Excerpt
TABLE OF CONTENTS
List of Figures
List of Tables
List of abbreviations
Chapter 1 Introduction
1.1 Introduction
1.2 Background Information
1.3 Problem Statement and Synopsis
1.4. Aim, objectives and research questions
1.5. Structure of the Research
1.6. Research Limitations
Chapter 2 Understanding Project Portfolio Management
2.1 Related Definitions
2.2 Need for Portfolio Management
2.3 Alignment with Organization Strategy
2.4 PPM Goals
2.5 History of PPM
2.6 PPM Process
2.7 Factors affecting the PPM Process
2.8 Project Portfolio Selection approaches
2.9. Project Portfolio Selection Models
2.10 Challenges faced by the PPM process
Chapter 3 Towards effective Philanthropy
3.1 Related Definitions
3.2 Origin and “Golden age” of philanthropy
3.3 Comparison between sector: profit & non-profit
3.4 Factors that affect Philanthropic goals or decisions
3.5 Challenges to Philanthropic work
3.6 General Characteristics of successful philanthropy
Chapter 4 Research Methodology
4.1 Introduction to Research Methodology
4.2 Research Approach
4.3. Research Purpose and Process
4.4. Data Analysis Tool
4.5. Limitations of the Research Design
4.6 Alternative Approaches to the Research Problem
Chapter 5 Data Collection
5.1. Exploratory study
5.2. Survey Results
Chapter 6 Data Analysis
6.1. Exploratory Study Analysis
6.2. Survey Analysis
Chapter 7 Discussion
Discussion of the research findings
Chapter 8 Recommendations and Conclusion
8.1. Recommendations
8.2. Suggestions for future research
8.3. Conclusion
References
Bibliography
Appendix A
Appendix B
Appendix C
List of Figures
Figure 2.1 Relationships between Portfolios, Programs and Projects
Figure 2.2 Portfolio, programme and project domains
Figure 2.3 The constraint view of project management
Figure 2.4 Consequences of not having PPM
Figure 2.5 Portfolio Management Cycle
Figure 2.6 Portfolio Management Process pg
Figure 2.7 FAP Model
Figure 2.8 ECV Method as a Decision Tree
Figure 2.9 The BCG Matrix
Figure 2.10 Risk-Reward Bubble Diagram example
Figure 5.1 Question 1 Survey results
Figure 5.2 Question 2 Survey results
Figure 5.3 Question 3 Survey results
Figure 5.4 Question 4 Survey results
Figure 5.5 Question 5 Survey results
Figure 5.6 Question 6 Survey results
Figure 5.7 Question 7 Survey results
Figure 5.8 Question 8 Survey results
Figure 5.9 Question 9 Survey results
Figure 5.10 Question 10 Survey results
Figure 5.11 Question 11 Survey results
Figure 5.12 Question 12 Survey results
Figure 5.13 Question 13 Survey results
Figure 5.14 Question 14 Survey results
Figure 5.15 Question 15 Survey results
Figure 5.16 Question 16 Survey results
Figure 5.17 Question 17 Survey results
Figure 5.18 Question 18 Survey results
Figure 6.1 Organizations size results
List of Tables
Table 2.1 Summary of comparison between portfolio approaches
Table 2.2 Popularity of Bubble diagram
Table 4.1 Interview Question 4
Table 4.2 Interview Question 8
Table 4.3 Interview Question 12
Table 4.4 Interview Question 8
Table 4.5 Interview Question 9
Table 4.6 Interview Question 12
Table 5.1 Number of targeted & received respondents
Table 5.2 Answers to Question 1
Table 5.3 Answers to Question 2
Table 5.4 Answers to Question 3
Table 5.5 Answers to Question 4
Table 5.6 Answers to Question 5
Table 5.7 Answers to Question 6
Table 5.8 Answers to Question 7
Table 5.9 Answers to Question 8
Table 5.10 Answers to Question 9
Table 5.11 Answers to Question 10
Table 5.12 Answers to Question 11
Table 5.13 Answers to Questions 12-16 (All interviewees)
Table 5.14 Answers of Question 17
Table 6.1 Correlation Analysis
Table 6.2 Correlation Analysis
Table 6.3A. Correlation Analysis
Table 6.3 B Correlation Analysis
Table 6.4A. General Factor affecting PPM implementation
Table 6.4B. General Factor affecting PPM implementation
List of Abbreviations
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Chapter 1 INTRODUCTION
1.1 Introduction
Chapter 1 is an introductory chapter of this exploratory research. It aims to present the research topic, describes the research drivers and selected methodology to carry out the research. At the beginning, a background of the topic is given, during which some of the main problems are presented. Following this the aims, objectives and research questions are identified, noting that the methodology is described in detail in Chapter four. The main limitations of the research are listed after an outline of the included chapters is presented.
