A DEFINITION OF PROJECT PORTFOLIO ... - CiteSeerX

A DEFINITION OF PROJECT PORTFOLIO MANAGEMENT

BASED ON A MULTIPLE PERSPECTIVE ANALYSIS

DANIEL MARTHINUS VAN ZYL MALHERBE

Research report presented in partial fulfilment

of the requirements for the degree of

Master of Business Administration

at the University of Stellenbosch

Supervisor: Martin Butler

Degree of confidentiality: A December 2011

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DECLARATION

By submitting this research report electronically, I, DMvZ Malherbe, declare that the entirety of the

work contained therein is my own, original work, that I am the owner of the copyright thereof

(unless to the extent explicitly otherwise stated) and that I have not previously in its entirety or in

part submitted it for obtaining any qualification.

DMvZ Malherbe 11 November 2011

Copyright © 2011 Stellenbosch University All rights reserved

Stellenbosch University http://scholar.sun.ac.za

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ACKNOWLEDGEMENTS

This report is the end of a journey started by my father who urged me to start with my MBA. He

always says “You can stay as you are, or you can change to Mainstay!”. To him and my mother,

thank you for the support and constant nudging and irritation to stay committed to this effort. I have

(again) learnt that hard work and dedication adds value to your life in more ways than you expect.

To my wife – you came into the picture at a late stage, but had to endure most of the effort and

frustration that the report brought into our house. Thank you for your understanding and patience

with me and my “second wife”. From now on, we have weekday evenings open to do whatever we

please.

Thank you to my bank manager for borrowing me the money for this journey.

Thank you to all the personnel at the USB who assisted in some way or the other in making this

degree possible. You left me with more questions than answers about myself and my role in our

society. It was always an immense pleasure to have the kind of intellectual stimulation that I

received during my interactions with all of you.

Finally, to myself. Thank me for allowing myself to be open to new ideas and to learn. Thank me

for putting my social life on hold and sticking to this task. Thank me for not failing me in completing

this degree. I’m going back to my ways and reigniting some old passions again. Forever a student

of life.


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ABSTRACT

Organisations are continuously involved in the process of selection, prioritisation and execution of

projects in order to achieve some stated objective, within the constraints of a finite set of

resources. The problem that many organisations face is how to go about making the decisions to

maximise the value of the investment in these projects.

Project Portfolio Management (PPM) is a management concept that facilitates and support the

decision-making processes to ensure that the optimal mix of projects in a portfolio supporting a

particular organisational objective. However, there is no generally accepted standard definition of

PPM. This absence of an accepted definition can lead to confusion when organisations implement

PPM. A well-defined, accepted standard supported by qualifying criteria will thus enable

organisations to make informed decisions about the application of PPM. It will also lead to a better

understanding of the PPM value proposition.

The purpose of this report is to define exactly PPM entails. It recommends a standard definition

that will enable an organisation to understand the use and benefit of PPM. The author reviewed the

many different definitions of PPM from different perspectives namely: academic literature, industry

bodies, popular press, software vendors and consulting groups. A critical review of the literature

was performed to clearly define the concept.

All of the different definitions were reviewed and compared within, and amongst, the different

perspectives. The final definition of project portfolio management is presented as follows: Project

Portfolio Management is a strategic management concept with the objective of ensuring that the

portfolio of projects is aligned with and support the organisational strategy. This is done through

the integration of strategic and operational management levels within the organisation.

An important insight of the research is that projects, and portfolios of projects, can be considered

as change initiatives and investments the organisation has made, or plans to make in future. Within

this context PPM is positioned on a strategic management level within the organisation to assist in

bringing about the change in the correct manner. PPM involves a dynamic decision-making

process (defined in this report) where the selection and prioritisation of projects to be executed is

done within the constraints of a limited pool of available resources. The selection and prioritisation

of projects is determined by a defined set of criteria discussed in this report.


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KEY WORDS

Project Portfolio Management

Project Management

Strategic alignment

Selection, Prioritisation and Execution

Decision-making processes

Strategy execution

Strategic versus Operational


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TABLE OF CONTENTS

Declaration ii

Acknowledgements iii

Abstract iv

Key words v

Table of contents vi

List of tables ix

List of figures x

List of acronyms and abbreviations xi

CHAPTER 1 ORIENTATION 1

1.1 INTRODUCTION 1

1.2 DEFINITION OF THE RESEARCH PROBLEM 1

1.2.1 PROBLEM STATEMENT 1

1.2.2 RESEARCH OBJECTIVES 2

1.3 CLARIFICATION OF AREAS OR GROUPS INCLUDED IN THE REVIEW. 3

1.4 ASSUMPTIONS 4

1.5 RESEARCH DESIGN AND METHODOLOGY 4

1.5.1. Literature Review 4

1.5.2. Research methodology 5

1.6 CHAPTER OUTLINE 5

1.7 CONCLUSION 6

CHAPTER 2 CONCEPTS EXPLAINED 7

2.1 INTRODUCTION 7

2.2 MODERN PORTFOLIO THEORY 7

2.3 PORTFOLIO MANAGEMENT 8

2.4 IT PORTFOLIO MANAGEMENT 8

2.5 PROJECT PORTFOLIO MANAGEMENT 9

2.6 PROJECT LIFE CYCLE 9

2.7 PROJECT MANAGEMENT OFFICE 10


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2.7 STRATEGY EXECUTION 10

2.8 CONCLUSION 11

CHAPTER 3 PPM AS DEFINED IN ACADEMIC LITERATURE 12

3.1 INTRODUCTION 12

3.2 GENERAL DEFINITIONS OF PPM FROM ACADEMIC RESEARCH 13

3.3 PPM AS A DECISION MAKING PROCESS 17

3.4 PPM AS A TOOL FOR IMPLEMENTATING ORGANISATIONAL STRATEGY 19

3.6 PPM AS A TOOL IN MANAGING NEW PRODUCT AND PRODUCT DEVELOPMENT 22

3.7 CONCLUSION 23

CHAPTER 4 PPM AS DEFINED BY INDUSTRY BODIES 24

4.1 INTRODUCTION 24

4.2 INTERNATIONAL PROJECT MANAGEMENT ASSOCIATION (IPMA) 24

4.3 ASSOCIATION FOR PROJECT MANAGEMENT (APM) 25

4.4 THE AMERICAN MANAGEMENT ASSOCIATION (AMA) 26

4.5 THE PROJECT MANAGEMENT INSTITUTE (PMI) 27

4.6 PROJECTS IN CONTROLLED ENVIRONMENTS (PRINCE2) 29

4.7 CONCLUSION 31

CHAPTER 5 PPM AS DEFINED BY THE POPULAR PRESS 32

5.1 INTRODUCTION 32

5.2 DEFINITIONS 32

5.2.1 General Articles 32

5.2.2. Books 36

5.3 CONCLUSION 40

CHAPTER 6 PPM AS DEFINED BY SOFTWARE VENDORS 41

6.1 INTRODUCTION 41

6.2. SOFTWARE VENDORS 41

6.3 PPM ATTRIBUTE FOCUS BY SOFTWARE VENDORS 46

6.4 ORGANISATIONAL AWARENESS OF PPM AS A MANAGEMENT METHODOLOGY 49

6.5 LARGE ORGANISATIONS VERSUS SMALL AND MEDIUM ORGANISATIONS 49


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6.6 CONCLUSION 50

CHAPTER 7 PPM AS DEFINED BY CONSULTING GROUPS 51

7.1 INTRODUCTION 51

7.2 PMSOLUTIONS 51

7.3 GARTNER RESEARCH 55

7.4 UMTSA 58

7.5 PCUBED 58

7.6 SPRINGHOUSE EDUCATION AND CONSULTING SERVICES 59

7.7 DELOITTE & TOUCHE TOHMATSU CONSULTING 59

7.8. LEE MERKHOFER CONSULTING (LMC) 60

7.9 KLR CONSULTING INCORPORATED 61

7.10 CONCLUSION 62

Chapter 8 SUMMARY AND CONCLUSION 64

8.1. INTRODUCTION 64

8.2 DISPARATE VIEWS ON PPM 64

8.3 RESEARCH PROBLEM, QUESTION AND METHOD 64

8.4. ACADEMIC PERSPECTIVE 65

8.5. INDUSTRY BODY PERSPECTIVE 65

8.6. POPULAR PRESS PERSPECTIVE 66

8.7. SOFTWARE VENDOR PERSPECTIVE 67

8.8 CONSULTING GROUP PERSPECTIVE 68

8.9 TOWARDS A COMPREHENSIVE PPM DEFINITION 68

8.9.1. Contextualisation and Positioning of PPM in an organisation. 68

8.9.2. The Objectives of PPM 69

8.9.3. Processes 69

8.10. THE DEFINITION OF PPM 70

8.11. RECOMMENDATIONS 70

REFERENCES 72


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LIST OF TABLES

Table 6.1: Vendor Rating in terms of PPM attributes presentation. 47

Table 6.2: Results of vendor rating in terms of PPM attributes presentation. 48


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LIST OF FIGURES

Figure 3.1: The framework of application of PPM, programme management and project

management in ESM 20

Figure 4.1: The relationship between portfolio management and portfolios. 28

Figure 4.2: Run the business: Change the business. 30

Figure 7.1: Integration of Strategic and Operational Levels 54

Figure 7.2: Enterprise PPM. 57


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LIST OF ACRONYMS AND ABBREVIATIONS

IT Information Technology

PPM Project Portfolio Management

PM Project Management

PMO Project Management Office

ROI Return on Investment

EVA Economic Value Added

NPV Net Present Value

IRR Internal Rate of Return

BLOGS Is a type of website or part of a website. Blogs are usually maintained by an

individual with regular entries of commentary, descriptions of events, or other

material such as graphics or video.

EPM Enterprise Portfolio Management


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CHAPTER 1

ORIENTATION

1.1 INTRODUCTION

At any given point in time, most companies are engaged in many projects (Blichfeldt & Eskerod,

2007). In some cases, organisations base their entire livelihood on the selection and execution of

projects. The problem that many organisations face is how to ensure that through executing these

projects, it is doing the right thing in the most effective way possible within the constraints of a finite

shared resource pool from which to execute these projects. Management therefore has to find a

way of maximising value through selection and prioritisation of the right projects and ensuring that

available resources are assigned to the these projects in the most effective way possible.

Project portfolio management is a management tool that can assist management in ensuring that

project selection, prioritisation and execution maximises the overall investment in these projects of

the organisation taking into account the limited availability of resources.

1.2 DEFINITION OF THE RESEARCH PROBLEM

1.2.1 PROBLEM STATEMENT

The research problem identified is the absence of a clear definition of Project Portfolio

Management (PPM) and exactly what it entails. These differing views on the subject matter stems

from a number of sources. These include academic literature, industry bodies, popular press,

software vendors and consulting groups. Each of these perspectives on PPM is tailored to suite the

specific objectives of these sources. The perspective of the software vendor is most likely

influenced by its product offering and focuses on the functionality and benefits of the software

package through which it intends to deliver PPM. An academic perspective will most likely have a

more theoretical perspective that is more research focussed. A consulting group perspective can

include a combination of industry bodies, software vendors and popular press.

Atlantic Global (2011), a PPM software vendor, describes PPM as a controlled and predictable

method for planning, managing and executing your portfolio of projects and programmes as well as

enabling you to manage the resource capability of your business more effectively”. This software

vendor creates the impression that PPM is narrowly defined as planning, managing and executing

a portfolio of programmes and projects. This definition of PPM focusses around the product

offering of the software vendor and does elaborate about all the other aspects involved in planning

or managing of PPM from a holistic perspective.


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De Reyck, Grushka-Cockayn, Lockett, Calderini, Moura and Sloper (2005) define PPM from an IT

perspective as an approach that includes as number of objectives and key elements. This implies

that there are many aspects to consider when deciding to implement PPM as a management

methodology of an organisation’s project environment.

Ellenbogen (2008) defines PPM as “involving the strategic and on-going assessment of all

proposed projects”. This description positions PPM as being only a strategic tool that considers

only proposed projects and their strategic impact on the organisation.

UMTSA (2011) defines PPM as the “continuous process of identifying, selecting and managing a

portfolio of projects in alignment with key performance metrics and strategic business objectives.”

Levine (2005) creates the impression and understanding that PPM becomes the bridge or hub that

integrates project operations and business operations.

Clearly PPM is described and defined in different ways that leads to different ways of

understanding how PPM can be used to ensure that the organisation is doing the right things

(effectiveness) in the right manner (efficiency).

Often when an organisation embarks on the adoption of PPM, it turns to the first definition of PPM

that is available. This can be from an internet search, word of mouth or any other way in which

information is obtained. The different sources of this first definition can be disparate and can lead

to many different ways of interpreting PPM and how it can add value to the management practices

in the organisation.

1.2.2 RESEARCH OBJECTIVES

The objectives of this study are as follows:

Through exploratory research, identify and present commonalities about PPM within and

amongst the different areas listed in the research problem.

To develop a definition of PPM that creates a consistent and holistic understanding of PPM that

can be used by any of the different areas listed in the research problem.

Based on the differing perspectives and definitions amongst these groups or areas, the author will

construct a definition of PPM that will enable a reader of this definition to understand what PPM

entails from an practitioner perspective. This definition should be able to provide the reader with a

more holistic picture of what PPM is in terms of processes, resources and techniques required to

implement successfully.


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1.3 CLARIFICATION OF AREAS OR GROUPS INCLUDED IN THE REVIEW.

1.3.1 Academic Literature

Wikipedia (2010) defines academic literature as academic publishing that relies on some

form of peer review or editorial refereeing to qualify texts for publication. It would have

undergone a peer review and be subjected to the accepted rules and regulations binding

on academic research.

1.3.2. Industry Bodies

Industry bodies are communities or affiliations that share a common goal of knowledge

sharing. These industry bodies also provide principles and guidelines on the most

commonly accepted practices within an industry. An example of this is the Project

Management Institute (PMI), which provides guidance on issues related to Project

Management.

1.3.3. Popular Press

The popular press includes magazines, newspapers, online communities and other

publications that are regularly available to the public through traditional or electronic

channels. This also includes books and similar publications that are readily available to

the public.

The statements made in this area cannot necessarily be accepted as researched facts,

but they do constitute a fair part of the public knowledge around the subject matter of this

report.

1.3.4. Software Vendors

Software vendors are proprietors of software products or solutions based on the subject

matter of this study. The companies like Oracle, IBM and Microsoft are good examples of

this area or group. They are included because software vendors often use the term PPM

to describe their product offerings.

1.3.5. Consulting Groups

This area or group consists of specialised consulting firms that deliver consulting services

to clients. Some of these firms also perform research that is also a valuable source of


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information. This information or knowledge cannot be regarded as the academic in nature

as it is not subjected to the requirements of academic literature.

1.4 ASSUMPTIONS

Throughout this research report, it is assumed that:

PPM seeks to facilitate the selection and prioritisation of projects in order to align these with the

strategic intent and objectives of an organisation.

PPM is not restricted to only one specific organisational area but is applicable to all aspects of

an organisation where use is made of projects and portfolios to achieve certain goals and

objectives.

1.5 RESEARCH DESIGN AND METHODOLOGY

1.5.1. Literature Review

The critical review of the literature is central to achieving the outcomes of this study on PPM.

Saunders, Lewis and Thornhill (2007:57) states that “the purpose of the literature review is not to

provide a summary of everything that has been written on your research topic, but to review the

most relevant and significant research on your topic.”

The content of the literature review requires a critical evaluation of current research on the topic

and, through adequate referencing, present the relationships between published research findings

to the reader (Saunders et al., 2007:58). The content should demonstrate that the author has a

very good understanding of the research topic.

The term critical review “describes the process of providing a detailed and justified analysis of, and

commentary on, the merits and faults of key literature within your chosen area” (Saunders et al,.

2007:59).

According to Marelli (2005), the advantages of a literature review include versatility, relatively low

cost and level of coordination. A literature review, however, requires a high level of skill in

identifying, analysing and reporting on the literature and is based largely on information about what

happened in the past.


