Published here March 2004. 

PART V | Overview | Five Levels of Management
Why Isn't Everyone Doing this Already?
Quantification of Uncertainty, Probability and Subjectivity

Five Levels of Project Portfolio Management

Figure 13 summarizes five levels of portfolio management maturity. Each level represents the adoption of one of the major solutions discussed in this paper for addressing the reasons that organizations choose the wrong projects.

Figure 13: Five levels of project portfolio management
Figure 13: Five levels of project portfolio management

As shown in the figure:

Level 1 organizes the work into discrete projects and tracks costs and other resource usage at the project level.

Level 2 replaces project-by-project decision making with the goal of identifying the best collection of projects to be conducted within the resources available. At a minimum this requires aggregating project data into a central database, assigning responsibilities for project portfolio management, and force-ranking projects.

Level 3, perhaps the most difficult for most organizations, requires developing metrics, models, and tools for estimating the value to be derived from projects. Although interdependencies are still ignored, this allows projects to be accurately ranked by "bang-for-the-buck" and provides a good approximation of the value-maximizing project portfolio.

Level 4 improves the tools to correctly account for project risks and interdependencies, which allows the project portfolio to be optimized, and finally,

Level 5 occurs when the organization has made project portfolio management a core competency and has put processes in place for continuous learning and improvement.

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