1.2 Background Information
Notions of solidarity, mutuality, and voluntary altruism constitute prime rationales of nonprofit activity (Toepeler 2003). Philanthropic organizations nature of work is based on conducting specific projects with a definite start and end. Their selection of projects and portfolios are usually attributed to two strategic determinants: Charitable motivations and Pragmatic or organizational concerns (Fruttero and Gaurin 2005). However, one of the most importance and critical management issues lies in determining the best project portfolio out of a given set of proposals (Doerner et al. 2006).
1.3 Problem Statement and Synopsis
Problem statement
Unwise selection of project/programme portfolios can lead to conducting of low-value projects or the taking of high risk projects that are not in the best interest of those organizations. The literature estimates that such problems cause organizations to obtain only 60% of their projects value. Thus, research to identify appropriate portfolio management approaches for philanthropic organizations would be of significant value.
Synopsis
The research aims to identify findings that would enable philanthropic organizations’ decision makers to enhance their project portfolio management process and identify the optimal portfolio of projects required to achieve maximum social value. Through the exploratory study, the research aims to extend the general benefits that PPM offers such as: maximum portfolio value and strategy alignment to the philanthropic sector.
1.4. Aim, Objectives and Research questions
Overall aim: The aim of this research is to identify the appropriate portfolio management approach for philanthropic organizations
Research objectives
In order to achieve this, the following objectives have to be fulfilled:
- To research the nature of philanthropic work in the literature and identify its special attributes.
- To research the aspects of project portfolio management in literature and identify its aspects.
- To identify the most appropriate portfolio approach and provide recommendations for its successful implementation.
Research Questions
The research aims to address the following research questions:
- RQ1: What is the current status of project portfolio management in philanthropic settings?
- RQ2: What are the general recommended portfolio approaches for philanthropic organizations?
- RQ3: What are the challenges and recommendations to successful portfolio management in the philanthropic sector?
To answer these research questions, the exploratory research used a mixed-methods approach of qualitative and quantitative research tools to undertake this study. More details on the research methodology is available in Chapter 4: Research Methodology
1.5. Structure of the Research
The structure of this research is to start with a review of the available literature on the topic, followed by collecting data using exploratory studies and survey method in order to answer the research questions and meet the objectives of the research. The complete dissertation is represented in eight chapters. The chapters have a logical setting as the topics progress. These chapters are:
Chapter 1. This chapter “Introduction” gives a background on the research topic. It describes the research drivers, aims and objectives. It further discusses the research limitations encountered during the research.
Chapter 2. This chapter “Understanding Project Portfolio Management” discusses
mainly theoretical concepts of PPM, presents from literature problems faced or general challenges in the field of project portfolio management, history on past & contemporary approaches for project or portfolio selection.
Chapter 3. This chapter “Towards effective Philanthropy” represents the literature
review conducted about the main aspects of philanthropy such as factors considered by philanthropic organizations for project or portfolios selection, project portfolio issues faced by such organizations and general recommendations for improving philanthropy
Chapter 4. This chapter “Research Methodology” elaborates on methodology used for research for the dissertation. The researcher’s approaches and strategies are discussed in detail.
Chapter 5. This chapter: “Data Collection” provides the general information gathered during the data collection process; it presents the main feedback gathered from the exploratory study and surveys results.
Chapter 6: This chapter “Data Analysis” provides detailed analysis of the data gathered by the research methods while referring to the research questions and using SPSS software for analysis.
