Project Management Institute

What is effectiveness in project portfolio management?

Stevens Institute of Technology, NJ, USA

Abstract: While project portfolio management (PPM) has increased its significance in various business contexts, research on the effectiveness of PPM is still limited. In fact, PPM effectiveness has not been clearly defined, and the factors contributing to PPM effectiveness have not been thoroughly investigated. The lack of such research has practitioners continuing with a PPM approach that has not been measured as to its effectiveness and impact on business results. As part of a major research initiative, the objective of this study is to investigate PPM effectiveness from a real-life business setting in order to propose a definition of PPM effectiveness. The results of this research should provide a foundation for future studies and provide practitioners with a guideline for creating organizational conditions that promote PPM.

Keywords: project portfolio management, effectiveness, definition

INTRODUCTION

Project portfolio management (PPM) has been practiced in many organizations as an approach to coordinate a portfolio of projects, or programs, to achieve specific organizational objectives (Project Management Institute, 2008). A typical goal of PPM is to ensure that an organization is doing the right work, rather than doing the work right (Project Management Institute, 2008). From industry practices, Copper, Edgett, and Kleinschmidt (2001) suggest that the maximization of portfolio value, portfolio balance, and strategic alignment are the typical goals of PPM for new product development.

To accomplish PPM goals, several authors have proposed PPM frameworks, which include those for project portfolio selection (Archer & Ghasemzadeh 1999) and management of portfolio in different settings (Kendall & Rollins 2003; Rad & Levin 2005; Rajegopal, McGuin, & Waller, 2007). Early research on PPM methodologies focused on R&D project/portfolio selection and evaluation (e.g., Chiu & Gear 1979; Spharim & Szakonyi 1984; Madey & Dean 1985; Khorramshahgol & Gousty 1986; Golabi, 1987; Bard, Balachandra, & Kaufman, 1988). This trend still continues, however, methodologies were developed for different settings and conditions such as a specific decision support system to identify an optimal project portfolio mix under uncertainty for information system projects (Kira, Kusy, Murray, & Goranson, 1990), a model for optimizing interdependent projects over multiple time periods (Dickinson, Thornton, & Graves, 2001), and a model for interactive R&D portfolio analysis dealing with project interdependencies and time profiles of multiple objectives (Stummer & Heidenberger, 2003). In addition to the methodologies proposed in the form of mathematical models discussed above, several authors suggested simpler methodologies for PPM that include economic/financial models such as payback period, net present value, bang for buck index, productivity index, profitability index, expected commercial value, etc. (Cooper et al., 2001; PMI, 2006; Rajegopal et al., 2007). Scoring models were also proposed for project selection and evaluation, while bubble diagrams were suggested for portfolio balancing. Product and technology roadmap and strategic buckets were suggested in part for strategy-portfolio alignment (Cooper et al., 2001). The state-gate approach was also proposed for portfolio management (Cooper, Edgett, & Kleinschmidt, 2002).

While some of the PPM frameworks and methodologies, including a standard for PPM (Project Management Institute, 2008) have been widely practiced, a simple question asked by practitioners is whether or not their PPM is effective. In the literature, research on PPM effectiveness is still limited. Several studies were conducted on PPM efficiency and performance (Blomquist & Muller, 2006; Martinsuo & Lehtonen, 2007). Even though the understanding of PPM efficiency is beneficial, the importance of PPM effectiveness cannot be overlooked. The use of the proposed frameworks and methodologies may be the means for achieving PPM effectiveness (Cooper, Edgett, & Kleinschmidt, 1999), however, one will not know until PPM effectiveness is defined. The objective of this study is to investigate PPM effectiveness from a real-life business setting in order to propose a definition of PPM effectiveness. Case study research was employed as the methodology. With an attempt to provide a better understanding of effectiveness in an organizational context, the literature on organizational, team, and project management effectiveness was reviewed and is summarized in the next section.

