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Why Is It Important to Distinguish Between Project Portfolio Management and PM?

Most entrepreneurs and professionals understand what project management is and why it’s important, but neglect the significance of project portfolio management (PPM). Despite having a similar name and some shared responsibilities, PPM is an entirely different concept with a different set of priorities and objectives.

So why is it important to distinguish between the two, and do you really need both to be successful?

PM vs. PPM

Let’s start by defining the exact differences and similarities between the two concepts.

Project management is about starting, organizing, and executing the work of a team to accomplish specific objectives within a given project. The ultimate goal is usually the final delivery of a project by a certain deadline, with that goal being broken down into a series of smaller goals that serve as steps to that ultimate destination. Project managers are usually given a project to take responsibility for, along with specific parameters for how to accomplish that project, such as which team members to use or which milestones to reach and by when. Project managers then coordinate those resources to ensure the timely delivery of the project.

Project portfolio management is a higher level of management. Instead of focusing on how to complete an individual project, PPM managers look at an entire portfolio of different projects, then prioritize them based on factors like profitability, significance and urgency. In most cases, PPM managers are also responsible for assigning different resources (including project managers) to different projects, to ensure they have everything they need to be completed successfully—without interfering with any of the other projects in the portfolio.

Why You Need Both

It’s important to distinguish these roles because they serve very different functions:

  • PPM sets organization-level goals, while PM sets project-level goals. First, PPM is focused on making sure the organization is able to achieve its goals (which usually include maximizing profitability for the long-term). While PM also wants to achieve those long-term goals, it’s more occupied with ensuring the successful delivery of individual projects.
  • PPM ensures profitability, while PM ensures delivery. PPM wants to make sure projects are taken on and executed in a way that builds revenue, cash flow, and profitability. PM just wants to deliver projects as expected.
  • PPM optimizes resources, while PM works with available resources. In most cases, PPM is responsible for optimizing resources—in other words, it’s going to choose which PM, employees, and other resources belong on individual projects. PM simply works within those parameters; a project may have a low budget and a tight deadline, so PMs need to make those restrictions work.

There’s an ebb and flow here that requires both roles to be executed effectively for organization-level success. In a small business setting, if you’re working with a limited team, it may be possible for one person to accomplish the responsibilities of both PM and PPM; however, even in this scenario, the person will need to distinguish between those responsibilities. For example, they’d need to spend time analyzing project profitability and urgency before settling on which project to tackle next (as a PPM), then would need to start executing the project (as a PM).

Identifying the conceptual differences between these two approaches, and mastering each is the first step toward a more efficient project delivery system in your organization. The next step is making sure you have the right software to get the job done. Start with SAP’s workforce planning and HR analytics software to make sure you have the right people for the right teams.

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