The project management paradigm has both been maturing and evangelized strongly as a management practice in the past decades towards becoming a strategy implementation vehicle. This advancement has come with an increasing pressure on the project management paradigm. This paper will draw upon literature and case study derived knowledge to give an introduction to two younger concepts, i.e. programs and project portfolios followed by an invitation to the reader to assess his/her own company on how they are applying these concepts for strategy implementation.
Firstly, this paper will argue that this pressure has come about through the expansion of project management into new and expanding application fields and the changing demands placed upon the paradigm due to this expansion. We argue that if projects are applied as vehicles of change and strategy implementation the project management paradigm dismisses itself from being the management paradigm of choice for managing this system of multiple interdependent projects. For realizing strategic objectives through projects, project management does not suffice.
Secondly, the paper will look at two extensions of the project management vocabulary that have been suggested to reach beyond these limits of the project management paradigm, i.e. program management and project portfolio management.
Finally, building on case observations, we suggest a framework for assessing strategy implementation approaches using projects, programs and portfolios.
Setting the scene
Projects have been with us for a long time and so has project management. Today it is widely accepted that project execution and project management have become an integral part of an organization's value chain. This has led to increasing professionalisation and standardization concerning definitions of projects and project related concepts, descriptions, situational approaches for project management. Thus, project management has found its place in many different application fields, ranging from construction and engineering, to automation, ICT, product development, large events, etc (Görög, 2005; Gardiner, 2005; Archibald, 2003; Morris & Pinto, 2004; Gareis, 2004; Eskerod,1996)
Reaching the limits
In the last decade or so, increasingly the idea has been espoused that, as projects are becoming a more pervasive way of organizing action in organizations, they effectively should be recognized as the building blocks of strategy implementation and harbingers of organizational change in turbulent environments. (McElroy, 1996; Lord, 1993; Pinto & Morris, 2004; Pellegrinelli, 2002; Kaplan & Norton, 2004) This idea seemed in accordance with the observation of a lack of strategy implementation literature versus the breadth of the strategy formulation literature (Verweire & Vandenberghe, 2004; Roberts & Gardiner, 1998) McElroy (1996) stated five benefits for using project management to introduce strategic change: all initiatives are coordinated; management are in control, there is early definition, planning and establishment of controls, risks can be identified and managed and all staff become committed through involvement.
However, for many observers, at that point, the limits of the project management paradigm are being reached. Tensions arise between the two management systems, i.e. that of strategic management and that of project management. (Bredillet, 2005; Bartlett, 2000; Thiry, 2002; Eskerod, 1996; PMI, 2003; Williams, 2000)
From a contemporary strategic management point of view, implementing strategy in organizations implies that the implementing system has to be capable of realizing the strategic objectives as efficiently as possible, whilst being pro-active towards rapid and unpredictable changes in the strategic macro-environment (turbulence). This means that the strategy implementation system has to be fundamentally open to changing requirements, environments and constraints. Otherwise, by keeping one's strategy implementation processes too rigidly focused on the realization of e.g. yearly predefined goals, the organisation may fail to identify new strategic opportunities or emerging risks. (Alexander, 1991; Bredillet, 2005; Thiry, 2002; Mintzberg e.a., 1998; Benko & McFarlan, 2003; Salaman & Asch, 2003)
If one confronts this vision with the traditional project management paradigm, the tension becomes clear. A management system designed for the management of single projects within the famously defined triple constraint (cost, time, quality) cannot be the most suited basis for managing strategy implementation through projects. Whilst project management tools and techniques as described in multiple standards are excellent to support project managers in their successful attainment of project success, they are not applicable for a company-wide set of strategy implementing projects/initiatives.
At that point, the project management paradigm must be enhanced with a new set of concepts and organizational forms more adapted to helping organizations realize strategic objectives in turbulent environments, whilst keeping open towards change. The project management vocabulary needs to be extended, with programs and portfolios.
Extending the family
Programs & Program Management
Programs and program management have been defined in various ways over the last decade, by both academics and standardization authorities.