LITERATURE REVIEW

In the literature, effectiveness has been the center of attention of several scholars of management research. Several studies have been conducted to investigate the effectiveness at the organizational and team levels. An attempt to define organizational effectiveness dated back to the “scientific management” approach of Frederick Taylor (1911) who perceived organizational effectiveness in terms of production maximization, technical excellence, and optimal utilization of resources. Taking a human relations’ view, several researchers refer to effectiveness as productivity through employee satisfaction (Mayo, 1933; McGregor, 1960; Likert, 1961). From a strategic management and design perspective, organizational effectiveness is viewed with respect to structure/strategy congruence, competitive attainment, and environmental control and flexibility/adaptation (Chandler, 1962). Later, researchers focused on using multiple perspectives to determine organizational effectiveness (Pennings & Goodman, 1977; Brundney & England, 1982; Elmes & Wilemon, 1988). Building on the works of several researchers such as Scott (1977), Cameron (1979), and Seashore (1979); Quinn and Rohrbaugh (1983) proposed a “spatial model” of organizational effectiveness, resulting from mapping various effectiveness constructs. This spatial model includes three competing values (organizational focus, structure, and means and ends) and four middle range models of organizational analysis (human relation, open system, internal process, and rational goal). Several researchers suggested that it would be generally more promising if an organization-specific model based on clear and explicit assumptions were developed (Campbell, 1977; Lewin & Minton, 1986). Organizational effectiveness would then be the degree to which the organization's “end” objectives are accomplished subject to certain constraints. Many scholars also suggested that the nature of effectiveness is multidimensional and should be defined by a complex of stakeholders, who may in fact hold different and incompatible perspectives (Cameron & Whetten, 1983; Lewin & Minton, 1986).

In addition to organizational effectiveness, team effectiveness was of interest to many researchers and was typically studied as part of an input-process-outcome (IPO) framework (McGrath, 1964; Denison, Hart, & Kahn, J. A., 1996; Mathieu, Maynard, Rapp, & Gilson, 2008). In the IPO framework, inputs describe antecedent factors that enable and constrain members’ interaction such as individual member characteristics (e.g., skills and personalities), team characteristics (e.g., structure and managerial influences), and organizational contextual factors (e.g., environmental complexity and organizational design). Processes describe members’ interactions directed toward task accomplishment. The outcomes in the IPO framework are typically the criteria of effectiveness, which are results and by-products of team activity that are valued by one or more constituencies. The outcomes may include team performance and members’ affective reactions (e.g., satisfaction). In their study of self-managing work team, Cohen, Ledford, and Spreitzer (1996) defined effectiveness in terms of performance effectiveness (e.g., controlling costs, improving productivity, and quality), employee attitude about their quality of life (e.g., job satisfaction, and organization commitment), and employee behavior. For cross-functional teams, Denison et al. (1996) specifically measured the outcomes in terms of information creation, team compression, image expansion, learning, growth satisfaction, capability development, and overall effectiveness.

In project management literature, even though project management effectiveness is of interest to many researchers, few researchers have attempted to define project management effectiveness. With his focus on understanding the impact of effectiveness and efficiency on project success, Phelan (2004) simply refers to effectiveness as the extent of accomplishment of the right things, the right ends; and efficiency as the economics of doing things right, the economics of the right means. Without defining project management effectiveness, Morrison and Brown (2004) proposed a conceptual construct of project management effectiveness, which includes multiple dimensions namely, organizational input, project management process, short-term results, and strategic impact. This conceptual construct is similar to the IPO framework of team effectiveness (Cohen & Ledford, 1994; Denison et al., 1996). The organizational inputs are supportive organization and rational project decision making. The processes include effective tools and systems, procedures and discipline, project leadership, project communication, resource adequacy and competency, and customer-process integration. The outcomes in terms of short-term results and strategic impact are about meeting project operational objectives consistently, meeting organizational strategic goals for project management, and project management that is smoothly integrated into organization's workflow.

RESEARCH METHOD

Design and Sampling

With the limited knowledge and perspective on PPM effectiveness, case study was used as a methodology (Yin, 1984; Eisenhardt, 1989). For the purpose of this paper, PPM practices of three organizations were investigated. These organizations were the leaders in their respective area.

Organization A is a leader in telecommunications services. The company consists of several business units. One of which is the global shared-services business unit that operates the company's wire line network, including providing support across business units in terms of finance operations, real estate, and supply chain services. Within this business unit, PPM of the wire line network was the focus of this study.

