Do you know what the concept of investment analysis and portfolio project selection is? This practice is very important as it provides what is necessary to implement more relevant projects and therefore gain authority and grow the business. For this reason, it is essential to understand it so that you can apply it in the best possible way to help your company obtain more consistent results by selecting and prioritizing the right projects.
This is a very important matter that can create a lot of doubts among project management professionals. In this post we’ll explain what a project portfolio is, inform the importance of the selection and prioritization process and highlight what are the best practices.
What is a Project Portfolio?
The project portfolio refers to the set of projects, programs and operations managed, with the intention to achieve strategic goals. This concept is presented in the sixth edition of the PMBOK guide, one of the main global references on project management. In a simplified way, we can say that it works as a portfolio responsible for organizing initiatives; it contributes to improving managers’ views regarding the initiatives implemented within the organization.
Organizing initiatives is the main tool for portfolio management. There’s no perfect way of doing it and it can be organized by departments or similarities, depending on each business’ needs. Therefore, portfolio management can gather multiple portfolios to optimize and facilitate management. This practice aims to improve the company’s development in the long term and to accomplish the right projects at the right time.
Why is Project Portfolio Analysis & Selection Important?
Project portfolio analysis and selection provide countless benefits for companies such as:
- Strategic alignment: Portfolio selection involves the choice and prioritization of the company’s initiatives. This assures that staff, investments and materials are put in strategic projects that can bring a better outcome for the business and deliver more value.
- Fast decisions: One of the main activities of portfolio selection is regular data collection regarding the initiatives that are already in course. Due to this follow up work, managers have access to different information that helps them make important decisions. Since the data is organized and qualified, the decision-making process becomes faster and more efficient.
- Reducing risks: Monitoring the portfolio makes following up with the initiatives easier. This favors a faster perception of detours and contributes to taking action in uncertain situations, reducing the risks for the organization.
- Optimized communication: Portfolio management also involves sending the collected data to the interested parties. Managers can have a more precise view of the ongoing projects and think of new initiatives to solve problems or create new products and services for the market.
What are the Best Practices for Portfolio Management?
Portfolio management is a comprehensive practice that involves several departments of the company. It is essential to know how to optimize this process. Thinking about it, we separated a few tips that can help you improve your investments through portfolio management:
1. Identifying Ideas
To improve portfolio management, it is important to gather all existing ideas and initiatives in the company. Usually, this process starts by asking the head of the departments to present all project ideas for the next period.
It is essential to also take care so the proposals are structured with minimum information to allow comparison between them. It is necessary that all involved areas contribute to creating a proper study for technical and financial viability to avoid prioritizing projects that are technically impracticable, have legal or environmental restrictions.
This is a very important practice because it helps managers to verify if a specific idea is doable or not.
2. Project Selection
After identifying the ideas, it is time to select the best projects and implement them. In this stage, it is important to establish what will be the criteria, classify them, and rank according to which ones present the best initiatives.
One of the critical factors for success is to guarantee the alignment between prioritized projects and the company’s strategic goals. The prioritization criteria and its importance tend to vary from company to company, only knowledge of the business can help in choosing the most relevant criteria for each context.
3. Balancing Projects
After establishing which ideas will be prioritized, it is necessary to have a project balancing. This practice’s goal is to balance the investment and to check if a specific company is prioritizing proposals of a specific field instead of others. When that happens, it could generate a misfit of the company’s strategic purpose and some areas might be compromised.
Besides balancing the projects, in order to ensure greater efficiency, it is also necessary to assess its capacity to serve projects with human, financial, and material resources available. Through this precise view, it becomes possible to decide which is the best sequence for the portfolio’s execution.
4. Implementing and Checking the Results
After deciding what ideas will be executed, it is necessary to pay attention to the implementation of all these initiatives. Check the evolution of the projects and, if any deviation occurs (it could be in costs, deadline, or scope), it is necessary to take corrective actions with the intention of solving the problem.
It is also essential to evaluate the result of the implemented projects. Through this practice it is possible to verify which ones kept the results aligned with the proposals and which ones won’t achieve the expected results, allowing the manager to decide from adapting it, suspending it, or continuing it.
Portfolio analysis and selection are essential steps because they help companies to identify what are the most viable projects that deserve priority to be implemented. Using these practices, companies can enjoy better their resources, guarantee the alignment between projects and the company’s strategy, and make decisions about continuing or suspending projects.
Any doubts on how the analysis and portfolio selection process works? Meet our specialized solution for Investment Project Management and learn how we can help. It will be a great pleasure to answer any of your questions!