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1.5.2. Research methodology

For the purposes of this study, a literature review of the available resources in the following areas

was performed.

Academic Literature

Industry Bodies

The Popular press

Software Vendors

Consulting Groups

The focus of the study was specifically on the differing definitions and descriptions of PPM within

and amongst the areas reviewed. In those cases where a definition could not be singled out the

author constructed a definition based on the available information. For each of the areas covered,

a summary definition of PPM is presented at the end of each chapter that corresponds to the

majority of the literature reviewed.

1.6 CHAPTER OUTLINE

The research report is structured in the following manner:

Chapter 1: This chapter provides an overview of the research problem and objectives, as well as

basic concepts. It also includes a brief description of the research methodology used to conduct

the study.

Chapter 2: This chapter will provide an overview on the on key concepts that used throughout the

study.

Chapter 3: This chapter will provide a literature review for academic articles. It will conclude with a

summary and definition for PPM as found in the literature for this area or group.

Chapter 4: This chapter will provide a literature review for industry bodies. It will conclude with a


Chapter 5: This chapter will provide a literature review for the area or group popular press. It will

conclude with a summary and definition for PPM as found in the literature for this area or group.


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Chapter 6: This chapter will provide a literature review for software vendors. It will conclude with a


Chapter 7: This chapter will provide a literature review consulting groups. It will conclude with a


Chapter 8: This chapter will provide a conclusion based on all the areas as discussed in the

previous chapters.

1.7 CONCLUSION

This chapter has introduced the research problem to readers, explained the objectives and

provided an overview of the research methodology used to answer the research question posed.


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CHAPTER 2

CONCEPTS EXPLAINED

2.1 INTRODUCTION

Throughout this research report, a number of terms and concepts are used that are related to PPM

and the overall understanding of PPM. The objective of this chapter is not to define these

concepts, but to create an awareness and understanding of these concepts that is necessary for

consistent use within this study. Some of the concepts are prone to be used interchangeably which

can lead to some confusion when used in discussion. The overview of these concepts will give the

reader a basis from which to understand the focus of this study namely the definition of PPM.

2.2 MODERN PORTFOLIO THEORY

Markowitz (1952; 1959) introduced the topic of Modern Portfolio Theory (MPT) sixty years ago.

The MPT is based on two principles:

Uncertainty of Security Returns which argues that due to the fact that the future cannot be

precisely predicted, it remains impossible to predict the precise returns that an investment will

yield to the investor.

Correlation among security returns which argues that in an economic system, the returns from

investments are roughly correlated. Economic good and ill tend spread, causing periods of

generally high or generally low economic activity. Markowitz (1959:4-7).

Markowitz (1959:6) introduces an additional perspective which is that “a portfolio analysis must be

based on criteria which serve as a guide to the important and unimportant, the relevant and the

irrelevant”. He further argues that the selection of these criteria depends on the nature of the

investor. The analysis therefore first and foremost depends on the establishment of a set of criteria

against which the investor will analyse the portfolio of investments.

The concept of efficient and inefficient portfolios is explained as follows: “If portfolio A has both a

higher likely return and a lower uncertainty of than portfolio B and meets the requirements of the

investor, it is clearly better than portfolio B. Portfolio B may be eliminated from consideration, since

it yields less return with greater uncertainty than does another available portfolio” (Markowitz

1959:6).

Markowitz classifies portfolio B as an inefficient portfolio due to the fact that it is inferior to portfolio

A. Portfolio A is classified as an efficient portfolio. Markowitz further argues that all inefficient


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portfolios should be eliminated from possible selection by the investor. This logic supports the

objective of value maximisation of the portfolio through selection and prioritisation of portfolios.

Markowitz (1959:7) places the investment decision on a continuum between highest and lowest

certainty of return versus the highest and lowest of actual return. The return on an investment

should be related to the amount of risk involved to achieve the return.

It is within these constraints of risk, return and outcome criteria that Markowitz mathematically

illustrates that through diversification of a portfolio of investments against set criteria, that a

balanced and acceptable return can be achieved by the investor. MPT essentially attempts to give

the investor the most appropriate diversification strategy when making investment decisions.

It is important to note that there are certain criticisms of the basic MPT as introduced by Markowitz.

The mathematical model is a function of the risk versus return which it attempts to maximise

against a pre-set outcome criteria as set by the investor. The MPT does not account for the social,

environmental, strategic or personal dimensions of investment decisions.

MPT is introduced because the decisions made about project selection and prioritisation is based

on the principles of MPT.

2.3 PORTFOLIO MANAGEMENT

The term portfolio is used interchangeably in a number of different contexts which include financial,

government, business, career, IT, product and project etcetera. This can attribute to some

confusion when the term portfolio is used in this study.

This is evident from the PMI’s (2010:4) definition of PPM: “Defined, a portfolio is a collection of

projects…” The term portfolio is used in the project context and therefore refers to a collection of

projects. This same example can be used in other contexts mentioned as well.

For the purposes of this study, the term portfolio will be defined as: The collection of related

tangible and intangible actions or initiatives. (Author’s own construct).

2.4 IT PORTFOLIO MANAGEMENT

Pieterse (2006) defines IT portfolio management (ITPM) as “a financial process, providing metrics

to assess the value of IT investments, prioritise IT initiatives and channel IT spending to increase

the return on investment while maintaining an acceptable risk-reward balance.” Pieterse (2006)

proposes that IT assets or investments are “all elements that drive IT spending e.g. projects,

software/hardware assets, skills, information and processes.”


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In terms of strategic business alignment, Pieterse (2006) argues that the objective of IT portfolio is

to ensure alignment of IT assets with the business strategy and also to support the process of

evaluating the intended business strategies in terms of feasibility and risk.

“IT portfolio management is not just a list of IT assets, but a process that evaluates the value

contribution of all IT assets with the objective of increasing the combined return on investment of

those IT assets” (Pieterse, 2006).

According to Jeffery and Leliveld (2004), ITPM is a “combination of practices and techniques used

to measure and increase the return on individual and aggregate technology investments – existing

and planned – and to reduce risk.” Jeffery and Leliveld (2004) proposes that ITPM builds on

financial portfolio theory, however with a stronger focus on balancing risk and whilst improving the

return on IT assets.

IT portfolio management focuses on managing a portfolio of IT assets with the objective of value

optimisation through business strategy alignment of these assets. These assets can include

human resources, software, hardware, processes and data. These assets are managed using

financial portfolio management principles to ensure value optimisation whilst balancing with risk.

2.5 PROJECT PORTFOLIO MANAGEMENT

“A portfolio is a collection projects (temporary endeavours undertaken to create a unique product,

service, or result) and / or programs (a group of related projects managed in a coordinate way to

obtain benefits and control not available from managing them individually) and other work that are

grouped together to facilitate the effective management of that work to meet strategic business

objectives. The components of a portfolio are quantifiable; that is, they can be measured, ranked,

and prioritised” (PMI, 2010).

PPM focuses on the collective management of projects and programmes undertaken by the

organisation to ensure that these projects and programmes are supporting the strategic intent and

direction of the organisation. PPM is therefore not discipline specific, but is applicable across all

projects and programmes within an organisation.

2.6 PROJECT LIFE CYCLE

The Project Management Institute (PMI) define the project life cycle as: “A collection of generally

sequential project phases whose name and number are determined by the control needs of the

organisation or organisations involved in the project” (Jugdev & Muller, 2005). Most project life

cycles include phases of conceptualisation, planning, execution and termination. As stated, the


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number and names of these project phases will be determined by the control needs of the

organisation and is normally the phases between the conception and termination of a project.

Project life cycle approaches will also be determined by the type of project undertaken. IT projects

require a different approach to that of a civil engineering projects for example.

2.7 PROJECT MANAGEMENT OFFICE

The PMI defines a Project Management Office (PMO) as follows: “An organisational body or entity

assigned various responsibilities related the centralised and coordinated management of those

projects under its domain. The responsibilities of the PMO can range from providing project

management support functions to actually being responsible for the direct management of a

project” (Hobbs and Aubrey, 2008). This definition emphasises that PMO’s are organisational

entities that function within a specific domain within the organisation. This implies that the domain,

which is referred to, should be defined clearly. PMO’s can therefore exist on departmental level or

strategic level within an organisation, depending on the definition of the domain for which the PMO

is responsible.

It is also necessary to appreciate that PMO’s can be categorised as multi-project or single-project

PMO’s. This adds to the complexity of the domain definition for which a PMO is responsible within

an organisation.

2.7 STRATEGY EXECUTION

“Implementing and executing strategy involves identifying all the hows – the specific techniques,

actions and behaviours that are needed for a smooth strategy-supportive operation – and then

following through to get things done and deliver results” (Hough, Thompson, Strickland & Gamble,

2008:258).

From a management perspective, the authors propose that “executing strategy is an action-

oriented, make-things-happen task that tests a manager’s ability to direct organisational change,

achieve continuous improvement in operations and business processes, create and nurture a

strategy-supportive culture, and consistently meet or beat performance targets” (Hough et al.,

2008:256).

In terms of the bigger organisational strategic management context, strategy execution is preceded

by the crafting and formulation stages of the organisational strategy. It falls within the responsibility

of senior management to formulate and execute on the organisational strategy of the organisation.


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2.8 CONCLUSION

This chapter introduced the basic concepts of modern portfolio theory, portfolio management, IT

portfolio management, project portfolio management, project life cycle, project management office

and strategy execution.

ITPM and PPM both have the objective of ensuring that initiatives are aligned to organisational

strategy. ITPM is however only focussed on the specific elements that are related to IT function

within an organisation. PPM however, has a more general scope and can include projects from all

across an organisation.

The project life cycle, project management office and strategy execution are all concepts that are

closely related to the subject of this study and it is therefore necessary for the reader to have an

awareness and high-level understanding of these concepts.


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CHAPTER 3

PPM AS DEFINED IN ACADEMIC LITERATURE

3.1 INTRODUCTION

The objective of this chapter is to review the definitions of Project Portfolio Management (PPM) as

described in the academic literature. The articles that are used as part of the literature review are

regarded as articles that have been subjected to the requirements of the literature of an academic

nature.

Academic research work in the PPM field is more focussed on the implementation and practice of

PPM within an organisation. This chapter discusses PPM from the following perspectives:

General definitions from the academic literature section discusses the definitions presented by

the authors as the basis from which they perform their research work on a specific aspect of

PPM.

The Portfolio management problem section discusses the definition of PPM from a perspective

of the selection and prioritisation of projects and portfolios and how to better the strategic

alignment of portfolios through the selection and prioritisation process.

PPM as a management tool for implementing organisational strategy proposes that PPM

should be viewed from a strategic organisational perspective and how PPM can be used as a

tool to implement organisational strategy.

PPM as a decision making process within an organisation discusses how PPM is considered to

be a decision making process within an organisation that supports the strategic intent of an

organisation.

PPM as a tool in managing new product development discusses how PPM is used in research

and development departments as a tool for making decisions around new product

developments.

Throughout the academic literature surveyed in this chapter, it is apparent that all of the above

perspectives are very much integrated. The literature shows that although authors discuss different

aspects and perspectives of PPM, a common agreement is noticeable about the underlying

principles of PPM. It is useful to present these perspectives separately as it highlights some of the

elements of PPM. These perspectives must however be seen and read as a holistic picture as

each contributes to a better understanding of PPM.


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3.2 GENERAL DEFINITIONS OF PPM FROM ACADEMIC RESEARCH

One of the most comprehensive definitions on PPM is provided by De Reyck et al. (2005). They

presented PPM from a holistic perspective that describes (1) the objectives and scope of PPM, (2)

pre-conditions required for PPM and (3) key elements of PPM.

According to De Reyck et al. (2005) the objective and scope of PPM includes the following:

Defining goals and objectives and thereby clearly articulating exactly what the portfolio is

expected to achieve

Understanding, accepting and making required trade-offs

Identifying, eliminating, minimizing and diversifying risk

Monitoring portfolio performance

Establishing confidence in achieving a desired objective.

These objectives and scope focusses on the management of the portfolios and does not provide a

clear link between management of the portfolios and the bigger organisational environment. It does

however provide a good benchmark of what managing single portfolio entails. A good appreciation

of the selection and prioritisation of projects within a set of resource constraints is shown.

According to De Reyck et al (2005), pre-conditions for PPM relate to those factors that

organisations should consider when adopting PPM approaches. These are:

Organisational strategy which relates to strategic goals and objectives that should be in place

to ensure that the portfolios supporting the strategic goals of the organisation can be aligned.

Business leaders’ involvement which requires management to have a holistic perspective of

the project portfolios in order to take better decisions around resource allocations from an intra-

and inter-portfolio perspective.

Team skills to be developed to such an extent that they can fully understand how the individual

projects support the portfolio and also how the portfolios support the organisational strategy.

These proposed pre-conditions positions PPM as part of the strategic architecture of an

organisation. It shows that PPM is geared towards selecting and executing those projects that are

aligned to and support the organisational strategy. It requires the leaders within the business to

understand an entire portfolio or range of portfolios and how these ultimately align with the

organisational strategy. The important aspect around team skills to be understood is that teams

that understand how PPM supports the organisational strategy, can implement these strategic

initiatives more effectively.


14

De Reyck et al (2005) consider the following to be key success factors of PPM within an

organisation:

Having a centralised view of the portfolio. This requires that a standardised inventory is taken

of all projects and portfolios.

Financial analysis requires the selection of a financial metric against which portfolios and

projects should be chosen and applied consistently.

A risk analysis is performed to ensure that the overall risk and reward of a portfolio is

considered.

Appreciation of interdependencies requires that interdependencies amongst projects within a

portfolio must be acknowledged and managed to reduce competition for available resources.

Prioritisation, alignment and selection of projects within a portfolio require that the selection of a

portfolio should seek to ensure alignment with the organisational strategy together with a well

balanced portfolio.

Constraints should be identified and understood in order to make decisions about the portfolio.

Dynamic re-assessment of the portfolio requires that portfolios be dynamically and periodically

re-assessed in terms of the strategic alignment and constraints that are applicable.

Need for specialised software highlights the fact that PPM is supported through effective

information collection, analysis and reporting.

The definition of De Reyck et al. (2005) creates a good understanding of not only the basic aspects

of PPM, but also how PPM is should be positioned within an organisation. It outlines the objectives

of PPM as well as the basic elements required to manage the process towards achieving the

desired objectives. It emphasises the importance of the strategic alignment within a finite set of

resources combined with consistent monitoring and performance of the portfolios against pre-

determined criteria.

De Reyck et al.’s (2005) discussion is presented however exclusively from an IT project

perspective. This might create the impression that PPM is a methodology exclusively focussed on

the IT environment which potentially limits the application of PPM in other areas of an organisation.

Buys and Stander (2010:3) presents the objectives of PPM as follows:

To become conscious of all the individual listings in the company’s project portfolio,

To develop an overall view and a deeper understanding of the portfolio as a whole,

To allow sensible sorting, adding, and removing of items from the portfolio based on their

costs, benefits, and alignment with long-term strategies and goals,

To allow the company to get the highest return from resources invested.


15

The main difference between the definitions of De Reyck et al. and that of Buys and Stander

centres around the objectives of what PPM should achieve. De Reyck et al are more general in

their argument which allows for PPM to be applied achieving any defined goal within any defined

context. Buys and Stander argues that PPM should be used as a methodology to ensure project

alignment with organisational strategy. Although these objectives differ, they are mutually

supportive of each other by acknowledging that PPM is a management process which has a

specific goal.

Hunt and Killen (2008:1) define PPM as: “a decision process that oversees the resource allocation

and on-going decisions related to a strategically oriented portfolio of projects”. The authors argue

that this on-going decision process includes all of new and current projects with the main goal of

maximising the value of the portfolio from a strategic perspective. The project portfolio evaluation is

performed within the constraints of strategic alignment, balance of risk versus benefit and resource

capacity of the organisation.

Archer and Ghasemzadeh (1999:208) define a project portfolio as: “a group of projects that are

carried out under the sponsorships and/or management of a particular organisation. These projects

must compete for scarce resources (people, finances, time etc.) available from the sponsor, since

there are usually not enough resources to carry out every proposed project which meets the

organisation's minimum requirements on certain criteria such as potential profitability etc.”