Organization B is in the insurance services industry. The company's products help customers protect life, property, and financial assets in the United States and around the world. To serve its clients, the company draws upon experience in data management and security and expertise in predictive modeling. Typical projects of the company involve software elements. PPM of software development projects was investigated in this study.

Organization C is in the insurance industry. The company helps its clients achieve financial security through life insurance, disability insurance, investment management, and other financial services. The focus of this study was on the management of a portfolio of corporate projects. These projects are either strategically or operationally important to the company.

Data Collection

To investigate PPM practices, six to ten individuals from each organization were interviewed. These individuals were representatives from various management levels, including senior-level executives such as president, executive vice presidents, vice presidents, CFO, and CIO. At the PPM and project management levels, the information was gathered from the director of PPM, the PMO manager, PPM committee members, and PMO personnel. Additionally, the director of project management was interviewed to help the researchers gain an understanding of the project management practices of each organization. Interviews were also conducted with the representatives from business units. The interviews with informants from different management levels helped the researchers understand the PPM practices of that organization from different perspectives.

These semi-structured interviews typically lasted about 60 minutes, except the interviews with the PPM director of Company C that lasted approximately 150 minutes. These interviews were conducted to gather information regarding, e.g., the PPM processes and methodologies used in each organization, the roles and responsibilities of the informant in PPM, the informant's view of their PPM practices, the placement of PPM and project management, and the informant's view of PPM effectiveness. Depending on the roles and responsibilities of the informants, some specific questions regarding strategic planning process, capital budgeting and portfolio funding, organizational culture, resource allocation, and governance were also asked. All interviews were conducted at the informants’ setting using two researchers. The interviews were also recorded.

Data Analysis

Each interview was transcribed, yielding approximately 15–30 pages transcripts. The transcripts were coded. The chains of evidence were developed. For each organization, within-case analysis was conducted. The document received from the respondents (e.g., PPM processes, scoring sheets, and project prioritization document) was also reviewed. Cross-case analysis was also conducted to analyze the consistency and inconsistency of the data across cases and to ensure the construct and internal validity of the findings (Miles & Huberman, 1980; Yin, 1984; Eisenhardt, 1989). After these analyses, the findings were compared and contrasted with the literature to identify the similarity/dissimilarity and for the external validation. A definition of PPM effectiveness was developed from the cross-case analysis and literature review. After the development of the definition, each case was revisited to investigate whether the case data supported the definition of PPM effectiveness.

FINDINGS AND DISCUSSION

This section presents research findings and discussion. The section starts with the presentation of PPM practices from each case. It then continues with the discussion of the similarities and differences of PPM practices from these cases. The definition of PPM effectiveness is proposed in the last section.

PPM in Each Organization

Organization A

Organization A is a communications services company serving the U.S. market with communications services for residential and business customers. Overall, the company is financially driven. In this study, we investigated the portfolio of network projects, which is managed under a network program management office (Network PMO) of the global shared-services business unit (GBU). The purpose of the Network PMO is to ensure the delivery of the network projects. In general, the project funding process starts with a capital planning process at the corporate level. Each business unit enters its initiatives as part of a capital request in the company's capital planning tool. After the investigation of the ROI at the corporate level and at each BU level, including the deliberated discussions and negotiations, funds are allocated to each BU.

In the network portfolio of the GBU, the network projects are typically originated from marketing initiatives. During the preparation of a project for the selection and prioritization process, there are project sizing and costing activities that require collaboration between marketing and the network PMO. With the availability of funds, the executive committee (with support from marketing) selects projects based on projected revenue generation. The priority of the projects depends on the business priority and is set by the marketing team. The marketing team maintains a list of funded projects to be rolled out in a given year, including their priority, and makes it available to the Network PMO. After being funded, the projects are planned and executed by the Network PMO.

As for project management, the Network PMO has a project management system including standardized project management processes and methodologies. Depending on the types of projects, the standard project management practices are followed and there is information systems support to help with recording and reporting status and progress. During project execution, besides regular project status meetings, there is a monthly meeting to review the status of key projects with senior executives. The President and executives of the GBU pay particular attention to the projects with the highest potential business impact and typically request a quarterly meeting with the project teams. Overall, Organization A has a mature strategic planning process. The network portfolio had linkage to the overall business strategy through the executive committee, the project selection process, and the project governance by senior executives.

