Victoria Sokolova 
Want to learn more about this organizational structure? Read further to learn the answer to the key questions about a PPMO.
What Is a Portfolio Management Office?
Let’s begin with a portfolio management office definition. A portfolio management office (aka portfolio office or project portfolio management office) is a department in an organization that oversees the portfolio management process within the entire company. Portfolio management refers to orchestrating all projects and programs running in the organization. So, the main purpose of the portfolio management office’s work is ensuring that all these projects are in line with a company’s business strategy and contribute to achieving its business objectives. Also, PPMO supports making the right decisions by the members of senior leadership and makes sure that the right resources (including financial investments) are allocated to the required projects.
Read more: Portfolio Management and Resource Allocation: What Do They Have in Common?
How does this organizational structure differ from the project management office? For better understanding, we’d like to present a comparison of a PMO and portfolio management office.
Project Management Office vs. Portfolio Management Office: What’s the Difference?
In a nutshell, the difference between these two organizational structures resembles the difference between project management and portfolio management.
- PMO focuses on effective project execution and their successful delivery; PPMO keeps focus on projects and programs’ strategic alignment.
- The main goal of a portfolio management office is to help the organization achieve its strategic goals and maximize actual and potential return on investment as a result of executing the right projects; a project management office is more concerned with delivering projects on time and within budget.
- A PPMO works with long-term strategies, while PMOs deal with short and mid-term objectives and project delivery.
As we see, a project management office focuses on project execution, while a portfolio management office is more about strategy execution.
Let’s now review the portfolio management role in more detail.
What Are Portfolio Management Office Roles and Responsibilities?
The research paper suggests that there are 3 essential roles of a portfolio management office.
1. Coordinating role.
What does this role involve? Coordination is implemented in two areas: allocation (or reallocation) of limited resources across the portfolio and promoting collaboration. Also, coordination activities on the portfolio level include project selection and approval, and cross-department coordination (e.g., resolving possible conflicts). The main goal of coordination is ensuring the right resource allocation within the project portfolio.
2. Controlling role.
This role involves proper information management for effective and informed decision-making process. As part of this role, portfolio managers gather specific and reliable information and provide senior management with it. They may also suggest corrective measures if necessary.
3. Supporting role.
Finally, the supporting role of a portfolio management office is all about helping project and program managers execute critical projects within the portfolio. It also involves establishing standards and methodologies for increasing the level of an organization’s project management maturity and improving project performance. In this regard, this role intersects with the functions of a project management office.
We’ll illustrate these roles and their purposes by the scheme provided by the authors of the above-mentioned research paper.
When Do Business Organizations Need a Portfolio Management Office?
The answer seems simple: when companies are striving to manage their project portfolios effectively and successfully. But here is the list of difficulties PPMO can help them overcome.
- Running too many projects with limited resources (limited human resources, constrained financial resources, or tight timelines).
- Projects are approved based on financial or resource affordability, with no attention to their business value. Though considering affordability, and especially resource availability, is also important, if we deal with project portfolio management, projects’ business values cannot be ignored.
- Office politics or the so-called “management by decibels”, when some members of management further projects that they consider important.
- No established mechanisms for project approval and prioritization. Everything is equally important.
- The inability to kill projects that aren’t going to deliver the expected value.
If at least some of these situations describe your organization, it may be reasonable to think about establishing a portfolio management office — it will establish the right prioritization, resource allocation, and grounds for strategic decision-making.
What Are Portfolio Management Office Functions?
Basically, the functions of a project portfolio management office for managing project portfolios are similar to those of a PMO for managing projects. Let’s consider them in more detail.
1. Ensuring strategic alignment.
A PPMO ensures that the portfolio of projects aligns with an organization’s business strategy. First of all, this helps utilize available resources most effectively for highest-priority projects and make sure that the projects and programs running in a company contribute to achieving its strategic goals.
2. Selecting projects and prioritizing them.
Selecting a collection of the right projects and programs is an essential aspect of project portfolio management. That’s why, PPMO works on project selection and prioritization. For example, they assess projects’ and programs’ values, costs, potential risks, and required resources. Upon this assessment, they select those ones that align with the business strategy. As a result, the most important projects are staffed with resources, and the entire portfolio supports an organization’s strategic goals.
3. Establishing standards.
The other mission of a project portfolio office is establishing standards and frameworks for proper portfolio management. For example, they develop criteria and performance metrics for assessing projects and programs within the portfolio. This aims to simplify the portfolio management process within an organization, make it more consistent and standardized.
4. Managing resources.
As a rule, the resources you need to distribute across multiple projects and programs are limited. This poses the need for wise prioritization and resource management. Resource management performed by PPMO involves capacity planning, identifying and eliminating bottlenecks, managing resource conflicts, and ensuring that people with the right skills are available when needed. Combined with project prioritization, intelligent resource management will ensure that projects with the highest business value will be delivered successfully.
“Resource management is a cornerstone of managing multiple simultaneous projects with a shared resource pool. Therefore, improper resource management can ruin the whole project portfolio flow very fast and unexpectedly”.
Jan Willem Tromp, a multi-project resource management expert, co-founder of Epicflow.
5. Performance analysis.
To keep project portfolios on the right track, you need to regularly monitor performance. In addition, the PPMO members need to report to senior leadership about the state of the portfolio. So, the other mission of a project portfolio office involves collecting data, analyzing dashboards, creating reports, detecting risks and opportunities across the portfolio, etc.
6. Benefits realization management.
Finally, PPMO needs to check regularly whether a project portfolio delivers the expected results and benefits; this will be an indicator of the effectiveness of their efforts.
Fruitful work of PPMO will be impossible without using specific software tools. Let’s consider their role in the next section.
What Tools Are Used by the Portfolio Management Office?
The work of a portfolio management office requires effective project portfolio management software. Let’s explore their capabilities and contributions through the example of Epicflow. It’s a multi-project resource management tool with portfolio management capabilities, and here’s how it can assist in the work of a PPMO.
Resource capacity planning: Epicflow shows resources’ future capacity and workloads, which helps you not only detect and prevent future bottlenecks but also understand resource availability for upcoming projects.
Project prioritization: You can set business values for all projects in your portfolio. Epicflow will then sort them according to their priorities and provide you with a comprehensive view of their state.
Resource allocation: Epicflow serves as an inventory of resource-related data: capacity, availability, skills, location, etc. It also suggests resource allocation options for specific projects based on this data. This simplifies resource allocation across the entire portfolio and prevents resource conflicts.
Multi-faceted portfolio overview: Epicflow’s features help project portfolio managers analyze the state of the portfolio, review budget consumption, and assess project, resource, and portfolio performance.
Decision-making support: Epicflow’s scenario planning tool helps you test different scenarios in a simulated environment before making a decision. For example, you can analyze the feasibility of starting a new project and find ways to address bottlenecks. What is more, Epicflow can suggest rescheduling lower-priority projects of the portfolio with regard to existing resource constraints.
Epicflow has helped a large government organization in the defense industry to cut lead times by 30% and improve performance by 300% without increasing headcount.
Read more: Why Smarter Delivery Beats Bigger Spend: Experiment at the Dutch Ministry of Defense
Want to learn more about Epicflow’s capabilities for portfolio management offices? Contact our experts to find out how it drives the project portfolio success.