This definition is proposed as part of the authors’ work on developing a portfolio selection

framework. It describes the basic elements of project evaluation and comparison within a portfolio

with the objective of selection of projects in a portfolio. Archer and Ghasemzadeh (1999:208)

focuses on project portfolio selection and argue that “it is a periodic activity that involves selecting

a portfolio from available project proposals and projects currently underway that meets

organisational objectives in a desirable manner without exceeding available resources of violating

other constraints.”

Archer and Ghasemzadeh (1999) establish the link between organisational strategy and portfolio

management. Their proposed framework integrates strategic considerations, portfolio selection and

individual project evaluation within a set of constraints in an effort to establish a decision and

management framework.

Blichfeldt and Eskerod (2008:358) used the definition of Archer and Ghasemzadeh (1999) as the

basis from which they conducted a study on actual PPM practices. From this study, PPM is

presented as a management methodology that includes:


16

Initial screening, selection and prioritisation of project proposals

Concurrent reprioritisation of projects in the portfolio

Allocation and re-allocation of resources to projects according to priority.

The findings of Blichfeldt and Eskerod’s (2008) study shows that the main focus of PPM practices

within an organisation should remain on the selection, prioritisation and resource allocation within

the portfolio. This presents a very good basic understanding of what PPM entails. One important

aspect that is not mentioned by the authors is the criteria against which projects are evaluated and

decisions around prioritisation of projects within the portfolio are taken.

Blichfeldt and Eskerod’s (2008) research findings indicate that project alignment with strategic

organisational objectives is not considered to be one of the objectives of PPM. Organisations do

not necessarily utilise PPM as vehicle through which project selection and execution is prioritised

based on the strategic intent of an organisation. PPM is only utilised as process through which

projects are selected and prioritised within the constraints of resource availability.

Laslo (2010) presents PPM as an “integrated method for optimising resource planning and

scheduling”. The author presents this against the background of realising that project management

as a discipline on its own doesn’t does not sufficiently recognise the interdependencies of single

projects in multi-project environments. Laslo (2010:609) argues that in multi-project environments

the vast majority of projects share resources and PPM can be used as an approach to align the

resource scarcity with the overall strategic direction of the organisation.

Based on this argument, Laslo (2010:609) further proposes that PPM can be used as a method of

minimizing expenses in multiple project environments related to resource scheduling.

Laslo’s work supports that of De Reyck et al. (1999) and Blichfeldt and Eskerod (2008) by

proposing that PPM is a methodology with which project selection and prioritisation is done to

ensure that resource allocation is optimised within the constraints of the overall strategic direction

of an organisation.

According to Rad and Levine (2008:1) “PPM involves a logical and formalised selection of projects

and a methodical execution of these projects to their logical and successful conclusion”. This high

level overview of PPM is supported by highlighting the difference between PM and PPM. Rad and

Levine (2008:1) explains that PM is “a process whereby each project is approved and managed

independently.” PPM facilitates the process of managing independent projects in an inter-

dependent manner. It will ensure that project selection and prioritisation is done consistently to

ensure that projects are aligned with the organisation’s strategic objectives. PPM introduces a level


17

of management complexity as “projects are no longer conducted as floating islands in an

enterprise” (Rad & Levine, 2008:1). This definition presents a balanced view of PPM because it

highlights the basic elements of PPM and creates a good understanding of the goal of PPM in

terms of aligning project objectives with strategic objectives.

The general definitions as found in the academic literature are very much aligned because these

definitions recognise the fact that PPM is a management methodology that should have, as a

minimum, the objective of aligning portfolios and projects to the organisational strategic intent of

the organisation. This alignment is done through selection and prioritisation against defined criteria

within a set of resource dependent constraints.

3.3 PPM AS A DECISION MAKING PROCESS

Banerjee and Hopp (2001) argues that one of the issues around PPM is finding the optimal way of

“allocating a limited budget to a set of candidate projects over time with the objective of maximizing

expected net present value.” This is referred to as the Project Portfolio Management Problem

(PPMP).

This allocation of limited budget can also be understood as the allocation of limited resources to

multiple projects and programmes. The authors propose that the allocation of limited budget or

resources is done within the constraints of a number of criteria against which all current and future

projects are evaluated and selected. This explanation however only addresses a very small aspect

of PPM as it only deals with the decisions around selection and prioritisation of the projects in a

portfolio.

“PPMP models often fall short of reality with respect to the fact that most project portfolio decisions

involve more than a single criterion. Frequently, these criteria are non-quantifiable and highly

subjective, for example long term strategic fit and company image” (Banerjee et al., 2001:5).

Decisions involving the selection and prioritisation of projects as part of a portfolio cannot be made

through a pure mathematical approach. Mathematical decision models can give a certain degree of

confidence when making decisions, but a degree of subjectivity and risk will always be present

when making decisions around selection and prioritisation of projects in a portfolio.

One of the key objectives of PPM is to provide management with the information necessary to

determine whether the strategic intent and direction of the organisation is supported by the projects

that are undertaken in an organisation. This highlights the need for consistent application of

selection and prioritisation criteria to projects in order to get optimal results and desired outcomes.


18

Banerjee et al. (2001:3) indicates through their research that issues around the selection and

prioritisation moved away from using decision models to decision information systems. They

further show in their work that mathematical modelling of selection and prioritisation doesn’t

address the needs of the end users of the information it produces. Their research indicates that

more focus should be placed on the development of schemes that can support the decision making

processes around the selection and prioritisation of projects and portfolios.

Similar to the work done by Banerjee et al. (2001), Herbots, Herroelen and Leus’ (2008) research

deals with how the scarcity of resources impacts the value of projects. According to Herbots et al

(2008:4) “project portfolio management deals with the continuous flow of projects; it entails

choosing the right projects and the associated capacity allocation”.

Herbots et al.’s (2008) research focus on the capacity allocation and downsizing decisions that

needs to be made using PPM. Although not as directly stated by the authors, these types of

decisions relate to the PPMP as introduced by Banerjee et al. (2001). The authors show that

project selection and capacity / resource allocation within a portfolio should be considered in terms

of the constraints of the bigger strategic context and direction of an organisation. The definition that

the Herbots et al. (2008) propose advances that there is a continuous change of projects within a

set of constraints. This adds to the complexity of decisions that need to be taken within the bigger

strategic context of the organisation.

Hunt and Killen (2008:1) describe PPM as decision process that oversees the resource allocation

and on-going decisions related to a strategically oriented portfolio of projects. Hunt and Killen

(2008) are supported by Cooper, Edgett and Kleinschmidt (2001:3) who defines project portfolio

management as “a dynamic decision process, whereby a business’ list of active new product (and

development) projects is constantly up-dated and revised. In this process, new projects are

evaluated, selected and prioritised; existing projects may accelerated, killed or de-prioritised; and

resources are allocated and re-allocated to active projects. The portfolio decision process is

characterised by uncertain and changing information, dynamic opportunities, multiple goals and

strategic considerations, interdependence among projects, and multiple decision-makers and

locations. The portfolio decision process encompasses or overlaps a number of decision-making

processes within the business, including periodic reviews of the total portfolio of all projects

(looking at projects holistically, and against each other), making Go/Kill decisions on individual

projects on an on-going basis and developing a new product strategy for the business, complete

with strategic resource allocation decisions.”

This is a comprehensive definition as it addresses aspects on PPM from varying perspectives and

gives the reader a good understanding of what PPM consists of and how and where it should be


19

applied in an organisation from an organisational management perspective. It supports the work of

Banerjee et al (2001) as it highlights the fact that decisions are made in an ever changing

environment within a set of constraints. This definition also integrates the decision process with

that of the strategic decision process within an organisation.

Both these definitions emphasise the decision support and process attributes of PPM. Although not

as directly, these definitions position PPM similarly to the definition presented by Yuming, Quan

and Peng (2007) as a process for implementing organisational strategy. These definitions do

appreciate that PPM is conducted in conditions that are similar to that of the strategic decision

environment of an organisation.

The work of Banerjee et al (2001) and Herbots et al (2008) deal primarily with how to make the

decisions involving the selection and prioritisation of projects within a portfolio. Their work focuses

on how to select the most appropriate criteria for project evaluation purposes. Although the focus

of the different areas differs slightly, it strongly supports each other and emphasises the decision

making support aspect of PPM.

This section shows that decisions involving portfolio selection and prioritisation remain one of the

key elements of PPM. It recognises and acknowledges the complexities involving the selection and

prioritisation of projects. It also emphasises the importance of making the correct decisions about

the criteria against which projects are to be evaluated as this has a knock-on effect on the

decisions that are taken around the strategic alignment of portfolios in the organisation.

3.4 PPM AS A TOOL FOR IMPLEMENTATING ORGANISATIONAL STRATEGY

“The strategic goal of an organisation is one of the most illusive concepts, certainly in the context

of a project portfolio model” (Rad and Levine, 2008). It is also argued that verbalisation is one of

the most difficult aspects of defining an organisational strategy. Through selection and

prioritisation, PPM facilitates the “distillation of the initiatives for the projects that are currently

underway, and recently completed, within the organisation” (Rad et al., 2008:3).

Yuming et al. (2007) describe PPM within the bigger context of Enterprise Strategic Management

(ESM). The authors argue that PPM becomes the tool “by which the crafted strategy is clearly

translated into a workable plan for their resources, provides the approaches and processes for

enterprise to work in total alignment from top to bottom, and the abilities to achieve total alignment

of the enterprise, and become the foundation for enterprise wide shared value and commitment.”

(Yuming et al., 2007:4).


20

This definition moves away from other definitions of PPM that focuses on objectives, goals and

elements of PPM, but rather focuses on where PPM fits in to the bigger management structure and

processes of an organisation. This definition positions PPM as a method for implementing and

executing organisational strategy.

Figure 3.1 presents the Framework of Application of PPM, PM and Project Management in ESM.

This framework makes a clear distinction between the overall corporate strategy, business strategy

and functional strategy. This framework also shows that projects become the tools with which

strategy is executed. The selection and prioritisation of these projects is however influenced by the

business strategy, which is in turn influenced by the corporate strategy through PPM.

The text boxes on the right hand side of Figure 3.1 represent the objectives of each of the different

levels. Corporate strategy is concerned with the vision, mission and goals of the organisation. The

business strategy level is where the more specific goals and objectives are formulated. These

Initiate, Analysis, Design, Build, Validate, Implement

Vision, Mission, Objectives and Goals

Proposals Prioritisation / Selection

Building Competitive Advantage Response to Changing Conditions Collaboration

Proposed Initiatives, Cost Benefit Analysis, Sponsorship approval, Project Prioritisation, Measure Results

Corporate Strategy

Figure 3.1: The Framework of Application of PPM, Programme Management and Project

Management in ESM

Source: Reproduced : Yuming et al, 2007:3

PM

Functional

Strategy

Project

Management

Business Strategy

PPM


21

business strategy goals and objectives are then implemented through projects that form part of the

functional strategy.

This definition of Yuming et al. (2007) and that of PRINCE2 as discussed in Chapter 4 section 4.6

mutually supports one another. PRINCE2 refers to PPM as “a coordinated collection of strategic

processes and decisions that together enable the most effective balance of organisational change

and business as usual” (PRINCE2, 2010). Both of these definitions focus strongly on the strategic

importance of PPM as a management methodology for implementing and enabling strategy.

The research of Dimmit, Iamratanakul and Shankar (2009) focuses on improving PPM through

better strategic alignment. The authors argue that more should be done to determine the strategic

alignment and fit of a project portfolio. This can be achieved through:

Maximizing the value of the Portfolio (MVP) serves to maximise the value of the portfolio

against one or more business objectives. These objectives can be related to profitability, risk

or strategy etcetera. The end result of this objective is a selected list of projects. (Dimmit et al.,

2009:1290)

Achieving a balanced portfolio (ABP) serves to obtain balanced portfolios of projects,

programs, and other components. A balanced portfolio is a condition when its components are

balanced in terms of a number of key parameters. (Dimmit et al.,2009:1290)

Aligning Strategy with a portfolio (ASP) serves the need to build a link between corporate

strategy and portfolios. All the portfolio’s components should align with business strategy,

contribute to strategic objectives, and allocated resources that reflect the strategic direction of

that business. (Dimmit et al.,2009:1291)

This definition strongly aligns with the MPT of selection based on underlying criteria, achieving a

balanced or risk versus return and ensuring that the portfolio aligns with the overall investment

strategy and maximising the return on the investment made.

What is interesting to note about the basic definition proposed by Dimmit et al (2009), is that these

objectives are prioritised in the research. MVP is awarded first priority, ABP second and ASP third

priority.

It is the opinion of the author that this prioritisation order doesn’t support the basic premise of PPM.

The first goal or objective of PPM should be the alignment of the portfolio with the strategic

direction and intent of the organisation. It then makes natural sense that finding a balanced

portfolio and maximisation of this portfolio should follow. The first constraint for PPM should always

be strategic alignment and all other elements should be managed within this constraint.


22

This section shows that PPM can also be used a tool with which an organisation can implement its

organisational strategy. The first requirement is that a well-defined organisational strategy exists.

This will enable the formulation of goals and objectives that can be translated into individual

projects through which strategy implementation and execution becomes tangible. Decisions

involving the selection and prioritisation of projects are made within the constraints of the strategic

direction and intent to ensure that strategy is executed and implemented as intended.

3.6 PPM AS A TOOL IN MANAGING NEW PRODUCT AND PRODUCT DEVELOPMENT

Cooper and Edget (2011) presents a definition of PPM against the context of new product

development within an organisation. “Portfolio management for new products is a dynamic decision

process wherein the list of active new products and R&D projects is constantly revised. In this

process, new projects are evaluated, selected, and prioritized. Existing projects may be

accelerated, killed, or de-prioritized and resources are allocated (or reallocated) to the active

projects.”

According to Cooper and Edget (2011), PPM in this context is focussed on the value maximisation

of the portfolio by selecting and prioritising projects within the constraints of balancing the portfolio

and aligning to organisational strategy. Another aspect considers the project pipeline resource

balancing and sufficiency. This deals with ensuring that the pipeline of projects is both sufficient

and is balanced with regards to the resources available to execute these projects in future.

Hunt and Killen (2008) propose the following definition of PPM from a perspective of service

product innovation PPM: “PPM methods aim to improve the product success rates by ensuring that

a strategically aligned portfolio of innovation projects is maintained.” Hunt and Killen (2008) further

proposes that in order “to provide the best value to the organisation, the portfolio must contain a

balance of project types and risk levels and the number of projects must be limited to ensure that

all projects can resourced effectively, but sufficient to enable an adequate flow of projects and new

product introductions.”

PPM as a tool for managing new product and product development is utilised in a specialised area

within an organisation. Portfolios and projects are very specific to research and development

activities. Due to these reasons, a lot of emphasis is placed on the constraint of resource

availability. Strategic alignment is determined and measured against the needs of the market

organisation’s market in which it operates.

Products and services delivered to the market by organisations need to have a strategic alignment

by default, but the timeliness of delivering these products or services to the market relies very


23

much on the resource availability within the organisation. Value maximisation requires balancing of

resources with the current and future project pipeline.

3.7 CONCLUSION

The review of the literature in this chapter shows that PPM can be broken down into two separate,

but integrated components namely the objectives of PPM and the elements which are necessary to

achieve the objectives.

In general, the overall objective of PPM is well defined as the alignment of project objectives with

the strategic objectives of the organisation. The basic elements that support this overall objective

are the selection and prioritisation of portfolios against pre-defined criteria. This selection and

prioritisation has to be done within the constraints of a finite set of resources which is available

within the organisation.

A fair amount of research is done on how to optimise and regulate the decision-making processes

around selection and prioritisation of projects within a portfolio. It is generally accepted that is a

dynamic process that combines both objective and subjective methods of selection and

prioritisation.

PPM is positioned between the operational and strategic levels within an organisation (refer to

Figure 3.1). This positioning requires commitment from both the senior and operational

management to ensure that the overall objective of PPM achieved.

