If Portfolio Management goes beyond the project lifecycle the question arises if it makes sense that the portfolio management function is located in the PMO or if it there are better to places within the organization.
In a classic environment the portfolio management (PPM) is part of the PMO (project management office) and it is managing the intake (e.g. budgeting) of projects, approval and execution monitoring. The example organization chart shows a sort of matrix organization where projects managed by the PMO are run through all the lines. The project managers are executing projects with resources from the service lines (subject matter experts, testing, etc.).
The PPM basically supports the PM and the Head PMO inside the project management office without having any touch-points outside of the function. In such an environment the PPM serves as a supporting function in a more administrative than managing role. The project portfolio manager in this role is not managing a portfolio but only a list of projects.
To enable the full potential of portfolio management especially in the fast-pace world where the organization is facing threats and opportunities it is a good idea to think about to separate the project planning from the project execution. The portfolio manager is working close with the senior management to understand the business priorities and collects the project request directly in cooperation with the service lines that are benefitting from the project deliverables. The PMO focuses on project management excellence and execution, while the project pipeline planning and benefit management stays within the portfolio management function. Such an organizational layout could look like the one below.
Especially for an organization executing larger change programs this setup has multiple advantages:
- The PPM works closely together with the Senior Management to shorten the lines of communication
- The portfolio pipeline is managed outside of the PMO to separate planning from execution so conflicts of interest can be minimized.
- The tracking of the project progress and statuses is performed by a neutral function.
- The Benefit is measured from a function that is not delivering the project value therefore the results are more trustworthy. Otherwise it would be the same if a function would be perform a self-auditing. Furthermore the benefit realization takes place when the project is already finished and hence is not related to the PMO anymore.
In a nutshell this means that a dedicated portfolio management function can better oversee the planning and execution progress and track the benefit realization as it is not directly involved in the PMO.
By leveraging the portfolio management function to a Project Portfolio Management Office (PPMO) I see even more value adding services that can be provided
- Change Management: Changes in projects even driven through a proper change process can impact the overall portfolio execution and value generation. Examples are resources that are needed longer in one project and therefore cannot be assigned to other projects. Also there might exist dependencies to or from other projects. Projects are no islands! The PPMO can be involved in the various steering committee boards of the projects and analyze the impact of the proposed changes in a larger context.
- Resource Management: Usually projects are run in classic matrix organizations where the members are sitting in line functions. This makes it somewhat tricky to get the right resources committed to a project. The PPMO can help here as it located closer to the head of the organization and drive the resource management.