The emergence of strategic project management

Project management has emerged as a strong discipline practiced by highly trained, certified professionals as organizations have come to realize they cannot stay in business if they cannot manage their projects. However, many companies are still limiting the application of project management to the tactical level. Here, of course, it is vital to the very survival of enterprises to ensure products are designed, manufactured and delivered to the market efficiently and effectively. But smart organizations also recognize project management is a critical strategic tool. They practice project portfolio management to select, manage and support a portfolio of projects that have the best chance of moving the enterprise forward, keeping it vibrant in the marketplace and returning maximum shareholder value. As departments and divisions compete for scarce financial and human resources, strategic project portfolio management provides the rational decision framework necessary to make the right project investment decisions that enable organizations to compete and win in the global economy.

Basics of Project Portfolio Management

The Project Management Institute (PMI®) released the Standard for Portfolio Management in June 2006, to fulfill the need for a documented set of processes that represent generally recognized good practices in the discipline of portfolio management. According to PMI, “Portfolio management is the centralized management of one or more portfolios, an approach to achieving strategic goals by selecting, prioritizing, assessing, and managing projects, programs, and other related work based upon their alignment and contribution to the organization’s strategies and objectives. Portfolio management combines (a) the organization’s focus of ensuring that projects selected for investment meet the portfolio strategy with (b) the project management focus of delivering projects effectively and within their planned contribution to the portfolio” (PMI, 2006, p. 5)

The steps of portfolio project management are applicable to any enterprise: Assess the merits of the organizations various proposed projects, weigh them against each other and select and support those projects whose execution will deliver the greatest value to the bottom line. The drivers of a portfolio of projects are:

  1. Where the company wants to go and what it needs to do to achieve the goal (e.g., improve its return on investment, increase shareholder value or gain market share).
  2. Tactical concerns, such as improvement projects individual departments need to undertake in order to become more efficient or effective.
  3. Problems whose correction requires a project or program.
  4. The need for organizational change management initiatives that prepare people to move in the desired direction along with the organization.

The application of portfolio management permits the sharing of goals and the allocation of resources among these drivers so that projects and programs can achieve their strategic intent. PMI’s Standard for Portfolio Management defines the following flow of control:

  1. Strategic intent and prioritization provide direction for determining the financial resources that should be allocated to the portfolio.
  2. The strategic intent is mapped onto a set of portfolio components (i.e., projects and programs) including their resource allocations. These components are managed according to the portfolio management principles outlined in this standard.
  3. Each program corresponds to the delegated subset of the overall strategic intent, which it will deliver by means of the allocated resources.
  4. Each project is defined by its contribution to the portfolio’s strategic intent, and can then be managed according to principles published by PMI.
An organizational context of portfolio management (PMI, 2006, p. 7)

Figure 1: An organizational context of portfolio management (PMI, 2006, p. 7)

Here is the basic process: (a) Define the organization’s overall strategic goals and objectives at the executive level; (b) pass these goals to the portfolio management function; (c) the portfolio manager selects, prioritizes and approves proposed portfolio components, ensuring that they are aligned to achieve the organization’s goals; and (d) the portfolio manager reviews the portfolio to ensure it is balanced (short-term versus long-term return, risk to benefit) and negotiates the contributions of relevant strategic stakeholders (e.g., executive management, operations, program management).

Once the portfolio manager has authorized a component, program or project, management takes control of the component and applies the correct management processes to make certain the work is performed effectively and efficiently. The responsible project or program managers monitor planned-to-actual performance relating to time, budget, resources, quality and scope, and communicate consolidated information to portfolio management. To remain effective and aligned with organizational goals, the portfolio management function depends on updates from the strategic planning process regarding any strategic changes. This ensures that any components no longer related to current goals can be discontinued rather than wasting resources. In return, the portfolio manager reports portfolio performance to the strategic planning process as it relates to achieving the organization’s planned strategy.

Challenges and Solutions

Economic pressures, such as cost-constraints or inability to raise prices without losing customers, often force organizations to focus on the tactical and leave little time to think strategically. Those new to the process of strategic project management may encounter challenges in the following areas:

