which skills are under capacity in the organization for which it is necessary to recruit. 

Overall summary of the forecast load
Summary view of forecast capacity in Stafiz
Summary of the type of missing profile
Summary table on missing profiles in Stafiz

B. Improving financial monitoring and project performance


Visibility across the entire project portfolio makes it possible to see the status of all projects at a glance and easily identify those that are deviating from their budget or falling behind schedule. It is easier to identify the blockers, and the reasons that lead to the underperformance of a project. With a view of the entire portfolio, it is possible to make the necessary decisions to restore the situation. For example, a project portfolio manager may choose to reallocate resources from a project that is showing progress to a project that is struggling. Without an overall view of the situation of the various projects in the portfolio, it is impossible to restore the situation, because there is a lack of information.


Project portfolio management identifies and assesses potential risks associated with each project. This allows appropriate risk management strategies to be put in place to minimize negative impacts and maximize the chances of success. By proactively monitoring and managing risks, portfolio management helps reduce delays, budget overruns and project failures.

Project monitoring
Monitor deviations and progress in Staifz with KPIs

Project portfolio management provides key performance indicators to evaluate the progress and results of projects. This helps identify troubled projects quickly and take corrective action to get them back on track. Performance monitoring also facilitates organizational learning by identifying best practices and lessons learned to share across projects.

View the status of a project portfolio in Stafiz
View the status of a project portfolio in Stafiz


C. More strategic decision-making 


Project portfolio management allows you to compare projects with each other using strategic criteria. It provides tools and methodologies to assess the benefits, risks, costs and impacts of projects on strategic objectives. These comparative assessments help decision-makers prioritize projects and make informed decisions.


Anticipation of opportunities and risks: Project portfolio management makes it possible to anticipate opportunities and risks linked to the external environment. It helps identify trends, market needs, innovations and potential threats that can influence the organization's strategy. This information helps decision-makers adjust the project portfolio to seize strategic opportunities or to address emerging risks.


Reassessment and continuous adjustment: Project portfolio management promotes an iterative and adaptive approach to strategic decision-making. It makes it possible to monitor project performance, evaluate results against strategic objectives and make adjustments if necessary. This allows for dynamic and evolving decision making based on changes in the environment and new information available.


With all these advantages, we understand that a company has every interest in taking a project portfolio management approach.


III. How to implement project portfolio management step by step?


A. Step 1: selection of projects

1. Project selection criteria


To determine which projects to include in the project portfolios to be managed, it is necessary to analyze and classify them according to more criteria:

  1. Strategic alignment: projects must be consistent with the organization's strategic objectives
  2. Expected results: projects must have clear and measurable objectives. They must have enough impact for the organization.
  3. Feasibility: the technical, operational and economic feasibility of the project must be assessed
  4. Return on Investment (ROI): projects must be evaluated based on their potential for profitability and generation of value for the organization
  5. Risks and uncertainties: projects must be classified according to risks and associated uncertainties.


2. Project evaluation method


The projects must then be evaluated to give them a rating against each of the above criteria. There are different evaluation methods that help in making informed decisions on which projects to include in the portfolio. Here are some of the commonly used methods:


  • Cost-benefit analysis (CBA): This method involves comparing the expected costs of a project with the expected benefits. It quantifies the costs and benefits in financial terms, then calculates the cost-benefit ratio to determine the profitability of the project.


  • Return on investment (ROI) analysis: ROI evaluates the expected financial return on a project by comparing the expected financial gains with the necessary investments. It is generally expressed as a percentage and allows projects to be prioritized according to their profitability potential.


  • Multi-criteria evaluation method (MEC): This approach takes into account several criteria, such as financial return, strategic impact, technical feasibility, alignment with the organization's objectives, etc. Projects are evaluated and rated according to these criteria, then a comparative analysis is carried out to determine priority projects.


  • Sensitivity analysis: This method consists of evaluating the impact of variations in the key parameters of a project, such as costs, revenues, deadlines, on the financial results. This helps identify projects that are most sensitive to changes and assess their robustness.


It is important to note that there is no single method that suits all cases. Organizations may choose to use a combination of methods depending on their needs and the complexity of the projects.

