Skip to main content

What is portfolio planning? 5 steps to project portfolio success

Long-term organizational success requires more than simply striving for wins on a project-by-project basis. Companies must build a cohesive project portfolio, made up of complementary, high value projects that align with their business goals. Of course, this type of portfolio doesn’t come together without significant effort. And it all begins with a comprehensive and focused portfolio plan.

What is portfolio planning?

Portfolio planning is the process of determining which projects your organization should take on. It’s a foundational part of project portfolio management (PPM), acting as the connective tissue between high level strategic planning that sets the direction of the entire organization and project-level planning. An effective portfolio plan lets organizations assess risk across multiple ongoing projects while ensuring each project contributes to their strategic objectives and won’t strain their available resources beyond their breaking point.

A version of portfolio planning is also used in the financial industry when putting together a group of investments, and it uses some of the same methodologies and tools as product planning. But planning a project portfolio is its own discipline, one that requires distinct practices and a unique perspective.

The benefits of portfolio planning
Enterprises in industries from oil and gas to construction, power, transportation and more can benefit from implementing a project portfolio planning process. Here are some of the key ways portfolio planning can help your company become more successful:

  • A complementary portfolio. Portfolio planning is a thoughtful process that leads to projects that complement each other within a set of portfolios that further greater organizational goals.
  • More valuable projects. Effective portfolio planning lets your company select projects that will deliver the most value and make the greatest positive impact.
  • Alignment with organizational goals. Without purposefully planning out your company’s project portfolio in advance, it’s unlikely that all the projects your organization chooses to pursue will make meaningful contributions towards meeting its strategic goals, from financial objectives to goals related to environmental, social and governance (ESG) issues.
  • Improved operational efficiency. A quality project portfolio provides you with a bird’s-eye view as to where your organization’s capital and resources are allocated, enabling more effective tracking against baselines and identification of opportunities for boosting efficiency.

All of these benefits are worth the challenges your organization and individual teams may face through the portfolio planning process. Some of the most common challenges in project portfolio planning include:

  • Accounting for risk. Any portfolio plan worth its salt must take into account potential risks and effectively prepare for them.
  • Accurately evaluating portfolio performance. What makes a project successful depends on your organization’s unique goals. Measuring overall portfolio performance requires a platform that gathers relevant project metrics in real time and lets your organization analyze them.
  • Optimizing your portfolio. Portfolio planning is not a one-and-done deal. Continual evaluation and optimization of your project portfolio is required to keep it healthy and profitable.
  • Assessing and dealing with resource limitations. Portfolio planning relies on resource planning and management to identify potential limits when it comes to labor, funds, materials or other resources needed to complete projects on schedule and within budget.

5 steps to effective portfolio planning in any organization
If you’re looking to improve the portfolio planning process at your company, start by following these five best practices.

1. Set a portfolio direction that aligns with your business strategy
One of the primary goals of portfolio planning is to select projects that will contribute to meeting organizational objectives. But you can’t align your portfolio with your business strategy if the latter is unclear.

Is your company most concerned about maintaining revenue? Breaking into a new, lucrative market? Do you need to address regulatory obligations within a certain time frame? Maybe recent events or analyses have convinced leadership to de-risk by consolidating operations in proven areas or evolving the way your organization’s assets are generating revenue. Define your company’s goals through discussions with stakeholders at all levels and only then begin translating those goals into possible projects geared to meet them.

2. Select the most impactful projects
Every company wants its portfolio to contain only those projects that offer the most value — however your organization chooses to define it. Achieving this requires a careful evaluation of what your company has done in the past and where it stands now. Collect and analyze historical project information — preferably with the help of an enterprise project performance (EPP) platform — including data on revenue, hours worked, scheduling, changes and resources used. You should also review relevant case studies, other industry examples and customer feedback to better assess costs and potential returns for projects in existing and new areas.

All this data won’t do your company much good if it can’t effectively synthesize it together, however. That’s where scoring models come in. Scoring models are analytical techniques that use both qualitative and quantitative data to assign a value — or score — to each project. These range from simplified scoring models like pairwise and Eisenhower matrices to more complex weighted scoring models that involve assigning weights to various criteria based on their relative importance. A PPM platform that captures both portfolio and project data in a centralized hub makes producing these scoring models on demand much simpler.

Of course, unless your organization has unlimited resources, it’s unlikely that your company will be able to simply select all the projects that reach the top of your list. Instead, your organization will be forced to select the best group of projects it can afford to pursue simultaneously. As objectives evolve over time, the contours of this group should change to better align with your organization’s new direction.

3. Prioritize and allocate resources accordingly
Managing and allocating resources well can mean the difference between a profitable portfolio and one that leads to delays and cost overruns. Effectively prioritizing resources requires having key resources available for your company’s most important projects when they need them. Managing resources at the portfolio level also involves accurately assessing available capital resources and then distributing them to fund your organization’s intended portfolio.

There are two major project prioritization methods. Quantitative prioritization involves ranking projects based on objective, calculable metrics, like expected profitability. Qualitative prioritization instead ranks projects based on factors that don’t have an inherent numerical value, like customer engagement or brand strength. In many cases, combining these methods will provide the most well-rounded assessment of a project’s overall value to your company.

4. Account for project dependencies
Project dependencies are requirements that must be met before either all or part of a project can be completed. Dependencies exist both within and between projects, both of which can be relevant for portfolio planning. Let’s take a look at several of the most common project dependencies to consider during the portfolio planning process:

  • Causal dependency. A causal dependency simply means one event causes, or is required for, another. Steps in a sequential workflow or series of projects are good examples of causal dependencies. When dealing with this type of dependency, small hiccups at any single stage of a project can impact scheduling across your entire portfolio.
  • Resource dependency. It’s hard to get the job done when you don’t have the resources to do it. Accounting for the resources each project needs, identifying potential supply issues in advance and determining how to distribute resources required by multiple projects is all part of the portfolio planning process.
  • Cross-team dependency. This refers to any element of a project that relies on another team to complete a step in a project — or their project as a whole — before your team can proceed with its own portion or separate project. Reducing cross-team dependencies when possible can help avoid potential delays and conflicts, but, especially in large enterprises, some level of cross-team reliance is inevitable.

Effectively mapping out dependencies and identifying solutions requires integrating PPM and project management functions in a single platform. And a centralized system is also a must for identifying potential synergies your organization could realize by pursuing certain projects sequentially or simultaneously.

5. Analyze performance and course correct as needed
Evaluating portfolio performance accomplishes a few things at once. It lets you know whether your portfolio is meeting expectations and if there are opportunities for further optimization to increase profitability, efficiency or other metrics your organization has identified. Frequent evaluation also keeps your company on top of changes, be they new internal priorities or external shocks affecting your industry, so your portfolio remains responsive to emerging trends. Portfolio optimization is a continuous process that requires access to real-time data. Leverage EPP software that gives you an enterprise-wide window into the real drivers of project success and has the tools needed to guide your company from insight to action.

Master project portfolio planning with EcoSys
EcoSys is an enterprise project performance platform with all the features your organization needs to improve the portfolio planning process. It integrates all project and PPM functions in a single platform, enabling intelligent project selection, ongoing performance management and true strategic alignment. EcoSys also includes the reporting and analytics capabilities needed to accurately evaluate project value according to the criteria your company sets while identifying potential issues in advance. Thanks to these features and more, building a winning project portfolio is now within reach for every enterprise that knows how critical it is to allocate their capital to the right projects. .

Ready to see how EcoSys can transform portfolio planning at your company? Contact us for a live demo today.