Organization B

Organization B is an information services company serving the global insurance industry with statistical, actuarial, and claims related products. At Organization B, the project portfolio is managed under the project management office of the development division (Development PMO), which was established 3 to 5 years ago. The development division is part of the information technology (IT) organization and has a structure that aligns its functional units with businesses, having a manager and needed resources for each functional unit. While there is no designated PPM office and staff, the Development PMO serves in this role. The portfolio consists of multiple development and infrastructure projects within the IT organization. The purpose of the PMO is to ensure the smooth utilization of resources, to alleviate resource contention issues, and to successfully manage high priority projects in the portfolio. The PMO has a full-time PMO manager and seven project managers (direct reports). Other project managers reside within the infrastructure division and other functional units of the development division (indirect reports to the PMO manager). At any given time, there are approximately 30 to 40 projects in the portfolio.

Projects are typically initiated by the business during a budget cycle or an off cycle review if required. Product managers (from the business units) and the PMO manager work collaboratively to develop requirements documents and the project charter. Project selection is conducted at the cross-business executive level, where major projects require approval from the CEO. This is accomplished annually as part of the capital budgeting process funding for business operations. Once approved, the projects are listed in the portfolio dashboard and categorized and scored by the PMO manager. The project ranking is performed by the prioritization committee, consisting of four senior executives from the IT department. The rank of a project determines its priority when there is resource contention. Top 10 projects typically receive all resources they need. The company has introduced tools and procedures that promote consistency in how the portfolio is prioritized and managed. For example, the PMO utilizes scoring sheets and uses systems to manage the ranking from the score sheets for each rater. For project management, once approved, projects follow a tollgate process. An online system is implemented and is used on a daily basis to ensure visibility into the projects and for tracking project status and issues. The system is available to all, supports transparency across the business and with management, according to the established hierarchy of permissions. There is an automatic escalation process if there are any conflicts or issues. The process is regarded as providing substantial improvement and benefit to the business. The PMO manager has a weekly meeting with project managers to discuss resource conflicts in the upcoming weeks. Another weekly meeting is also set to review the dashboard, milestones, and processes. Organization B utilizes strategic planning processes. IT strategy was developed using a top-down and bottom-up approach. A strategic exercise is used to develop multi-year views: 10, 7, 3, and next year visions and goals. Theses visions and goals are used as a foundation for the development of quarterly objectives and metrics.

Organization C

Organization C is an insurance company, which has a dedicated corporate level project portfolio management office (PPMO), reporting to the VP of strategy. The PPMO has a dedicated director and staff. It is directly involved with the selection, prioritization, and governance of the corporate project portfolio through a prioritization committee (PC) and a project review committee (RC). Even though the project portfolio could consist of IT or non-IT projects, the majority of 40 projects in the portfolio are IT-related projects.

The PC is chaired by the director of PPMO. The committee members are senior level managers representing various functions, including businesses. The company's senior executives were not involved in making the funding decisions but they provided their perspective on the priority of projects pertaining to the strategic direction of the company. Additionally, a benefit realization team (BT) has been established to help project teams identify benefits of their project prior to presenting the project proposal to the PC. The PC has sole authority in making project funding decision and reports directly to the management committee, which consists of the company's senior executives. The PPMO maintains active oversight of the portfolio of projects through the RC, chaired by the director of PPMO. The RC emphasizes project delivery and provides inputs to the PC to assist in making the go/kill decisions. For each project, the funding decisions were made on a phase-by-phase basis. The quality process consultants, part of the IT excellence and quality organization, provide assistance to project managers to ensure project delivery. All corporate projects follow a standardized project management process that incorporates the interactions with the PC, RC, and BT. Organization C has a mature strategic planning process. The organization utilizes the company's strategy map, including drivers and metrics. While the company's strategy does not change very often, it is revisited every 12 to 18 months and reviewed regularly.

Similarities and Differences in PPM Practices

These three organizations use different approaches to PPM. While Organization C has an independent office for PPM, Organizations A and B manage their portfolio as part of their business operations and utilize project management office to ensure a successful delivery of projects.

