Project Portfolio Management (PPM): Definition, Methods, and Benefits

In project portfolio management (PPM), projects of a company are managed in a centralized manner.

What exactly is project portfolio management? Project Portfolio Management (PPM) describes the processes of a company for the selection, prioritization, and controlling of projects.

PPM is decisive for companies since it enables the strategic management of projects and set priorities to the most important proposals. Advantages include optimized resource utilization and a higher success rate in project implementation while the challenges lie in prioritization and the need for precise planning data. Important tasks in PPM are the selection and prioritization of projects, strategic resource allocation and portfolio monitoring. 

PPM software supports the process through automation, real time analysis, and graphic representations. In contrast to operational project and program management, PPM focuses on strategic orientation and corporate objectives. In our article, we explain the definition and meaning of PPM, project portfolio management methods and solutions with project portfolio management software.

Table of Contents

1. What is project portfolio management (PPM)?
2. What are the tasks of project portfolio management?
3. What are the objectives of project portfolio management?
4. How are projects selected and prioritized in PPM?
5. What project portfolio management methods are there?
6. What project portfolio management tools are there?
7. What are the advantages of using PPM software?
8. How can project portfolio management be implemented in a company?
9. PPM vs. program management: What are the differences and similarities?
10. PPM vs. project­management: What are the differences and similarities?
11. Conclusion on project portfolio management (PPM)

What is project portfolio management (PPM)?

Project portfolio management (PPM) is a central organizational unit which strategically aligns all company projects, their processes, and technologies. It ensures that projects are in line with the corporate objectives and is carried out by a project portfolio manager or project management office. 

According to the definition of project portfolio management, PPM is not only focused on operational implementation. PPM is particularly valuable for growing companies, sectors with high innovation pressure, or companies with numerous or large-scale projects which run simultaneously. PPM is to be distinguished from single project management, and program management which coordinates related projects.

The implementation of PPM with the PLANTA project management software at the Max Frank corporate group has lead to a substantial improvement of budget and cost control as well as date tracking. The software provides a transparent and structured overview of all ongoing projects, letting inefficient working methods and isolated procedures become a thing of the past. Thanks to the system’s adaptability to individual project processes and integration with the ERP system, Max Frank was able to optimize its budget process and make project management more efficient.

The Royal Bank of Scotland benefits from PPM, having replaced 35 old software systems and 50 internal solutions as well as numerous Excel sheets. Within 12 months, the bank improved its data structure, increased process transparency, and reduced costs in the business units.

Why is project portfolio management important for companies?

Project portfolio management allows for a systematic approach for the administration and controlling of multiple projects. It helps companies to ensure that their projects are in line with their strategic objectives.

PPM is the basis for better resource utilization, risk management, and decision-making in project prioritization. It increases transparency and control and ensures a higher success rate for projects. The purpose of PPM lies in the maximization of the overall value and benefit of the project investments. 

By continuously monitoring and adjusting the project portfolio, the company can react to changes in a flexible way and use resources more efficiently, which leads to an increased overall performance and helps to achieve the defined objectives.

What are the advantages of project portfolio management?

Project portfolio management offers numerous advantages for companies that want to strategically control and optimize their project portfolio.

The advantages include:

• Objective project selection: Reliable data and evaluation models render the project selection process objective and efficient by enabling a clear assessment of the projects in the portfolio.
• Optimized risk management: Project risks are analyzed in a comprehensive manner, evaluated, and monitored, so that preventive measures can be taken to reduce the probability of occurrence of such risks and ensure that only projects with benefits that justifiy the risks are selected.
• Flexible project management: By combining different planning methods like Scrum and Waterfall, PPM allows for agile adjustments to changes on the market or in the company.
• More efficient project runtimes: PPM monitors time and resource plans as well as project risks to identify delays and resource conflicts at an early stage and be able to take adequate measures.
• Improved ROI: The benefits of PPM improve the return on investment (ROI), which leads to positive project success.

What are the challenges of project portfolio management?

Despite the numerous advantages of project portfolio management, the effort involved should not be underestimated. It entails costs and administrative processes, but these can be easily managed with a suitable software solution. 