It is also through this positioning that PPM is regarded as an effective way of executing

organisational strategy. The selection and prioritisation of projects enables senior management to

more effectively control the execution of organisational strategy through project execution. PPM

also facilitates the flow of information back to senior management that enables the monitoring of

strategy execution.

PPM is applicable to number of different contexts within industries or within organisations. The

basic objective and elements of PPM can be applied to a varying number of contexts given that it is

understood and well defined.

PPM is essentially a management tool and methodology that, if used effectively, can assist in

selecting those projects across departments that ultimately adds value by supporting the overall

organisational strategy.


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CHAPTER 4

PPM AS DEFINED BY INDUSTRY BODIES

4.1 INTRODUCTION

This chapter will review and discuss the definitions of Project Portfolio Management from the

Project Management Industry body perspective. There are only a small number of recognised

industry bodies in the project management industry. The project management industry bodies are

located in different geographic regions of the world, but the most prominent are based in Europe

and the United States of America. These industry bodies reach into all different parts of the world

mainly through regional chapters or affiliations in local countries where they are represented.

The following industry bodies are included as part of the literature review:

International Project Management Association (IPMA)

Association for Project Management (APM)

American Management Association (AMA)

Project Management Institute (PMI)

Projects in Controlled Environments (PRINCE2)

4.2 INTERNATIONAL PROJECT MANAGEMENT ASSOCIATION (IPMA)

The International Project Management Association (IPMA®) is a non-profit project management

organisation that represents more than fifty project management associations from all continents of

the world. The association focuses exclusively on project management and promotes project

management to business and organisations across the world. IPMA also offers a certification

programme through which the project management profession recognition is increased. (IPMA,

2011a).

No explicit definition of PPM is provided by IPMA. The reason for this might be that the association

views PPM as a separate discipline which does not fall within its scope of services provided by the

association. The vision of the association is focussed on the project management industry through

setting of standards and improving methods of certification. (IPMA, 2011b).

In his research on the relationship between project managers and executives of an organisation,

Wijngaard (2008) shows that a gap exists between the executive of an organisation and the project

managers of an organisation. He argues that this gap is the result of differing perspectives

between the project managers and the executives of an organisation due to their differing roles


25

within an organisation. His research and work indicates that project managers tend to have a short

term view focussed on project execution where executives are more focussed on the long term

results both positive and negative.

The work of Haukka (2009) on project portfolio maturity supports the research of Wijngaard and

shows that there is a distinction to be made between project management and project portfolio

management. Haukke proposes that an organisation should develop and implement a singular

standardised project model or methodology that should govern the way in which all projects are

executed.

He further proposes that this standardised project model should clearly distinguish between the

management of the projects and the implementation processes of the projects. It is further

important that the different implementation processes should be managed according to the same

standardised management processes. This standardised project model or methodology links the

management of the different projects to the management system of the entire organisation.

According to Haukke, PPM requires a change in the management culture of an organisation. This

is evident from the arguments above that a singular standardised project model should be

implemented if PPM as a management methodology is to succeed.

“The essential challenge in portfolio management is doing the right things and having the abilities

to do them. Traditional project management concentrates more on doing things right.” (Haukke,

2009).

4.3 ASSOCIATION FOR PROJECT MANAGEMENT (APM)

The Association for Project Management is the largest independent professional body of its kind in

Europe with the mission to develop and promote the professional disciplines of project and

programme management for the public benefit. The APM has its own APM Body of Knowledge

which is continuously developed through the combined experience of its members.

The APM has a formal definition of PPM and is stated in their 5th Edition of its Body of Knowledge

Definitions as: "Portfolio management is the selection and management of all of an organisation’s

projects, programmes and related business-as-usual activities taking into account resource

constraints. A portfolio is a group of projects and programmes carried out under the sponsorship of

an organisation. Portfolios can be managed at an organisational, programme or functional level”.

(APM, 2010:3)


26

This definition creates the understanding that PPM is only about managing different projects within

a certain set of constraints. It does not make a clear distinction between project management itself

and the higher level of management that is generally required from a PPM perspective.

Although this definition makes reference to the fact that a number of projects are managed within a

certain set of constraints, it does not indicate how the management of these projects are linked to

organisational strategy and finding the optimal mix of projects to support the organisational

strategy.

4.4 THE AMERICAN MANAGEMENT ASSOCIATION (AMA)

The American Management Association is an organisation that specialises in training solutions for

a number of different management disciplines. Although not specifically focussed on the

Information Technology or Project Management industries, the AMA does provide a substantial

source of information on a number of management topics including PPM.

PPM is described by the AMA from the perspective of the Project Management Office (PMO) and

how PPM can be used by the PMO within an organisation as a methodology to manage all projects

within an organisation relative to each other and the organisational strategy.

The AMA defines PPM as follows: "Project Portfolio Management is inherently a responsibility of

executive and senior managers. Establishing a project portfolio management capability enables the

PMO to facilitate the involvement of executives and senior managers in project oversight. It allows

the PMO to manage and coordinate on-going executive and senior manager guidance and

participation in processes, deliberations and business decisions related to:

Alignment of projects with business strategy,

Approval of the project "business plan" and funding,

Allocation of organisational resources for project work,

Prioritisation of projects in in the portfolio collection,

Review of on-going project and portfolio performance." (Dinsmore & Cabanis-Brewin,

2006:479)

This definition, places a lot of emphasis on the collaborative involvement of the senior managers

and executives mainly through oversight activities. It further positions PPM a on a strategic level

within the organisation with it being the responsibility of the senior executives and management in

the organisation. It does not go into too much detail on how PPM is executed in practice, but does

provide a general sense of understanding where PPM fits into the organisational management

environment.


27

This definition clearly establishes the link between project management functions and the strategic

management of these projects.

4.5 THE PROJECT MANAGEMENT INSTITUTE (PMI)

The Project Management Institute (PMI) is one of the world’s leading not-for-profit membership

associations for the project management profession. Its purpose is to advance the project

management profession through globally recognised standards and certifications, collaborative

communities, research programs and professional development (PMI, 2010).

The PMI’s standard on Project Portfolio Management presents PPM from two separate, but

integrated perspectives. These two perspectives are the definition of a portfolio, and secondly the

definition of portfolio management.

A portfolio is defined as a “collection of projects (temporary endeavours undertaken to create a

unique product, service or result) and/or programs (a group of related projects managed in a

coordinated way to obtain benefits and control not available from managing them individually) and

other work that are grouped together to facilitate the effective management of that work to meet

strategic business objectives. The components of a portfolio are quantifiable; that is, they can be

measured, ranked, and prioritised” (PMI, 2006:4).

According to the PMI standard a portfolio represents the organisation’s set of active programs,

projects, sub-portfolio and other work at a specific point in time. (PMI, 2006:4)

A portfolio reflects investments made or planned by an organisation, which are aligned with the

organisation's strategic goals and objectives. It is where priorities are identified, investment

decisions are made and resources allocated (PMI, 2006:4).

An interesting aspect to emphasise from the above definition is the fact that a portfolio allows the

organisation from obtaining benefits and control otherwise not possible from managing the projects

individually. A portfolio therefore requires the right projects or programmes to be bundled together

in order to optimise the benefit and control as referred to.

Project Portfolio Management is defined in three separate, but similar ways in the PMI standard on

Project Portfolio Management.

Firstly, PPM is defined as the centralised management of one or more portfolios, which includes

identifying, prioritising, authorising, managing, and controlling projects, programs and other related

work, to achieve specific strategic business objectives (PMI, 2006:5).


28

Secondly, PPM is described as an approach to achieving strategic goals by selecting, prioritising,

assessing and managing projects, programs and other related work based upon their alignment

and contribution to the organisation strategies and objectives (PMI, 2006:5).

Lastly, PPM combines the organisation’s focus of ensuring that projects selected for investment

meet the portfolio strategy with the project management focus of delivering projects effectively and

within their planned contribution to the portfolio. (PMI, 2006:5)

This definition of PPM distinguishes clearly between project management and portfolio

management and also provides a perspective on how these two disciplines integrate with each

other.

There is also a correlation between the basic premises and principles of Modern Portfolio Theory

(MPT). A strong emphasis is placed on the alignment to strategic objectives from both a portfolio

and project management perspective.

The link between a portfolio and portfolio management is made very clearly in these definitions of

portfolio and portfolio management. The components of a portfolio are quantifiable and can be

measured, ranked and prioritised. Portfolio management encompasses the decisions that are

taken about the different portfolios based on the portfolio metrics. Without these components being

quantifiable in some way, portfolio management cannot be done effectively. This is graphically

presented in Figure 4.1.

Figure 4.1: The relationship between portfolio management and portfolios.

Source: Authors own construct

Components

Portfolio

Project Portfolio Management

PPM Decision Making Processes

Portfolio A

Project A‐1

Program A‐2

Portfolio B

Project B‐5

Program B‐76


29

The PMI’s definition of PPM is a very clear and structured definition that brings together all the

different aspects that can be associated with PPM. It addresses both the implementation and

management aspects and how these should integrate with each other. It also improves the

understanding how PPM fits into the bigger organisational context.

4.6 PROJECTS IN CONTROLLED ENVIRONMENTS (PRINCE2)

PRINCE2 is a de facto standard developed and used extensively by the Office of Government

Commerce (OGC) in the UK and is widely recognised and used in the private sector, both in the

UK and internationally. PRINCE2 is a process-based approach for project management, providing

an easily tailored and scalable project management methodology for the management of all types

of projects. (PRINCE2, 2010)

The Office of Government Commerce (OGC) refers only to portfolio management and not project

portfolio management. This is attributed to its broader definition of portfolios. The OGC firstly

defines a portfolio as “the totality of an organisation’s investment (or segment thereof) in the

changes required in order achieving its strategic objectives” (OGC, 2010:2)

Portfolio management is referred to as “business change initiatives” (OGC, 2010:2). It is further

defined as “a coordinated collection of strategic processes and decisions that together enable the

most effective balance of organisational change and business as usual”. (OGC, 2010:2).

The OGC further states that portfolio management as a business activity should be permanently

adopted and incorporated in the strategic planning process of the business. There should be a

continual prioritisation of the portfolio in order to ensure the alignment with the overall strategic

perspective of the organisation. The OGC also recommends that the portfolio management activity

should sit in a business change or strategy department and report directly to the management

board.

The OGC places a strong emphasis on the link that portfolio management establishes between

business as usual activities and organisational strategy (as per their definition). Portfolio

management facilitates collaborative decision making, in the context of the whole organisation and

by the appropriate people at the appropriate level. (OGC, 2008:5). This is graphically presented in

Figure 4.2.


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Figure 4.2 - Run the business; change the business

Source: Office of Government Commerce, 2008:5

This definition of portfolio management recognises the link between organisational strategy and

project portfolio management. It also presents the concept of PPM to the reader from a different

perspective. Projects are defined as “invested change initiatives required to achieve strategic

objectives” (OGC, 2008:2). This use of the term change initiatives leads to a broader

understanding of what the concept of a project entails within an organisation. It requires an out-of-

the-box approach when thinking about the use, and definition, of projects within an organisation. A

project is therefore not limited to product development or implementation of an IT system for

example, but becomes a lot wider in definition and scope.

This perspective of projects being change initiatives within an organisation can also lead to more

emphasis placed on change management as part of the process of portfolio management. This

definition therefore introduces another metric against which the readiness for change of an

organisation is measured. It can be argued that the readiness for change is sometimes more

important to the success of a project than merely having enough resources available.

Strategic Objectives

Managed Benefits

Managed Programmes and Projects

Change the BusinessPortfolio

Management

Run the Business

Business as Usual


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4.7 CONCLUSION

Even though most of the industry bodies are primarily focussed on project management as a

discipline, it is noted that PPM as a related discipline is gaining more prevalence in the project

management industry. The PMI has even gone as far as publishing a standard on PPM.

Amongst these industry bodies there is a fair amount of consensus about the overall objective of

PPM which is the objective of managing a number of projects and programmes according to

defined processes that will assist in ensuring that these portfolios are aligned to and support the


PPM is positioned within the organisation on strategic management level and it is noted that a lot

of emphasis is placed on the importance of senior management involvement and commitment to

ensure that the supposed benefits of PPM is realised.

The industry bodies in general clearly distinguishes between portfolio management and project

management as separate disciplines, but also gives clear guidance on how these two disciplines

are integrated and create the synergy necessary to derive the intended benefits of PPM.

It is noted in the literature reviewed that industry bodies do not limit the application of PPM to any

specific area or industry. This emphasises that the principles of PPM is applicable to any context,

as long as the context is understood and defined.

Industry bodies are in general regarded as thought leaders in their respective industries. The

definitions provided by the project management industry bodies gives a clear understanding of

PPM in terms of objectives, requirements, implementation, basic elements and positioning of PPM

within an organisation.


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CHAPTER 5

PPM AS DEFINED BY THE POPULAR PRESS

5.1 INTRODUCTION

The group popular press includes magazines, newspapers, books, online communities and other

similar publications and content. The statements made by contributors in this area can not

necessarily be accepted as researched facts, but they do constitute a fair part of the generally

accepted public knowledge on the subject matter of this study.

It will be assumed that the authors of these articles have not done formal, peer reviewed academic

research and that their opinions are based on their own experience, knowledge and perception of

PPM.

This area has been included on the assumption that the majority of organisations obtain their

information on PPM from this source. Another prominent source of information are software

vendors (discussed in chapter 6). There are some overlaps on the subject matter of PPM between

popular press and software vendors. This can be attributed to both of these areas being active in

the public domain whereas academic articles, consulting groups and industry bodies are more

exclusive and propriety in nature.

It will also be assumed that due to the nature of popular press, it is expected that definitions found

in this area will vary in context and definition that ranges from management focus,

implementations, and other aspects of PPM.

5.2 DEFINITIONS

5.2.1 General Articles

Duffy (2002) defines PPM as “the tracking and management of multiple IT projects with a clear eye

on costs and benefits as well as the potential overlap amongst them. In that sense it is simply

project management applied collectively to a company’s entire group of projects.” This definition is

very simplistic and focuses only on IT related projects. This definition does not recognise the

elements of strategic alignment, selection and prioritisation of projects against defined criteria.

The emphasis on IT related projects can lead to a narrow use and application of PPM within an

organisation. Project management principles are limited in scope and does not realise the full value

of PPM which is combining the optimal mix of projects that support organisational strategy.


33

Ellenbogen (2008) argues that PPM involves the strategic and on-going assessment of all

proposed projects. Ellenbogen (2008) further argues that PPM arose out of the need to “rationalise

and try to achieve greater transparency at the executive level of project spend and benefit”.

The author further equates a project portfolio to an investment portfolio and states that “taking a

project-equals-an-asset-approach will lead to a less cavalier attitude in which investments to

pursue” (Ellenbogen, 2008).

This definition directly draws its underlying principle from the financial portfolio management

discipline by proposing that projects should be viewed like any other assets that are invested in by

an organisation. It also links the management of the project portfolio to the alignment with the

organisation’s strategic intent.

Ellenbogen (2008) refers to the term prosed projects which can lead to multiple interpretations.

One interpretation can lead the reader to think that the author is referring to projects that are still in

the project pipeline and will only get underway at some future point in time. This interpretation only

includes projects that have an effect in future. There is no consideration for the projects that are

currently underway and how they influence the portfolio and its contribution to strategy.

The other assumption will be where proposed projects are considered to include all current and

future projects that are included in the current portfolio and therefore managed as part of the

objectives of the company.

Ellenbogen (2008) does not make any specific mention of the whether projects are categorised.

This can create the perception that all projects are considered to be part of the portfolio regardless

of their context within the organisational environment.

Entrekin (2007) advances that one of the main drivers of implementing a PPM solution in an

organisation is the opportunity to simplify the organisation’s project management processes.

Entrekin (2007) advances this argument from the underlying assumption that within an

organisation’s project management processes, there are a lot of complexity involved in managing

all of these projects as the organisation grows and takes on more projects. This complexity is

attributed to factors that can intuitively be accepted in a growing organisation.