At the corporate level, all three companies follow their capital planning process to allocate funds across businesses. For Organization A's network project portfolio, the project selection and prioritization are done by businesses as part of the usual business operations. For Organization B's development project portfolio, the project selection is performed by businesses while the prioritization is executed by the IT organization to ensure the appropriate allocation of IT resources. Differing from the other companies, Organization C allocates discretionary funds to its corporate project portfolio and utilizes an independent portfolio prioritization committee, which operates separately from the company's business units. Regardless of which approaches the companies use, projects in their portfolio are selected with an expectation of supporting the company's strategic directions and operations even though the direct linkage may be difficult to establish. Since revenue generation is important for Organization A, the projects are selected based on the revenue they are expected to generate. Organization B's portfolio also supports its businesses. Organization C utilizes a benefit realization committee to unsure that the project benefits are articulated. The projects are selected and prioritized based on their benefits and their alignment with the company's strategic direction. In all three companies, the senior-level executives are involved in the portfolio governance. Organization A's executives pay a significant attention on the network portfolio, especially the strategic initiatives. Organization B's CIO and VPs of the technology organization are involved in project ranking and are informed about the status of projects in the portfolio through its Development PMO. Organization C's executives receive the status of the portfolio through the director of PPMO, on behalf of the PC and GC.

As for project management, all three organizations utilize project management office and standard project management processes and methodologies. The project management office is utilized to help ensure the successful delivery of the projects in the portfolio. For Organization A, based on the types of products or services generated by projects, the network projects are assigned to a relevant group under the network PMO. Each group has its own project managers who are the direct reports of the group director. Organization B utilizes a centralized development PMO for managing development projects. Project managers are the direct reports of the PMO manager. Since Organization C's corporate projects involves IT elements, the projects are managed under the IT organization, where the IT excellence and quality group provides project management consultants to project managers to ensure successful project delivery.

In contrast to the project portfolio management processes proposed by Project Management Institute (Project Management Institute, 2008), to different degrees these three organizations practice strategic planning, portfolio alignments, portfolio monitoring and control, and project execution and reporting processes. Among the three organizations, due primarily to designated PPMO and processes, the portfolio management of Organization C is the most mature, in consideration of all four process groups mentioned above. To different degrees, other organizations employ well-defined procedures, including formal and explicit methods for PPM and project management. Even though the companies do not employ a specific measurement to assess portfolio success, they emphasize the success of individual projects in the portfolio. Middle managers, such as portfolio managers and PMO managers, also play major roles in PPM. All three companies continuously learned and implemented new practices to improve their PPM. These findings are similar to what has been suggested in the literature as important elements for successful PPM. For example, Cooper et al. (1999) studied portfolio management practices of 205 U.S. firms to gain insight into PPM methods used by the firms, their level of satisfaction, and the performance results. They found four clusters of firms based on management fit and overall quality rating. Their results suggested that the top performers employed well-defined procedures, and applied formal and explicit methods consistently to all projects, leading to high-value projects, the alignment of the portfolio with business’ strategy, and the right balance and number of projects. The top performers also had management buy-in to the PPM approach. These findings were also supported by a later study of Blomquist and Muller (2006) indicating that high-performing organizations apply project and portfolio management practices significantly more than low performing organizations. They also emphasized the roles of middle managers in PPM. Martinsuo and Lehtonen (2007) studied the role of single-project management in achieving PPM efficiency and found that the high degree of goal setting, information availability, and systematic decision making in a project level are reflected in higher levels of portfolio management efficiency.

Toward a Definition of PPM Effectiveness

The research evidence indicates that PPM has been practiced in three organizations but none of them explicitly defines effectiveness in project portfolio management. With the relevant information that we have collected from the cases, we propose definitions of PPM effectiveness. First, we propose the definitions in each organization's context. Next, we define PPM effectiveness from research evidence across the cases and relevant literature.

