5 Best Practices For Effective Project Portfolio Management

By: Eileen O'Loughlin on August 10, 2016

“Project portfolio management might be able to grow organically, but it doesn’t happen automatically.” – L. Steven Gunsior

This quote from the president of Level 5 Consulting sums up the issue that many small and midsized businesses (SMBs) struggle with as they look to institutionalize portfolio management practices. Maybe the following scenario sounds familiar:

The breadth and depth of your projects have progressed to where portfolio management is the next logical next step. However, project portfolio management (PPM) processes do not simply occur out of necessity. Implementing PPM requires a decisive and strategic plan of action… But where and how should you start?

To help guide you through this transition, we interviewed leading industry experts to uncover their tips for effective portfolio management. With their insights, we’ve created the following list of best practices for implementing portfolio management.

(See the Next Steps section at the end for a downloadable checklist summarizing each best practice.)

  • David Wakeman, PMP and principal of Wakeman Consulting Group, a consulting company specializing in business strategy and creating revenue solutions.

  • Davis Buckheister, PMP and project manager at ADAPTURE, an IT consulting company specializing in information security, infrastructure and cloud solutions.

  • L. Steven Gunsior, president of Level 5 Consulting LLC, an IT consulting firm that specializes in custom software development, project management and IT strategy.

Not sure if PPM is right for your business yet? Head over to our recent article detailing the benefits of portfolio management for more info about why SMBs should consider PPM.

(Click on a link below to jump directly to that section.)

Best Practices for an Effective PPM Process

Identify Your Business Goals and Strategy

Establish a PMO

Develop Project Evaluation Criteria

Develop Risk Management Strategy

Invest in a PPM Solution

Next Steps: Download Best Practices Checklist

Best Practices for an Effective PPM Process

While exact PPM processes will vary, there are some overall best practices to keep in mind as you implement portfolio management at your organization:

1. Identify Your Business Goals and Strategy

The first step toward effective PPM is to identify your organizational goals and and clearly define a business strategy to reach those goals. Ask yourself, “What do we want to achieve?”

Asking this question will help you develop an action plan. Each project in your portfolio should align with your organization’s strategic vision.


“I think, if you always keep an eye on what projects you have, and how they fit into the organization’s larger strategic plans, you will find that they have done a pretty good job of making your PPM practices effective.”

Dave Wakeman

principal of Wakeman Consulting Group

Wakeman says that a common pitfall occurs when businesses identify their business strategy, but lose sight of the individual projects on the path to achieving their strategic vision.

They just look at the business as a whole and never jump back and look at the pieces that are being built,” says Wakeman.

To avoid this oversight, Wakeman advises that organizations take the time to not only identify a business strategy, but also actively take steps to evaluate where they stand in relation to business objectives.

This process involves taking inventory of all current projects and resources:

  • Project inventory: Evaluate the current projects in your pipeline for redundancies, stalled projects and other potential areas for cost savings.

  • Resource inventory: Identify your skilled employees and their current and future availability to see who is available to work on high-value initiatives.

Keep in mind: Poor planning and goal setting can hamper PPM success. Organizations must identify an overarching business strategy, but also set aside time to reaffirm the projects on the path to achieve their goals.

2. Establish a PMO

Next, establish a business unit to oversee portfolio management processes and coordinate efforts across the organization. Commonly, this business unit is called a project management office, or PMO.

It’s likely your organization already has an informal team who support managers and project efforts. After all, you wouldn’t be looking to implement portfolio management processes if the number and complexity of your projects didn’t warrant support from a dedicated team.

However, Gunsior cautions that for PPM efforts to be successful, this team needs to be given recognition and support from executive staff. Otherwise, the system of checks and balances doesn’t work.

Gunsior notes that establishing a PMO can protect an organization from pet projects coming from the C-suite executives, as well as headstrong project managers. This is because all initiatives must be signed off on by a single unit.


“Once the portfolio of projects is understood, an organization is going to have to expend effort to make sure selection of and coordination between projects is maintained…This governance can take place through a PMO or some other team, but those charged with it need to have a strategic view and executive support.”