One of the most pertinent of these complexity factors is decentralisation. It is due to decentralised

management of individual projects that a lot of complexity is introduced into the project and

portfolio management processes.


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Entrekin (2007) states that “moving from a decentralized project management approach to a

centralized project portfolio approach is a huge opportunity to simplify”. It is important to note the

clear distinction that the author makes between a decentralised project management approach and

centralised project portfolio approach. This statement suggests that there is distinction between

project portfolio management and project management processes.

According to Entrekin, it is clear that when adopting PPM, one of the key considerations is

centralisation. This idea of centralisation supports the suggestion of Ellenbogen (2008) that “all

projects are included” in the project portfolio.

Even though there is no formal definition presented by the Entrekin on what exactly PPM is, this

article brings emphasises an aspect of PPM that is central to its intended purpose as a

management methodology or process.

The idea of a centralised approach as suggested by Entrekin is intrinsically strong, but

centralisation must be contextualised in order for it to be defined.

If it is assumed that PPM consists of setting project objectives, allocation of resources amongst

projects, appropriate fund allocation and aligning projects to strategic objectives. Strategic

objectives must be defined with a specific entity’s end goals in mind otherwise they become merely

statements. A project objective can only be defined within a bigger context for it to really support

and add its intended value. Resources and fund allocation has to be finite – hence the need to be

defined and managed within a bigger defined context. These aspects can only become meaningful

if it is done within a specifically defined context.

It is only within this defined context that the idea of centralisation can be applied and used. If there

isn’t a defined context and a centralised reference point, centralisation therefore by default can’t

exist. This also highlights the necessity of any project portfolio being managed within a defined

context.

The question therefore has to be asked about any project portfolio: Where does it fit in within the

wider organisation? Only when this question is adequately answered, does it become possible to

implement a centralised project portfolio approach. Turbitt (2005) gives an indication by suggesting

that projects are grouped so that they can be managed as portfolios. Portfolios have “a boundary

which is related to the one thing the company wants to achieve” (Turbitt, 2005). Regardless of what

the author implies with the one thing a company wants to achieve, this definition helps explain

contextualisation as discussed in the previous paragraphs.


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Computerworld magazine (2002) defines PPM as the “organisation of a series of projects into a

single portfolio consisting of reports that capture project objectives, costs, timelines,

accomplishment, resources, risks and other critical factors”. It elaborates further by stating that

“executives can then readily review entire portfolios, spread resources appropriately and adjust

projects to produce the highest departmental returns”.

Although a strong emphasis is placed on reporting of metrics, this definition creates the

understanding that projects are selected and prioritised with an objective of value maximisation

within a resource dependent constraint.

This definition also suggests that a portfolio is a series of projects that are bundled together into a

single portfolio. This creates the understanding that there is some kind of sequential time

dimension associated with a portfolio where one project follows after completion of another. A

better choice of term could have been parallel or related. These two terms imply that projects can

be executed independently, but relative to all other projects in the portfolio.

Further direct reference to MPT suggest that “as its name implies, project portfolio management

groups projects so they can be managed as a portfolio, much as an investor would manage his

stocks, bonds and mutual funds” (Computerworld, 2002). It is based on this statement that the

author furthers the argument that discussions are not just about how much a project will cost, but

also its anticipated risks and return in relation to other projects.

All though this definition is a bit high level and presented from an IT PPM point of view, it does

have a strong link and reference back to the fundamentals which PPM is founded on.

Jordan (2009) argues on a very high level that PPM should be used to enable businesses to make

the decisions about which projects to include based on a number of criteria. Jordan further argues

that PPM is only effective when the data about the project portfolio is used by management to

make the decisions that will ensure that the optimal portfolio is supporting the organisations goals.

PPM therefore has a prominent dimension of being a management information tool that assists in

decision making about projects and project portfolios. The real value of PPM as a management

tool is realised when decisions are made and actions taken based on the decisions.

The Cutter Consortium (2003) defines PPM as a framework for thinking about prioritisation. PPM is

described as an umbrella concept where all projects under this umbrella are managed individually,

however, from a senior management perspective these projects are viewed “in the aggregate as a

collective means of establishing the organisation’s goals” (Cutter Consortium, 2003). This

framework assists in prioritising those projects that support organisational goals.


36

Greer (2006) further supports the notion that PPM should be seen as a management process that

assists in decision making. Greer (2006) defines PPM “as a management process designed to help

an organization acquire and view information about all of its projects, then sort and prioritize each

project according to certain criteria, such as strategic value, impact on resources, cost, and so on.”

It is further argued that the objective of PPM is similar to that of managing a financial portfolio.

This definition relates to the basic understand of portfolio management from a financial

perspective.

Swanson (2010) provides a definition that is very different to the general trend that is observed

throughout the literature on popular press covered thus far. Swanson (2010) defines PPM with

project management and project life cycle as the point of departure. Swanson (2010:2) argues that

a project portfolio is “a collection of investments in the form of projects or programs that an

enterprise has selected to meet their business needs”. All of these projects have a project life

cycle. Swanson proposes that PPM is focussed on the product life cycle which encompasses the

project life cycle. PPM measures the investment value of the project by including post-project

operational costs and product benefits.

This definition of PPM therefore has the characteristics of a multi-period net present value (NPV)

dimension associated with it. It does not only focus on the present value and contribution of the

project to organisational goals for example, but requires decisions around selection and

prioritisation to factor in longer term effects on the organisational goals and objectives. Projects

cannot only be measured in terms of its short term value to organisational goals, but also its long

term value when the implemented change is operational.

This definition of PPM positions it not only on a higher level relative to project management, but

also positions it as a way to measure the value of the investment in the underlying project in terms

of the longer term future of the organisation. If one assumes that the product life cycle Swanson is

referring to consists of a number of projects, then the definition proposed here is more in line with

the general trend observed. If the assumption is made that Swanson’s understanding of PPM is in

line with the general trend observed, then this definition of PPM is very focussed on a specific

measurement criteria for the projects within the portfolio.

5.2.2. Books

Melton (2008:18) defines PPM from a process point of view as follows: “The process is effectively

structured around the management, co-ordination and prioritization of resources so as to maximize

the delivery of business benefits for an organization through the optimal mix and sequencing of

proposed projects”. This process further has to be properly formalised in order to:


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Support more effective programme and project management (as a form of governance).

Enhance communication between projects, programmes and the business.

Support decision-making on the best use of resources versus the benefits to be realized (this

maybe a mix of financial and non-financial benefits).

Provide transparency on the scale and breadth of projects within an area of an organization.

This definition proposes that PPM should be focussed on enabling and supporting the decision

making process around projects and their viability within the bigger project portfolio context. All

these decisions have to be made within the constraints of a finite set of resources. This definition

supports the previous arguments that PPM should be practiced within a defined context through

formalisation which implies that there are certain ground rules and boundaries set as part of the

PPM process.

Moore (2010:31) states that “modern portfolio theory (MPT) can be applied to a selection of

projects within organisations”. PPM is therefore applied in the same way to projects as MPT is

applied to financial investments. Both desired outcomes are the ability to make decisions about the

most appropriate mix of projects or investment considering the expected returns versus the risk

involved. Moore (2010:24) emphasises that defining organisational strategy always comes before

selecting and prioritising the portfolio of projects that will support the strategy. By defining the

organisational strategy, the context within which PPM is applied is also defined. This relates back

to the formalisation concept of Melton (2008) and contextualisation as discussed previously.

Moore (2010:153) further states that “PPM is a long term process, rather than a one-off investment

in technology”. PPM is therefore a combination of the right processes and the right technology that

supports it. Although not directly stated, Moore’s work (2010) can lead to the understanding that

PPM can be used effectively to enable strategy execution within an organisation.

Rajegopal, McGuin and Waller (2010:10) present PPM from two perspectives. The first perspective

is that PPM is paradigm. It is therefore a way of thinking that “PPM looks to empower the business,

not just the project process” (Rajegopal et al., 2010:10). The authors propose that PPM is a

management approach that looks at possibly implementing and standardising the project

management process as implemented on a project management level.

In the second definition the authors suggest that “PPM is the management of the project portfolio

so as to maximise the contribution of projects to the overall welfare and success of the enterprise.

PPM is the management of that collection of projects and programmes in which a company invests

to implement its strategy, for example asset programmes, improvement initiatives and strategic

change work streams among others. A PPM process can utilise various techniques to provide


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tangible results for your business, ensuring that project investments contribute directly to realising

your corporate goals.” (Rajegopal et al., 2010:10).

Rajegopal et al (2010) defines projects and programmes as investments in strategy

implementation. This positions PPM as the enabler for strategy implementation and execution

within an organisation through project execution. This definition is also similar to that of PRINCE2

and the OGC as discussed in section 4.6.

Albeit not part of the definition as proposed by the authors, it is argued that PPM is “critical for

decision-making, governance and to ensure that the company’s business objectives are being

supported by the right set of projects (Rajegopal et al., 2010:11). This argument supports the

notion that one of the objectives of PPM is the enabling and supporting of the decision-making

process in organisations around selection and prioritisation of projects in the organisation.

Levine (2005:9) applies a different approach when defining PPM by explaining what PPM is not.

According to Levine (2005:9) PPM should not be seen as the management of multiple projects.

This definition of what PPM is not creates the understanding that PPM is more than only a number

of projects bundled together and managed simultaneously.

Levine (2005:9) proposes that PPM is “a set of business practices that brings the world of projects

into tight integration with other business operations”. Based on this argument, PPM therefore

bridges the siloes in an organisation by integrating not only projects with the business, but

integrating multiple different projects with multiple different business departments. PPM brings

operational management of an organisation into contact with the project management operations

of an organisation.

Levine (2005:22) ultimately defines PPM as “the management of the project portfolio so as to

maximise the contribution of projects to the overall welfare and success of the enterprise”.

Levine (2005:23) divides PPM processes up into two phases: Firstly, the prioritisation and selection

of projects for the portfolio, and secondly the management of the projects in the portfolio. The first

phase deals with selection and prioritisation of project against pre-determined criteria. The second

phase deals with integrating PPM and PM as separate disciplines. PPM deals with bridging the

gap between project management operations and business operations. PPM is the process that

aligns the multiple project objectives with the organisational objectives and helping to ensure that

the right projects are selected, prioritised and executed within the constraints of a finite set of

resources.


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This alignment of business objectives with project objectives serves the purpose of ensuring that

business objectives are implemented through project execution. PPM is effectively the enabler of

organisational strategy implementation and execution in this context.

Levine (2005:91) goes a step further by repositioning PPM as “a hub” instead of “a bridge”

between project operations and business operations. Through this positioning of PPM, the

integrating role that PPM plays between project and business operations is further highlighted. This

can now lead the reader to understand PPM as a process whereby all projects are managed

relative to one another and to all business operations it supports.

Linenberg and Makleff (2006:46) define PPM against the background of establishing the difference

between PM and PPM disciplines. “PM focusses on a single project at a time. Although through

inter-project dependencies, the focus of the project manager is on project-related indicators”

(Linenberg et al., 2006).

“PPM takes a broader view and looks at the selection and outcome of a set of projects. The

indicator that is critical from the PPM perspective is on the portfolio of project that achieves the

greatest strategic and financial value for the firm” (Linenberg et al., 2006).

PPM is focused on the overall strategic value of a set of projects whereas PM is only concerned

with the individual project objectives. PPM therefore becomes the process through which a number

of individual project objectives are collectively evaluated against their contribution to overall

strategic alignment and financial value of the organisation. Linenberg et al (2010:45) emphasises

that PM and PPM disciplines are complementary in nature.

Pennypacker and Dye (2002:14) defines PPM as a process based methodology which focuses on

“knowing the relative value and risk associated with every project that has been proposed or

already underway”. This relative project value and risk is evaluated against an organisational

master project plan. All projects within the project portfolio are measured against the objectives of

this master project plan. This definition of PPM does not directly focus on the alignment of the

portfolio objectives with that of the business, but it recognises that measurement of the project and

portfolio objectives are required.

Cooper, Edgett and Kleinshmidt (2002:182) propose that PPM consists of three aspects namely:

Resource allocation – how the business spend its capital and people resources and

development projects it invests in.

Project selection – ensuring that the business has a steady stream of projects and,

Strategy – it is one way of operationalising a business strategy.


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Consistent with other work of Cooper et al (2002), this definition creates a high level understanding

that PPM is about selecting and prioritising projects within a finite resource constraint. Alignment of

the portfolio goals with the organisational strategy is not defined explicitly, but PPM is positioned as

a way of implementing (operationalising) the organisational strategy through projects

5.3 CONCLUSION

This chapter presented definitions and descriptions of PPM arising from the area regarded as

popular press. The opinions expressed by the authors in this area do differ, but there is a strong

consensus about the underlying principles of PPM.

PPM is a tool that enables management to have a holistic view of all the current and future projects

within the organisation. This holistic view allows for a better understanding of these projects which

leads to better decisions-making about the strategic importance and viability of projects. These

decisions should not only evaluate the short term effect of a project, but also consider effects on

the longer term to the organisation. The decision-making processes revolve around the selection

and prioritisation of projects to ensure that value maximisation is achieved within a finite pool of

resources.

PPM is positioned on strategic management level and is therefore regarded as a very effective tool

through which the organisation’s strategy is executed. PPM facilitates the integration between

business and project operations through a structured, standardised approach that support

consistent decision-making processes.

PPM has a cultural dimension that is integral to the everyday operations of an organisation. PPM is

therefore not presented as an ad-hoc process, but thoroughly part of the management structures

and processes within the organisation.

PPM can be applied in any context within an organisation. The critical aspect to consider is the

setting of the boundaries to define these contexts within which PPM is applied. This

contextualisation supports the notion that PPM should be implemented and applied through a

centralised approach where decisions around selection and prioritisation are made by a central

governance body.

PPM provides management with the processes and governance structures that enables consistent

project execution and reporting. This consistency allows for decision-making processes that use

reliable information in order to select, prioritise and execute processes that support organisational

strategy. PPM can help to ensure that the organisation is doing the right things, effectively.


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CHAPTER 6

PPM AS DEFINED BY SOFTWARE VENDORS

6.1 INTRODUCTION

In all of the areas covered in this research report, software vendors most likely have the most

influence on what is generally considered to be defined as PPM. This can be attributed to the fact

that PPM is mostly implemented through software applications and the first place an organisation

will go and look for information on the subject is through software vendors that provide solutions

into the market.

This chapter focuses on the literature that is supplied by software vendors that provide project

management and PPM software into the market. The literature was primarily obtained by doing

internet searches and downloading the information from the individual software vendors’ websites.

This chapter will start with a general overview of the software vendors selected and also provide

the different perspectives and definitions on PPM from these software vendors. A brief discussion

on possible similarities and differences between the different market segments will also be

provided and how the focus of the software vendors on the different market segments seems to

influence the use and integration of PPM into their software solutions.

6.2. SOFTWARE VENDORS

It was noted that although the software vendors indicate that they provide software to support

project portfolio management solutions, no formal definitions or descriptions of how the software

vendor understands PPM could be found on the website. In cases like these, the functionality and

characteristics of the software solutions was used to make a deduction about how PPM is

marketed to the prospective buyer of the software.

This section will provide a number of software vendors and their definitions of PPM.

ACE Project (2010) does not provide a formal definition on what PPM is or should be, but the

underlying functionality of the software solution indicates to processes that can be linked to PPM.

The software is designed with a strong focus on the management of multiple projects as well as

the ability to report on all active projects in terms of the resources that is being utilised by each

project.


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Artemis 7 (2010) doesn’t present its solution from a project perspective, but rather positions itself

as a solution that “manages the world’s largest work portfolios”. This software is very much

positioned as a decision support tool that incorporates most of the basic aspects of PPM.

Assembla (2010) proposes to give the user the ability to “organise with portfolios”. This

functionality enables the user to view the activity stream from many projects in one view and apply

time reporting to the portfolio.

AtTask’s (2010) approach to portfolio management gives executives and managers all the tools

they need to get the most out of their company’s resources – helping organisations zero in on

those projects that provide the most value.