B. Step 2: prioritization of projects

Once the projects have been evaluated, you are able to provide them with a “scoring”. Assign scores to each project based on predefined criteria such as strategic impact, feasibility, ROI, and more. Then, calculate an overall score for each project and use these scores to prioritize them.


It is also recommended to consult relevant stakeholders to obtain their views and support during decision-making.


C. Step 3: Allocation of resources

1. Optimization of resources


To allocate resources correctly within the framework of project portfolio management, we must seek to optimize resources.

Resources should be allocated to projects based on the project situation and its priority level.

Behind the resource allocation choices, the manager seeks to:

  • Optimize resources to ensure the load is aligned to the optimal capacity level. The optimal level of capacity depends on each organization. In certain companies, for example, the workload allocated to employees should not be at maximum capacity, because time must be reserved to work on other activities (training, management, etc.)
  • Carry out arbitrations to obtain the expected results on the projects: if, for example, a project which is at the top of the priorities is falling behind schedule which could adversely impact its results, the project manager must look for how to recover project resources less priority to allocate them to this project and restore the situation


We must therefore constantly work on the reallocation of resources and challenge the status quo to improve the optimization of resources.


2. Management of constraints and dependencies

To successfully manage the project portfolio, capacity planning must take into account a certain number of constraints linked to resources and the project.

The following constraints must be particularly taken into account:

  • Availability constraints: specific resources required for a project may be limited or unavailable at certain times. For example, specialist experts may not be available during certain periods or key equipment may be reserved for other projects. It is essential to take these availability constraints into account when allocating resources.
  • Schedule Constraints: Projects may have strict schedule constraints that require a specific allocation of resources to meet deadlines. It is important to take these time constraints into account when optimizing resources.
  • Budgetary constraints: Available financial resources may be limited, and it is essential to respect budgetary constraints when allocating resources to projects. Proper financial planning is necessary to ensure efficient use of resources.
  • Dependencies between projects: Some projects may have dependencies between them, meaning that the completion or progress of a project depends on the availability of results or resources from other projects.


These constraints and dependencies must be anticipated for the resource optimization work to produce the best possible result.


D. Step 4: Monitoring and evaluation of projects

1. Project monitoring dashboard


To properly manage a project portfolio, it is necessary to have visibility into the performance of all projects in the portfolio. This involves being able to consolidate the dashboards of all projects.

The project dashboard is crucial for properly managing your project portfolio. It provides visibility into the situation and performance of the project. The project monitoring dashboard must provide the following information:

  • Progress monitoring: it highlights the activities carried out, the tasks in progress and those to come. It offers a global vision of the progress of the project and allows deviations or delays to be quickly detected.
  • Project management indicators: it provides key performance indicators (KPIs) to evaluate project performance. This may include indicators such as on-time, cost and quality compliance, stakeholder satisfaction, resource utilization, etc. 
  • Risk management: The dashboard can include information on identified risks and their level of criticality. This helps monitor risks and take proactive steps to mitigate their impact on the project.


2. Project performance indicators


There are many performance indicators for a project and each project portfolio manager must choose the most important indicators to remain aligned with their objectives. We must focus on indicators that have a real impact, and on which it is possible to act. 

To measure a project, the main performance indicators are as follows:

  • Project progress: what is the progress in percentage or value compared to the objective. This progress can be detailed by task or looked at overall.
  • Time spent relative to objective: another performance measure is the ability to stay within the budgeted time objective on the project, in order to remain aligned with the objective.
  • Project margin compared to the budget margin: when it is possible to calculate a budget margin (it must be sold and have a turnover), it is interesting to compare the recalculated margin of the project to the margin initially budgeted. The recalculated margin takes into account past and future costs on the project.
  • The completion rate: it compares the sold value of the project in relation to the value of the past and future time of employees on the project. This provides another analysis on the performance of the project and whether the pricing of it was correctly carried out.


You can find the detailed calculations in our article 12 financial indicators to follow for project management .

Find out how to manage your projects in Stafiz

Project portfolio management is therefore an asset for all companies that work in project mode. This approach makes it possible to bring greater performance to projects by aligning project management with the strategic objectives of a company. It provides greater visibility to identify improvement levers and allows resources to be optimized to deliver better results overall.

To get started with effective project management, you need to identify the right project portfolio management software.

The Stafiz software allows you to meet all the needs of project portfolio management.