Project Portfolio Management: Ensuring Performance Matches the Promise

Decorative image with office and onsite project workers

Portfolio Management is a ‘hot’ discipline, which offers significant potential benefits from ensuring:

  • a greater proportion of projects and programs are driven by a measurable strategic contribution that is realistically achievable; and
  • that these initiatives are implemented successfully so that the planned strategic contribution is actually realised.

Yet many organizations struggle to reach the promised land in practice.  Why would this be?

Four common mistakes can be identified:

Firstly, many organisations believe that a necessary first step is to procure a software solution.  Practical experience however shows that repeatable processes and effective governance come first – as Sanwal says[1], “Technology, thoughtfully applied, can help you enable the process with greater efficiency, accountability, and transparency, but it is not the solution or even one of the most essential components of the solution.

Secondly, organisations develop portfolio management practices, but they are not applied consistently. Research by Cooper[2] finds that the difference between the ‘winners’ and ‘losers’ is often not so much that the latter don’t engage in portfolio management, but rather that they don’t do it consistently i.e. they allow managers to bypass the agreed procedures and apply agreed decision criteria inconsistently.  A report from McKinsey[3] emphasises the point, “as one executive observed, his company’s biggest failures occurred when senior managers overrode established processes and methodologies.

Thirdly, organisations focus on the means, not the end – thus the emphasis is on re-designing templates and documenting ‘how to’ guidance.  That’s not to say these developments aren’t of value, only that they are means to the end of improved initiative delivery and benefits realisation.  It is therefore crucial that portfolio management focuses on developments that make a tangible difference to organisational performance, for example by: applying a benefits categorisation framework that links initiatives to strategic objectives; improving the reliability of initiative forecasting to enable better investment decisions; agreeing portfolio investment criteria to facilitate portfolio prioritisation that reflects strategic priorities; and working with projects and programs to identify and manage resource constraints, risks and dependencies that too often de-rail delivery.

And fourthly, trying to ‘boil the ocean’.  Some organisations attempt to start by centrally managing all projects and programs across the organisation.  The result in larger, more complex organisations is the ‘Soviet Planner syndrome’ where a mass of data is sought that is out of date by the time it is collected.  The key is to focus on the projects and programs that are of greatest strategic significance. Antonio Nieto Rodriguez[4] (former Global Chair of the PMI) argues that, “fewer, more effectively selected and managed projects are the key to strategic and long-term success…

those organisations that focus on just a few key initiatives can perform significantly better than unfocused organisations”.

Project team meeting in modern office

Success depends not just on avoiding these mistakes, but also on keeping in mind the six key characteristics of effective project portfolio management:

Firstly, it’s an active practice

Russell Ackoff[5] says, “A good deal of the corporate planning I have observed is like a ritual rain dance; it has no effect on the weather that follows, but those who engage in it think it does. Moreover, it seems to me that much of the advice and instruction related to corporate planning is directed at improving the dancing, not the weather.”  The challenge is therefore to ‘influence the weather’ with a bias for action, for example: identifying problems early (in areas such as resource and dependency management); and taking the hard but necessary decisions to reallocate funding when appropriate by, for example, changing the default option at stage gates so that unless the case for continued investment is made, funding ceases. This challenge is one that includes the Portfolio Management Office (PMO) – as one leading practitioner[6] says,

the portfolio management office must be seen inside the organisation as change agents and contributors capable of acting as “conductors” who help teams meet corporate goals – not as just overseers relegated to reporting and reviewing schedules.

Secondly, it’s a disciplined practice

That treats projects and programs as investments. That is, we expect to see a return on investment where the benefits realized have a value (non-financial as well as financial) that exceeds the costs incurred. This requires discipline and consistency in application – as Kahneman et al[7] say,

executives need to be prepared to be systematic…Using checklists is a matter of discipline, not genius.  Partial adherence may be a recipe for total failure.

That’s not to suggest the portfolio management practices are a straight-jacket with no flexibility – only that where variations from agreed processes are proposed they are made with a full understanding of the implications on the wider portfolio and the rationale is approved by the portfolio governance body.

Thirdly, it’s an evidence-based practice

By, for example, collecting reference class data to improve cost and benefit forecasts and recording the sponsor’s and business case writer’s track record in the Business Case; using scorecards and checklists to inform portfolio prioritisation; and applying staged release of funding where incremental funding commitments are linked to confidence in delivery and benefits realisation.

Fourthly, it’s a fast and frugal practice 

Portfolio prioritisation doesn’t depend on complex algorithms or advanced software systems.  Rather, it is based on reliable data that enables executives to make informed decisions on the collection of initiatives that represent the greatest strategic contribution, subject to consideration of risk and constraints. McKinsey[8] argues that in considering project investment decisions, we should examine, “the handful of characteristics that are most critical to a project”.  The PMO should therefore work with the portfolio governance bodies in developing investment criteria that reflect these characteristics, and in presenting data that enables senior management to make more informed decisions.

Fifthly, it’s a benefits-led practice 

Remembering that benefits realisation represents the primary rationale for investing taxpayers’ and shareholders’ funds in projects, programs and portfolios.  Consequently, we should ensure the portfolio adopts and maintains a focus on benefits realisation and optimising strategic contribution across the portfolio lifecycle.

And lastly, it’s a transparent practice 

In the real world, transparency trumps accountability.  Portfolio management holds a mirror up to the organisation, providing a clear line of sight in relation to the collective portfolio position on spend against budget, delivery against schedule, and benefits realisation against forecast.  This visibility provides a basis for what Thorp refers to as ‘activist accountability’ and continuous improvement.  One aspect of transparency/visibility is the use of short one page summary documents including: investment scorecards and checklists for assessing attractiveness and achievability; portfolio dashboard reports and one-page summaries of delivery, spend and benefits realisation; and the creative use of graphical summaries such as Portfolio ‘Bubble’ Maps etc.

Want to know more:

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QUTeX customised executive education


[1] Sanwal, A. (2007) Optimizing Corporate Portfolio Management, Wiley.

[2] Cooper, R. (2006) From Experience: The Invisible Success Factors in Product Innovation, Working Paper No. 19, The Product Development Institute.

[3] Bishan, M., Nangia, I., & Wenger, F. (2014) Preparing to make big-ticket investment decisions, McKinsey & Company Corporate Finance Practice, July.

[4] Nieto-Rodriguez, A. (2012) The Focused Organisation – How Concentrating on a Few Key initiatives Can Dramatically Improve Strategy Execution, Gower.

[5] Source:


[7] Kahneman, D., Lovallo, D., & Sibony, O. (2011) Before You Make That Big Decision…Harvard Business Review, June 2011, pp51-60.

[8] Bishan, M., Nangia, I., & Wenger, F. (2014) Preparing to make big-ticket investment decisions, McKinsey & Company Corporate Finance Practice, July.


Steve Jenner is a best practice author, business practitioner and trainer: Steve’s work centres mainly in the fields of portfolio management and benefits management. He is a Fellow of the Chartered Institute of Management Accountants, with an MBA and Masters of Studies degree from Cambridge University. When not walking the Caminos in Spain and Portugal, or riding his motorbikes in the UK and Australia, he designs and teaches courses for the Graduate School of Business at QUT.

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