Increase ROI to maximize your project portfolio

Nearly everything a business does – whether enacting a marketing campaign, launching an updated product, or investing in new equipment – has one primary purpose: to maximize profit.

Executives expect every dollar funneled into an initiative to generate revenue that exceeds the original investment. This payoff is called a return on investment, or ROI for short.

Delivering positive ROI in project management requires leaders to optimize resources, reduce costs, and minimize waste while ensuring on-time delivery. It’s a tall order, but the following strategies and metrics will give you a strong start as you pursue increased ROI in your projects and portfolios. 

What is project/product portfolio ROI?

In project management, return on investment compares a project’s anticipated completion cost against the potential return of a successful delivery. With these two values, executives calculate the initiative’s overall return. If this prediction fulfills decision-makers’ definition of what a good ROI for a project is, they’re far more likely to proceed to the development phase.

Product portfolio ROI is similar to project ROI, but it measures the profitability of an entire product line instead of calculating the value potential of a single initiative. 

Calculating ROI provides insight into value generation. It highlights the best resource allocation strategies, maximizing investment dollars. It also acts as a ranking tool, prioritizing projects and strategies according to potential profitability.

Project managers need an in-depth understanding of current market conditions and future trends to calculate ROI accurately. The calculation should also account for potential risks affecting the initiative’s final value.

9 proven strategies to increase project and portfolio ROI

Whether you’re planning a social media marketing strategy or developing a new mobile app, consistent methods and workflows ensure all your projects increase ROI. 

Here are our top suggestions for maximizing revenue and profitability:

1. Implement a clear project intake and prioritization process

You need a standardized system to evaluate and prioritize projects based on empirical data and business goals. Ideally, an interdisciplinary cross-department team should lead the process, reducing possible bias and providing a broader perspective of the factors justifying project initiation. 

First, decision-makers should identify business drivers like market demand, feasibility, and key results. Then, they can compare project goals against company objectives using metrics that gauge the desired outcome’s potential value. Initiatives that demonstrate alignment with business goals and optimal ROI receive the green light and prioritization within the queue. 

2. Optimize resource allocation

Maximize ROI by strategically allocating resources toward projects poised to generate significant value. Project managers should routinely assess and adjust resource utilization to optimize efficiency and productivity.

3. Embrace agile and adaptive approaches

The agile project management framework is flexible and iterative, allowing teams to adapt quickly to evolving market conditions and requirements. Agile practices also speed up project delivery and reduce waste, optimizing ROI further.

4. Use scenario planning to anticipate risks

“What if” analyses can answer vital questions, such as:

• Does the team have adequate resources to start and finish the project?

• How will redirecting resources impact other projects in the pipeline?

• How might delays and supply disruptions impact project outcomes?

The answers help project managers understand potential mishaps and their impacts. With these insights, they can evaluate potential risks and develop contingency plans that minimize the effects on budgets and profits.

5. Streamline communication and reporting

Select a single communication channel to manage correspondence and cut back on inefficient standup meetings, emails, and notifications. With a centralized source of information, project managers can easily access status updates and other intel, minimizing disturbances to team members and saving everybody time.

6. Automate reporting and status tracking

Instead of writing reports and statuses manually, adopt a project management application that automatically updates dashboards. Whenever someone closes a task, these systems notify the PM and adjust the assignment status in real time. Some platforms ensure task progression by alerting leaders when items are ready for review and approval, minimizing lag time and increasing productivity.  

7. Monitor ROI metrics

Project management should measure progress and outcomes against established targets using key performance indicators (KPIs). Monitoring KPIs identifies opportunities to improve workflows and make data-based strategy adjustments that enhance project ROI.

8. Continuously review and improve processes

Don’t settle for good ROI; make it great. Foster collaboration among team members, stakeholders, and partners to constantly refine project management practices. With open communication and knowledge sharing, the team can optimize processes, increasing efficiency and maximizing return on investment.

9. Consolidate project management tools

Companies often adopt a range of software applications to meet their various needs. Instead, consolidate solutions into a single project management and communication platform, like Tempo. You’ll streamline operations and reduce the cost of software user licenses. Reorganization saves time and money, which boosts ROI.

Key metrics for measuring project and portfolio ROI

Ready to start pursuing enhanced profitability? Use this basic formula to calculate ROI:

Return on investment = ((Income – Total investment cost) / Total investment cost) X 100%

The ROI formula assists in financial management by comparing an investment’s monetary value to its cost.

Here’s an ROI calculation example: Imagine you’re a team member on a marketing campaign that leverages social media ads. To determine the marketing ROI for placing ads on a specific platform, you must subtract the ad buy from the income earned by the campaign, divide that number by the ad buy investment, and multiply by 100 to generate the percentage return.

Learning how to calculate ROI for a project is only one side of the equation. To boost an initiative’s return on investment, you must also monitor metrics and KPIs throughout execution to ensure your team is on the right track. Avoid vanity metrics that look good on the surface but don’t provide actionable insights. Instead, focus on the following indicators:

Cost performance index (CPI)

CPI measures a project’s cost efficiency and progress by comparing the earned value of completed work at any point during development to the cost incurred.

First, find the earned value. The earned value of work is the proportion of finished work multiplied by the total budget, like so:

Earned Value (EV) = Percent completion X Budget at completion

To find the CPI, simply divide this number by the actual cost (i.e., the amount spent to achieve this work). Here’s the formula for this metric:

CPI = EV / Actual cost (AC)

A CPI of one means the project is precisely on track. Anything lower indicates the team is overspending, and a number above one means they’re ahead of budget.

For example, if a team has spent $2,800 to complete 75% of the work for a project with a budget of $4,000, you would calculate the CPI metric like this:

EV = 0.75 X $4,000 = $3,000

CPI = $3,000 / $2,800 = 1.07

Tracking CPI allows project managers to monitor performance and uncover cost overruns early enough to avoid harming the ROI. CPI also facilitates data-backed decision-making and predicts potential profit. 

Resource utilization rate

Resource utilization metrics tell project management how effectively they allocate staff and equipment. The formula compares the hours an employee or tool provides value against their total working hours, yielding a percentage of resource utilization. It’s easiest to apply when employees split their attention between billable and nonbillable activities.

Here’s how it works:

Resource utilization rate = (Total billable hours / Total available hours) X 100%

Resource utilization is rarely 100%. Administrative duties and organizational tasks aren’t billable and don’t generate direct value, but they keep a business running. A reasonable utilization rate is 80%.

Utilization identifies overworked or underworked staff, allowing the project manager to rebalance workloads to get everyone working at peak performance. Optimized resource allocation also helps improve project forecasting and planning accuracy. All these factors contribute to increased ROI.

Value delivery

Value delivery metrics illustrate how well a product or service meets its audience’s needs and expectations. They measure a variety of indicators, like:

• Customer satisfaction (CSAT)

• Customer engagement

• Conversion rate

• Market share

• Brand revenue

Driving higher ROI with Tempo’s integrated project management tools

Whether you’re running a marketing campaign or performing research and development, you need tools to convert raw data from project metrics and KPIs into actionable insights. Only then can this information help you improve productivity and increase efficiency, thus maximizing ROI. 

Tempo’s suite of applications forms an integrated project management platform that guarantees you get the most out of investment dollars. Tempo’s Timesheets reviews team productivity by tracking and reporting hours. Meanwhile, Capacity Planner manages and optimizes resource allocation, and Financial Manager oversees spending and financial governance. With Portfolio Manager, you can predict project outcomes with nearly 100% confidence.

Together, these applications illustrate the efficacy of project teams and strategies, helping you reach profit goals and deliver a maximum return on investment.