Project Portfolio Management 101: Processes, Tools, and Examples

Smartsheet Contributor Kate Eby

Aug 10, 2017 (updated Jan 04, 2022)

Successful projects require continual management from project conception to sunset. However, no project can exist in a vacuum, and failure to connect multiple project strategies, budgets, or objectives will lead to siloed, often unsuccessful work. Additionally, if you approve projects without considering competing proposals, your organization can suffer delivery delays, budget overruns, and even project dismissal. Project portfolio management seeks to avoid these problems and helps create a more efficient approval and execution process by critically comparing every proposed project to each so that organizations can take on an appropriate and realistic amount of work. 

This article is your comprehensive guide to project portfolio management (PPM): what it is, how it relates to project and program management, phases of the PPM life cycle, and expected benefits and challenges. We’ll discuss how a PPM tool can help standardize and streamline your processes and provide a framework for choosing the tool that best suits your organization. Along the way, you’ll hear from two PPM professionals who give their tips to help you maximize success.

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What Is a Project, and What Is a Program Portfolio?

To understand project portfolio management, we’ll break the term down into its parts. As it relates to PPM, a project is an individual effort to create a discrete product or service in a bounded amount of time. A program is a group of related projects, often with a common goal. Finally, a portfolio is the management of multiple programs (and within each program, multiple projects) and will always have an underlying strategic objective. Ultimately, you unify projects and programs under a portfolio because you will manage them more effectively if they live together, under a set of common objectives, rather than separately in silos.

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What Is Project Portfolio Management (PPM)?

According to the Project Management Institute (PMI), project portfolio management is the “centralized management of one or more portfolios that enable executive management to meet organizational goals and objectives through efficient decision making on portfolios, projects, programs, and operations.” Essentially, you use PPM as a management strategy to evaluate potential projects and then appropriately adopt and prioritize them. You assess potential projects using both quantitative and qualitative factors. 

The overall objective of PPM is to continually increase efficiency by implementing a reliable, metric-driven process to choose which projects to adopt and in what order. Therefore, the main underlying goals of project portfolio management are to successfully evaluate projects’ propensity for successes and/or risks and to schedule projects in a way that maximizes organizational performance. 

Project portfolio management began as a natural response to having multiple project leads at a given time and no way to organize them. Project managers needed a formulaic system to calculate risk, given the many (and often competing) constraints and opportunities of each individual project. In the early 2000s, however, professionals realized a wider, higher-level need for PPM. Executive-level employees needed to gain visibility into project adoption and scheduling processes, so they could understand and back up middle management’s decisions. Today, PPM is often an enterprise-wide process used to evaluate, prioritize, schedule, and track projects and should align with the organization’s overall goals. Still, it’s important to remember that PPM is inherently iterative and continues to evolve alongside technology and business processes to best reflect and support them.

You can tailor PPM to any specific department and scale it for any size or volume of projects. Common types of PPM include enterprise project portfolio management (EPPM) and PPM for information technology (IT PPM). EPPM refers to large- scale PPM initiatives that are responsible for evaluating every project across all departments. IT PPM is responsible for projects that you run within the IT department, and that, therefore, IT has domain over. Later on, we’ll discuss PPM software tools that best support these different categories of PPM.

Project Portfolio Management vs. Project Management vs. Program Management

Before delving deeper into PPM, it’s important to understand the difference between this discipline and related fields, such as project management (PM) and program management (PgM). PMI defines project management as “the application of knowledge, skills, tools, and techniques to project activities to meet the project requirements.” (Remember, a project is a temporary, unique effort to create a product or service, so project management is, therefore, also temporary and concerned with a unique effort.) 

According to PMI, program management is “the application of knowledge and skills to monitor and manage a program — a group of related projects.” By contrast, project portfolio management is the zoomed-out, big-picture view of all potential projects. PPM is a strategic system of evaluating multiple projects so that project and program managers can make informed decisions when accepting, prioritizing, and triaging projects. 


Alan Zucker

Alan Zucker is a project management professional with over 25 years of experience. He is a Founding Principal of Project Management Essentials and previously worked as both a Program Manager and Director of Project Management at Fannie Mae. When asked about the relationship between PM, PgM, and PPM, Zucker says, “Projects, programs, and portfolios are generally hierarchical. PPM usually refers to the highest level, where we are managing all of the efforts to ensure strategic alignment.”



