PORTFOLIO SELECTION OF PROJECTS - Strategic Planning for Project Management

Companies that are project-driven organizations must be careful about the type and quantity of projects they work on because of the constraints on available resources.

Because timing is often critical, it is not always possible to hire new employees and have them trained quickly enough, or to hire subcontractors, whose skills may well be questionable anyway.

Figure below shows a typical project portfolio. Each circle represents a project. The location of each circle represents the quality of resources needed and the life cycle phase that the project is in. The size of the circle represents the magnitude of the achievable benefits, relative to those of other projects, and the “pie wedge” represents the percentage of the project completed thus far.

In Figure below, Project A has relatively low benefits and uses medium quality of resources. Project A is in the definition phase. However, when Project A moves into the design phase, the quality of resources may change to low or high quality. Therefore, this type of chart has to be updated frequently.

Basic portfolio:

Basic portfolio

Figures below show three different types of portfolios. Figure below represents a high-risk project portfolio where high-quality resources are required on each project. This may be representative of a project-driven organization that has been awarded several highly profitable, large projects. This could also be a company that competes in the computer field, an industry that has short product life cycles and where product obsolescence occurs only six months downstream.

Typical high-risk project portfolio:

Typical high-risk project portfolio

Figure below represents a conservative, profit-oriented project portfolio, say that of an organization that works mainly on low risk projects that require lowquality resources. This could be representation of project portfolio selection in a service organization, or even a manufacturing firm that has projects designed mostly for product enhancement.

Typical conservative, profit-oriented project portfolio:

Typical conservative, profit-oriented project portfolio

Figure below shows a balanced portfolio with projects in each life cycle phase and where all quality of resources is being utilized, usually quite effectively. A very delicate juggling act is required to maintain this balance.

Typical balanced project portfolio:

Typical balanced project portfolio

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Strategic Planning for Project Management Topics