Chapter 7: This chapter “Discussion” contains the discussion on the main research findings in reference to the research questions.
Chapter 8: This chapter “Recommendations and Conclusions” contains recommendations for addressing the identified challenges, suggested areas of research. The chapter also contains the overall conclusion arrived at the end of the research.
1.6. Research Limitations
Despite the researcher’s best efforts, this research, as the case with many other researches, had been associated with certain limitations.
First, the research faced data access difficulties during data collection: respondents were very sensitive to disclosing information; which lead to a moderate sample size: 71 respondents from 15 different philanthropic organizations. In reality, an inclusion of an increased number of respondents from organizations will enhance the reliability and integrity of the result.
The second limitation is also related to data collection. The research topic was found to be poorly researched; information on similar research was almost not available. Therefore, much of the findings were based on collective analysis from the literature review and data collected through the exploratory study and survey method. However, no comparisons to previous research could be made.
The third limitation is the utilization of forced-choice questions in the survey; which generally introduces certain inaccuracies in results; since the answers are likely to represent respondents’ closest point of view. This limitation also doesnot allow the respondents to express their own opinion. However, this was incorporated to address the concern of data control and quality which the survey faced due to being conducted without the direct presence of the researcher.
Finally, time consideration was one of the main limitations, since additional time could have assisted in mitigating several of the above-mentioned limitations.
Chapter 2 Understanding Project Portfolio Management
This chapter represents the literature review conducted about the theoretical subject of Project Portfolio management (PPM). It discusses the core concepts of the subject topic: need for PPM, how PPM resolved Projectified organizations, history of PPM, PPM Process and PPM Process challenges.
2.1 Related Definitions
2.1.1 Project
The literature provides a variety of definitions for this term:
- A project is a temporary endeavor with a defined start and finish undertaken to create or deliver a unique product or service (Moustafev 2011).
- A temporary endeavor undertaken to create a unique product or service. (PMI 2000:6)
- Projects are a series of planned activities with clearly defined start and end points
and clearly defined deliverables (Rajegopal, McGuin and Waller 2007).
Not all projects are equal. Literature has provided different classifications of projects
according to the researchers’ various perspectives (Levine 2005, Atlantic Global 2007). Levine (2005) provided three classifications of projects as follows:
- Utility or Maintenance project: projects that generally support ongoing projects and services. When prioritized, these projects might not register as high on the benefits-value scale as some other project types. For this prequalification criteria consist more of need and justification data as opposed to cash-based benefits and alignment to strategies
- Growth or enhancement project: Projects that support strategic initiatives and represent increasing value. Such projects are needed to keep the firm in a solid competitive position. They’re likely to fall into the medium-to-high benefit and high-alignment segments of the raking criteria. For most of the organizations, the growth or enhancement projects will comprise the bulk of the project
- Transformation project: a project which offers the opportunities to move the firm to a new level or to introduce new products or services that will dominate the market place. The goal is to capture a new market or leap ahead in technology; it has the potential of yielding benefits but must require special handling.
- Under this category, there exists Gorilla projects, Levine (2005) describes them as projects that lead to strong products that dominate a market and force any potential competitor to search for a niche market instead.
Atlantic Global (2007) provided the following categories based on competitive advantage:
- Tactical: delivering competitive advantage today
- Administrative: delivering concurrently promised service levels and supporting existing strategic projects
- Strategic: delivering competitive advantage in the future
- Innovation: smaller and experimental projects delivering possible competitive advantage tomorrow
- Future vision: contingent upon strategic and innovation projects
2.1.2 Program
Although programs are not directly related to the subject research, understanding its definition will help in distinguishing between projects and programs. Moustafev (2011) provided the below definition:
Programs are closely related to the concept of projects. A program is a grouping of interdependent projects united by the same theme or topic. Gardiner (2005) further elaborates that projects form only a part of an overall programme and that they have a definite beginning and end. In contrast, programs are ongoing concerns that may continue for an indefinite period of time.
- A Program is a group of projects managed in a coordinated way to obtain benefits not available from managing them individually (Turner 1992: 345 cited by Gardiner 2005).
