Project Management Institute

Program management and project portfolio management

new competences of project-oriented organizations

Roland Gareis, University of Economics and Business Administration, Vienna

Project-oriented Organizations perform simultaneously a number of different projects, they hold a portfolio of projects. The more projects a company performs, the more complex it becomes.

Project-oriented Organizations have dynamic boundaries and contexts. On the one hand the number and the sizes of the projects and programs are constantly changing, permanent and temporary resources are employed, and cooperations are organized in virtual teams. On the other hand, varying strategic alliances are established and relationships to the different social environments of the different projects and programs are managed.

In order to manage the dynamics of Project-oriented Organizations besides intensive corporate identity activities, such as strategic planning activities, reflections of the corporate culture, and continuous organizational development, specific integrative functions, such as program-management and managing the project portfolio, have to be performed.

Program management and the management of the project portfolio, as new management competences of Project-oriented Organizations, require specific management processes and management methods.

Strategy, Structure and Culture of the Project-Oriented Organization

A Project-oriented Organization is an organization that:

• Defines “Management by Projects” as an organizational strategy

• Applies temporary organizations for the performance of complex processes

• Manages a project portfolio of different project types

• Has specific permanent organizations to provide integrative functions

• Applies a “New Management Paradigm”

• Has an explicit project management culture

• Perceives itself as being project-oriented.

Project-oriented Organizations consider projects not only as tools to perform complex processes, but also as a strategic option for the organizational design of the company. By applying “Management by Projects” the following organizational objectives are pursued:

• Organizational differentiation and decentralization of management responsibility

• Quality assurance by project teamwork and holistic project definitions

• Goal orientation and personnel development

• Organizational learning by projects.

Project-oriented Organizations perceive projects and programs as temporary organizations for the performance of complex processes, such as contracts for external clients as well as product developments, marketing campaigns or reengineering activities for internal clients.

The more projects of different types a company holds in its project portfolio, the more differentiated it becomes and the higher becomes its management complexity. In order to support the successful performance of the single projects as well as to ensure the compliance of the objectives of the different projects with the overall company strategies, specific integrative structures, such as a strategic center, expert pools, a pm-center of competence, and a project portfolio steering committee are required. Some of these permanent organizations might be virtual.

The Project-oriented Organization is characterized by the existence of an explicit pm-culture, i.e., by a set of pm-related values and norms. In the Project-oriented Organization project management is considered as a business process, for which there exist specific procedures and a common understanding of the performance of this process, the project roles involved, and the project management methods, to be applied.

EXHIBIT 1. Dynamic Boundaries of the Project-Oriented Organization

Dynamic Boundaries of the Project-Oriented Organization

Exhibit 2. Strategy, Structure, and Culture of the Project-Oriented Organization

Strategy, Structure, and Culture of the Project-Oriented Organization

Exhibit 3. Adequate Organizations for the Performance of Processes of Different Complexity

Adequate Organizations for the Performance of Processes of Different Complexity

Further, in a Project-oriented Organization the application of a “New Management Paradigm” is required. Traditional management approaches are emphasizing detailed planning methods, focusing on the assignment of clear defined work packages to individuals, relying on contractual agreements with clients and suppliers and using the hierarchy as central integration instrument.

Compared with this traditional management approach the major concepts common to “new” management approaches such as:

• consideration of organization as competitive advantage

• empowerment of employees

• process-orientation

• team work in flat organizations

• continuous and discontinuous organizational change

• customer-orientation

• networking with clients and suppliers can be perceived as a “New Management Paradigm.”

Exhibit 4. Clustering of Projects

Clustering of Projects

Programs and Project Portfolios

Program Definition

For processes of different complexities different organizations are adequate. A program is a temporary organization for the performance of a process of high complexity. The projects of a program are closely coupled by common overall objectives, overall strategies and common processes and methods. A program has a time limit and is medium or long term (1–5 years) in duration.