This software also gives steering committees tools they need to prioritise, optimise, and align

portfolios with strategic and financial goals, improving investment accuracy and alignment. It

provides reports and dashboards that provide real time status of portfolios, increasing portfolio

visibility that translates into increased accountability.

Clarizen (2010) proposes that PPM provides a birds-eye view of an entire set of projects in order to

compare, prioritise and group project, budget and resources information at an executive level and

make decisions and changes accordingly. PPM helps spread resources appropriately across the

portfolio of projects, keeping a close tab on progress across the organisation.

Easy Projects.Net (2010) limits their use and understanding of PPM to the grouping of multiple

projects.

Genius Inside (2010) indicates that Enterprise Project Portfolio Management allows the

organisation to consolidate all of the project information delivering a 360 degree view of all the

resources, budgets, earnings and strategic alignment of all the projects.

Genius Inside software further enables the users to manage the project pipeline and prioritising

projects according to strategic alignment and constraints. The software allows the grouping of

actual and potential projects, scoring them against custom criteria and comparing these projects on

a portfolio level. It enables the users to score projects in relation to the organisations strategies and

objectives.


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Hewlett-Packard’s (2010) Project and Portfolio Management module is aimed at maximising the

value of the entire portfolio. The main selling points of this software focus on

Aligning the IT portfolio to better support the business strategy,

What-If scenario planning that creates and optimal mix of projects, proposals and assets,

IT program and project status capturing,

Delivering information that assists in portfolio decisions,

Governing the portfolio lifecycle.

This functionality is more aimed at an IT environment, but the objectives in terms of functionality as

outlined can easily be applied to projects that are not of an IT nature.

Microplanner X-Pert (2010) focuses on multi-project scheduling and gives the users the ability to

analyse requirements across all projects to determine possible current and future shortfalls in

terms of limited resources available in an organisation.

Oracle’s (2010) software solution is based on three aspects which are as follows:

Invest in the right portfolio of projects

o Establishing of corporate metrics for project selection,

o Score and rank projects based on key evaluation criteria,

o What-If scenario planning to evaluate the introduction of new projects in the portfolio

Standardise project delivery

o Normalise key business processes,

o Tracking of project progress,

o Analysis of project data

Optimise project resources

o Align resource skills and availability to future needs,

o Find and deploy the most qualified resources,

o Improve productivity with streamlined collaboration capabilities

Planisware (2010) software is developed around the basic principle of strategic decisions that are

made within the constraints of limited resources. The company markets its software functionality

that will enable “decision processes that will obtain the best project portfolios to meet companies’

objectives and ensure maximum return” (Planisware, 2010). The software will help an organisation

to achieve a sustainable, balanced portfolio that is strategically aligned to ensure maximisation of

limited resources.


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Planner Suite (2010) is a holistic Project Management, Portfolio and Productivity improvement

solution which allows the user to plan multiple projects, administer and integrate processes and

projects.

One of the main features of the Primavera (2010) software solution that it delivers value through a

strategy-first approach to selecting the optimum set of investments. Primavera Portfolio

Management assist with the decisions to be made around strategically prioritise, plan and execute

an organisations portfolios.

Primavera is currently part of the Oracle stable of technologies. There are however still unique

perspectives on PPM that is provided by the Primavera PPM solution.

Principle Toolbox (2010) gives the user the ability to group initiatives such as ideas, projects and

programmes into portfolios for analyses, budgeting and prioritisation. It further assists the user in

monitoring progress and the strategic contribution of these initiatives to the organisations goals.

Project.Net (2010) enables users to make more accurate decisions about projects underway in an

organisation. These include projects that are providing the greatest benefit to the organisation,

projects that are falling behind schedule, exceeding costs and budget, and projects that can be

scaled down in order to reallocate resources to other projects.

Project Open (2010) base their solution around being able to collectively manage a group of

current of proposed projects according to a number of variables including estimated cost, profit,

risk and success probabilities. One of the main decisions that should be taken by the user is that of

the prioritising of projects according to the stated variables.

Projektron BCS (2010) states that the project portfolio functionality of their software assists the

user to compare multiple projects with regard to their value to company to support strategic

decisions.

PSNext (2010) software solution will enable users to define an optimum portfolio of projects which

are in line with corporate objectives and achievable with available resources and budgets. This

software will assist in turning strategies into concrete measurable results

SAP RPM (2010) identifies the key market need for their software solution by stating that

“successful organisations are those that can maximise business value, achieve balance and align

their overall portfolio with strategic objectives”. This software solution enables the management of

a differing range of project portfolios.


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Teamcentre (2010) software solution is aimed at connecting the strategic product portfolio plans

with operational execution. The software also gives the user the ability to maximise investments by

continuously governing the selection of the right mix of investments. The Teamcentre solution

seems to be aimed more at research and development environments, but the principles that the

software applies to other areas of project management as well.

WorkLenz’s (2010) software solution combines the full functionality for project, program and

portfolio management in one application. The main aspects of this solution which relate to PPM are

that it enhances visibility and fidelity across the portfolio, eliminate projects unaligned from

corporate strategy and optimises return on investments.

Microsoft’s Project Portfolio Server (2008) states that this software tool helps an organisation

realise its potential by identifying, selecting, managing and delivering portfolios that align with an

organisation’s strategic priorities. “PPM is the continuous process of identifying, selecting and

managing a portfolio of projects in alignment with key performance metrics and strategic business

objectives” (Microsoft, 2008). Microsoft also suggests that the relationship between PPM and PM

equates to PPM being about “doing the right things” and PM about “doing things right”. PPM

therefore focuses on the selection and prioritisation of projects and PM focuses on the execution of

these selected projects. Microsoft (2008) suggests that through this relationship unrealised value

can be realised.

Vertabase’s (2010) definition of a portfolio is the collection or grouping of a number of projects. The

software enables the user to capture information about many different projects in consistent

manner with information available across all the projects that form part of the portfolio.

IBM’s Rational software solution describes PPM as the “determining the optimal mix and

sequencing of proposed projects to best achieve the organisations overall goals” (IBM Rational,

2011). It also provides the ability to get information on the cost, resource consumption, expected

timelines, benefit realisation and other relationship interdependencies with other projects in a

portfolio. In its value statement to customers, the IBM Rational software solution makes a very

clear distinction between Product, Project and Application portfolio management within IT.

CA Clarity PPM (2011a) “provides and automated solution to enable an organisation to improve

investment decision making, enhance productivity and efficiency.”

The CA Clarity software solution encompasses a number of different capabilities that is marketed

under PPM. The core functionality around the PPM capability is designed to “align strategic

investments with corporate goals” (CA Technologies, 2011a). The other capabilities include project


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management, resource management, demand management, project financial management,

reporting and end-user training. These capabilities of the software are in line with the basic aspects

PPM as a management concept and tool.

CA Technologies have also developed its PPM software to target specific disciplines and

industries. These are PPM for IT, PPM for Product Innovation, PPM for Professional Services and

PPM for Public Sector. (CA Technologies, 2011b). This emphasises the wide applicability of PPM

as a management tool and discipline. It emphasises that the basic principles and aspects are

applicable to a variety of scenarios or contexts. There are certain factors that are specific to a

discipline or industry and these can be integrated into PPM to ensure that set objectives are

reached.

6.3 PPM ATTRIBUTE FOCUS BY SOFTWARE VENDORS

A number of common PPM attributes were identified in the literature review of software vendors.

These common attributes are as follows:

Strategic alignment

Selection and Optimisation

Value maximisation

Resource Management

Reporting and Organisation

Due to the nature of software being developed to provide solutions to a specific discipline or

industry, another attribute was selected to try and determine whether PPM solutions are developed

with this in mind. This attribute is called the Discipline / Industry Specific Application of PPM and

indicated in Table 6.1 as Dis/ Ind Spec App

Table 6.1 provides a cross reference between these attributes and whether or not the vendor

made any reference to the attribute.


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Table 6.1: Vendor rating in terms of PPM attributes

Software Vendor Strategic Alignment

Selection / Optimisation

Value Maximisation

Resource Management

Reporting & Organisation

Dis / Ind Spec App

1. Assembla No No No Yes Yes No

2. AtTask Yes Yes Yes Yes Yes No

3. Clarizen Yes Yes No Yes Yes No

4. Easy Projects.Net No No No No Yes No

5. Genius Inside Yes Yes Yes Yes Yes No

6. HP PPM Yes Yes Yes Yes Yes Yes

7. Microplanner X-Pert No Yes No Yes Yes No

8. Oracle Yes Yes No Yes Yes No

9. Planisware Yes Yes Yes Yes Yes No

10. Planner Suite No Yes No No No No

11. Primavera Yes Yes No No Yes No

12. Principle Toolbox Yes Yes No Yes Yes No

13. Project.Net Yes Yes No Yes Yes No

14. Project Open No Yes No Yes Yes No

15. Projektron BCS Yes No No No Yes No

16. PSNext Yes Yes No Yes Yes No

17. SAP RPM Yes Yes Yes No Yes No

18. Teamcentre Yes Yes Yes No Yes Yes

19. WorkLenz Yes Yes Yes Yes Yes No

20. ACE Project No Yes No Yes Yes No

21. Artemis 7 No Yes No Yes Yes No

22. Microsoft Project Portfolio Server

Yes Yes Yes No Yes No

23. Vertabase No Yes No No Yes No

24. IBM Rational Yes Yes Yes Yes Yes Yes

25. CA Clarity Yes Yes Yes Yes Yes Yes

Source: Author’s own compilation

Table 6.1 indicates a Yes if the vendor made reference to the attribute and No if the vendor made

no reference to the attribute. The results of these cross referencing are presented in Table 6.2.


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Table 6.2: Results of vendor rating in terms of PPM attributes presentation

Totals Strategic Alignment

Selection / Optimisation

Value Maximisation

Resource Management

Reporting and Organisation

Discipline / Industry Specific Application

Yes 68% 88% 40% 68% 68% 16%

No 32% 12% 60% 32% 0% 84%

Source: Author’s own compilation

It is noted from the results that the majority of the software provides applications that facilitates the

strategic alignment, selection and prioritisation and resource management. In addition, reporting

and organisation is included as functionality in all of software applications. This is expected as the

main objective of any software applications is to facilitate the collection, processing and

presentation of information.

The organisation of projects is a key factor to ensure the consistent execution and delivery of

projects within a portfolio. This consistency then allows for consistent and reliable reporting which

is essential as decision-making around portfolios is one of the key outcomes of PPM.

It is interesting to note that the majority of the vendors do not refer to value maximisation as a key

attribute of PPM. This might be attributed to the fact that value maximisation is considered by

vendors to be only one of the underlying criteria against which portfolio or project selection is

measured. By referring to value maximisation as a defined functionality, a software solution begins

to limit itself in terms of application and flexibility of use.

It is clear from the results that software vendors do not limit the application of PPM to only specific

disciplines or industries. It was only noted in two instances where the PPM solution is specifically

focussed on an organisations IT portfolio. In all other instances, projects and portfolios are

mentioned in general that leads to the understanding that PPM can be applied to any environment

or context, as long as projects and portfolios are the vehicles through which it is implemented and

used.


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6.4 ORGANISATIONAL AWARENESS OF PPM AS A MANAGEMENT METHODOLOGY

It is necessary for organisations to be fully aware of the benefits of PPM and whether it is worth

their while to adopt PPM as a management methodology within their organisations. Small and

Medium organisation might not consider themselves mature enough to adopt management

methodologies such as PPM. It is however a way to measure and compare all their projects across

all their activities in a consistent manner and make informed decisions about projects and their

contribution to organisation objectives.

To a certain extent, the software products aimed at small and medium organisations does not

create this awareness amongst prospective customers and clients. In most cases, the functionality

of these products facilitates the management of multiple projects in consistent ways. PPM requires

this consistency in order to accurately do the analysis of the captured project information. This

directly influences the decisions made about the overall alignment of projects and portfolios to

organisational objectives and strategy.

6.5 LARGE ORGANISATIONS VERSUS SMALL AND MEDIUM ORGANISATIONS

A categorisation can be made between software vendors that target large, corporate organisations

and software vendors that target small to medium sized organisations. Based on the literature

available on the internet, it does suggest that there is a different level of understanding and

implementation of PPM practices between large organisation and small and medium organisations.

The vendors that target large organisations are vendors that are also generally associated with

other software tools that are focussed strongly on large organisations. Examples of these are the

Oracle, SAP, Computer Associates (CA) and Microsoft. These vendors market their products with

definitions of PPM that are closely aligned with the general definition of PPM. These products

focus more on the management aspects of PPM rather than the actual functionality of the software.

These software products are focussed on the benefits and results of PPM rather than the “how-

to’s” of PPM.

In contrast to this, the vendors that are associated with small and medium organisations tend to

focus more on the functionality of their software. These software packages are mostly marketed on

the ability to manage and collaborate on multiple projects. These products, in general, have a

strong programme and project management focus that incorporates the time management;

resource management and financial management focus areas of the projects being managed.


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6.6 CONCLUSION

“An effective project portfolio management system process serves to identify, analyse and quantify

project value on a regular basis; to prioritise projects; and to identify which projects to initiate,

reprioritise, or terminate” (Rad et al., 2008:1). A software solution is a pervasive element of any

PPM system. It collects processes and reports on information to support the PPM process.

If PPM enables management to make informed decisions about multiple projects in a consistent

manner, then the majority of the software products available in the market should functionally

enable PPM from a technology point of view.

It is the opinion of the author that irrespective of organisational size, projects should always be

aligned to the overall strategy of an organisation. The go-kill decision for project execution should

always be supported by a sound and valid business case based on reliable information.

The definitions and descriptions presented by software products that target small and medium

organisations can be misleading because it is generally more focussed on the project management

aspects rather than a higher level management of a portfolio of projects. A portfolio is also

presented as a number of projects with a strong collaboration focus. There is no link established

between the portfolio and the organisational strategy.

The software products that targets large corporations provides a better, more comprehensive

definition that has a strong focus on the management methodology aspect of PPM. The definitions

present a strong link between the organisational strategy and the selection and prioritisation of

projects in the portfolio and also how the software functionality is focussed on supporting the

decisions that need to be made using the software.

Software tools are used within a context where the functionality is aligned with the information that

is available and required within this context. This principle applies to PPM software as well. The

success of using such software tools will ultimately rely on the users who align functionality with

information available in their own PPM context.

Software vendors do contribute to the overall understanding of PPM; however, being strongly

focussed on the collection, processing and reporting of information that supports the PPM process,

a gap in the broader understanding of PPM does appear when using software vendors as the main

source of information on PPM.


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CHAPTER 7

PPM AS DEFINED BY CONSULTING GROUPS

7.1 INTRODUCTION

Consulting groups are generally involved with the implementation of PPM applications in

organisations. In order to design and implement a complete PPM solution, that encapsulates the

application, process and human elements, consulting groups need to have a very good

understanding of the theory and literature on PPM. In addition, they also require an appreciation of

all the software applications available to deliver a complete solution for an organisation.

Consulting groups are generally focussed on selling services and products based on the subject

matter of their chosen field to prospective clients. This will most likely be reflected in the definitions

sourced in this specific area. It is however noted that the definitions of PPM in this chapter are a

mixed-blend of definitions that ranges from strong-academically orientated, to strong product-

marketing orientated. It is also characterised by some high-level definitions versus very detailed

definitions of PPM.

For the purposes of the research, the term consulting groups will be used as reference to the

organisations that perform consulting activities to other organisations on the subject of PPM. It was

noted during the literature research, that a relatively small number of organisations specialise in

consulting services on PPM specifically. In most of website visits, it was noted that organisations

tend to focus on primarily delivering project management consulting services with only a secondary

reference to PPM. This can likely be attributed to the fact that PPM is a relatively specialised

discipline and that PPM is reduced to the management of multiple projects. It might also be related

to the fact that the awareness in the market about PPM is low and that project management

consulting services are more profitable and the market much bigger.

This chapter will present and discuss the different definitions and perspectives of a number of

consulting groups that specialise primarily in providing consulting services and products on PPM to

clients. The literature was primarily sourced through the internet via the websites of these

consulting groups.