2.1.3 Project Portfolio
Project Portfolios are a group of projects that are carried out under the sponsorship and/or management of a particular organization (Archer and Ghasemzadeh 1999).
Another definition by Moustafev (2011) is:
Project portfolios are a collection of projects and programs in an organization that are often classified by the type, objective or goal that they are expected to achieve.
2.1.4 Relationship between portfolios, programs and projects
Portfolios represents the collection of programs and projects, the process of PPM includes oversight, management and control of those components (Rajegopal, McGuin and Waller 2007). Figure 2.1 illustrates this relationship.
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Figure 2.1 Relationships between Portfolios, Programs and Projects (Adapted from Rajegopal, McGuin and Waller 2007 p.12)
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Figure 2.2 Portfolio, programme and project domains
(Adapted from Rajegopal, McGuin and Waller 2007 p.14)
As seen from Figure 2.2., program management involves the managing of multiple, ongoing and interdependent projects, while project management focuses on specific deliverables.
2.1.5 Strategy
The literature provides various definitions of strategy; in practice strategy exits in every organization (Yelin 2005).
However, the below definition is relevant to the dissertation discussion: Johnson et al. (2006, 9) defined strategy as:
The direction and scope of an organization over the long term, which achieves advantages in a changing environment through its configuration of resources with the aim of fulfilling stakeholder expectations
2.1.6 Project Portfolio Management:
Many definitions are provided by the literature for project portfolio management:
- Project Portfolio Management is defined as the managerial activities that relate to (1) the initial screening, selection and prioritization of project proposals, (2) the concurrent reprioritization of projects in the portfolio, and (3) the allocation and reallocation of resources to projects according to priority ( Blichfeld and Eskerod 2008). Moustafev (2011) provided two related definitions:
- A grouping of methods for analyzing and collectively managing a group of current or proposed projects based on numerous key characteristics.
- A methodology for analyzing, selecting and collectively managing a group of current or proposed projects based on numerous key characteristics while honouring constraints imposed by management or external real-world factors
Levine (2005) provided the below definitions:
- PPM is a set of processes, supported by people and tools, in selecting the right projects and the right number of projects, and in maintaining a portfolio of projects that will maximize the enterprise’s strategic goals, efficient use of resources, stakeholder satisfaction and the bottom line.
- PPM is a set of business practices that brings the world of projects into tight integration with other business operations. It brings projects into harmony with the strategies, resources and executive oversight of the enterprise and provides the structure and process for project portfolio governance.
- Project Portfolio Mgmt is the management if the project portfolio so as to maximize the contribution of projects to the overall welfare and success of the enterprise
2.1.7 Project Management:
Two popular definitions were provided by Moustafev (2011):
- Project Management: the application of knowledge, skills, tools and techniques to project activities to meet project requirements.
- Project management is the science and the art of delivering a project by maintaining cost, schedule and technical performance that satisfies stakeholder expectations while honoring internal and external constraints.
2.1.8 Distinction between Project Management and Portfolio Management
The distinction between project management and portfolio management has been discussed in the literature. Calderini (2005) pointed out that project management tacked the aspect of doing projects right while project portfolio management focused on doing the right projects. Moreover, he explained that Project Management focuses on a single project while in contrary Portfolio Management was concerned about managing a set of projects:
Contrary to Project Management, which focuses on single project, and Programme Management, which concerns the management of a set of projects that are related by sharing a common objective or client, or that are related through interdependencies or common resources, PPM considers the entire portfolio of projects a company is engaged in, in order to make decisions in terms of which projects are to be given priority, and which projects are to be added to or removed from the portfolio (Calderini 2005).
Project management tends to focus on the traditional constraints of a project being on-
time, on-budget and on-quality as represented in the below figure reproduced from Norrie and Walker (2004):
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Figure 2.3 The constraint view of project management
2.1.9 Programme Management
Programme management is the process of managing multiple, ongoing, interdependent projects. Programme management is comprised both of operational initiatives that enable realization of business value, and of grouping of activities and projects that enable the implementation of a strategy and seek its outcome (Rajegopal, McGuin and Waller 2007).
