3. Five Levels of Project Portfolio Management
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.