7.2 PMSOLUTIONS

PMSolutions is a project management firm helping organisations govern, manage and measure

their portfolio to improve business performance (PMSolutions, 2011).


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The PMSolutions’ definition of PPM is presented as a structured set of processes that provides an

organisation with consistent ways to select, prioritise and manage projects that maximises on

organisation’s responsiveness, revenues and adaptability whilst keeping projects aligned with

strategic business goals and objectives within a finite set of resource constraints (PMSolutions,

2011).

This definition addresses the strategic alignment aspect through selection and prioritisation of a

number of projects with the aim of maximising the return on the investment from the projects

underway given that a finite resource base constraint is in place.

The basis from which PMSolutions market their consulting services is based on the work of

Pennypacker (2005) which describes his Project Portfolio Management Maturity Model.

Pennypacker (2005:79-80) describes Project Portfolio Management as “similarly the art and

science of applying a set of knowledge, skills, tools and techniques, but to a collection (or portfolio)

of projects in order to meet or exceed the needs and expectations of an organisation’s investment

strategy.”

Pennypacker (2005:15-21) uses his PPM Maturity Model (PPMMM) to describe the basic

components of PPM as follows:

Portfolio governance addresses the processes that facilitate the governance of an

organisation's project portfolio and is mainly focussed on the portfolio governance processes

and policies with high level decisions made on the alignment of portfolios with organisational

strategy.

Project opportunity assessment addresses the processes around identifying and consistently

assessing project opportunities and mainly focuses on the processes and procedures that

continuously identify and assess project opportunities with a strong focus on business value

determination.

Project prioritisation and selection addresses processes that facilitate the review, prioritization,

and selection of projects in the project portfolio and mainly focuses on project prioritisation

processes and criteria coupled with the funding processes of selected projects.

Portfolio and project communications management facilitates the collection and sharing of

portfolio information and mainly focuses on the communication processes that should be in

place which facilitates the flow of information between projects and portfolios within an

organisation. This can be seen as one of the main elements required to enable the decision

support needed on the categorisation and balancing of project investments with organisation

goals.


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Portfolio performance management facilitates the collection, analysis, and management of

information used in portfolio performance management processes and decision-making. This

component mainly entails the decision-making processes that involve the portfolios under

review.

Portfolio Resource Management deals facilitates the assignment of resources across the

organization to support the projects in the organization’s portfolio and mainly focuses on the

processes required to ensure that resources applied across projects are adequately skilled and

assigned to projects and portfolios to ensure that prioritised projects are supported.

These components of Pennypacker’s PPMMM positions PPM as a management methodology that

includes more than just the selection and prioritisation of projects to support organisational

strategy. This can be attributed to the fact that this description of PPM is presented against the

background of a management maturity model. This description recognises that a number of related

management practices need to be in place, in order to sustain the strategic alignment and

optimisation of portfolios within an organisation.

What is interesting to note is that portfolio governance is the only component that specifically

mentions the strategic alignment of the portfolio with organisational strategy. It is the opinion of the

author that portfolio governance becomes the foundation from which all other components listed

are founded. If the portfolios of projects are not aligned with the strategic goals and objectives of

the organisation, then the whole objective of what PPM as a management tool and methodology

should achieve, becomes irrelevant.

Although not directly stated in this definition, these components can be grouped into two levels that

address the strategic aspects of PPM and components that address the operational aspects of

PPM.

Strategic aspects are focused on how the project portfolios are aligned with and also support the

overall business strategy. This attempts to answer the question of whether the organisation is

doing the right things. It is evident from the first three components namely: Governance,

opportunity assessment and prioritisation and selection that these components are more focussed

on how PPM supports the organisational strategy.

These components drive the decisions of whether the organisation is evaluating new project

opportunities, selecting and prioritising these projects to ensure that the projects align with and

support the organisational strategy.


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Operational aspects are focused more on the day-to-day business operations. This can be

translated into project execution. This attempts to answer the question of whether the organisation

is doing things right. This is evident from components management, performance management

and resource management that these components are more focused on the operational

management of PPM. The operational level of PPM purposefully facilitates the integrated

management of multiple projects within an organisation. It facilitates the communication between

projects, the performance of projects and resource allocation between different projects.

Integrating project management and portfolio management allows organisations to select the best

portfolio of projects that are aligned with business strategy, monitor their performance and

iteratively re-prioritise the portfolio as business conditions and budgets changes. (Pennypacker,

2005:79-80). For purposes of discussion in this section, assume that a top-to-bottom hierarchy of

the components is intended by Pennypacker. This hierarchy has portfolio governance at the top

and resource management at the bottom of this hierarchy. Further assume that the factor that

integrates the strategic and operational levels it is the flow of information between these levels that

supports the integration of the strategic and operational levels. It is not the purpose of this

discussion to analyse how information flows between the components, but merely that information

becomes the factor that integrates the different components. This is graphically depicted in Figure

7.1.

Figure 7.1 Integration of Strategic and Operational Levels

Source: Author’s own construct

Governance

Opportunity Assesment

Selection and Prioritisation

Communications Management

Performance Management

Resource Management

Strategic Level

Operational Level


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The directional arrows represent the flow of information within the model. Assume that information

flow from top to bottom by passing through each of the different levels.

This shows how a decision (which becomes information to next level) taken at governance level

ultimately affects the decisions taken by a resource management level. Information received from

the resource management about skills and capacity can also ultimately influence the decisions

taken in the governance level where decisions are made about whether the organisation has

enough resources to support the organisational strategy.

Another example that explains how decisions taken at Performance Management level can affect

the decisions made at the Selection and Prioritisation level. Decisions made about the criteria for

Selection and Prioritisation affects the way in which the Performance Management level is applied

to projects.

If it is further assumed that the operational level is associated with the execution of projects within

an organisation, this maturity model presented by Pennypacker, shows that PPM can be used as a

tool that management can utilise to implement organisational strategy. This model provides the link

between the strategic and operational levels of an organisation. This supports the work of Yuming

et al. (2007) as discussed in the chapter on academic articles in this research report.

Maturity measurement models, when implemented, can give an indication of how strong a specific

culture within an organisation is. This PPMMM can therefore give an indication of how strong the

paradigm and culture of PPM is within an organisation. This supports the suggestion by Rajegopal,

McGuin and Waller (2007:8) that PPM is a paradigm within an organisation.

7.3 GARTNER RESEARCH

Gartner is an institute that performs research primarily in the Information Technology (IT) industry.

Their research focuses on topics within the industry with the objective of proving advice and

guidance to IT professionals. This research is then also used as the basis from which their

consulting product offering is presented.

With a view to marketing their consulting services specifically related to program and portfolio

management, Gartner (2011) proposes that their “frameworks and tools ensure that IT investment

decisions are grounded in both the short and long term business objectives and the organisation’s

readiness to execute. In addition, Gartner services help organisations realise business benefits by

proactively identifying and mitigating risks.”


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It is further stated that Programme and Portfolio management involves the following key issues:

Requests for new IT investments appear to be in conflict with current pressures to reduce

costs,

Previously approved projects and programmes are being put on hold or terminated all together,

Institutionalising “just right” project and program management and governance processes is

essential for continued customer and executive confidence,

Business, technical and organisational risks need to be proactively identified and addressed,

Organisation visibility on the performance and interdependencies of its IT portfolio is critical to

managing costs.

Gartner (2011) addresses the key components of PPM comprehensively. The link to organisational

strategy is presented from both a long- and short term view. The definition also addresses and

takes cognisance of organisational capacity over the long and short term strategic window of the

organisation.

This definition not only presents a high-level understanding of PPM, but through the key issue

listing proposes some activities of PPM. Selection and prioritisation of projects is coupled with the

need to identify business, technical and organisational risks relevant to the organisation. This is

grounded in institutionalised governance process, with organisational level visibility of the IT

portfolio, which provides the confidence the executive need to take decisions.

The only limiting aspect of this definition is that it only refers to IT related portfolio. This is however

expected given that Gartner’s main focus remains the IT industry.

It is however interesting to note that research conducted by Gartner in 2008, proposes that PPM

will likely be applied across departments within organisations in future.

According to this research, PPM deals with how organisations take-on, execute and measure

project-based work and helps organisations optimise limited resources. Their research shows that

traditionally, PPM have been used to optimise resources within a business silo (such as IT, product

development etc.) (Apfel et al, 2008).

The objective of this piece of research is to make predictions about the future of Project

Management Offices and how PPM will be applied by organisations in future. What is interesting to

note is that reference is made to the “traditional way” of applying PPM principles within business

silos. It is predicted by Apfel et al (2008:4) that PPM applications will be used by different business

units within an organisation, but that there would be a need to have visibility on projects across


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these multiple business units within the organisation. The organisational level visibility will enable

“enterprise level optimisation while supporting local PPM decisions” (Apfel et al., 2008:5).

The term “business unit” would have to be defined for this perspective and application of PPM, but

this argument shows that contrary to the definition discussion in the previous section, PPM as a

methodology is not only restricted to the confines of the IT department or industry.

Enterprise PPM is graphically depicted by Gartner (2010) in Figure 7.2 which shows that PPM is

applicable to many differing contexts and environment within an organisation. It is clear from Figure

7.2 that a core PPM function should exist within an organisation. The principles adopted from this

core function are then fine-tuned to support the different contexts in which it is applied. This core

function also serves the purposes to ensure that project selection and prioritisation still remain

consistent to ensure alignment with overall organisational strategy.

Figure 7.2: Enterprise PPM.

Source: Gartner, 2010


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7.4 UMTSA

UMT SA is a consulting firm that specialises in the consulting and outsourcing of PPM practices to

clients. The company is located in South Africa and is affiliated to its parent company, UMT UK,

which provides consulting and outsourcing services in the international arena. UMT UK is also

considered to be a prominent thought-leader on the subject matter of PPM.

UMT Consulting uses Microsoft Office Portfolio Server® as the technology platform through which

consulting and outsourcing services are delivered to their clients. According to the managing

director of UMT SA, UMT UK developed the concepts and software on PPM during the 1980’s and

that the software was sold to Microsoft in 1996. This software was incorporated into the Microsoft

Office Portfolio Server suite. (Van der Colff, 2011.)

In a subsequent whitepaper published by Microsoft on the subject of PPM, the proposed definition

of PPM is considered to be a strong reflection of the view that UMT UK and UMT SA holds on

PPM.

The definition is as follows: “PPM is the continuous process of identifying, selecting and managing

a portfolio of projects in alignment with key performance metrics and strategic business objectives”.

(Microsoft, 2008).

This definition presents a succinct description of the basic components of PPM as well as the

positioning of PPM within the organisation as management methodology. It also establishes the

basic concepts that a portfolio of projects is measured against a pre-determined set of criteria used

to evaluate the overall performance of the portfolio to enable better organisational strategic

alignment.

7.5 PCUBED

PCubed is a specialised consulting organisation that focuses on consulting to clients on Project,

Program and Portfolio Management techniques. Similar to that of UMTSA, PCubed also base their

products and services on the Microsoft Office Portfolio Server® software.

The definition found on the PCubed website is also presented from a marketing perspective and

focuses on the benefits to be derived from implementing their PPM solution.

The definition broadly defines PPM as the “maximisation of the value and impact from project and

portfolio investments, providing confidence in delivery of strategy and benefits within financial,

resource and schedule constraints” (PCubed, 2011).


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The consulting services that PCubed market to prospective clients is based around three separate

areas of PPM. These are:

Portfolio Optimisation where the focus is on “providing the organisation with a strategic level

process for selecting and prioritising programs and projects and optimising the portfolio along

strategic constraints.” (PCubed, 2011)

Portfolio Delivery where the focus is on “providing the right capabilities to successfully deliver

value from the portfolio of projects” (PCubed, 2011).

Benefits Management where the focus is on “ensuring that the organisation’s investments

actually deliver business value” (PCubed, 2011). This service focuses on using PPM as a

method through which strategy is delivered and executed in the organisation.

These three service offerings establish the relationship between strategic and operational

alignment, but also enforces the notion that PPM as a management methodology can be used to

deliver the strategy of an organisation.

7.6 SPRINGHOUSE EDUCATION AND CONSULTING SERVICES

Springhouse Education and Consulting Services (2011) provides consulting services on project

and portfolio management.

The Springhouse definition proposes that PPM involves “identification, selection, management and

delivery of portfolios that best align with the business strategy.”

The PPM consulting framework that Springhouse proposes indicates that PPM further involves the

optimisation of the portfolios against financial and risk evaluation criteria and also takes into

consideration the fact alignment with organisational strategy has to be done within a finite set of

constraints.

Springhouse (2011), similar to Gartner (2008), very pertinently positions PPM as a methodology or

management tool that can be applied across different areas within an organisation and is not only

applicable in certain areas or an organisation.

7.7 DELOITTE & TOUCHE TOHMATSU CONSULTING

Deloitte & Touche (hereafter referred to as Deloitte) is a professional services consulting firm that

operates globally and provides consulting services across a number of different industries and

businesses.


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Deloitte presents PPM on a very high level and does not discuss the more detailed aspects of

PPM. Deloitte (2011) describes PPM “as the truest measure of organisational intent as it shows

where investments are made and where change is taking place within the organisation. It is both

pursuing the right projects and then executing these selected projects effectively and efficiently.”

Deloitte also suggests that the lack of proper PPM results in poor alignment and prioritisation of

programmes and projects with the overall business strategy.

Even though this definition does not deal with the detailed components and aspects of PPM, it

positions the function of PPM within the organisation and what the supposed outcome and benefits

of PPM within an organisation can be. From this description it is clear that programmes and

projects within organisations are selected and prioritised to ensure that the organisational strategy

and objectives are supported.

Deloitte also positions an organisation’s project portfolio as a “significant agent for change”. This

perspective requires a shift in thinking about how the projects are drivers of change. If the change

that these projects individually contribute to the organisation, it implies that through applying PPM

principles, change in an organisation can be assessed and understood from a portfolio level. This

understanding of organisational change from a portfolio level should then contribute to a better

understanding of the capacity for change from a strategic level.

7.8. LEE MERKHOFER CONSULTING (LMC)

Lee Merkhofer Consulting provides “high quality training, assistance and software for prioritizing

projects and optimally managing project portfolios” (Merkhofer, 2011).

The definition of PPM presented is based on the analogy of financial portfolio management and

PPM is described as “A formal, tool-supported process intended to help organizations

select projects and better manage project portfolios using techniques similar to those employed by

financial managers to optimize investment portfolios. A project portfolio is a collection of projects

(and, perhaps, other work) grouped together to facilitate the effective management of that work.”

(Merkhofer, 2011).

By using the analogy of the financial portfolio management, it assumes that the reader has the

basic knowledge of the processes and objectives of financial portfolio management which includes

selection, prioritisation and monitoring of financial assets in order to return the maximum value

back to the investor given an acceptable level of risk. PPM is proposed as being similar, although

the basic processes of selection, prioritisation and monitoring are different.


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Merkhofer (2011) acknowledges that the alignment of a portfolio to organisational strategy is one of

the primary objectives of PPM. However, Merkhofer (2011) argues that strategic alignment is

merely just another criterion that can be used to assess whether the portfolio is performing as

expected given a defined criterion. Merkhofer therefore dis-assembles this generally accepted

objective of PPM and separates the alignment of portfolios to strategic organisational objectives

from the definition of PPM.

This dis-assembling has an effect on how PPM is understood when reviewing this definition. It

implies that a criterion for the selection and prioritisation of projects within a portfolio does not

necessarily have to be the alignment of the overall strategic objectives of the organisation.

It can further lead to the understanding that any project can be included in a portfolio which does

not have anything related to other projects – as long as its outcome is measured against the

criterion that is selected for that specific portfolio.

This definition allows for portfolios to be managed within different contexts in the organisation. It

therefore proposes that PPM should be not be linked to specific disciplines or departments within

an organisation, but that it can be applied where necessary. This is then also consistent with

Merkhofer’s definition of a project portfolio which is a collection of projects (and, perhaps, other

work) grouped together to facilitate the effective management of that work (Merkhofer, 2011).