2.1.10 Distinction between Programme Management, Portfolio Management and Project Management
The main difference between program management and portfolio management is that the former involves management of related projects, while the latter concerns unrelated projects (Gardiner 2005). However, when considering program and project management both aim to achieve change in a controlled manner, but the difference lies in the level at which the change is controlled (Gardiner 2005). Project deliverables form only part of an overall program and has a definite start and end. In comparison a programme is an ongoing concern which may continue for an indefinite time with new projects joining and existing ones finishing (Gardiner 2005).
2.1.11 Projectified organizations or Project-based organization or Project-oriented organisation:
Projectified organizations also referred to as project-based organization, or the projectoriented organisation can be described as: An organisational unit that executes a substantial share of its operations as projects (Engwall 2003).
Research has highlighted various organizations referred to as projectified organization, project-based organisation, or multi-project setting organisations. All of these concepts refer to an organization in which the substantial share of the organisations’ operations is run as projects (Matti 2008). The importance of project based organizations has increased lately, since multi-project settings have become more or less a de facto standard for organizing complex work (Matti 2008).
2.2 Need for Portfolio Management
Organizations dealing with projects in their daily routines are increasing (Levine 2005, Rajegopal, McGuin and Waller 2007, Matti 2008). Top management departments are spending much time and resources balancing the needs of the various projects running in their organizations (Blichfeld and Eskerod 2008).
Levine (2005) believes that organizations often do well when managing individual projects or a reasonable number of projects. However as project numbers increase, challenges arise due to mainly two points: complexity of management and constrained resources. Since an additional problem is competition on resources among several projects, that are drawing from a common pool (Matti 2008).
Matti (2008) provided the managerial and employee perspectives on resources competition:
- Managerial perspective: There is a competition for resources among projects (Matti 2008).
- Employee perspective: Work is seen to be disruptive and fragmented, since employees face time pressure and few opportunities for recuperation between periods of intense work (Zika and Sundstro 2003 cited in Matti 2008).
Moreover, because of the general increase in project size and scope, projects are becoming naturally becoming more mission critical than in the past. The recent economic crisis in 2008-2010 have definitely added to the pressure on top management to decrease project-related cost and to drastically improve quality (Moustafev 2011).
Due to the importance of this arising need, researchers have increased their attention in Project Management and in particular in studying multi-project settings (Engwall and Sjogren 2003, Elonen and Artto , Matti 2008, Zika-Viktorsson and Sundstro 2003).
Matti (2008) emphasized the importance of this: While the project challenge of yesterday was to plan and execute a large project, the challenge of today is managing a project in an environment where several parallel projects are all competing for a limited resource base.
Levine (2005) recognized the below challenges faced by multi-project organizations:
- Increasingly numbers of potential projects in which to invest
- Difficulty aligning projects and portfolios with organizational objectives
- Difficulty achieving consensus among competing stakeholders regarding project priorities
- Inadequate measurement and methodologies to determine project benefits, costs and risks
- An overemphasis on project execution management, without due diligence on project portfolio selection and alignment
- More complex and challenging project constraints, including budgets, personnel, risk, time and compliance
Matti (2008) identified the following frequent issues faced by project managers in multi- project settings: dyadic leadership, group dynamics, as well as external relations to consultant, client and peer relations. The importance of managing portfolios has heightened since recent estimates indicate that $2.3 trillion is spent on projects in the United States alone (Levine 2005). Clearly, alignment of project portfolios with organizational strategy is of paramount importance. Sharing this opinion, Wheelwright and Clark (1992) highlighted the importance of the right set of projects in project portfolio for a company’s progress.
However, the following points serve as alarming indicators
- 89 percent of companies are flying blind, with virtually no metrics in place for finance (Levine 2005).
- 84% percent of companies are unable to adjust and realign their budgets with business needs more than once or twice a year (Levine 2005).
- Close to $1 trillion is spent in underperforming investments, as mentioned by Levine(2005) not only is the spending huge but it is poorly managed in a fragmented manner, using project-focused rather than portfolio focused methods.
