Even the most optimized project portfolios are subject to change over time. Portfolio rationalization is one technique project management professionals can use to ensure their portfolios continue to align with strategic goals as an organization grows. It’s an important part of the modern portfolio management process, which defines portfolios specifically as groups of projects, programs, and work that work to meet strategic business objectives.

What is Portfolio Rationalization?

Portfolio rationalization is a term used to describe the ongoing process of modifying project portfolios to ensure they align with changes to market and economic conditions or changes to your organization’s strategic goals.
This process can be divided into two main actions: first, it focuses on taking inventory of the resources, projects, and demands your organization currently manages. With a thorough understanding of where your portfolios are at, you can accurately determine a few important things:

  • What your organization already has
  • What your organization currently needs (and what it may need in the long term) to achieve strategic goals
  • Any limits or constraints that apply now or in the future

The second part of rationalizing involves eradicating low-value projects or programs so that your organization can prioritize the others. Think of it as “tidying up” your project and work management systems.
Completing the rationalization process helps project management teams allocate resources and tools according to an updated ranking of their importance. It also ensures that you address or consider any constraints so that project activity continues to progress in the future.

Understanding the Benefits of Portfolio Rationalization

It pays to rationalize portfolios regularly – literally.
Portfolio rationalization can help organizations reduce costs, maximize performance, and support strategic decision-making. It also gives PMOs the tools they need to assess and minimize risk before it causes problems.
Overall, rationalization supports strategic planning and execution and helps organizations maximize the value they’re getting from current investments. And “trimming the fat,” so to speak, in your PPM systems–cutting down your software stack, for example–can also boost productivity and efficiency across the organization.

5 Key Tips for Rationalizing Portfolios

It’s easy to see why portfolio rationalization is a good idea, but how to successfully navigate it is less obvious. Find below a few tips that can help you begin rationalizing project portfolios within your organization.

 

Cut Out the Problem Projects

There are plenty of reasons that a project might be draining more value than it provides. This might include pet projects, indefinitely on hold projects, defunded or “killed” projects,and other activities that don’t seem to have a visible benefit for your organization.

 

Don’t Be Afraid to Be Decisive

When it comes to reducing project capacity, it’s usually better to be more liberal than you might think you need to be. Doing so can help you avoid having to reduce again in future quarters or during future rationalizations.
It’s also wise to try to limit how many projects you place “on hold.” They can easily drain resources, time, and energy from your team – it’s better to simply cancel or approve and fund them so that you have a clear path forward.

 

Use Rationalization to Shape Resource Allocation Decisions

Project managers should be able to make decisions about how to allocate resources at the same time and level as decisions are made and portfolio rationalization.
In other words, organizations should not separate resource allocation from the process of rationalizing portfolios. If portfolio management happens at the business unit level, resource allocation should take place there, too.

 

Don’t Dwell on Sunk Costs

It’s easy to keep giving low-value projects second, third, and fourth chances because of the amount of work or resources you’ve already dedicated to them. But sunk costs can’t be recovered, and continuing to pour resources into these projects does far more harm than good.
If it doesn’t meet your value standards, it’s time to cut the project loose. You can likely still utilize the learnings and in future endeavors.

 

Consider a Tiered Ranking System

If evaluating projects through a black-and-white lens is too difficult, or if disagreement over project value arises, creating a tiered system may help you. It will help you evaluate which projects will stay and which will go.
Instead of asking whether a project has enough value (a yes or no question), you can ask how much value the project has and which tier that puts it in. Then, with your projects ranked, you can determine which tiers will make the cut and which won’t.
From there, narrowing things down even further to the top lineup of valuable projects becomes much easier.

Portfolio Rationalization: A Key Resource for Project Management Professionals

No matter how you get it done, rationalizing your project portfolios is an essential practice. Particularly for large-scale and enterprise project management offices.

With the help of PPM software solutions like Sciforma Vantage, your team can easily access the data and project insights you need to measure value, risk, and more. Visualize resource allocation and gain visibility of the entire project lifecycle. So that your team can make informed decisions about how to align with organizational strategy. Ready to get started? Request a demo with us to see Sciforma Vantage in action!

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