Joe Pusz

Joe Pusz is the Founder and CEO of The PMO Squad, a project management consulting firm. He clarifies the difference among the three terms. “Project portfolio management is doing the right project or program at the right time. PPM is a strategic function, while project and/or program management is the delivery of work as prioritized within your portfolio decision making.” So, PPM is the strategic framework that drives decision making to carry out projects or programs. 


Zucker gives an example of the difference between the three: “For example, an automotive company manages a project portfolio that includes all of the cars, trucks, and SUVs in its product line. There may be a separate portfolio dedicated to managing SUVs that includes managing the existing suite of products (operations) as well as developing new models. The effort to develop a new SUV model would be a program comprised of several interrelated projects that need to be coordinated. There would be individual projects to design the engine, interior, exterior, etc. that are part of the new SUV model program.”

Successful organizations will create a framework where PM, PgM, and PPM all work jointly. Rather than having project managers or program managers who only support their own projects or departments, everyone must work together in the organization’s best interest. 

The Benefits of Project Portfolio Management

The high-level benefit of project portfolio management is creating a reliable system within which companies can consistently manage their projects and programs. Other benefits include minimizing risk, maximizing profits, and ensuring smart allocation of resources.

Read our guide on the pros and cons of project portfolio management to learn about more benefits.


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The Phases of Project Portfolio Management

Although PPM is a continuous process, it does follow a life cycle in order to assess each project or set of projects. Because not every proposition that PPM evaluates is a “project,” however, we formally refer to these needs as components. A component can be anything from a business case to a full-scale project or program concept, i.e., any proposition that you evaluate and manage using PPM. 

The PMI identifies 10 essential phases of project portfolio management, which it divides into three overarching categories (called groups): 

The Aligning Processes Group (phase 1-7): This is the preparation work you do before you approve a project and begin execution. It includes the following seven phases:

  • Identification: List ongoing or new components managed with PPM.
  • Categorization: Group components into relevant business groups.
  • Evaluation: Collect data on each component to define its value. Components can be evaluated using both qualitative and quantitative metrics, but the evaluation is always data-driven (avoiding any personal or otherwise unsubstantiated preference).
  • Selection: Produce a list of all components deemed valuable by the previous phase.
  • Prioritization: Rank components based on strategic categories (for example, innovation, cost savings, risk vs. return, etc.).
  • Portfolio Balancing: Order components to create a balanced execution plan. For instance, you wouldn’t choose components that fall only into the innovation category, but rather a balance of components that reflects your resource constraints.
  • Authorization: Formally communicate decisions, receive approval on budget, timeline, etc., and allocate resources. After this stage, project or program teams can begin executing on each approved component.

The Monitoring Group (phase 8-9): This includes the reporting and review stages. In this group, PPM teams review the PPM processes and modify them for the next cycle: 

  • Portfolio Periodic Review and Reporting: Gather key performance indicators (KPIs) about your PPM process. The keyword here is periodic — these reviews happen at predetermined, routine times to continually improve upon processes. Note that this is not a review of the components themselves, but a review of the actual processes that drive PPM.
  • Strategic Change: Adjust your strategic processes as necessary based on your review.

The Component Processes (phase 10): This final group examines the performance of the components themselves:

  • Component Execution and Reporting: Once the components are complete, examine their performance. Their relative success will provide feedback on the strength of the current PPM processes.

Remember, however, that PPM does not function in a silo. Rather, the ten phases described above run alongside project and executive-level processes, and the different levels interact with each other throughout the process to set expectations and ensure buy-in and collaboration. The infographic below shows how the different business levels typically interact with each other over the course of a PPM life cycle.


Project Portfolio Management Evaluate Potential Projects

How Does Project Portfolio Management Evaluate Potential Projects?