- Businesses that face lack of resources combined with many suffering projects is not an uncommon finding (Eskerod 1996 cited in Blichfeld and Eskerod 2008).
- Standish group reported success rate to be 35% rate for IT project in its (Chaos 2009 report). Although the report focused on IT projects, this provides an indicator of general project performance (Moustafev 2011).
Moustafev (2011) identified unpleasant consequences due to lack of portfolio management, Figure 2.4 below displays this:
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Figure 2.4 Consequences of not having PPM (Adapted from Moustafaev 2011 p.222)
Yet literature states that many organizations in both the private and public sectors, either have an under-developed PPM process or treat it as a simple extension of their program management or a centralized PMO capability (Archer and Ghasemzadeh 1999).
2.3 Project Portfolio Alignment with Organization Strategy
Since the key managerial task for businesses is to dedicate resources across all of these projects (as well as do daily work) and consequently, management across projects is critical to company performance (Blichfeld and Eskerod 2008).
PPM brings about the ‘right’ selection of projects that is tightly integrated with other business operations (Levine 2005). Hence PPM bridges between the project’s function and the organization’s strategy (Levine 2005). Ensuring strategic alignment is of importance to any project type success. PPM centers on linking project portfolios to their organization’s strategy (Levine 2005).
2.4 Project Portfolio Management Objective and Goals
Project Portfolio Management Objective:
The PPM process objective is to determine the optimal mix and sequencing of proposed projects to best achieve the organization’s overall goals, aligned with the preferred strategies and within the organization’s resource (people and funding) constraints (Dye and Pennypacker 1999, Levine 2005 and Moustafev 2011).
Project Portfolio Management goals
Project Portfolio Management aims to achieve three main goals, all literature pointed to the same common requirements (Ghasemazadeh et al 1999, Sommer 1999, Rădulescu1 and Rădulescu 2001, Cooper et al. 2001b, Yelin 2005, Moustafev 2011):
1- Maximizing the value of the portfolio: Due to limitation in organizations’ resources; each project as well as the portfolio of projects should selected to maximize the portfolio value in respect to contribution of short-term and long- term development, scope and resources (Cooper et al., 1997a, Cooper et al., 1997b, Archer and Ghasemzadeh 1999,Chien 2002 and PMI 2006).
2- Balancing the portfolio against available resources: The candidate project should preserve the desired balance in the portfolio mix in aspects such as: risk and return, long and short term benefit like in any financial investment (Cooper et al. 2000).
3- Linking projects with strategy: The final portfolio of projects should be
strategically aligned and should reflect the business’s strategy. Cooper et al.
(2000) argued that corporate strategy must be reflected in the project portfolio and resource allocation to projects.
Furthermore, Levine (2005) mentioned additional portfolio requirements such as:
- Projects appropriate for organization’s value and culture;
- Projects directly or indirectly contribute to cash flow;
- Projects efficiently utilize the various resources (capital, human resource, physical)
- Projects not only contribute to short term business but also long-term development.
As discussed in Moustafev (2011), the above balance requirement ensures that the following situations are successfully avoided:
- Too many small projects and not enough breakthrough; too many visionary projects
- Too many short-term and not enough long-term strategic projects
- A disproportionate amount of resources devoted to a few business areas while other important areas are in need
- Poor risk management
2.5. History of Project Portfolio Management
Background on PPM
Modern Portfolio Theory owes its origin to the Nobel-prize winning economist Harry Markowitz (1959) work on developing a financial portfolio selection and capital allocation theory (Levine 2005).
The application of this financial portfolio selection and capital allocation theory to the project management domain has also been previously explored (Souder 1984, Martino 1995, Archer and Ghasemzadeh 1999, Benko and McFarlan 2003). However, portfolio theory was first adapted to IT projects, paving the way for modern project portfolio management. (Levine 2005, Rajegopal, McGuin and Waller 2007). It’s important to note that not all researchers view PPM as a new defined discipline. Levine (2005) acknowledged the work of Markowitz but elaborated that the basic elements of PPM and the environment in which it is applied is not new. Levine (2005) emphasized that the PPM elements were available but in the responsibility of two distinct groups: operations management and projects management.
