Project Portfolio Management and Managing Multiple Projects: Two Sides of the Same Coin?

Proceedings of the Project Management Institute Annual Seminars & Symposium

September 7–16, 2000 • Houston,Texas,USA

Introduction

In today’s competitive business environment, managers and

companies find themselves facing competition for scarce re-

sources, narrowing windows of opportunity, and constantly

changing demands of internal and external customers. In addi-

tion, projects are continually being added, changed, and re-

moved in response to business activity and changing market

conditions.As a result, the backlog of “needed”projects requires

resources that exceed management’s ability to provide, almost

mandating that project priorities be constantly scrutinized and

changed. The growing rate of diverse and unpredictable changes

in technology and environment, the demand to reduce lead time

and time to market, the increasingly demanding market and

the rise in international competition, require consistent and ef-

fective project and product management.

This paper focuses on what seems to be one of the main causes

of failure: the need to management multiple project interde-

pendencies assuring their mutual compatibility at the portfolio

level. Every different project portfolio selection, therefore,

could—and generally does—change either the risk or relevance

of each project. This situation is exacerbated when the projects

selected have no clear relation or link to the corporate strategy.

Currently there exists a general philosophy that all projects

under way make up the project portfolio.Unfortunately, a group

of independent projects does not make up a portfolio—it is

simply a group of projects, consuming time and resources.

Hopefully, these projects have been selected with long-range

strategy in mind. Projects generally are not independent. If a log-

ical person would not purchase a mutual fund or a group of

stocks without first assessing his or her long-term financial goals,

why do companies approve and fund any project that is proposed

without first evaluating it and its contribution to and alignment

with the corporation’s strategic goals and objectives? Often is it

due to management’s inability to clearly define the company’s

strategic vision, goals and objectives or their willingness to suc-

cumb to pressure from the political astute and organizationally

savvy managers.

Exhibit 1 summarizes, at a high level, the major differences be-

tween Project Portfolio Management and Multiple Project

Management.

Assessing Priorities and Allocating Resources

During the past several years, much has been written on the sub-

ject of resource allocation for projects, often under the title of

project portfolio management. These writings have focused pri-

marily on methods for the short-term resource allocation.

Generally models emphasized day-to-day planning, giving

Project Portfolio Management and Managing

Multiple Projects:Two Sides of the Same Coin?

Lowell D. Dye, PMP,Central Region Manager,PM Solutions,Inc.

James S.Pennypacker,Director, Center for Business Practices,PM Solutions,Inc.

Portfolio Multiple Project

Management

Purpose Project Selection Resource Allocation

and Prioritization

Focus Strategic Tactical

Planning Emphasis Long & Medium-Term Short-Term

(day-to-day)

(annual/quarterly)

Responsibility Executive/Senior Project/Resource

Managers

Management

Exhibit 1. High-Level Comparison of Project Portfolio Management and Multiple Project Management

priority to projects based on their perceived level of urgency, with

urgency being determined by the level of risk, complexity, or rel-

ative strength of the project sponsor. Therefore, what frequently

happens is that projects, though strategically relevant, but low

risk, are viewed less urgent and given a lower priority in the over-

all project portfolio than projects with the same or less strategic

relevance, but higher risk.

There is a tendency to assign all projects in the corporate

portfolio a Number One Priority. In spite of this widely recog-

nized criticality, a clear and formal project selection and prior-

itization policy is too often lacking; selected projects are all

considered as high priority projects. As a result, there is no clear

guidance as to which project(s) has the greater urgency and the

more critical need for resources, effectively placing all projects

in an equally competitive position for limited resources. So re-

gardless of the strategic value of certain projects, the will of

management is not exercised as to which is more important in

the timing of delivery to customers, internal and external. In such

a situation, precedence in the access to critical resources is es-

tablished by individual functional managers. This is done on the

basis of the degree of pressure perceived and thus from a view-

point that is, to say the least, partial. Strong political and psy-

chological pressures are among the causes of this costly situation:

it might not be pleasant nor politically advisable to tell people

they are working on a low priority project.