Evaluation is arguably the most integral phase of PPM. Evaluation strategies and elements vary based on industry or the type of project, but most successful PPM systems will include the following elements:

  • Risk Mitigation: Calculating and taking steps to reduce or prevent adverse effects on any proposed component 
  • Planning/Scheduling: Setting a calendar for component execution
  • Resource Management: Identifying and allocating the proper talent and technical expertise that a component necessitates 
  • Financial Management: Determining the appropriateness of a proposed budget and making adjustments so that it is realistic and takes into consideration any constraints 
  • Determining Return On Investment: A metric-driven projection of component ROI, this process also includes defining how you will measure ROI 
  • Project Prioritization: Taking into consideration the risks and potential successes of the evaluated components, decide in what order the organization should take projects on 

Below is a list of common evaluation techniques used in PPM to measure potential projects. Still, companies usually create a hybrid or their own method.

  • Monte Carlo Simulation: This is a computerized risk analysis technique based on probability distributions. The simulation assigns values to any factor with uncertainty and then builds outcome models by running repeated results for all possible outcomes. Based on the probability of each factor occurring and on each factor’s associated risk value, this technique can help teams determine the potential costs and benefits of a project.   
  • Decision-Tree Analysis: This is a visual depiction of options that uses a more qualitative approach. Start with a single event, such as an individual project, and then draw lines outward for each possible course of action or factor. You can include factors with unknown outcomes on the decision tree by adding multiple general potential outcomes — positive, neutral, or negative. Seeing the total number of possible outcomes and the ratio of positive to negative outcomes can help you assess whether or not a project is viable. 
  • Cost Benefit Analysis (CBA): This is a systematic approach to determining a project’s viability that weighs the potential costs against the potential benefits. A CBA has two functions: first, to determine if the benefits outweigh the costs and by how much; second, to create a system for comparing projects to each other (benefits vs. benefits and costs vs. costs). 
  • Scoring Model: This method rates projects on a numeric scale in several different categories. It then adds these scores together to create a total project attractiveness score, which organizations can use to prioritize projects.

In addition to evaluating projects, organizations also have to evaluate their PPM process (step 8 of the PPM life cycle). Here are some common ways to do so:

  • Five-Question Model: This is a qualitative method to assess the health and success of overall PPM. In the five-question model, PMs or PPMs consider the following five questions: 1.) How well are we executing? 2.) Are we investing in the right things? 3.) Are we optimizing our capacity? 4.) Are we realizing our promised benefits? 5.) Can we absorb all the changes? Make process adjustments according to the answers.
  • Portfolio, Program, and Project Management Maturity Model (P3M3): This branch of the traditional maturity model measures a company’s health and ability to constructively adapt. This is a hierarchical method that looks at both the processes that deliver portfolios, programs, and projects and the overall system.

What Is a PPM Tool?

A project portfolio tool is a centralized management system to oversee the PPM process. To accomplish the many goals laid out by PPM, there are a variety of software tools that automate processes (to reduce manual calculations and labor). 

Alan Zucker explains the recent popularity of software tools. “The software platform enables the ability to track the lifecycle of all projects from ideation to funding approval to execution to benefits realization,” he says. “If a software platform is not used, all of this information would not be tracked or would be tracked on incompatible and out-of-date spreadsheets.”

The main benefit of PPM software is that it grants visibility into every aspect of your PPM process, from the evaluated categories (budget, resources, risks, etc.) to status to the decisions themselves. PPM software can standardize processes and eliminate discrepancies by providing reliable documentation of all communication, decisions, and evaluations that occur in the PPM life cycle. Additionally, many tools like reporting, data analytics, or dashboards enable higher-level functionality to grant visibility into your data-driven decision making.

“The software can ensure that data is collected consistently for all projects,” Zucker says. “Workflow can be enabled to reduce the manual effort of tracking down approvals. Standard reports can be generated from the software, which eliminates the need for people to waste countless hours manually creating reports. The software also fosters standardized tools and practices.”
Pusz emphasizes that PPM tools keep team members focused on the data. “When properly configured and integrated into organizational processes, the tools help to eliminate emotional decision making,” he says. “The tools focus on the intended ROI and other configured factors,  such as resource utilization, skillsets, and budgets.”

However, both Pusz and Zucker warn against assuming that PPM tools will solve all process-related problems. In fact, both call attention to the many challenges of implementing project portfolio management software.