L. Steven Gunsior

president of Level 5 Consulting LLC

Keep in mind: PPM efforts can fail through a lack of governance. PMOs can centralize project processes and offer the appropriate oversight—however, it’s imperative that PMOs have executive support.

3. Develop Project Evaluation Criteria

Once a business unit is in place to oversee PPM efforts, this entity can work with business leaders to develop project evaluation criteria. These criteria will help your organization review, evaluate and authorize projects to ensure they align with strategic objectives.

Questions to ask as you evaluate new project initiatives include:

  • Does the project drive business goals?

  • What is the expected tangible outcome?

  • Can this outcome be achieved by a project already underway? (i.e., Is this initiative unique?)

  • What is the project’s risk-return profile? (E.g., high-risk, high-return or low-risk, low-return)

  • What resources are required to complete this initiative?

Buckheister gives the following use case to illustrate why it’s important to have a project review process in place:

Use Case: Avoid Redundant Projects

“Projects are commonly championed by business unit executives and are more [or less] likely to get approved because of their good or bad relationship with the CEO. This leads to project duplication and selection of projects that are not aligned with actual business goals.

For example, the VP of HR may be authorized to purchase and implement a new cloud-based software tool. However, IT may already have a system implemented that could accommodate the functionality with much less investment, risk and resources. If there are solid processes in place to vet these projects before they are underway, project portfolios can be built and managed much more effectively.”

This is a good example of how PPM can improve operational efficiency and reduce waste. Evaluating each new project initiative against the same criteria helps an organization select and prioritize those projects that deliver the most value, i.e. offer the greatest return on investment.

Keep in mind: Gunsior says that project selection must be kept in sync with strategic goals. As such, if those goals change, then the project selection criteria should be modified as well.

4. Develop Risk Management Strategy

Evaluating a project’s risk-return profile is an important step in the review phase. But, developing an organizational risk management strategy is included as its own best practice because it is so crucial to PPM success.

It’s important to evaluate each project’s inherent and potential risks to the overall portfolio, rather than only comparing project initiatives side-by-side.

Buckheister says that the simple act of deciding to execute on a project (rather than first evaluating it as a theoretical) will change the risk profile—potential costs and resource requirements are actualized, and this can impact other projects in the portfolio.


“If the organization chooses to execute project A, then project B’s risk profile may have changed significantly due to the scope involved and resources needed in project A.”

Davis Buckheister

project manager at ADAPTURE

As such, it’s important to perform risk assessments several times over the course of a project’s life cycle. This allows the project manager to keep the PMO and stakeholders up-to-date with any changes. In turn, stakeholders can weigh new initiatives against the overall portfolio more accurately.

Keep in mind: Effective risk management is crucial to both project and portfolio success. For more information about developing an effective risk management strategy, download our free e-book that walks you through managing risks at each stage in the project life cycle.

5. Invest in a PPM Solution

The final best practice on our list is to invest in a PPM solution to increase cohesion and visibility into PPM processes. These tools help create a historical project archive, which business leaders can draw on when making future investment decisions.

As a rule, businesses should vet products prior to purchase. This includes:

  • Reading reviews of leading PPM solutions. This allows you to see how your peers have rated products and vendors for qualities such as depth of functionality and customer support.

  • Scheduling product demos. This allows you to test drive a product prior to purchase. It’s important that every individual who will be using the software in their day-to-day activities, from employee to executive, has a chance to interact with the product during the trial period and give their feedback. This can foster high user-adoption after purchase.

To help businesses compare PPM products and choose a solution that best fits their needs, Software Advice has built an interactive PM Buyer’s Guide. Using this guide, buyers can filter our inventory of products by various criteria, such as user rating, number of reviews, deployment offering and price.

Next Steps: Download the Best Practices Checklist

For the best chance at successful PPM, your organization should follow each best practice in the order they appear here. This helps ensure that your business strategy and processes are in place prior to investing in a software solution and that there is a governing body that can oversee implementation.

To help you remember each step in order, download and print the checklist below:

Download Checklist