Project and Portfolio Management (PPM) is a formal approach that an organization can use to orchestrate, prioritize and benefit from projects. This approach examines the risk-reward of each project, the available funds, the likelihood of a project's duration, and the expected outcomes. A group of decision makers within an organization, led by a Project Management Office director, evaluates the returns, benefits and prioritization of each project to determine the best way to invest the organizationâ€™s capital and human resources.
PPM does not involve running the projects, but it does involve choosing which projects to execute and how to fund them. The PPM group will examine each potential project to first determine if the project is supporting the goals and objectives of the business. Projects that fail this first criteria are eliminated from selection. The PPM group will also examine the interconnections and contingencies among projects. These relationships can affect the ranking, prioritization, funding and selection of projects within the portfolio. Finally, the PPM group will monitor projects that are motion. Poorly performing projects may affect other projects within the portfolio, so a consistent monitoring of portfolio projects is needed.
Project Selection Methods
PPM can rely on a project steering committee to help determine where to best to utilize the organizationâ€™s funds in project for a return on investment (ROI). Project selection often relies of the time value of money as an input to the project selection process. Time value of money uses a formula to determine either the present value or future value of a project based on some given assumptions.