In its most basic description, programs are a collection of projects that are related to each other, on the basis of their aim to realize similar or the same strategic objectives. This differs from the strictly technological thinking on programs where the term program management was seen as the coordinated management of two or more projects, e.g. in defense and aerospace industries. (Archibald, 2003). This means that a program is not merely a set or a subset of projects in an organisation. These projects have to be linked by a common strategic objective translated into a common program objective, which transcends a single project objective. This vision on programs can be observed widely in areas like mergers and acquisitions, cost reduction programs, CRM implementations etc.
Program management, in turn, is then best described as to what deficiencies of the project management paradigm it seeks to mitigate. It can be seen as a tactical management practice to be placed between singular but interdependent projects and the strategic turbulence surrounding it. The program manager is constantly on the lookout for conflicting, counteracting, duplicating or positively re-enforcing initiatives, and has to assess the associated risks. As such, the program organisation aims to shelter the project organization from the strategic turbulence and the strategic apex and business organisation from the complex interdependencies between projects. It functions as two bidirectional interfaces directing the realization of strategic objectives to success and creating and maintaining a shared vision of strategy implementation between different parts of the organisation. (McElroy, 1996; OGC, 2003; PMI, 2003; Thiry, 2004; Thorp, 2000; Pellegrinelli, 2002; Van den broecke & Hof, 2004)
The context and building blocks of programs are summarized and visualized in exhibit 1.
Exhibit 1 depicts the translation of strategic objectives into programme objectives. It is the goal of the programme management organisation to implement this strategy by setting up and managing an interrelated set of projects in order to reach the programme objectives. Underlying the realisation of the program objectives by the program organisation are 5 building blocks.
Programme objectives are defined in terms of benefits to be realized. The realisation thereof is the final focus of success for programs and brings with it an organisational and strategic dimension as opposed to projects and project management. In the program management vocabulary, projects are designed to effectively and efficiently deliver products. These are often quite tangible items such as a piece of technology or a process redesign with associated training material. These products are then to be aggregated and brought into the business organisation. If done well, using the correct techniques and structures, certain capabilities can be created in the organisation, i.e. the organisation is able to use the products to its advantage.
The creation of new capabilities does not, however, imply the realization of strategic objectives. A crucial task for the program management organisation is to ensure that the organisation applies the new capabilities in a continuous manner so that tangible business benefits are obtained. We make a distinction between intermediate benefits and end-benefits on the following basis. Benefits are created on many different levels in the organization. Numerous operational benefits (intermediate) can contribute to the realization of more global, composed benefits (end benefits). Intermediate benefits can help to understand and manage the sometimes complex cause effect relations between the capabilities and the end benefits. The end-benefits are the last step that indicates a movement of the organization towards the realization of the program objectives and/or the organizations strategic objectives. (Thorp, 2003; OG, C 2003; Williams & Parr, 2004).
It is the task of the program management organisation to manage the combination of these building blocks through effective coordination and communication between different layers of the organisation. For possible examples of governance structures see different standards and methodologies (OGC, 2002; Williams & Parr, 2004; Thorp, 2002; etc.).
Project Porfolios and project portfolio management
The second often-made extension to the project management vocabulary is the concept of project portfolios and project portfolio management. Having its grounds in financial theory where a portfolio of financial assets has to be balanced according to risk, size and return, it has been picked up in a wide variety of management domains. For instance there is the brand portfolio, the product portfolio or the IT portfolio.. The last couple of years the term project portfolio has become commonplace in project management environments. Projects, then, are viewed as possible investment objects for realizing the organizations future. (Gardiner, 2005; PMI, 2003; Morris & Jamieson, 2004; Archibald, 2003;, Artto & Dietrich, 2004) The concept of projects should be viewed as a broad one, all temporary and unique initiatives using up resources can be elements of a portfolio, thus possibly also including programs.
