In multi-project organizations, project managers are competing against one another for resources. Then, they could highlight the strong points of their projects in order to receive investments. Alternatively, portfolio manager, portfolio sponsors and investors have to select the appropriate combination of projects to achieve strategic goals of multi-project organizations. Also, strategy analyst could offer a variety of business and commercial scenarios where could be difficult just select a simple strategy that guides in the project selection process. In this complex situation, it is hard to make effective portfolio decisions.

Senior management must create a balance between providing an environment that encourages people to bring excellent business, product and process ideas as projects and an environment with a rigorous strategic assessment which will be done on these emerging ideas to determine their likely strategic fit in the organization’s future. In this sense, a fluid dialogue between the project teams and the organization’s decision makers have to be encouraged to understand what the current status of projects is and what the proposed objectives, activities and projects are.

Project portfolio management can help to deal with the continuous flow of projects, implementing a systematic approach to choose the right projects and the associated capacity allocation. Usually, this process includes the prioritization of projects that is required when there is restricted resource availability and projects are not concurrently executed. So, the latter problem coincides with finding an appropriate sequencing rule that impulses the smooth development and execution of projects.

You may think that the first step toward a solution is to define a portfolio direction. I agree. When the strategic statement, objectives and goals are determined, your organization is able to establish the portfolio direction for the next strategic planning cycle. From my perspective, portfolio direction is how an organisation decides to invest its resources in different type of actions, such as change, incremental, ongoing and mandatory actions. Also, the portfolio team can think in what kind of project should be included in each type of activity.

At this point, it is possible to use different portfolio management processes depend on the organisational environment. I could suggest applying a simple three-phase model:

1.- Generating alternatives. In this phase, portfolio team collect project data to create portfolios based on different combination of projects and scenarios.  This phase is focused on the inputs to the resource-allocation decision and the role of the organization in preparing these inputs. Project alternatives should be presented to a peer review board for guidance before any significant evaluation of the alternatives has been performed.

2.- Selection of opportunities aligned with strategy. This phase is oriented to analyse each project value and project definition level in the context of a clear strategic statement. All the proposed projects and their interdependencies must be considered. Also, different non-financial criteria could be used in the analysis. As a result, a sequencing rule could be recommended to perform the selected projects.

3.- Make allocated resource decisions. The capital allocation is made and the final portfolio is approved in this phase. Sometimes, the decision can include the modification of the original proposals or require additional analysis to obtain a better solution.

Understanding portfolio management as a decision-making process is a key factor to obtain a balanced portfolio that add value to the organization and is aligned to the strategic statements. In addition, this process can be iterative and flexible to collect more data if this is required to achieve an effective portfolio solution. At the end of the day, project portfolio management should show the way in which the strategy of the organization would be implemented by using a suite of projects and programs.