PPM: Balancing the Portfolio

Ian Whittingham, PMP is director of Calixo Consulting, providing project and program management expertise from initiation through to implementation, covering business transformation, workflow process re-engineering, and enterprise data integration. He is a regular contributor to ProjectManagement.com. You may contact Ian directly at [email protected].

  Business Case   Portfolio Management   Strategy  

How does a company get the best return from the money it spends on projects? It’s a question that very many executives would like to know the answer to. Helping to find an answer to that question is one of the more important goals of Project Portfolio Management.

As its name implies, PPM aims to realize the maximum return on investment by managing the value of individual projects in aggregate. How that value is defined can mean more than just dollars and cents, but that’s the value that executives generally have in mind when they ask about a project’s payback on their investment in it.

In aspiring to maximize return on investment, PPM takes inspiration from a key principle of securities portfolio management, which emphasizes diversity as a means of reducing risk among investments and--in the long run--creating opportunity for a higher rate of return than investing in a single security might achieve.

As an inspirational idea for developing PPM techniques, the foundational work of economists like the Nobel Laureate Dr. Harry Markowitz, who developed Modern Portfolio Theory (MPT), suggests that a similar approach can be applied across a group of projects to optimize the allocation of funding and resources while minimizing risk and uncertainty.

However, there is a crucial difference between investing in a portfolio of securities and in a …

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