Authors have cited many different aspects or variables that should come into play whilst managing a portfolio, e.g. the availability of (key) resources, technical risk, operational risk, commercial risk, strategic alignment, balancing long-term with short-term goals, ROI's, NPV's, pay-back periods, intangible but measurable benefits, immeasurable intangible benefits, process improvements, change capacity of the receiving organizational entity etc. To this end various techniques and aids, both soft and hard have been put forward over the years: visual bubble charts, prioritization methods, management information systems etc. (Morris & Jamieson, 2004; Archer & Ghasemzadeh, 2004; Gardiner, 2005; Archibald, 2003; Cooper e.a., 2000; Benko & McFarlan, 2003; Williams & Parr 2004, PMI 2003)
Basically, project portfolio management should enable organizations to decide upon and maintain an optimal mix of projects on which to deploy the available project resources. The generic definition of ‘optimal' can then be defined as an appropriate balance between desirability and feasibility of the portfolio outcomes.
This appears to be quite straightforward as a general concept. However there appear to be different opinions in the literature. Some authors seem to suggest that there is only one project portfolio per organisation or at least per organizational entity. (Benko & McFarlan, 2004; Williams & Parr, 2004; Artto & Dietrich, 2004; Gareis, 2004) Others seem to suggest that organizations have to manage separate portfolios clustered around strategic objectives or themes transversally, that is across organizational entities, irrespective of traditional budgetary boundaries. (Kaplan & Norton, 2004; Archibald, 2003).
In any case, typically, the governance structure encompasses that a project organisation collects data on existing and newly suggested projects. Through a series of stage-gate decision making processes projects then get approved, ramped up, accelerated, slowed down, delayed, or even cancelled by portfolio decision making entities. Typically these portfolio boards are made up of senior people from different parts of the business and the project organisation. (Archibald, 2003; Gardiner, 2005; Morris & Jamieson, 2004; Artto & Dietrich, 2004)
Through this governance process the project mix can remain aligned with strategic intentions, interdependencies between projects can be mitigated (if negative) or incorporated (if positive) and a common vision on strategy implementation within the organisation can be facilitated.
Thus project portfolios and project portfolio management have been brought forward as a second extension of the project management paradigm to realize strategy through projects. Through the creation of an optimal mix of projects (and programs), project portfolio management seems to be another suited candidate to reach beyond the limits of project management in aiding organizations in realizing strategic objectives through projects.
Programs versus portfolios
In the previous chapter we have discussed two extensions of the project management vocabulary. Both appear to mitigate the problems of keeping the collection of projects aligned with each other, with the strategic priorities and with the (key) resources available. Also in literature confusion can be noted in finding distinctions between both. (Artto & Dietrich, 2004) Nevertheless, there is one clear distinction we would like to put forward.
The difference between both concepts lies in the degree of independence between the constituting projects. Projects in a portfolio are each discretely existing objects. A project in a portfolio has its own right of existence, while in programs that is mostly not the case. This entails that programs are more a tightly coupled system, requiring more continuous follow-up of the projects in their operational, tactical and strategic interdependencies. In a project portfolio this is normally not the case. A project portfolio is then a more loosely coupled system mainly concerned with prioritizing and selecting distinct projects towards an optimal project mix. Practically, a project in a program may not have a business case, while all projects in portfolio must have one. That is also why programs can be part of a project portfolio. This of course has implications for the follow-up of the projects in a program or in a portfolio, since the management of a program will entail the follow-up of the program business case, whilst portfolio management is a collection of business cases.
To sum up, both program management and portfolio management enrich the project management paradigm from only “doing the projects right” to include “doing the right projects”, thus enabling projects to be used as vehicles for realizing strategic objectives. Program management is designed for more tightly coupled projects whilst portfolio management takes a more loosely coupled approach. (Cooke-Davies, 2004; Gray, 1997)
The “real world” of course does not care too much about semantics. Therefore in practice both concepts will become blurry and mixed models are abundant. This is the topic of the next chapter.
How do organizations realize strategic objectives through projects, programs and portfolios?
The following is derived from the results of a six month research track on strategic alignment performed by the Program Management Research Centre of Vlerick Leuven Gent Management School, Belgium. The purpose of the study has been to develop an assessment tool to evaluate the degree of alignment of projects, programs and portfolio(s) with the management of strategy implementation.