  1. Executive championship. Without buy-in from high-level decision-makers and their ability to give guidance and support to the portfolio manager, strategic project management will fail. Why? Even in a strategic environment, portfolio managers sometimes succumb to the politics and temptations of selecting projects that are the pet projects of mid-level and lower-level managers. Even organizations that have established a formal Project Management Office need an executive champion, particularly when the office is understaffed.
  2. Business acumen. A portfolio manager needs much more business acumen than a traditional project manager because he or she has to decide which projects are necessary in order to meet the organization’s strategic objectives.
  3. A solid project management process. Leadership may do an excellent job of creating a strategic portfolio of projects and setting goals and ground rules. But if the actual practitioners – the project managers and their teams – are in a “just-do-it” mode or are inefficient or ineffective in managing their projects, all the strategic work is for naught. That’s why strategy at the highest levels has to be paired with a consistent, repeatable process that ensures that practitioners at the project level are consistent and efficient. A repeatable approach is the strong foundation that ensures that each project is contributing to the value that was anticipated – on time and on budget within certain permissible variances. Training and certification of project management staff may be a wise investment.
  4. Timeframes and budgets. Executing projects efficiently and effectively across the board depends on honest and realistic timeframes and budgets, so that projects are not set up for failure from the start.
  5. Requirements’ analysis. Portfolio managers need skill in gathering accurate requirements, analyzing them and managing them properly throughout a project’s implementation to ensure a value-added outcome that improves an organization’s bottom line. As a project proceeds, someone must keep an eye on value and scrutinize costs in comparison with benefits to ensure the project remains sound. Again, training in business analysis for portfolio and project managers may be necessary.
  6. Stay the course. One of the most common mistakes leading to project failure is not staying the course. Even organizations that get off to the right start by establishing a strategic portfolio of projects and giving marching orders to management, often toss the entire strategy out the window as soon as anything goes wrong. They simply return to a reactive, just-do-it mode. It takes a great deal of business acumen and persistence to stay the course. Set the vision and strategy and then leave it up to the portfolio manager to manage the projects for the best business value. However, while being reactive can throw off the entire portfolio, the portfolio manager and executive champion also need to be flexible to adjust the portfolio as project risk becomes too high, new opportunities arise, change occurs in the marketplace or when a serious problem arises whose correction depends on a new project not previously represented in the portfolio.

A powerful tool to get started with project portfolio management is a facilitated planning session. A trained external facilitator meets with key individuals to facilitate and outline the process. They lay goals, risks and issues on the table, assemble the portfolio and establish the strategic project management process. It is best that the facilitator come from outside the company in order to avoid bias and politics in leading the team through the process.

Targeted Resource Management

Targeted resource management guarantees the right people and the right skills are in place to execute the selected projects. In addition to a broad base of functional employees that perform a company’s ongoing, sustaining work, every organization also needs to allocate human resources for project-related work. However, since multitasking became popular over 10 years ago, organizations have hired staff for functional work and, whenever necessary, expected them to perform project-related work as well. As human resource costs grow in today’s economy, the multi-tasking trend can be expected to continue.

Although some multitasking is always necessary, research has shown that it can be very inefficient. Scientific studies reveal that shifting mental gears costs time. Joshua Rubinstein, David Meyer, and Jeffrey Evans, described the hidden costs of multitasking in “Executive Control of Cognitive Processes in Task Switching” (Rubinstein, Meyer & Evans, 2001). To better understand the human capacity for multitasking and its limitations, the researchers studied patterns in the amounts of time lost when people switched repeatedly between two tasks of varying complexity and familiarity. The measurements revealed that for all types of tasks, subjects lost time when they had to switch from one task to another. Further, time costs increased with the complexity of the tasks.

When resources are booked to the hilt and beyond, they are slow to respond when change is necessary – in other words, always. That’s why progressive organizations have realized they can get better results if they stand down their resources a bit to give them time to think and be creative. Today, more and more companies are targeting distinct human resources for sustaining project work. While sometimes it may be necessary for the same people to fill both shoes, specialized personnel allocated to the project resource pool means faster and more efficient execution of projects.


Introduced several years ago, project portfolio management is now emerging stronger than ever before. The market for project and portfolio management software is evolving rapidly, offering tools designed to support the entire project life cycle, from portfolio management to resource allocation and detailed project and program planning. According to Gartner research, the total project and portfolio management software market grew 12.3 percent to more than $406 million in 2004. Gartner predicts the most likely scenario for project and portfolio management software new license revenue is an 11.4 percent compound annual growth through 2009, and that revenue will reach about $696 million during the forecast period.

As high-velocity change necessitates an ever-increasing number of projects that must be executed faster and with fewer resources, the demand for strategic applications of project management is high. The key to success is a portfolio manager who can maintain a strategic, enterprise-level perspective. Unlike a traditional project manager who is tactically focused, a portfolio manager’s primary concern is with the comparative business case and ROI of projects. He or she provides individual project managers with the tools, training, resources and support they require and then lets them do their job, stepping in only to help or provide course correction when needed. A disciplined project portfolio manager avoids becoming swayed by pet projects, special interests, politics or personal agendas by maintaining a strategic view of the entire portfolio while continually challenging the ability of individual projects to add value to the bottom line.


Nicole S. Latimer-Livingston, N. S.(2006) Market Trends: Project and Portfolio Management Software, Worldwide, 2004-2009 Retrieved from

Rubinstein, J., Meyer, D., & Evans, J., (2001, August) Executive Control of Cognitive Processes in Task Switching, Journal of Experimental Psychology: Human Perception and Performance, 27(4) 763-797.

PMI (2006) The Standard for Portfolio Management Newtown Square, PA: Project Management Institute

© 2007, Don Wessels
Originally published as a part of 2007 PMI Global Congress Proceedings – North America



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