First of all, the sheer volume of projects and management activities that PPM is responsible for makes the entire process difficult to control. Zucker speaks to this. “In my experience…it [PPM software] establishes an orderly process for governing the allocation of investment dollars. It provides visibility into the projects and programs being executed,” he notes. “However, it is very difficult to centrally monitor and control a large number of projects or complex programs. Monitoring and controlling a portfolio of projects requires collaboration between the project and program managers and the portfolio managers,” he adds.

This requisite communication introduces the second key challenge: forcing employees to collaborate across management levels. “Individual project, program, and portfolio managers tend to have their own preferred practices for managing projects,” Zucker continues. “Enterprise PMOs and Finance organizations also have their own expectations and requirements for the tool. Coming to a shared, common set of expectations and processes across these groups can be challenging. Often, there is an imbalance in which one group’s requirements prevail over another’s,” he emphasizes. This can lead to disputes and stalled performance. 

Finally, there can be significant challenges in the implementation of PPM software itself. Pusz explains, “PPM software, like most software, is as good as the time spent to configure it properly. The larger enterprise tools can be cumbersome to configure to consider all criteria for PPM evaluation. Also, they can be expensive and require constant training and maintenance to stay current with organizational strategy.”
These challenges should not deter you from adopting PPM software, but you should be aware of the limitations before you begin implementation and actively work to combat them. Done intentionally, implementation of a software tool can be very effective. After all, as Zucker points out, “In general, these challenges do not arise because the tools have intrinsic limitations. The challenges are often caused by how the enterprise decides to build or configure the software.”

The Qualities and Functionality of PPM Tools to Consider

Once you’ve identified your organization’s specific needs and constraints, you can look at products and assess their functionality. There are no objectively “necessary” functions. Rather, the following are simply common qualities of strong PPM tools. Of course, only your company’s variables can determine the weight of each capability.

  • Usability/UI: Is the interface easy to use? What is the learning curve?
  • Collaboration/Communication Features: Are there in-app communication features? Does the tool update in real time? How do you monitor version control? 
  • Cloud-Based vs. On-Premises Software: How difficult is the actual implementation, and what are the costs? What security risks does the software pose?
  • Reporting: Does the tool offer data analysis or analytics? If so, are they automated?
  • Integrations: Does the tool integrate with other programs you use? Can it pull data from multiple resources?
  • Data Storage: How much data and what file types can you store within the app? 
  • Mobile: Is the program accessible via mobile devices? 
  • Dashboards: A dashboard is a data visualization that is often used to report high-level metrics and statuses. Some PPM software tools possess this functionality, and it can elevate your reporting and analytics tactics. 

How to Choose the Right Project Portfolio Management Software

While each tool will tout unique features that you can tailor to your organization, you shouldn’t choose software based on functionality alone. As Zucker and Pusz point out, a fancy software program will not solve all of your process problems overnight. In some cases, it might introduce more issues. Instead, you must first ensure that you have the internal bandwidth to both implement and maintain a software tool of this size and gravity. 

The basic framework for choosing a tool is simple in theory, but often complex in practice. To find the right PPM software for your company, you must consider two key factors: organizational fit and cost

Concerning this first step, organizational fit, you need to determine the specific needs of your company and if and how a software tool can meet these needs. Think of fit as an umbrella term that includes size, capabilities, support systems, and other cultural factors.

“The first step when choosing a PPM tool is understanding your enterprise and organizational needs,” says Zucker. “Most of the tools have their own strengths and weaknesses. The key question is: How will the tool work in your environment?

Pusz agrees, saying that it is necessary to ask the question, How will the tool fit the culture of the organization?

Here is a list of questions, from Pusz and Zucker, that can guide your investigation into PPM software fit: 

  • How do you plan to use the tool?
  • What features and functions are important to you?
  • Is compatibility with other programs a key requirement?
  • Is your organization using a certain PM methodology (such as Agile or Scaled Agile)?
  • If so, will the tool work in that environment?
  • Is workflow an important consideration?
  • If the teams are distributed in multiple locations, does the tool provide proper collaboration capabilities?
  • Does the tool provide different levels of access and information for leaders vs. project resources?

 Regarding the second key factor of cost, expenses go far beyond the sticker price of the new software. As Pusz and Zucker explain, there are many hidden and qualitative costs that take your organization’s budget, resources, and health into account. 