Merkhofer’s definition of PPM positions it as a management tool that can be used to organise a

number of projects and manage these according to a pre-defined set of criteria which supports a

specific goal within an organisation.

7.9 KLR CONSULTING INCORPORATED

KLR is a Canadian consulting firm that provides services to clients that mainly focuses on project

management and outsourcing, project resource provision, implementation of project management

offices, business process transformation, post-implementation reviews and portfolio management

(KLR, 2011).

As part of its service product offering, KLR presents PPM as: “the defining, structuring and

implementation of strategies to gain a better understanding of the projects an organisation is doing

and the value the organisation expect to derive from these projects” (KLR, 2011).

This definition of PPM describes only the relationship between projects selected and value to be

derived from these projects within an organisation. Portfolio management is further described as “a

collection of projects or programs grouped together to facilitate effective management of efforts to


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meet strategic business objectives. These projects or programs are not necessarily interdependent

or directly related. Portfolio management is the centralized management of multiple projects,

programs and possibly portfolios. This typically includes identifying, prioritizing and authorizing

projects and programs to achieve specific strategic business objectives” (Robertson, 2011).

It is however necessary to acknowledge Robertson’s (2011) definition of project and program

management in order to better understand Robertson’s (2011) definition of portfolio management.

Project management is defined as a temporary endeavour with a specific start and end date with

the objective of creating a unique product, service or result. (Robertson, 2011:1)

Program management is defined as “a group of related projects managed together to obtain

specific benefits and controls that would likely not occur if these projects were managed

separately. While project management focuses on the delivering the specific objectives of the

project, programme management is focussed on achieving the strategic objectives and benefits of

the integrated program” (Robertson, 2011:1). Robertson argues that program management groups

related projects together and portfolio management groups programs and projects together that

are not necessarily related. This definition positions PPM as the “umbrella” under which project and

programmes can be collectively managed with the overall objective of ensuring alignment with the

organisational objectives. It can also be understood from this definition that programmes can also

be used directly to create a unique product, service or result as long as it aligns and supports


The part of the definition that relates to the “unrelated grouping of programmes and projects”,

emphasises the notion that PPM as a discipline is applicable across all areas of an organisation.

Project and Programmes that originate from different departments in an organisation can be

grouped together as long as the overall objective of strategic alignment and support is observed.

7.10 CONCLUSION

A strong relationship on the definition of PPM exists between consulting groups and software

vendors. This is mainly due to the fact that consulting groups pair the defined business process

with the enabling and supporting technology. It is therefore expected that the consulting groups

base their understanding and definition of PPM on the functionality of the underlying software. It is

however also noted that some consulting groups do not follow this path and follow a more

academic approach when defining PPM.

There is a strong consensus that the objective of PPM is to ensure projects objectives are aligned

to organisational objectives. This is done primarily through a continuous decision-making process


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of selecting and prioritising projects that support organisational strategy within a finite pool of

resources. There is also a school of thought that states that strategic alignment of portfolios is

merely one of many different criteria that can be used to establish the objectives of a portfolio.

Consulting groups position PPM between a strategic and operational level of the organisation. This

is because PPM should play an integrating role between the strategic and operational levels within

an organisation. Projects are selected and prioritised on a strategic level, and then executed on an

operational level given that resource constraints have been accounted for. This integration role that

PPM plays again emphasises the adequacy of PPM being used as a tool to execute organisational

strategy.

As with other areas reviewed in this study, it was also noted that consulting groups recognise that

the underlying principles of PPM is widely applicable across many disciplines and industries.

Although consulting groups would in general not be the primary source of information on PPM,

they do represent a substantial amount of knowledge, and not merely information, on PPM.

Consulting groups are those entities that amalgamate all of the different sources of information on

PPM. This ranges from the purely theoretical to purely practical ends of the PPM knowledge

spectrum. The definitions and descriptions in this area give provide a balanced view of PPM.


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CHAPTER 8

SUMMARY AND CONCLUSION

8.1. INTRODUCTION

In this chapter, all of the conclusions of the different views covered in this report will be combined

to present a comprehensive conclusion on what PPM actually entails. Recommendations on how

these disparate views on PPM can be better aligned and consolidated will also be presented.

8.2 DISPARATE VIEWS ON PPM

It was noted throughout this study that disparate views on PPM exist. These disparate views are

however not fundamentally different from another. The disparity arises from the context from which

PPM is described and presented to a reader or researches. Each different context creates an

understanding and positioning of PPM that only addresses a small part of the bigger picture. It is

however possible with a bit more research or reading to get an understanding of the full PPM

picture is all about.

8.3 RESEARCH PROBLEM, QUESTION AND METHOD

The research problem is identified was a lack of a clear definition of PPM to enable practitiners to

apply the principles in the business environment. These differing views on the subject matter stems

from a number of sources. These include academic literature, industry bodies, popular press,

software vendors and consulting groups. Each of these perspectives on PPM is tailored to the

specific objectives of these sources.

For example, the perspective of the software vendor is most likely influenced by its product offering

and focuses on the functionality and benefits of the software package through which it intends to

deliver PPM. An academic perspective will most likely have a more theoretical perspective that is

more research focussed. A consulting group perspective can include a combination of industry

bodies, software vendors and popular press.

The focus of the study was specifically on the differing definitions and descriptions of PPM within

and amongst the areas reviewed. In those cases where a definition could not be singled out the

author constructed a definition based on the available information. For each of the areas covered,

a summary definition of PPM was presented at the end of each chapter that corresponds to the

majority of the literature reviewed.


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8.4. ACADEMIC PERSPECTIVE

It was noted that the research on PPM within the academic literature is focused on the

implementation and practice of PPM in organisations and not merely theoretical in nature.

Research performed is very specific around the underlying principles that constitute PPM. It

therefore was necessary to review this research with a holistic view in order to get a better

understanding of PPM from an academic perspective.

Within the academic literature, it was noted that the selection and prioritisation of projects within a

finite set of resources is regarded as the cornerstone of PPM. It ultimately helps ensure that the

objective of portfolio value maximisation, accounting for risk, is achieved. This selection and

prioritisation is done within a decision-making framework that should include the criteria against

which projects are selected and prioritised. The research shows that the development of the most

appropriate decision-making framework that can support the objectives of selection and

prioritisation remains a strong focus.

PPM is presented as a tool that can be used by management to execute organisational strategy.

The PPM function within an organisation is positioned between the strategic and operational levels

of the organisational level. Decisions around project selection and prioritisation are taken on a

strategic level with the strategic alignment in mind, whilst the execution of strategy is performed

through the execution of these projects.

Unlike ITPPM, PPM is not limited to a specific discipline or department within an organisation. It

incorporates all projects and departments within an organisation in order to evaluate all projects

against common criteria. This is also why PPM is so well suited to enable management to execute

organisational strategy. The underlying principles of PPM are however applicable to specific

departments and disciplines as is evidenced by ITPPM and PPM for product development.

8.5. INDUSTRY BODY PERSPECTIVE

Industry bodies can be regarded as the thought leaders in the industries that they serve. The

industry bodies reviewed in this study is from the PM industry. PPM as a related discipline has a

fair amount of prevalence that it enjoys in the PM industry and relative consensus is also noted

amongst those industry bodies that do recognise PPM. The PMI is the only industry body which

has released a formal standard on PPM.

Industry bodies position PPM on a strategic management level, which makes it a strategic

management function.


66

The main objective of PPM is the management of a number of projects and programmes according

to defined processes that will help to ensure that these portfolios’ objectives remains aligned to

overall strategic objectives of the organisation. These processes include the selection and

prioritisation of projects and programmes within the constraints of a finite pool of resources.

A clear distinction is made between PPM and PM. Even though these disciplines are presented as

separate from each other, their interrelatedness is emphasised. For PPM to be effective as a

management tool, it needs projects to be executed consistently across the board in order to

evaluate the contribution of these projects to organisational strategy. The project management

discipline requires appropriate guidance from a PPM discipline in order to generate and realise its

expected value to the business.

Industry bodies do not limit the application of PPM to only specific disciplines or departments within

an organisation. It is the scope and definition of the portfolio that determines which projects are

included, irrespective of its origin within the organisation. The portfolio itself becomes the silo within

which projects are managed and aligned to organisational strategy.

8.6. POPULAR PRESS PERSPECTIVE

In general, popular press can be a very good source of information on PPM and can provide a

balanced view on the subject. It is also a more accessible source relative to academic articles and

industry bodies.

The main objective of PPM is to facilitate the selection and prioritisation of projects against defined

criteria that will help ensure that the selected and executed projects are aligned to the strategic

objectives of the organisation. This objective has to be achieved within the constraints of a finite

pool of resources.

Within the popular press, PPM is positioned on strategic management level within the organisation.

This supports the idea that PPM should be applied and implemented through a centralised

approach. This centralised approach enables senior management to have a holistic view of all the

current and future projects in the organisation. PPM therefore supports the decision-making

processes in which management engages to ensure that the maximum value is gained through

project viability and strategic importance.

PPM is presented as a tool through which an organisation can execute its strategy. PPM facilitates

a structured and standardised approach through which business and project operations are

integrated. This is where the business selects and prioritises the projects that should be executed

through PM practices within the organisation.


67

As noted in the other areas of this study, PPM principles are applicable to different contexts and is

not restricted to any specific discipline or department within an organisation.

Emphasis is placed on the fact that PPM should be part of the organisational culture. It should

therefore reflect in the way that organisations operate on a daily basis. If PPM is to become culture

in an organisation, it should rethink and redefine the position and place of projects within the

organisation. Projects should become the primary vehicle through which changes are affected in

an organisation. Only by repositioning projects within an organisation, can the full value of PPM be

realised and benefitted. PPM can help to ensure that on organisation is doing the right things,

effectively.

8.7. SOFTWARE VENDOR PERSPECTIVE

One of the main objectives of any software tool is help achieve the overall objectives of the

underlying process that it was designed for. This includes the collection, processing and reporting

of information related to the process. The majority of the software solutions reviewed in this study

is designed and developed to assist in achieving the PPM objective of effective decision-making,

by collecting, processing and reporting on data from multiple project environments.

The software vendors create an understanding of the PPM objectives of project strategic alignment

through selection and prioritisation taking into account the limited pool of resources from which to

execute these projects.

The software solutions do not limit their scope of application to only specific industries or

disciplines.

In some cases, strong emphasis is placed on project management discipline only. PPM is then

reduced to only being merely the management of multiple projects simultaneously. This can bring

about a very limited understanding of what PPM entails.

Software vendors do contribute to the overall understanding of PPM; however, being strongly

focussed on the collection, processing and reporting of information that supports the PPM process,

a gap in the broader understanding of PPM does appear when using software vendors as the main

source of information on PPM.


68

8.8 CONSULTING GROUP PERSPECTIVE

Although consulting groups are not generally seen as the primary source of information on PPM

due to its more proprietary nature, it does provide a very balanced understanding of what PPM

entails.

The main objective of PPM is to ensure that portfolio and project objectives are aligned to strategic

organisational objectives. This is primarily done through a continuous decision-making process that

involves the selecting and prioritisation of projects against defined criteria within the constraints of

a finite pool of resources.

It is also noted that the definition of the criteria is crucial to the definition and objectives of PPM.

One school of thought proposes that strategic alignment is only one of many criteria against which

portfolio can be managed. This argument is valid and can present a lot more possible applications

of PPM in different contexts.

Consulting groups in general position PPM between the strategic and operational levels of

management in the organisation. This is to emphasise the integrating role that PPM can play

between these two levels of management. It also supports the notion that PPM can be used as a

tool to execute organisational strategy in the organisation.

8.9 TOWARDS A COMPREHENSIVE PPM DEFINITION

8.9.1. Contextualisation and Positioning of PPM in an organisation.

PPM has to be implemented and applied within a defined context. This is similar to ITPPM which

applies portfolio management principles in an IT specific environment. The elements included are

assets, infrastructure, software, process and all other elements considered to be part of the IT

portfolio. This is also evident where portfolio management principles are used in product

development and research projects.

PPM is concerned with applying portfolio management principles to projects. These projects have

to be selected and grouped within the scope of the bigger defined context. This context helps to

establish an overall objective that must be achieved through the collective management of these

included projects.

This overall objective can then also attribute to the intended objective of PPM and what it as a

management tool is supposed to help achieve in the organisation. The definition of the context can

ultimately determine the scope, size and objectives of the portfolio. This definition also determines


69

where PPM will be applied in the organisation and which projects will be included as part of the

project portfolio.

The context in which PPM is applied in an organisation is determined by the positioning of PPM

within the organisation. With ITPPM, PPM is positioned within the IT discipline and the context is

then determined. The literature in this study positions PPM on a strategic management level within

the organisation where it supports the primary objective of ensuring that portfolio objectives are

aligned to the strategic objectives of the organisation. Throughout the literature it is noted that PPM

can be applied as management tool through which organisational strategy can be executed. It is

because of this positioning of PPM, that PPM is generally applied within a strategic organisational

context.

PPM should be positioned at a level in the organisation where it bridges the gap between strategic

an operational management. This positioning all the PPM process to dictate the selection and

prioritisation of projects on a strategic level and the execution of projects on an operational level.

8.9.2. The Objectives of PPM

As stated in the section 8.8.2, the positioning and context of PPM influences the definition of the

objectives of PPM. The literature in this study primarily positions PPM within the strategic

alignment, management and execution context within an organisation. This then influences the

objective of ensuring that projects are aligned to the organisational strategic intent.

According to the literature reviewed there is consensus that PPM has the following objectives:

Maximum value is derived from the portfolio of projects whilst accounting for risk,

Ensure that project objectives are aligned with the strategic intent of the organisation.

Integration of strategic and operational management levels within an organisation.

However, these generally accepted objectives of PPM should not necessarily be limited to strategic

alignment only. This will depend on the positioning of PPM and the context within which it is

applied.

8.9.3. Processes

PPM achieves its objectives through a continuous process of decision-making. This decision-

making process primarily involves the selection of projects based on its relative priority to other

projects within the portfolio. The selection and prioritisation of projects is determined through the

benchmarking of the projects against the defined criteria.


70

One of the main drivers in this selection and prioritisation process is the limited availability of

resources from which projects can be executed.

PPM is also described as a governance process through which standardised processes are

developed and used in the strategic selection and prioritisation of projects as well as the

operational execution of projects.

8.10. THE DEFINITION OF PPM

PPM is a strategic management concept with the objective of ensuring that the portfolio of projects

is aligned with and support the organisational strategy. This is done through the integration of

strategic and operational management levels within the organisation.

Portfolios and projects can be considered as change initiatives and investments the organisation

has made or plans to make in future.

PPM positioned on a strategic management level within the organisation.

PPM involves a dynamic decision-making process where the selection and prioritisation of projects

to be executed is done within the constraints of a limited pool of available resources. The selection

and prioritisation of projects is determined by a defined set of criteria.

8.11. RECOMMENDATIONS

PPM as a discipline should be used more exclusively in order to create a better awareness and

understanding of what it entails. Terms like portfolio management, IT portfolio management and

project portfolio management should be used less interchangeably.

PPM is defined and described both as too wide and also too narrow. This is very evident from the

level of detail used by academics versus software vendors. This is also expected to some extent

as the objectives and purposes of these two groups differ drastically. The PMI standard on PPM

can serve as a very good base from which academics, authors, consulting groups and software

vendors can create a consistent understanding of what PPM is all about. From this point forward

can these groups tailor their products to the needs of their clients.


71

By not using a minimum standard, prospective adopters of PPM might not gain a full understanding

of what PPM requires and entails from an implementation, operational and maintenance

perspective. This can lead to incomplete understanding and appreciation of how PPM can be used

to benefit the organisation.

As is the case with most other management disciplines and sciences, a strong collaboration is

needed between the academic and practical implementation. Having different groups across the

spectrum working in vacuums will not contribute to the overall understanding and use of a specific

discipline. It is therefore necessary that all groups that deals with PPM on some level contribute to

the body of knowledge on PPM.


72

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