In fact, it is argued in the literature that PPM serves as a bridge between strategy and operation. Ultimately, PPM enables organizations to transform the organization’s vision into reality (Morris and Jamieson 2004, Dey 2006).
2.6 Project Portfolio Management Process
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Figure 2.5 Portfolio Management Cycle (Levine 2005)
2.6.1 Project Portfolio Management Process Overview
The Portfolio management process is viewed to be constantly ongoing and iterative (Levine 2005). The process serves as a continuous mechanism to ensure that projects remain aligned with their strategic intent (Rajegopal, McGuin and Waller 2007). At a general level the PPM process can be divided into two primary stages (Levine 2005 and Moustafev 2011):
I. Prioritization and selection of candidate projects for the portfolio:
The first stage focuses on the prioritization and selection of projects for the portfolio (Levine 2005). Levine further discussed that during this stage the process starts with a rational prioritization and selection procedure, in which a proposed is evaluated against a set of selection criteria, bad projects get weeded out (or modified to meet the criteria). If a proposed project can’t pass the minimal criteria there is no need to rank it for selection.
II. Maintaining the pipeline
The second stage deals with managing the projects within the portfolio approved projects through continuing, delaying or terminating approved projects (Levine 2005). The project pipeline is maintained by traditional project initiation, execution and control techniques as well as by periodic reviews of each project to ensure that each project still supports the initial selection requirements (Moustafev 2011).
At a more detailed level, the project portfolio management process normally, involves five distinctive phases.
Levine (2005) described the five processes to be:
1. Identification of needs and opportunities
2. Selection of best combination of projects (the portfolios)q
3. Planning and execution of the projects (project management)
4. Product launch (acceptance and use of deliverables)
5. Realization of benefits
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Figure 2.6 Portfolio Management Process (Levine 2005, pg 500)
2.6.2 Project Portfolio Management Process Details
1- Strategic consideration and orientation:
Phase in which the organization needs and opportunities are identified and the strategy is reviewed. This leads towards the selection of the projects with better strategic alignment (Levine 2005).
2- Project evaluation phase:
Phase in which projects are evaluated through analyzing the benefits derived, as well as the individual contribution of each project to the portfolio objectives.
3-Portfolio selection:
Phase involving a continuous comparison of projects, which compete between each other, with the final intension of ranking in the top positions to achieve the entrance to the organisational portfolio. The (Project evaluation) and (Portfolio selections) phases could be considered as one joint phase, which is (Portfolio Selection).
In this stage the fit of the projects to the strategic goals requirement make certain that company finances and other resources are not wasted on ventures outside the organization’s sphere of strategic interests (Moustafaev 2011). Ultimately the best combination of projects i.e. the portfolios are selected (Levine 2005).
4- The organisational resources assignment:
This phase is also known as the planning and projects execution phase (Levine 2005). During this phase the organizational assets are assigned to the selected projects. However, since the organisational assets are limited and are constantly requested for different projects, this can cause an extremely complex managerial problem.
4- Monitoring and control phase:
Phase in which management is responsible for assessing, recurrently, the portfolio performance and all that is related to the portfolio range.
Implementation of the PPM process involved three people groups (Levine 2005):
- Senior management: Responsible for providing leadership and direction
- PPM Governance Council: Members responsible for managing the selection of projects for the portfolio and review projects for possible deselection. Team composed of key leaders of high levels such as Chief Executive Office and other senior staff. The council role is to bridge the gap between operation management and project management and to ensure successful communication for making sound portfolio related decisions (Levine 2005).
- Project Management Office or PMO: Centralized office which monitors approved projects and advises the governance council where projects are deviating from planned benefits and value. The office is responsible for getting financial and work progress perspective updates from project leaders. This information goes into a database and is reported to executives via a Project Portfolio Management Team (PPMT), giving the project inventory and its status (Rajegopal, McGuin and Waller 2007).
2.7 Factors affecting the Project Portfolio Management Process
The Literature review concludes that certain factors play a significant role in the success of the PPM process:
- Organisational Strategy: Organizations should have clear strategic imperatives in place, properly communicated across all departments, to which the PPM goals are to be aligned to. The Portfolio Process cannot be effective if the organization was lacking a business strategy in the first place (Calderini et al 2005).