As Zucker says, “Don’t just look at the initial cost of purchasing or licensing the software. Look at the total cost of ownership.”

Use the following questions, again paraphrased from Pusz and Zucker, to guide your investigation into product cost:

  • What is the initial cost of purchasing or licensing the software?
  • What is the effort and cost of configuring the software for your environment?
  • What are the per-seat or licensing costs?
  • What are the ongoing costs for maintaining the application? How big of a team will you need to maintain and enhance the application?
  • What are the organizational tools, such as project scheduling, accounting solutions, or reporting solutions?
  • What is the maturity level of the staff using the tool? What (ongoing or intermittent) training will be necessary?
  • If you are using a software as a service (SaaS) model, does the vendor meet your security, reliability, and scalability needs?

 An in-depth investigation into organizational fit and cost is imperative to finding a tool that will suit your organization’s needs, especially over time. Because PPM is inherently process oriented, you’ll need a tailored, robust, and adaptable program that also fits within your company’s constraints. Without taking the time to isolate your specific needs, a PPM software tool will likely fail and potentially erode your existing processes.

“Most organizations fail to recognize the value and importance of organizational change management,” says Zucker. “They implement a new software package without understanding how it fits into the organizational context and culture, and then they wonder why there is resistance to its use.”

Zucker offers two examples where organizations overlooked certain internal criteria, which led to ineffective PPM tool use:

  • “One of the PPM tools was configured so that resource-level cost estimates had to be entered into the tool. Most project managers developed their cost estimates on a spreadsheet and then entered them into the tool. It would generally take a minute to enter a single estimate (one person for one month). It would literally take hours to re-enter data into the tool.  
  • One enterprise PMO organization implemented a set of project health indicators using an internally developed algorithm. The algorithm created a lot of false positives. The indicators were abandoned until a new set could be implemented.” 

Ultimately, engaging in these two steps will help you make the best PPM software choice for your company and give you a foundation to later focus on functionality. 

Project Portfolio Management Templates

To get started with some aspects of PPM process and tools, we’ve included free, downloadable templates for Excel. Note that these templates are not full-scale PPM software tools, but rather helpful tools that can support specific processes of the PPM life cycle. 

Project Budgeting Template

Project Budgeting Template

Track labor, materials, fixed costs, and actuals to stay on track with the proposed project budget. In PPM, you can use this template to monitor everything from component budget to execution, and evaluate both component and PPM performance. 

Download Project Budgeting Template

Excel | Smartsheet

Project Risk Matrix Template


Identify, organize, and track risks for each proposed project with this template. 

Download Project Risk Matrix Template

Excel | Word | PDF

Project Portfolio Summary Template


Project Portfolio Summary Template

Track overall PPM processes in one centralized spreadsheet that manages requested components, evaluation status, and all associated risks over time. Plus, discover in-app collaboration features, real-time updates, and more to keep everyone up to date.

Download Project Portfolio Summary Template

Excel | Smartsheet

Project Management Dashboard 


Use this template to share the high-level status of your project with stakeholders. You can use this for individual components or projects, or you can edit it to gain visibility into the success of your PPM process.

Download Project Management Dashboard

Microsoft Excel | Smartsheet

Cost Benefit Analysis Template


Identify the potential costs and benefits of each proposed component as part of the evaluation phase of PPM.

Download Cost Benefit Analysis Template 

Excel | Smartsheet

Project Tracker Template


Project Tracker Template

Track the status of each individual component or project once it enters the execution phase. 

Download Project Tracker Template 

Excel | Smartsheet

Project Portfolio Scorecard Template


Project Portfolio Scorecard Template

During the evaluation phase, create a visual scorecard of each proposed component to help guide decision making.

Download Project Portfolio Scorecard Template

Excel | Smartsheet

Portfolio Master List Template 


In this template, create a prioritized master list of all authorized components, projects, programs, or portfolios.

Create ​Portfolio Master List in Smartsheet

Portfolio Milestone Rollup Template


Track the high-level status of multiple projects simultaneously in this spreadsheet-inspired portfolio rollup. Monitor progress toward milestones, add comments, and manage the budget.

Create Portfolio Milestone Rollup in Smartsheet

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