What are the challenges in project portfolio management?

The implementation and use of PPM can be linked to different challenges which must be overcome to achieve the desired results.

This is how you tackle the following challenges:

• Embedding PPM tools in existing systems
  Solution: Plan the early integration of PPM tools and use interfaces and APIs to ensure a seamless connection to existing systems. Test the integration extensively before the final launch.
• Maintenance and updating of complex data
  Solution: Rely on automatic data updates and regular audits to ensure data quality. Use central data management platforms for consistent information.
• Resource allocation with scarce resources
  Solution: Use resource management tools to monitor availability and utilization. Implement clear prioritization guidelines and transparent resource allocation procedures to avoid conflicts.
• Change management in the event of rejectionLösung: Implement a comprehensive change management program that includes training, clear communication and feedback mechanisms. Involve key people at an early stage to secure support.

What are the tasks of project portfolio management?

The following tasks are essentially part of project portfolio management:

1. Project selection: Selection of projects that best fit the company’s strategic objectives and support the defined corporate goals.
2. Project prioritization: Determining the order in which projects should be implemented based on their strategic benefit and resource requirements.
3. First resource planning: Allocation and optimization of available resources across all projects.
4. Risk management: Identification, evaluation, and management of risks within the entire project portfolio and in the interaction of all projects.
5. Project controlling: Monitoring the progress and results of all projects in the portfolio to ensure they meet the expectations.
6. Continuous optimization of the project portfolio: Adjust the portfolio by adding, removing or reprioritizing projects to maximize the strategic value.

What are the goals of project portfolio management?

The objectives of PPM support the corporate strategy by ensuring that all projects contribute to the realization of the long-term vision and the strategic priorities of the company are particularly helpful in project controlling. This leads to a better alignment of resources and increases the likelihood that the company’s objectives will be achieved.

The main objectives of PPM include:

• Strategic orientation: Ensuring that all projects support the company’s long-term goals and strategies.
• Value maximization: Maximizing the overall value of projects through optimal project management and sound risk management.

How does project selection and prioritization take place in PPM?

The process of project selection and prioritization for the implementation of a project portfolio is presented by Projektmanagement-Institut (PMI) as follows: 

1. Inventory: The first step is to identify all projects and the associated data, budgets, processes and prioritizations and to map them in a project overview. 
2. Analysis: As part of the project analysis, benchmarks and key figures for project success are defined. In addition, the schedule, costs, budget and resource utilization are created for each project. The projects can also be sorted according to business areas, strategic goals and corporate values. 
3. Classification and weighting: The projects are evaluated according to their priority and their contribution to the corporate objective.
4. Alignment of the project portfolio: When creating the project portfolio, projects are prioritized, redundancies are eliminated, resources are roughly planned, risks are identified and minimized and projects are coordinated with each other. 
5. Implementation: In order to manage the project portfolio, contracts may have to be terminated, projects rescheduled and budgets and resources rescheduled.

Project selection and prioritization as well as the weighting and classification of projects is based on various criteria. These do not only aim to select projects that meet the company’s strategic objectives, but also respond to external factors such as market requirements and competitive conditions.

Criteria for project selection and prioritization are:

• Strategic benefit: Evaluation of how well the project supports the long-term objectives and strategic priorities of the company.
• ROI: Analysis of the expected financial return compared to the investment costs to determine the economic benefit of the project.
• Market Analysis: Research market requirements and trends to ensure that the project meets current and future market needs.
• Competitive analysis: Evaluation of how the project compares to competitive initiatives and whether it offers strategic advantages or differentiation in the market.
• Added value: Assessment of the potential added value, regardless of the financial success or benefits that the project can bring to the company.
• Dependencies: Analysis of dependencies between relevant projects in order to take these into account when compiling the project portfolio.
• Compliance and legal requirements: Checking whether the projects meet all relevant legal and regulatory requirements.
• Innovation potential: Evaluation of the project’s potential to promote innovation or enable technological progress.

What project portfolio management methods are there?

Different methods for evaluation and prioritization have proven useful for carrying out project portfolio management strategically. 

