The Difference Between Project and Portfolio Management (2024)

In today’s business landscape, project portfolio management (PPM) has become an increasingly crucial practice for project-oriented firms. For those businesses looking into the approach, this Project Portfolio Management Strategy Guide aims to clarify the difference between project and portfolio management, cover PPM basics like methodologies and capabilities, and offer insights into effectively implementing PPM. Serving as a valuable resource for project teams, leaders, PMOs, and executives, it addresses challenges, provides an overview of PPM tools, and introduces the next step — Enterprise Project Portfolio Management.

The roles of project managers and portfolio managers are often confused. Understandably so: At first glance, the difference can be subtle—but it’s actually quite significant. Although complementary, these two theoretical frameworks do not involve the same management, the same roles, or the same responsibilities.

The Project Management Institute (PMI) definesproject managementas: “The use of specific knowledge, skills, tools, and techniques to deliver something of value to people.”

According to the same source,portfolio managementis: “The centralized management of one or more portfolios, which includes identifying, prioritizing, authorizing, managing, and controlling projects, programs, and other related work, in order to achieve specific strategic business objectives.”

Although these definitions are deliberately broad, they provide insights into some of the differences betweenproject and portfolio management.

To understand the difference between project and portfolio management, let’s start with some clarity around what a portfolio is. Aportfolio of projects is simply a set of projects managed together to achieve strategic goals or benefits. Unlike individual projects, which have specific deliverables, a portfolio supports the strategic directions of the enterprise or business function. Consequently, grouping multiple, interrelated initiatives into portfolios makes it possible to optimize the allocation, the prioritization, and the scheduling of resources across multiple projects against the financial and strategic goals of the organization.

Just like an investment portfolio — a grouping of financial assets such as stocks, bonds, currencies, and commodities owned by an investor, who needs to make sure the mix of assets offers good balance to maximize profit with limited or controlled risk — a project portfolio needs balance between short- and long-term projects, as well as high-risk/high-value initiatives and bread-and-butter projects.

A project is a specific, time-bound endeavor that focuses on a unique goal or a specific area for improvement. For example, the launch of a product line, the implementation of a system, or the rollout of a marketing plan. Accordingly, project managers are responsible for meeting the objectives within the boundaries of fixed timelines, budgets and resource allocations.

A key challenge for project managers is to reconcile the operational concerns tied to work collaboration and task management with the changing requirements and expectations of clients or project owners, whose requests may prove challenging to integrate.

They are also required to re-evaluate the project situation on a regular basis. Even without new client requests or specifications, projects may creep off track during the course of execution. So it goes without saying that a great project manager stays on the lookout to detect any unexpected problems that may arise.

While a project manager focuses her efforts on individual initiatives, a portfolio manager considers a set of multiple projects. The challenge is to visualize the connections between them and the firm’s long-term objectives and vision. In other words: successful portfolio management requires the ability to embrace a higher-level perspective and to look at the big picture.

Here are a few of the main areas of focus of portfolio managers:

• Project Selection: Separating the wheat from the chaff, examining numerous projects, and picking the best to build great portfolios
• Strategy Realization: Identifying patterns and trends across projects, establishing connections with organizational goals to ensure portfolio strategic fitness
• ROI Maximization: Efficiently optimizing human and financial resources and prioritizing projects based on objective analysis to maximize business return
• Data-Based Analysis: Tracking analytics to gain a dynamic understanding of portfolio health, simulating scenarios to plan the best course

The PMO is the department or person responsible for managing projects at the portfolio level.

Traditionally, PMOs have been in charge of defining, enforcing, and maintaining project and portfolio management standards. The idea was to ensure organization-wide consistency and improve the efficiency of project work. However, as markets grew in complexity and as organizations grew in PPM maturity, Project Management Offices worldwide have evolved. Nowadays, their role and place in the business is more central and strategic.

A PMO will actively support the realization of key strategic initiatives through process, method, and tool optimization. It also provides coaching and support to project populations, and overall oversight of project and portfolio management life cycles. Additionally, the PMO helps executive leaders to make sure that their large strategic initiatives will deliver the expected impact. How? By providing the data-based insights that’ll enable them to change gears rapidly whenever new conditions warrant a course correction.

Accordingly, a Project Management Office has become a key differentiator for any project-focused business.

Still according to the Project Management Institute, a program is “a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. Programs may contain elements of work outside of the scope of the discrete projects in the program.”

A program is therefore a collection of projects undertaken to pursue a specific goal or perform a specific activity. For example, the launch of an airplane is a program composed of several projects, one for each feature. One may create a program to achieve a specific objective or around the work performed for a given client.

In a sense, a program manager can be viewed as a “super” project manager. She is responsible for planning, for governance, and for ensuring the proper delivery of program outputs. This includes progress monitoring, management of program budgets and risks, interdependency coordination, resource optimization across projects, and more.

Often, program managers have experience acting as project managers for large and complex initiatives. As a result, program manager skills and attributes include leadership skills, sound knowledge of project and portfolio management processes, and a collaborative mindset.