In the case of Organization A, without a designated PPM office, project portfolio is managed as an integral part of day-to-day business operations. Major projects are viewed as strategic investments. Network projects are managed by the Network PMO. The PMO provides relevant project information to executives for making portfolio decisions. Senior executives put much emphasis on balancing and managing risks of the portfolio and on the alignment of the projects in the portfolio with the organization's strategic objectives (by tracking and measuring projects and the portfolio against the objectives, measured in terms of revenue). Senior executives also rely heavily on the effective management of projects in the portfolio. In Organization A's context, effectiveness in project portfolio management can be defined as the organizational capability to select and govern projects in the portfolio such that the portfolio is balanced in terms of risk and return and aligned with the organization's strategic objectives to generate financial benefits to the organization. This definition is in line with portfolio aligning and monitoring and controlling process groups. At the Network PMO level, effectiveness in project portfolio management can be defined as the organizational capability to manage, monitor, and control project in the portfolio for successful project delivery and to provide necessary information for making portfolio decisions. In the Network PMO's context, PPM effectiveness is defined as part of portfolio execution and reporting.

In the case of Organization B, a portfolio of development projects are managed by the Development PMO. Without the responsibility of project selection and evaluation, the PMO emphasizes successful project delivery. In particular, the PMO manager places more attention on resource utilization and conflict. The PMO utilizes information systems to promote visibility of project status, transparency of resource allocation, and communication. The CIO and VPs are informed of the status of projects in the portfolio through its Development PMO. In Organization B's context, the effectiveness in managing the Development portfolio can be defined as the organizational capability to manage and govern projects in the portfolio to promote successful project delivery for organizational value and benefits. In the Development portfolio context, PPM effectiveness is defined as part of portfolio alignment (project prioritization), monitoring and controlling (review and report performance), and execution and reporting.

While Organization C has not defined PPM effectiveness, through the PPMO, Organization C focuses on transparent project portfolio planning, linked to the business strategy. Organization C has designated committees that have full responsibility for strategic planning, portfolio alignment and monitoring and controlling. Project execution and reporting are under the responsibility of the PMO, operated under the IT organization. In addition, the committees and processes are implemented to promote transparency in a decision-making approach that can promote integrity, cohesion, and morale of the project management community; adaptability to internal changes and external opportunities; and control and predictability of project delivery, leading to portfolio success. In Organization C's context, effectiveness in project portfolio management can be defined as the organizational capability to transparently plan and govern project portfolio in alignment with the company's strategy and internal changes and external opportunities to generate short and long-term value and benefits to the organization and satisfaction of project management community. As Organization C has the most mature PPM, its PPM effectiveness is defined with the focus on portfolio alignment and monitoring and controlling. At the PMO level, effectiveness in project portfolio management can be defined as the organizational capability to manage, monitor, and control projects in the portfolio for successful project delivery and to provide necessary information for making portfolio decision. In the PMO's context, PPM effectiveness is defined as part of portfolio execution and reporting.

These different definitions of PPM effectiveness reflect the different levels of PPM practices in these organizations and represent different PPM process groups suggested by Project Management Institute (Project Management Institute, 2008). To achieve the overall effectiveness of PPM, the management of every process group must be effective. This includes the aligning, monitoring and controlling, and project execution and reporting process groups. Based on cross-case analysis, we propose a definition of PPM effectiveness as:

“The organizational capability to (1) form and govern a project portfolio such that the portfolio aligns with the organization's strategic direction, addresses risks and opportunities, and is adaptive to the internal and external changes in order to provides short and long term value or benefits to the organization, and (2) to manage projects in the portfolio to promote transparency, process consistency, visibility and predictability of projects in the portfolio, and to promote integrity, cohesion, and morale of the project management community.”

The effectiveness in PPM, as defined previously, represents the effectiveness in the selection and prioritization, resource allocation, monitoring, and control of the project portfolio such that the portfolio provides values or benefits supporting an organization's strategic direction; the portfolio addresses risks and opportunities; the financial and physical resources are transparently allocated; the relevant information is available for making decision; the portfolio is adaptive to the internal and external changes in a business environment; and the project management community of the organization possesses high integrity, cohesion, and morale. This definition of PPM effectiveness was defined based on the attainment of the portfolio management outcomes, which is similar to what Pennings and Goodman (1977) suggested regarding the definition of effectiveness.