These are the most common PPM methods:

• Traditional Project Portfolio Management
• Balanced Scorecard
• Value Based Management (VBM)
• Economic Value Added (EVA)
• Stage Gate Process
• Agile Portfolio Management
• Kano Model

Traditional project portfolio management is based on traditional evaluation approaches like cost-benefit analysis and risk estimate. Projects are evaluated according to their strategic use and their financial profitability. This is suited for companies which use clear, quantitative criteria for selecting and prioritizing projects and require structured decision-making.

Balanced Scorecard uses an equilibrated analysis of key figures such as finances, customers, internal processes, as well as learning and growth to evaluate projects. It is ideal for companies that strive for a holistic view and the strategic alignment of their projects.

Value Based Management (VBM) is focused on the potential contribution of the project when it comes to increasing the company’s value. VBM is used by companies that want to evaluate the long-term value increase of the company. 

In Earned Value Analysis (EVA), the economic surplus value of a project is thoroughly evaluated . This method not only takes into account the cost of capital employed, but also analyzes the current date and cost situation by specific key figures. By continuously tracking these key figures, EVA allows for a precise progress evaluation and trend analysis. It is particularly suited for companies that want to calculate and evaluate both the financial surplus value and the progress of their projects in a precise manner.

The Stage-Gate process subdivides projects into phases which are separated by decision levels (gates). Performance is evaluated at each gate to decide whether to continue, adjust or terminate the project. The stage-gate process is particularly suited for companies that have to manage complex projects with several stages of development and decision-making requirements , e.g. in product development or innovation projects.

Agile project portfolio management allows for flexibility and fast adjustments. If requirements and market conditions change, you can react accordingly. It is perfect for companies that work in dynamic and fast developping environments and require flexible and adjustable project management.

The Kano model puts the focus on customer satisfaction.. Projects are evaluated according to the categories of basic factors, performance factors and enthusiasm factors and how they affect customer satisfaction. The model is useful for companies who want to make sure that their projects live up to the customers’ requirements and expectations and maximize their satisfaction.

What project portfolio management tools are there?

In project portfolio management, central tools and software solutions are decisive for the efficiency of the processes and of the upcoming management tasks. 

Project management software allows for precise scheduling, task management, and progress tracking. Gantt charts in project management tools offer a visual representation of the project schedule by showing tasks, milestones, and their chronological sequence. They provide a clear overview of the course of the project, the duration of individual tasks and their dependencies. This allows managers to quickly identify delays, monitor progress and make adjustments to ensure the project stays on schedule.

With resource management tools you can optimize the assignment and monitoring of resources in order to avoid bottlenecks.

Collaboration tools improve communication and collaboration through document management and real-time communication among project team members. 

Dashboard, and reporting tools provide a visual overview and detailed reporting of project data and key figures, facilitating quick decisions. 

Risk management software supports the identification, assessment and monitoring of risks in order to take appropriate measures to minimize risks and ensure the success of the project.

The following PPM tools support the PPM processes by different functions which allow for efficient planning, management, and monitoring of projects in the portfolio:

What are the advantages of PPM software?

The use of project portfolio management software offers numerous advantages, especially when it comes to real-time data, tracking dependencies, and increasing efficiency.

These are some of the advantages of using PPM software:

• optimizing resource allocation
• managing dependencies
• well-founded decision-making
• increasing transparency and traceability
• strategic orientation
• automation of processes

PPM software reduces manual errors and increases efficiency through automation. It enables effective resource assignment and improves the coordination of project dependencies. The software optimizes decision-making by detailed insights in project and portfolio values which are provided via dashboards and reports. These insights facilitate precise planning and prioritization. Furthermore, the software increases transparency and communication through comprehensive reporting and enables real-time tracking of progress, budget utilization, and results.

Here are some examples of PPM software and their functions:

• Microsoft Project: Project planning, resource management, scheduling, and reporting, integrated with other Microsoft products.
• Jira Road Maps: Management of project portfolios, planning, resource management, progress tracking and visualization of dependencies.
• Smart Sheet: Scheduling, resource management, progress tracking and reporting, supports collaborative working and automation.
• Plan view (incl. Clarizen): Portfolio management, resource planning, strategic alignment, capacity planning, and risk management. Clarizen provides comprehensive project and portfolio management functions.
• PLANTA Project: Project planning, resource management, time and cost tracking, risk management, provide detailed project reports and automated workflows.

