Top Down Approach to Project Portfolio Management - Why Is It Important?

Every organization works hard to dedicate sufficient resources to the processes that matter the

most. This approach is known as portfolio management and its adoption happens to be

tremendously important for increased productivity and cost-effectiveness of the crucial

organizational procedures.

Top down project portfolio management is becoming an increasingly popular concept among

business managers. Several reasons determine its attractiveness and necessitate the adoption of

such an approach. Why is top down portfolio management so important and what are the major

ways in which it can affect businesses?

WHAT IS TOP DOWN PROJECT PORTFOLIO MANAGEMENT?

This approach relies on the selection of project portfolio management (PPM) software for the

adoption of a solution-oriented approach towards corporate processes. There’s a significant

difference between the top down and the bottom up approach. In the case of top down

management, individual tasks and processes are examined by managers to stimulate more effective

overall execution.

According to many, the top down approach results in better project planning and improved overall

project execution.

The top down approach provides an ongoing view of all essential processes, tasks and micro-tasks. It

makes it easier for managers to make informed decisions and to relocate resources on the basis of

current necessity. Objectives are defined by the company managers and expectations are

communicated clearly with all other members of the team.

The bottom up approach involves a reversed structure – all team members provide their input. The

problem with this process is that the significant networking required for execution will take up large

amounts of resources and there’s no full or centralized control. The results of bottom up project

management also happen to be more difficult to measure.

WHY IS TOP DOWN PROJECT PORTFOLIO MANAGEMENT SO IMPORTANT?

A top down approach stimulates the implementation of the solutions that make sense both in

financial and organizational terms. Resources get allocated in the most rational way, which

decreases the cost of execution and prevents the loss of resources on processes that may not

necessarily be effective.

When top down solutions are implemented, the focus is on the business objective and the desired

outcome. Management becomes easier and team leaders become capable of avoiding unnecessary

or excessively costly challenges.

Unrealistic execution schemes are seen as a serious problem in the case of bottom up execution.

These stem from the lack of centralized monitoring and the chaotic communication that could be

typical for bottom up management. This is one of the main reasons why numerous large and

successful corporate structures have adopted a top down approach to project portfolio

management.

THE MOST IMPORTANT BENEFITS OF THE TOP DOWN APPROACH

Top down project portfolio management results in a vast range of advantages, some of which have

been discussed already. Taking a deeper look at all the positive characteristics will shed some light

on why this approach has been widely adopted in successful organizations.

BETTER PROJECT ALIGNMENT

This approach makes it easier to define a systematic approach to task execution. Managers select

the most effective solutions, keeping the focus on the main goals and diminishing the prominence of

unnecessary executions.

BETTER PLANNING AND EXECUTION

Having full view over the numerous corporate processes that take place simultaneously will enable

managers understand the big picture. This aspect of top down project portfolio management will

ultimately lead to better planning and better planning is the key to more effective execution.

VISIBILITY

The top down approach guarantees much better visibility. Managers communicate the company’s

needs clearly with the team. They pass vital information down the chain, which means that

everybody is on the same page. Workers in the company understand the task at hand and they know

where to get additional information (from their supervisor). The structure has delivered excellent

results for many years and it continues guaranteeing a high level of visibility till present day.

A SENSE OF PURPOSE

Everybody in the corporate organization is aware of the major goal. Every team member

understands tasks and the manner in which individual efforts contribute to accomplishing the major

goal. Thus, top down project portfolio management results in a sense of purpose and standardized

procedures, as well. The two factors work together to guarantee product or service quality in the

long run.

GOOD STRUCTURE

The corporate structure is clear and easy to understand. Bottom up project management can easily

lead to chaotic communication, a problem that is non-existent when the top down approach is

implemented. There’s a well-defined hierarchy and a clear structure. This structure is highly

functional and everybody is accountable for a certain element of project execution.

INTERESTING PROJECT PORTFOLIO MANAGEMENT DATA

Many companies still stick to a bottom up approach, regardless of the fact that it seems to be

standing in the way of efficiency. Though bottom up project management may sound logical, it is

connected to very difficult verification of benefits and the investment of large amounts in processes

that don’t deliver the expected results.

According to Kaplan and Norton statistics for 2013, nine out of 10 companies fail to implement an

effective project management strategy. IBM estimates suggest that 40 percent of the investment in

IT solutions is wasted due to poor project portfolio management. These problems often stem from

the chaotic and random nature of the bottom up approach.

When a poor strategy is chosen, portfolio management will not deliver the expected results.

Strategies will lack focus, which is the most important prerequisite for maximum productivity and

cost-efficiency. Bottom up approaches may work for already established procedures but when it

comes to transformation and boosting productivity, this portfolio management strategy will be

weakened by multiple shortcomings.

Effective portfolio management is the most important element for strategy execution. It enables

corporate structures to move forward and benefit from a high level of accountability. Many

companies are still failing at this critical process but change is possible and necessary.

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