Projects must be prioritized based on their relative importance

and contribution to the overall strategy. Each project should be

prioritized relative to other projects being evaluated as well as

those currently under way.In addition, as the business and tech-

nical environment changes, the priority of one or more projects

may change also.

Unfortunately, most managers, and especially project man-

agers, are not in the position to control or change project prior-

ities. Thus, project managers, along with the resource managers,

must continually ask themselves several critical questions:

(1) Are resources assigned to the highest priority projects?

(2) Are project resources being fully utilized?

(3) Are projects being completed on time, within budget, and

to the required quality standard?

The focus on resources is because rarely does the project man-

ager have the luxury to add additional resources for an extended

period of time to complete the current “critical or high priority”

project.

The multiple project environment requires that an efficient,

dynamic, process for determining how to allocate resources to

and set a realistic delivery schedule for new projects, especially

when being added to an existing set of on-going projects.

The growth rate of multiple, parallel projects in need of pro-

gram management is phenomenal, between 20% and 30% a

year”according to Hugh Ryan, director of the large, complex sys-

tems practice at Anderson Consulting. The imperative is forcing

organizations to rethink how they implement IT projects from

the ground up. The first priority, says PG&E’s CIO John Keast,

is a holistic view of common business goals.“If you focus on the

big picture first, then you’ll have people who can deal with the

cross-project situations that inevitably come up,” says, Keast.

“Too often in the past, they were inwardly facing and lost sight

of the whole” (Wilder, Caldwell, & Garvey).

Corporations are constantly undertaking multiple projects to

add new product lines or to improve and replace existing prod-

ucts/processes. In order to achieve economies of scale and scope,

firms may want to leverage their resource investments on new tech-

nologies, processes, and products. In addition, because of increas-

ingly intense international competition,the perspective of multiple

project management has become a critical issue for competition.

Regardless of the number of projects, whether one or 100,

there are several common objectives for all projects:

• Minimum total throughput time (time in shop) or all projects

• Minimum total completion time for all projects

• Minimum total lateness or lateness penalty for all projects

(Meredith & Mantel).

To best accomplish these objectives, multiple project envi-

ronments should be focused on ensuring compatibility among

different simultaneous projects with a strategic portfolio ap-

proach. Generally speaking, multiple project management is an

area where traditional methods and techniques appear to be

less adequate. This problem is mainly related to the complexity

of inter-project links, both tangible (e.g., financial,technical) and

intangible (e.g., client relations, knowledge transfer.)

Each new project, especially new product development proj-

ects, often has both technical and organizational linkages or in-

terdependencies with past or currently ongoing projects. The

strategic management of these linkages among multiple projects

is complicated, but is often a critical issue for a firm’s project

management performance.

Most multiple project environments involve constant change

and managers should recognize that a well-defined project se-

lection and prioritization process can give guidance to project and

resource managers for planning and allocating resource assign-

ments. The resource allocation issue is concerned with deter-

mining the best tradeoffs between available resources throughout

the duration of all projects in the project portfolio and estab-

lishing the right priorities. The priorities of the individual proj-

ects within the project portfolio relate to urgency of need and

there is almost always competition between the projects for re-

sources when one has a higher priority than the others.

Allocating resources, especially human resources, to projects

in a multiple project environment is sometimes difficult and

often creates problems. Important in this allocation process is the

linking of day-to-day planning for each individual project to the

long-term business strategy. In addition, allocating the right

human resources to a project is vital. The more projects that are

involved and the more specific the skills and knowledge required

for each project, the more important, but also the more difficult,

is the allocation process. Frequent conflicts between projects

thus arise; and if not resolved in a systematic perspective, these

conflicts could lead to a drastic reduction in project and overall

organizational performance.

Proceedings of the Project Management Institute Annual Seminars & Symposium

September 7–16, 2000 • Houston,Texas, USA

Long-term resource allocation should be placed in the strate-

gic business and planning process. Generally corporations walk

through their resource allocation process. Directly linked to this

process is the medium-term resource allocation, which if done

at all is generally accomplished quarterly. The day-to-day plan-

ning, for effectively managing resources among multiple projects

is conducted within project execution and product delivery

processes.Coupling day-to-day planning to the strategic business

plan this medium-term-resource allocation is absolutely neces-

sary. Also, by linking medium-term resource allocation, and

day-to-day resource planning, to long-term resource allocation,

the business strategy process, and to strategic goals, all affected

stakeholders will have a better understand the overall need for a

logical and consistent project selection and prioritization and, in

effect, a reliable resource allocation process.