- Top level commitment: Any implementation of PPM capability needs strong and visible sponsorship of the defined processes by the senior executives. The role of executives is paramount to achieving effective project portfolio management; thus they always need to be aligned with their organization’s portfolio management strategy by continuously enrolling them in the PPM process (Calderini et al 2005, Levine 2005).
- Mature and cooperative environment or culture: The availability of a supportive environment or culture that supports effective PPM. Developing a culture that supports selection of right projects is not easy. Since as mentioned by Levine (2005) many staff may consider responsible portfolio management a big change, due to being previously less accountable for projects execution. Moreover, staff may complain that PPM is too difficult in order to avoid accountability or out of fear that critical work will not get done in a timely fashion. The solution to this lies in simplifying the process as best as possible. Since as mentioned by Levine (2005) employees often avoid change and implementation of responsible portfolio management would be a big change for many staff.
- Level of interest of the stakeholders involved: Most of the people involved in the process have their specific terriorities to oversee and might not be motivated to spend their time on PPM or they might not have the skills, tools, or practices to participate fully in this important function (Levine 2005).
- Monitoring of projects progress:
The importance of constantly revising the active projects by management was highlighted by Cooper et al. (1998) since the decision making process is characterized by uncertain and changing information; whereby a list of active projects being constantly updated is required.
- Levine (2005) notes that the project progress needs to be evaluated based on two dimensions:
a) Measuring of project performance against previously set targets using various tools:
- CPM (Critical Path Method) software was discussed as a means of tracking project progress, however it was mentioned that it will assist in indicating that there is slippage in the schedule, however without specifying how much work of the work is slipping by.
- EVA (Earned Value Analysis) was suggested as a key performance measurement technique, it was considered to be a better option at looking at performance since EVA can generate the value of cost variance and schedule variance at more detailed levels.
- Levine (2005) explained that EVA capabilities are available in almost all conventional project management softwares. The goal is that schedule and cost overruns can be discovered at an early stage and then be communicated to the portfolio governance council by the PMO.
b) Evaluation of the critical parameters that were used to select the project in the first place. In addition to tracking project progress, there are critical parameters that constantly need to be considered to evaluate all projects for continuation or termination. Levine (2005) identified the below parameters that need to be considered:
- Change in the need for project
- Is the project still aligned with the strategies?
- Are the project deliverables still needed?
- Are the cost benefits or time frame still acceptable?
- Window of opportunity still open
- Change in critical technology making the project obsolete?
- Change in firm’s strategies
- Project Management Office or PMO:
The role of the PMO is important since the PMO primary role is to monitor the project performance and consider the critical parameters through using the tools above mentioned and alert the governance council if the project needs to be reexamined, depending on the information gathered.
2.8 Project Portfolio Selection approaches
The literature presented various approaches to portfolio selection; there are more than one hundred tools and techniques for project portfolio selection (Archer and Ghasemzadeh 1999). Hence it is not difficult for organizations to select suitable tools.
Selection of an appropriate project portfolio approach depends on considering many relevant factors. (Lefley and Morgan 1998, Rad and Levin 2006) claimed that utilization of project selection tools and techniques should collaboratively take into consideration of important aspects of strategy, resources, and risk Another critical factor that should be considered when adapting tools, techniques, methods and models is the availability, accuracy, reliability and up-to-datedness of data input for analysis. This is more challenging for new organizations or organizations moving to new business industry where there are lacks of database, information and experiences (Rădulescu1 and Rădulescu 2001).
Cooper et al (2001b) discussed the various tools, techniques and models for project portfolio selection. Their results concluded that organizations tend to use different combinations of techniques instead of relying on a single method or technique.
In addition, their results showed that financial methods were popularly used, although they produced poorly performing portfolios. In fact their research showed that best performing portfolios were found to be chosen based on strategic approach, rather than on financial methods. The table below presents a summary of their survey results:
Table 2.1 Summary of comparison between portfolio approaches (Adapted from Cooper et al, 2001b)
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