Because of the high complexity of programs, a conception project has to be the basis for a program. For the realization of a program on the one hand projects, as differentiation instruments, and on the other hand a program office, a program steering group, process owners, etc., as integration structures are applied. Usually some of the projects in a program are performed sequentially and some are performed in parallel. Programs have program-specific strategies, organizational rules and structures.

Typical programs are the development of a “product family” (and not of a single product), the implementation of a comprehensive IT-solution (such as SAP), the reorganization of a group of companies in a holding structure, and large investments, such as an oil platform.

Project Portfolio Definition

For integration purposes a set of projects might be clustered in different ways. Considering the sequence, in which projects are performed the “chain of projects” results, by relating a set of projects to each other according to a specific criterion, such as the technology applied or a geographic region, a “network of projects” results, and by considering all projects performed by an organization, the “project portfolio” results. A project portfolio is defined as a set of all projects a Project-oriented Organization holds at a given point in time and the relationships between these projects.

Exhibit 5. Program WBS

Program WBS

In a project portfolio different project types, such as internal and external projects, unique and repetitive projects, marketing, contracting, organizational development projects, etc., might be included. In comparison to a program a project portfolio is not an organization.

Program Management

Program management has to be performed in addition to the management of the single projects of a program. It includes the processes of starting, coordinating, controlling and closing-down a program. The program management methods are similar to the project management methods, i.e., there is a program work breakdown structure, a program bar chart, a program environment analysis, etc.

In order to allow for autonomous projects on the one hand but to assure the benefits of organizational learning, economies of scale, and networking synergies in a program on the other hand, a specific program organization is required. Typical program roles are program owner, program manager, and a program coordination team, typical program communication structures are program owner meetings and meetings of the program coordination team.

The advantages of designing specific program organizations instead of defining a “Mega-Project” with several subprojects are as follows:

• A less hierarchical organization

• A clear terminology: a program manager and several project managers instead of one project manager and “project managers” of the subprojects

• Empowerment of the projects of the program by allowing for specific project cultures, specific relationships to environments, specific project organizations, etc.

• Differentiation between program ownership and different ownerships for the different projects.

Exhibit 6. Program Organization Chart

Program Organization Chart

Project Portfolio Coordination

The basis for the coordination of the project portfolio is a database, including the project type, relations of a project to other projects, information about the project organization, information about relevant project environments, and project ratios. These data can be used for relating projects to each other, for deciding about new projects to be started, for setting project priorities, and for stopping projects. The project portfolio database is not a project information system but contains aggregated project data only. It might be integrated with a project information system.

Exhibit 7. Project Portfolio Report 1

Project Portfolio Report 1

For the coordination of a project portfolio a specific process and specific methods, such as the preparation of a project proposal, and project portfolio reporting methods, are required. Typical project portfolio reporting methods are the bar chart of projects, the projects profit versus risk graph, the progress chart of projects, etc.

The objectives of the project portfolio coordination process are:

• Optimizing the results of the project portfolio (and not of the single projects)

• Selection of projects to be started

• Interrupting or stopping projects

• Definition of project priorities

• Coordination of internal and external resources

• Organization of learning of and among projects.

The functions and responsibilities of the project portfolio management process are shown in Exhibit 9.

Conclusion

For Project-oriented Organizations it is not sufficient to have the competence to manage single projects efficiently, but additional competences, such as the competences for the assignment of projects and programs, for project and program coaching and auditing, for networking between projects, and for program management and project portfolio coordination are required. For all of these processes an explicit assessment and continuous further development is necessary.

Exhibit 8. Project Portfolio Report 2

Project Portfolio Report 2
Literature

Gareis, R., & Huemann M. (2000). Project Management Competences in the Project-oriented Company. The Gower Handbook of Project Management, ed JR Turner and SJ Simister, Gower, Aldershot forthcoming.

Gareis, R. (1997, July). State Hospitals of Salzburg 2000. PM Network, p. 23–25.

Exhibit 9. Project Portfolio Coordination-Process-Responsibility Matrix

Project Portfolio Coordination-Process-Responsibility Matrix
This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA

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