While project portfolio management owes its genesis to financial portfolio management, there are some key differences. The first is the outcome of the portfolio. With a portfolio of financial assets, such as stocks, the return is measured in the same common denominator: dollars. This allows us to create some common key measures of performance, such as return on assets, price/earnings ratios, ROI, etc.
Projects, however, are not all directly tied to dollars. Some projects improve employee moral, some increase market share, and some simply make current operations more efficient. Another way to look at this is to think of each project as a business outcome. Companies invest in a project to achieve a certain goal. Recent examples from EIG clients include:
When we’re heads down in the middle of a project, it’s often easy to focus on staying on task, on budget, and on scope – and all too easy to lose track of the original business proposition. Truth is, all projects start with a business value proposition in mind. This is what I like to call the business target.
A while ago, as an exercise in a project management class I was teaching, I asked each of the PMs to tell us the purpose of their project. The first PM said “to upgrade the payroll system”. Oops – that’s not much of a purpose. Why would we want to spend lots of dollars just to upgrade a payroll system? Turns out there were new tax rules coming in that the old system couldn’t handle. So – the real purpose of the project was to enable compliance with new tax regulations. Obviously, if this could be done with a few minor tweaks, that would be better than a full upgrade. Given it could not, the upgrade was on.