Making all the pieces fit is one of the greatest challenges fac-

ing today’s business executives, middle managers, and project

managers, but it also provides corporations with one of their

greatest opportunities. The demand for “big-picture” project

management can catalyze—and then cement—the long-needed

project selection-business strategy-resource allocation integra-

tion on which all progressive and competitive CEOs and Senior

Managers insist.

A Multiproject Portfolio Selection and Prioritization process

is needed to help make the pieces fit, including a comprehensive

evaluation methodology to assess the complex interactions that

arise between projects within the strategic portfolio and the

ever-changing relevance or risk of the overall portfolio. The

overall process should continue until a satisfactory result is

achieved, actions for improvement are taken that may act to

strengthen the competitive position of the company as a whole,

or elements to enhance the success factor of individual projects.

It is very conceivable that projects may be reclassified and a new

project portfolio structured.

The Multiple Project Challenge

Managing multiple projects is a challenge within many organi-

zations because of current practices that ignore the basics of proj-

ect priorities, project categories, project standards, and multiple

tool applications. Lack of priorities, categories, standards, and

uniform tool applications complicates the startup and initiation

of projects especially in a multiple project environment.

There is a mistaken belief that project category and project pri-

ority are the same. Category relates to the size, dollar value, du-

ration, and overall contribution to the organization’s financial

health. Priority, on the other hand,is the urgency of need and re-

lates to time of delivery and criticality of delivery date. The two

are related, but should always be treated separately.

Categories of projects give an organization the basis for the

level of detail required in planning and the selection criteria

that can be used on any size of type of project (Ireland).

Periodic reviews of current and potential projects to be placed

in the project portfolio, as well as, decisions regarding resource

allocation must be conducted. Without quarterly, or at least

semi-annual, evaluations, decisions on the make up of the proj-

ect portfolio are generally made too late and, due to pressure to

be “productive,” resource allocation decisions are resolved in

discussions between project managers and resource managers.

Unfortunately, without a good process, resources may be allo-

cated to the wrong projects.

This dilemma is clearly stated by says Kathy Boyd, global ser-

vices manager with Hewlett-Packard’s consulting unit,“Problems

are accelerated today because of business time-frame demands,

tight budgets and very short project deadlines. Where does any

IT project fit in the overall business strategy? That must be

known” (Wilder, Caldwell, & Garvey).

This situation is obviously complex for a variety of reasons.

Typically, the problem is not well defined, the company does not

have an orderly way of examining project alternatives, forced al-

ternatives may violate budget,time,resources, and/or specifications

on one or more projects, or very simply project alternatives have

not been prioritized with respect to the entire project portfolio.

Another reason for having a well-defined approach to project

portfolio management is that in using day-to-day planning for

this purpose is generally undesirable, but not atypical, regardless

of company size, industry or products/services. This kind of

planning is appropriate when used by the project manager to

shift resources among multiple projects and tasks. Moving lim-

ited talent among multiple IT projects has become the modus

operandi of the CIA. When one project hits a bump and needs

additional resources, all the others are fair game.“First we look

to projects near completion, take the senior talent from those,

and assign then to the higher-risk or higher-visibility initia-

tives,”says Michael O’Brachta, an information services officer in

the CIA.“If the available pool doesn’t work, then we go raid ex-

isting projects and make hard decisions about pulling resources

off to assign them to riskier or more visible projects” (Wilder,

Caldwell, & Garvey).

As a method of trying to manage the corporate project port-

folio, day-to-day planning often is very unstable and unsuit-

able. In contrast, the project portfolio must have some degree of

consistency and stability. In addition, while planning the port-

folio once a year can be effective for looking at competitive or-

ganizations in practice, an annual review period is too long

because changes in the project portfolio within a year are in-

evitable. The problem is that many companies do not know

how to handle a more frequent portfolio review process.

