Project Portfolio Management

3.4 PROJECT PORTFOLIO MANAGEMENT

Project portfolio management is the systematic process of selecting, supporting, and managing a firm's collection

of projects. Projects are managed concurrently under a single umbrella and may be either related or

independent of one another. The key to portfolio management is realizing that a firm's projects share a common

strategic purpose and the same scarce resources.19 For example, Pratt & Whitney Jet Engines, a subsidiary

of United Technologies Corporation, is similar to other major jet engine manufacturers in creating a

wide portfolio of engine types, from those developed for helicopters to those for jet aircraft, from civilian

use to military consumption. Although the products share common features, the technical challenges also

ensure that the product line is highly diverse. The concept of project portfolio management holds that firms

should not manage projects as independent entities, but rather should regard portfolios as unified assets.

There may be multiple objectives, but they are also shared objectives.20

Artto21 notes that in a project-oriented company, project portfolio management poses a constant challenge

between balancing long-term strategic goals and short-term needs and constraints.Managers routinely

pose such questions as the following:

* What projects should the company fund?

* Does the company have the resources to support them?

* Do these projects reinforce future strategic goals?

* Does this project make good business sense?

* Is this project complementary to other company projects?

Objectives and Initiatives

Each of the questions in the previous list has both short-term and long-term implications, and, taken together,

they constitute the basis for both strategic project management and effective risk management. Portfolio

management, therefore, entails decision making, prioritization, review, realignment, and reprioritization of a

firm's projects. Let's consider each of these tasks in more detail.

DECISION MAKING The decision whether or not to proceed in specific strategic directions is