The path to Project Portfolio Management: from PMOs to Prioritization

Cost cutting triggered by the 2008 recession has accelerated the evolution of project management in many organizations by shifting their focus from learning how to increase efficiency to learning how to prioritize.

Slalom Consultant Heather Bridges leads change management processes and imparts leadership and organizational knowledge that it is endemic to the change process. She finds that strategic planning walks hand in hand with improvements in project management.

When the 2008 recession hit most Enterprises made substantial cuts in their payrolls. But the recession didn’t freeze technological change or reduce competitive pressure. On the contrary, recessionary pressures made it imperative for organizations to retool with new business processes and technologies for the increasing velocity of business.

In the 2008-2009 period most organizations sought to deliver the same number of projects using fewer resources by streamlining processes and improving efficiency. Thus a common complaint we heard in 2009 was “we don’t know how to get more efficient!” To improve efficiency many organizations formed or revamped internal Project Management Organizations (“PMOs”), pooling project managers, business analysts, and functional analysts across projects organization-wide. Where these resources previously had been siloed within functional areas, PMOs enabled a fixed number of resources to handle more projects than before.

In the 2009-2010 period, however, many organizations discovered that the increased efficiency delivered by their PMOs still couldn’t close the gap between project resources and demand. The reason for this was typically a little of everything: efficiency gains were not enough to offset resource cuts; urgent opportunities created by economic conditions, such as falling interest rates, mandated new projects; and the combined pressure of competition and technology change made new projects critical just to retain competitive parity.

Thus the common complaint we started to hear in 2010 became “we don’t know how to prioritize.”

Project Portfolio Management (“PPM”) is the process by which resources are allocated to projects according to their importance. “Portfolio management” draws its name from the field of finance, although PPM involves allocating project resources to a mix of projects rather than allocating financial resources to a mix of investments. But with a project portfolio resource allocation is sometimes lumpy rather than fluid. The secret to progressing from leveraging PMOs to effective PPM is project selection, prioritizing one project over the other, with governance.

the path from PPO to PPM leads through prioritizing

If project portfolio management is the summit, project management organizaions could be base camp 1 and prioritizing could be base camp 2

Prioritization—deciding which projects will receive resources and which will not—requires a deep understanding of who to prioritize for. But many organizations that focused on leveraging PMOs to improve efficiency in 2009 failed to tackle prioritization on an organizational level. In some cases the combination of a lack of strategic vision and insufficient resources tossed responsibility for prioritization into the laps of the PMOs themselves. PMOs manage a river of projects fed by upstream tributaries–the functional units feeding them projects. Thus by default the PMOs were being put in the position of making strategic decisions for their organizations every time they had to say to a functional unit “we can’t do your work because we’re doing someone else’s work.”

Happily, when an organization goes through the process of creating a project prioritization strategy it can bring the organization’s functional leaders together so that they share a vision and work together better as a team. Ultimately there are tremendous organizational change implications when a shared vision of organization direction emerges on the level required to successfully prioritize projects.

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