DeMaio and Corso propose a five-step model that takes a log-

ical approach project selection and prioritization aimed at help-

ing decision-makers in a multiproject environment:

• Individual project evaluation, evaluation, classification, and

initial screening

• Multiproject classification and selection

• Actions for improvement and portfolio reclassification

• Priority assignment

Proceedings of the Project Management Institute Annual Seminars & Symposium

September 7–16, 2000 • Houston,Texas, USA

• Ongoing control of project portfolio.

It is critical to establish project selection and prioritization

guidelines that are consistent with the corporate mission and ob-

jectives. “You have to keep a portfolio viewpoint, and project

managers have to think beyond the IT part,” says United Airlines

senior VP and CIO Bruce Parker.Also, United has had to rethink

deployment strategies for the most important resource of all:

people (Wilder, Caldwell, and Garvey).

When selecting and prioritizing projects, especially when re-

source allocation in a multiple project management environment

is an issue, it is important to consider the following:

• Projects should be similar in size and level of complexity.

• Projects should be relatively of the same duration and require

few unique resources.

• Projects should be of similar priorities to permit balancing re-

quirements without completely omitting some projects in re-

source assignment.

• Projects should be similar disciplines or technologies.

These considerations will allow the decision-maker(s) to log-

ically compare like projects, (i.e., apples to apples.)

All projects, even inter-related projects in a multiple project

environment, typically have a unique and complete life cycle with

different start and finish times. This usually places individual

projects within the project portfolio in different phases for the

project manager to plan and execute at the same time.A project

manager may experience some difficulty in trying to maintain

a balance between the projects because of the different phases of

the life cycle being pursued at the same time. This situation is

compounded by projects having different priorities. Higher pri-

ority projects generally receive first consideration for initial and

subsequent resource assignments. This situation is compounded

by the impact or influence of adding a new project to taking a

project from the project portfolio.

Attempts to manage multiple projects are also complicated by

the fact that management attention, available resources, and

project control tools must be spread over many projects. These

factors exacerbate an already difficult task and reduce the like-

lihood of project success especially when the project portfolio is

comprised of large and small, technical and non-technical, strate-

gic and operational projects, etc.

A multiple project environment does not permit senior man-

agement attention to be focused; instead, senior management

must delegate authority of the project to lower management

levels. Project control resources cannot be concentrated on mul-

tiple small projects to the extent they can be dedicated to a sin-

gle major project, even though project controls are in many

ways more important on multiple projects due to overlapping

schedule and resource requirements.

Summary

Perhaps the best way to summarize the focus of project portfo-

lio management and what separates it from multiple project

management is in the understanding of what Project Portfolio

Management really is. This concept is perhaps best explained by

David Cleland in The Strategic Context of Projects.

“An enterprise that is successful has a ‘stream of projects’flow-

ing through it at all times.When that stream of projects dries up,

the organization has reached a stable condition in its competi-

tive environment. In the face of the inevitable change facing the

organization, the basis for the firms decline in its products, ser-

vices, and processes is laid—and the firm will hobble on but ul-

timately face liquidation.

In a healthy firm, a variety of different preliminary ideas are

fermenting. As these ideas are evaluated, some will fall by the

wayside for many reasons: lack of suitable organizational re-

sources, unacceptable development costs, a position too far be-

hind the competition, lack of strategic fit with the enterprises

direction, and so on. There is [and should be] a high mortality

rate in these preliminary ideas. Only a small percentage will

[and should] survive and will be given additional resources for

study and evaluation in later sages of their life cycles.

Senior mangers need to ensure that evaluation techniques are

made available and their use known to the people who provide

project ideas and opportunities for growth. Senior management

must create a balance between providing a cultural ambience in

the enterprise that encourages people to bring forth innovative

product and process ideas and an environment that ensures that

rigorous strategic assessment will be done on the emerging ideas

to determine their likely strategic fit in the enterprise’s future.”

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Proceedings of the Project Management Institute Annual Seminars & Symposium

September 7–16, 2000 • Houston,Texas, USA

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