A framework, developed through literature study, has been applied on five cases through open-ended interviews with multiple stakeholders from both the strategic, business organisation and the project organisation. The cases research has been conducted on two international banks, one professional information provider, one IT services provider and one telco. The questions asked during the interviews covered both strategy implementation management and the management of projects, programs and portfolios.
Concerning strategy implementation management
1) What are the outputs of the strategy formulation process, are they objectives, themes, intentions, … ?
2) Do/can you discern strategic clusters ?
3) Are there any structures, roles, processes in place to oversee the realization of these strategic clusters?
Concerning project, program and portfolio management
4) Where in the organisation do initiatives (projects and/or programmes) exist?
5) Do you/can you cluster them in a certain way, around acceleration zones, people, business units, etc?
6) How are these projects, programs and portfolios managed? Do these governance structures (if any) align with the governance structures, roles and processes of the management of strategy implementation?
By asking these questions we could see how both perspectives, strategy implementation management and the management of projects, programs and portfolios were aligned.
A first observation has been that there are clear differences in the degree of conscious management and follow-up of strategy implementation, from using Balanced Scorecard and Strategy Mapping tools to informal meetings. Secondly, there are clear differences in the degree of formalization of managing projects, programs and portfolios in a concerted way, from separately setting up program and portfolio structures to none of the above. Thirdly, that the linkages between the management of strategy implementation and the management of projects, programs and portfolios are recognized by most managers. However action on the matter varies from attaching a strategic qualification to initiatives to managing strategic project portfolios (based on acceleration zones) via an integrated management information system.
All interviewees agreed that the management of their collection of projects can be considered as building blocks of strategy implementation. However, the five companies managed their projects, programs and portfolios in different ways. We observed generally four settings.
- portfolios per acceleration zone
- portfolios per resource pool
- programs as part of an existing portfolio
- programs independent from the existing portfolios
The five organizations used multiple settings in varying degrees of intensity. To give an illustration we have chosen to describe one of the five cases briefly.
One of the companies has a strategic management system in place that allocates strategic objectives to different persons from the management committee, including red-amber-green KPI follow-up. It also facilitates the identification and follow-up by these persons of the projects associated with the set of related strategic objectives, or acceleration zone. However the project, programs and portfolios are not managed via this system. The entire project portfolio is in effect managed within its IT department because of it being the location of the key resource pool. The same people of the management committee are part of the portfolio board, and the projects are categorized per ‘strategic categories'. However these categories do not correspond with those stipulated in the strategic management system and that system is not referred to in the board meetings. Also the company has a program separately from this portfolio in terms of the main part of the governance, yet it is part of the portfolio in terms of resource consequences. Summarizing there is a lack of consistency between the management systems used.
With the conclusions of these observations we come to the understanding that there is no such thing as an ‘ideal' management system best suited for realizing strategic objectives through projects, programs and portfolios. As with the described example, management depends on situational and cultural factors of the organisation. However, we believe that any company needs to be aware of how they manage strategy implementation, how they manage their projects, programs and portfolios and finally how both management systems fit with the strategic, operational and cultural context of the organisation.
We started from describing how projects are increasingly appreciated as vehicles for realizing strategy objectives. Following that assertion we argued that the project management paradigm is not adapted to manage the issues that go with effectively and efficiently managing strategy implementation. We extended the project management vocabulary and gave some insights into the concepts of programs and project portfolios and how they can aid in mitigating the challenges of strategy implementation. We concluded that the difference between both approaches lies mainly in the level interdependence between the projects underlying both concepts. Programs are tightly coupled, whilst portfolios are loosely coupled.
We then introduced a framework to assess how the governance of the management of projects, programs, and portfolio(s) is aligned with the management of strategy implementation. We observed differences between organizations and also an apparent lack of consistency between the management systems used. In that matter, we recognize that no single dominant model should apply.
We recognize that the situation differs between companies with different strategic, operational, and cultural characteristics. The framework we propose can support managers in their assessment of their strategy implementation approach and their management of projects, programs and portfolios. It can help them to evaluate whether these systems are aligned with their strategic objectives.