This definition of PPM effectiveness also suggests different levels of effectiveness, depending on the maturity of the project portfolio management practice of an organization. The definition of PPM effectiveness implies the level of maturity in project portfolio management. At the low end of maturity level, the PPM effectiveness can be defined in terms of the organizational capability to manage projects in the portfolio to promote transparency, process consistency, visibility, and predictability of projects in the portfolio, and to promote integrity, cohesion, and morale of project management community.” Some may refer to this as effectiveness in multiple project management. At the high end of maturity level, the PPM effectiveness should also include “The organizational capability to form and govern a project portfolio such that the portfolio aligns with organization's strategic direction, addresses risks and opportunities, and is adaptive to the internal and external changes in order to provide short and long term value or benefits to the organization.” Note, that the low or high end of maturity level does not imply bad or good project portfolio management. An organization may make a conscious decision to pursue PPM effectiveness at the low end level, if it serves its context and purposes. This implies that the definition of PPM effectiveness gives an organization some alternatives to justify their PPM effectiveness depending on the purpose and the context of their PPM. In addition, this definition of PPM effectiveness addresses the effectiveness from the organizational perspective and from the perspective of the project management community. It, therefore, supports the notion that effectiveness is a multi-dimensional concept. It also reflects different models of organizational effectiveness suggested in the literature (Scott, 1977; Cameron, 1979; Seashore, 1979).

CONTRIBUTION AND IMPLICATIONS

This qualitative study was conducted to investigate the PPM practices of organizations in order to potentially propose a definition of PPM effectiveness. From the investigation of three organizations and the relevant literature, we propose a definition of PPM effectiveness. The results of this study should contribute to the theory and practice of project portfolio management.

In terms of the theoretical contribution, as this research proposes the first empirically-grounded definition of PPM effectiveness, it should serve as a platform for future studies on PPM effectiveness. Future research can be conducted to validate and fine-tune this definition to different settings. A measurement of PPM effectiveness can be developed. Factors affecting PPM effectiveness are also worth investigation. Future studies can also be conducted to investigate the linkage between PPM effectiveness and organizational effectiveness and the linkage between PPM effectiveness and project management effectiveness or team effectiveness. These studies should promote a better understanding of organizational effectiveness, especially in the context of a project-oriented organization.

The findings of this study provide several practical managerial implications. First, the study reveals the PPM practices of three market-leading organizations. Practitioners can use this information as a benchmark for development or improvement of their PPM practices. Second, the study proposes a definition of PPM effectiveness, derived from the research evidence and a literature review. With this definition in mind, practitioners can implement a PPM approach that will enhance PPM effectiveness. Practitioners can use the proposed definition as a basis for the development of measurements for assessing PPM effectiveness and for creating a working environment that promotes PPM effectiveness. Third, while an overall definition of PPM effectiveness was proposed in this study, the definition also implies different levels of maturity in project portfolio management. This gives management some alternatives to apply this definition to reflect the level of maturity or the purpose of their PPM. Within one organization, different functions may have different responsibilities for PPM. Those functions should focus on certain elements of PPM effectiveness that are relevant to their responsibility. As discussed in this study, the main responsibility of the Development PMO of Organization B is not project selection and evaluation. Their responsibility is the successful delivery of projects in the portfolio. While overall PPM effectiveness should be achieved, the PPM effectiveness in the context of the Development PMO should be perceived in terms of resource allocation; successful project delivery; and integrity, cohesion, and morale of the project management community.

CONCLUSION

This study was conducted to investigate PPM practices in order to propose a definition of PPM effectiveness. As a research result, the preliminary definition of PPM effectiveness was proposed as “The organizational capability to (1) form and govern a project portfolio such that the portfolio aligns with the organization's strategic direction, addresses risks and opportunities, and is adaptive to the internal and external changes in order to provide short and long term value or benefits to the organization, and (2) to manage projects in the portfolio to promote transparency, process consistency, visibility and predictability of projects in the portfolio, and to promote integrity, cohesion, and morale of the project management community.” This definition of PPM effectiveness was defined from different perspectives based on the attainment of PPM outcomes. More work is needed to further validate and operationalize this definition for future research and practice. A potential limitation of the study is related to the fact that data were collected from three organizations. Even though these organizations were market leaders in their respective markets and the informants had a high level of expertise and experience in PPM, the definition of PPM effectiveness would benefit from gathering evidence in many more companies and industries.

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1Dr. Peerasit Patanakul is affiliated with The Pennsylvania State University, effective August 2012

©2012 Project Management Institute

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