Establish Buy-In

The project portfolio process is a method which can maximize the output potential of all projects undertaken by your organization at a given time, subject to limited resource constraints. Before beginning your project portfolio management efforts, establish an environment of understanding and cooperation among key decision makers in your organization. The project portfolio process may include terminating current projects that may be successful and timely in favor of projects that have a larger economic or strategic impact on your operations. It is important that managers understand this concept to avoid any feelings of resentment when this happens. Foster a team-based attitude toward project selection instead of identifying small groups of employees with specific projects. This will avoid feelings of rejection arising in project teams that are re-assigned or split between new projects.


During the project portfolio management process, you will be allocating resources including time, money, employee productivity, and technology to those projects that contribute the most to your company’s profitability. Before considering any specific projects, develop a list of priorities by which to judge each one. Continually monitor your priority list and adapt it to changing strategic goals and evolving business climates. Items by which to prioritize your projects can include cost, contribution to revenue, marketing impact, time frames, and achievement of specific goals.

Determine Capacity and Demand

All organizations are faced with the problem of utilizing limited resources in the most effective way. Gather information on your resource capacity and the resource demands of each project before using your priority list to determine which projects to undertake. The total resource demand of all chosen projects cannot exceed your company’s resource capacity. For example, if your firm has ten computers and twenty employees available for project work, you cannot choose a portfolio of projects that requires twenty three employees and eleven computers. Budget constraints are also a large factor when determining the optimal project mix.

Optimize the Project Portfolio

Armed with your list of priorities and information related to resource capacity and the resource demands of individual projects, you are now ready to choose a set of projects to undertake that will maximize strategic relevance for your company. Keep in mind that projects that are not initially selected are not necessarily eliminated; lesser priority projects can be undertaken when resources are freed up by the completion of higher priority projects.

Several software packages exist to aid you in the project portfolio process, but for simpler project portfolios a decision tree may be used to lay out all possibilities related to the combination of projects chosen. Follow the link at the end of this article for an example of a project decision tree.

First, list each project, along with its total cost and requirements for employees, technology, and other resources. Then, single out the projects that score highest according to your project priorities, and then select a portfolio of projects to undergo. Remember, the total resource demands of all chosen projects must be less than your total resource capacity. As new potential projects are introduced into your organization, and as current projects are completed, revisit the project portfolio process to decide which new projects deserve the newly available resources based on your updated priority list and resource capacities.