Improving project portfolio decision making in theory ...

Track 19: IT Governance and Business IT Alignment

13 June 2016

Improving Project Portfolio Decision Making in Theory and Practice

Hamid Belarbi Utrecht University The Netherlands 1

• Project portfolio management (PPM) • Problem statement • Research question • Research approach • Conceptual framework • Results • Discussion • Conclusion

13 June 2016

Agenda

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PPM is a dynamic decision process wherein a list of active development projects is constantly revised. (source: Gutierrez and Magnusson 2014)

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Project Portfolio Management

PPM has three goals: 1. Strategic alignment; 2. Maximization of value; 3. A balanced portfolio. (source: Artto and Dietrich 2004; Gutierrez and Magnusson 2014; Heising 2012; Kester et al. 2009; Killen et al. 2006; Wen 2010)

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Why PPM?

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An organization has generally more ideas than resources. Therefore, it needs to invest in most interesting ideas.

• Jeffery and leliveld (2004) report that 98% of surveyed or interviewed Fortune 1000 CIOs is aware of PPM, but only 17% is realizing its full potential; • PPM research is conceptual, theoretical, and based on many hypotheses; • Researchers offer many models and tools for project selection, other aspects are underexposed; • Serious limitations in practice. Models and tools do not suggest solutions for them (source: Kornfeld and Kara 2011); • Various authors state that these models are hardly used in practice

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Problem Statement

(source: e.g. Archer and Ghasemzadeh 2004; Petit and Hobbs 2010).

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• Martinsuo (2013) made an appeal for more empirical research. She argues, that: • PPM goals are outdated. New goals are needed. • Proposed models and tools do not consider context for project selection. • PPM is not only project selection and prioritization, it enacts more.

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Problem Statement

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• Main question: How can an information intensive organization improve decision-making for project selection within its project portfolio management process?

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Research Questions

• Sub question: What processes constitute PPM, and why are they important? Focus is on development of (business) IT. Maintenance & operation phase is disregarded! 7

• Grounded theory approach

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Qualitative preliminary survey (14 respondents) Extensive literature review Two expert reviews (conversations) Eleven in-depth interviews • • • •

6 non-profit + 5 commercial in Netherlands 100 – 95000 full time employees 1,5 mlj – 369 mlj annual portfolio budget 10/15 - ~600 running projects per annum

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Research Approach

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Four sequential phases derived from the portfolio manager’s tasks. 1. 2. 3. 4.

Portfolio structuring; Resource management; Portfolio steering; Organizational learning & portfolio exploitation.

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Initial framework

source: Jonas 2010

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PPM process consists of

• Project portfolio principles • Portfolio decision-making • Portfolio risk management • Resource management • Portfolio monitoring, reporting and control • Project portfolio reviews • Influential aspects (very important) (This answers the sub research question)

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Consecutive conceptual framework

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Conceptual Framework

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Jonas 2010 • • • •

Sequential phases One time portfolio Static selection Naming convention of the four phases suggests a narrow description of the PPM process

Belarbi 2016 • • • •

Concurrent concepts Continuous portfolio Dynamic selection PPM process enacts more, e.g. risk management, principles, organizational context, culture, and so on.

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Conceptual Framework Comparison

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• No formal PPM process owner in some organizations; • Measurement is conducted unsufficiently; • Portfolio lifecycle (static vs dynamic), organizational misalignment; • Organizations do not have sufficient roles in PPM; • Portfolio risks are hardly managed; • Projects are hardly terminated; • Project overload is a much seen phenomenon; • Value delivery? Benefits are hardly managed.

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Results

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• Today we will discuss portfolio risk, ppm goals and strategic alignment.

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Results discussion

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• An uncertain event, set of events or conditions that, if they occur, have one or more effects, either positive or negative, on at least one strategic business objective of the portfolio.

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Discussion Portfolio Risk

(source: Project Management Institute 2008).