PLANTA Project: PPM software for effective portfolio management

PLANTA software for project portfolio management in the Enterprise edition is the ideal solution for PPM, as it offers support in all phases of portfolio management. The software enables the definition and analysis of evaluation criteria, the classification and prioritization of ideas, plans and projects and offers comprehensive target and project monitoring.

Below, you will find a more detailed description of the most important functions and the workflow of PLANTA Project and how to use it to achieve good project portfolio management:

Evaluation criteria and risks must be defined to identify projects that best suit the corporate strategy. In PLANTA Project, evaluation criteria is defined in the master data and is continuously updated. By providing a clear structure for defining and maintaining the evaluation criteria, PLANTA Project facilitates the selection and prioritization of the projects.

PLANTA Project supports PPM additionally by allowing for a structured risk detection and evaluation, which improves decision-making and contributes to the successful control of projects. Risks and their influence on the course of the project are systematically monitored with PLANTA Project: Project risks are formulated as questions and are weighted. New risks are identified at an early stage and existing risks are continuously reevaluated. 

Ideas, proposals, and projects are described in detail in the respective core data. They contain information on objectives, scope, possible consequences of non-realization, costs, effort, as well as key performance indicators.

By weighting the evaluation criteria, the system calculates the total objective contribution and risk value of the project ideas, proposals, and projects. This allows for an objective and transparent evaluation which contributes to strategic alignment and risk minimization.

Project ideas, proposals, and projects are prioritized using reference values such as target contribution and risk value. This prioritization makes it possible to determine which projects are carried out and which are not.

PLANTA Project shows the utilization of individual or several departments and enables resource conflicts to be resolved by simply moving the projects. Simulations can be quickly created, edited and exported as a roadmap in PowerPoint.

Quality Gates enable transparent monitoring of the project implementation phase through regular section checks. The portfolio manager defines quality gates and assigns them to the respective projects. Based on the data provided by the project manager, the portfolio manager tracks the progress and the achievement of project objectives.

The progress of the portfolio is tracked by monitoring the status of individual projects and plans. This makes it easier to monitor target achievement. The portfolio manager creates status reports for every portfolio at the push of a button. They are then directly analyzed and graphically displayed on the screen.

The info board provides a comprehensive overview of portfolios by presenting different diagrams, the developments in areas like risks, evaluation criteria and project analyses in a vivid manner.

Optimization of project transparency and resource planning at Dr. Willmar Schwabe with PLANTA Project

The Dr. Willmar Schwabe corporate group, a leading manufacturer of herbal medicinal products implemented PLANTA Project to improve transparency and the management of about 300 simultaneously running projects. Before introduction, project monitoring was carried out in a rudimentary and inadequate SharePoint solution, which led to a lack of transparency and inefficient allocation of resources. The decision in favor of PLANTA was made in December 2018, followed by a quick implementation phase of 2.5 months. The software has been used since March 2019.

PLANTA Project helped to significantly increase adherence to schedule as well as the number of simultaneously running projects. The clear view of the entire portfolio enabled a targeted focus on important projects and improved resource planning. The project pipeline is now transparent which allows for more efficient planning and resource adjustment for the coming years.

How to implement project portfolio management in companies?

If you want to implement project portfolio management in your company, you will have to take the following steps for implementation :

1. Definition of the strategic objectives: Definition of the corporate goals and priorities to be supported by PPM.
2. Selection and implementation of PPM tools: You need suitable software that supports the planning, monitoring and analysis of projects. This software must be integrated into the existing IT infrastructure.
3. Definition of processes and standards: development of clear processes and standards for project selection, evaluation, and prioritization. This includes defining criteria and evaluation methods to ensure that projects are strategically aligned.
4. Training and integration of employees: Training ensures that all employees involved understand the new processes and software tools and can use them effectively. This promotes acceptance and a smooth transition to the new project portfolio management system.
5. Adjustments: Implementation of the PPM system and regular monitoring of its performance. If necessary, contracts have to be terminated, projects rescheduled and budgets and resources rescheduled. Adjustments are made to increase effectiveness and ensure that the system continuously supports the company’s objectives.
6. Continuous monitoring and optimization: Ongoing review and adjustment of the PPM system to ensure it remains effective and achieves business objectives. This includes regular feedback loops including so-called lessons learned and optimizations based on the data and experience gathered.

Challenges may be faced during the implementation of a project portfolio management system , e.g. missing employee acceptance and resistance towards change. In addition, integration into existing systems and processes requires careful assurance of data quality and consistency.

PPM vs. Program Management: What are the differences and similarities?

Project portfolio management manages a collection of projects and programs. It comprises the evaluation, prioritization, and resource assignment on a superior level. Program management coordinates several related projects to achieve specific program goals. It is focused on the successful implementation and integration of projects.

Similiarities include the necessity to manage resources and risks as well as to monitor progress. Differences show in the perspective: PPM is more strategic and broader in scope, while program management is more operational and focused on the coordination of individual projects within a program. Different software solutions reflect these focal points: PPM software offers comprehensive portfolio management functions, while program management tools are focused on the coordination of projects and their operational realization within a program.

PPM vs. project management: What are the differences and similarities?

Project portfolio management and project management differ in terms of their objectives, their scope, and their focus. PPM is focused on the strategic orientation and prioritization of several projects. It is a superordinate process which includes the continuous selection, control, and optimization of projects within a portfolio.

In contrast, project management is focused on the operational aspect, namely the realization of a single project. The aim is to achieve specific targets in terms of time, cost and quality, and to manage the entire product life cycle from initiation to conclusion. 

Another difference is the scope of tasks. While PPM includes the continuous management of an entire project portfolio, project management is focused on the realization of a single project with a defined start and end point. In project management, the focus is on tactical decisions, detailed planning, and operational execution.

PPM tools support strategic planning and prioritization, offer functions for the feasibility of projects, and allow for comprehensive analysis and reporting for the entire portfolio.

Project management software, on the other hand, offers functions for detailed project planning, task management, and progress monitoring. However, both disciplines use similar methods such as Gantt charts, critical path methods, and risk management techniques. PPM methods differ from project management methods, especially when it comes to their respective depth and breadth of application.

How does multi-project management relate to PPM?

Multi-project management (MPM) and project portfolio management are closely connected. MPM includes the operational coordination of several simultaneously running projects. PPM offers the strategic planning framework. Both disciplines work together to manage dependencies and ensure a portfolio overview that maximizes the overall value for the company.

How does task management relate to PPM?

Task management and PPM are directly coordinated. Project portfolio management defines the strategic prioritization and selection of projects , while task planning in project management is concerned with in-depth planning and the operational implementation of the projects. PPM ensures the overarching prioritization and rough planning of resources, while task management includes the monitoring and control of individual project tasks to make sure that they are in line with the strategic objectives.

How does cost planning relate to PPM?

PPM controls the strategic budgeting and resource assignment across all projects. That’s why cost planning in project management and in PPM are closely connected. PPM makes sure that financial resources are distributed effectively to the prioritized projects. Continuous cost control and monitoring as part of PPM ensures that projects remain within their budget and that the financial objectives of the company are achieved.

How does Resource planning management relate to PPM?

Resource planning in project management and project portfolio management are closely linked since PPM controls the strategic distribution of resources across several projects. PPM enables the efficient use of available capacities to avoid bottlenecks and ensure flexibility. The integrated PLANTA suite enables strategic portfolio planning and operational project planning including detailed resource planning and therefore supports effective project and portfolio management.

Conclusion on project portfolio management (PPM)

Project portfolio management (PPM) is essential for companies, as it enables systematic planning, monitoring, and controlling of all projects and provides a strategic focus. While program and project management are operationally oriented, PPM ensures that projects are managed in line with the long term objectives of the company. Software for PPM such as PLANTA Project is indispensable since it offers comprehensive data analyses, real-time transparency, and precise reporting. This enables companies to manage their project portfolio more efficiently, avoid bottlenecks and increase the success rate of their projects.