• Interviewees perceive risk management as a project management activity! • Portfolio risk measures: • • • •

Interdependencies management; Project overload management; Project termination management; Triangulation of project selection methods.

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• Strategic projects only? • In literature PPM is depicted as being a reflection of the business (or information) strategy (see e.g. Jonas 2010). The interviewed organizations manage also other projects within their portfolios (reasons given: not mature enough, business continuity is also important, culture needs to change).

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Discussion PPM Goals

• A balanced portfolio? • This is not a goal according to interview results, it might be a means to ensure a healthy portfolio (a KPI) or to reduce portfolio risk. Ensuring a balanced portfolio possibly grows with PPM maturity.

• Value delivery? • This is a perceived goal. The interviewees use a combination of multicriteria, a checklist or discussion approach in order to select projects. Lamratanakul (2008) groups these approaches under benefits measurement management. Sad part is that benefits are hardly managed.

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PPM goals

IT Governance goals

• Strategic alignment; • Maximization of value; • A balanced portfolio.

• Business IT alignment; • IT enables the business and maximizes benefits; • IT risks are managed appropriately; • IT resources are managed responsibly.

(source: Artto and Dietrich 2004; Gutierrez and Magnusson 2014; Heising 2012; Kester et al. 2009; Killen et al. 2006; Wen 2010)

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Comparing Individual Goals

(source: Brand and Boonen 2008)

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PPM goals

IT Governance goals

Strategic alignment Maximization of value Portfolio balance Risks are managed appropriately • Resources are managed responsibly

• Business IT alignment • IT enables the business and maximizes benefits • IT risks are managed appropriately • IT resources are managed responsibly

• • • •

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Suggested PPM Goals

(source: Brand and Boonen 2008)

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• The interviewees do not work top down, they rather try to assess proposed projects on strategic value. Since strategy is more or less broad, vague and fuzzy, interviewees stated that it is difficult to succeed. • The portfolio board selects projects based on available (budget and human) resources. Problem with this approach is that they have issues with resource planning and estimating perceived benefits (quite off even). • This results in a project overloaded organization where employees suffer from change fatique and projects are structurally over time, over cost and under quality. • The organizations learn little of these issues. However, they know they are performing bad, but do not know what to improve. Improvement is driven primarily when problems arise to the surface.

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Discussion Strategic alignment

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• Main question: How can an information intensive organization improve decision making for project selection within its project portfolio management process?  Regular measurement is key. This process enables learning to improve decision-making. • Conduct regular reviews on: 1. expected and actual benefits; 2. expected and actual risk responses; 3. estimated and actual resource usage; 4. expected and achieved strategic objectives; and 5. planned and actual project duration; 6.

Other aspects might include estimate accuracy, amount of terminated projects, decision duration, selection criteria, user satisfaction, amount of (simultaneous) running projects, the percentage of projects that deliver within constraints, and so on.

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Conclusion

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1. 2. 3. 4.

5. 6. 7.

Create transparency for stakeholders and other interested parties! Implement PPM ownership, measurement and improvement! Implement portfolio risk management and appoint a responsible portfolio risk manager! Manage project overload by limiting project selection and simultaneous running projects as well! Implement a project termination procedure at PPM level! Track and report benefits at PPM level and appoint a responsible benefits manager! Implement resource management at PPM level and assign resources from within PPM! Centralized resource allocation clears the way for project managers to deliver results. In many of the interviewed organizations project managers were wasting time on getting resources assigned instead of working on delivery due to decentralization of resource management.

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Recommendations

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• Interviews were conducted with only one interviewee per organization. Only in the Netherlands. Some organizations had multiple portfolio managers.

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Research Limitations

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• In the current paper the proposed model is an analysis framework. In the future I want to extend the model by showing how organizations can use the proposed model to improve their ppm proces?

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Future Work

• Effect of collaboration between PPM, information management, and enterprise architecture on business agility and ICT flexibility

• Effect of timekeeping on the quality of resource management. What is a workable balance? 23

• Thank you for your attention.

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Questions

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