the science of successful organizational project management
PMI has developed and released standards in each of the domains of portfolio, program, and project management and is currently preparing new editions of these in order to improve their consistency and alignment. It is urgent to develop a consistent approach to integrating the management of these three domains, for the following reasons:
- For many years, the terms have had a number of different definitions and applications (for example, program = large projects, or projects with subprojects, or product life cycles, and so forth).
- PMI has only just broadened its range of standard-setting to include programs and portfolios: these were previously explicitly excluded from all standards in the PMBOK® Guide family.
- The fact that, until recently, only project management was standardized created two major (mutually exclusive) issues, both of which contribute to giving projects (and project management) a bad name:
- A number of project managers insisted that providing the project deliverables, as defined in the charter and scope statement, was the sum total of their responsibilities. This frequently led to stakeholder dissatisfaction, since no plans were in place for exploiting and benefiting from the project outputs (one typical example being the provision of IT tools, with no changes made to the business processes and no training given).
- At the other extreme, project managers have attempted to apply the PMBOK® Guide beyond its domain of relevance, into program and, to some extent, portfolio management, but without any formal mandate or methodologies of tools. This has led to major overruns in time and cost, since adequate definition, planning, and control mechanisms were not in place.
Now that the standards from PMI do exist, we need to make sure they are applied where they belong.
Management cybernetician Stafford Beer (1979, p. 81, 85) spent many years researching the necessary and sufficient conditions for a complex system to be “viable”—able to prosper in a given environment. He determined that viability was maintained by engaging in different activities, keeping them from interfering with each other, managing them together, focusing on the future, and doing so in the context of an identity within which the interests of the whole over time could be taken into account. He considered that this is how the human nervous system works, and how successful collective enterprises work too. Many applications of the VSM have been undertaken, by Beer and others, in business, government, non-profit organizations, and non-organizational systems.
This paper examines how the concepts of the Viable System Model (VSM) can be applied to integrate Project, Program, and Portfolio Management (P3M) into a single, consistent discipline that I have named Probernetics.
Viability and Variety
A system is viable if it can respond to changes whether or not they have been foreseen. That is, if it can respond to the environment with requisite variety.
In order to become or remain viable it must be able to achieve requisite variety with the complex environment with which it is faced. It must be able to respond appropriately to the various threats and opportunities presented by its environment. The exact level at which the balance of varieties should be achieved is determined by the purpose that the system is pursuing. (Jackson, 1992, p. 105)
Projects, Programs, and Portfolios
The following definitions are taken from the Combined Standards Glossary (PMI, 2006):
- A project is a temporary endeavour undertaken to create a unique product, service or result.
- A program is a group of projects managed in a coordinated way in order to obtain benefits and control not available from managing them individually. Programs may include elements of related work outside the scope of the discrete projects in the program.
- A portfolio is a collection of projects and/or programs and other work grouped together to facilitate effective management of that work to meet strategic business objectives.
Another way of interpreting these definitions is that a program embodies a strategic intent that will be achieved, over time, by applying project-based management techniques, whereas a portfolio is a snapshot at a given point in time of the set of projects and programs to which the organization's resources are applied in order to achieve the organization's strategic goals.
Overview of the Viable System Model
The overall objective of the Viable System Model is to provide a mechanism by which the “variety” of the business environment and that of the solutions can jointly be managed in such a way that the optimum solution is achieved, maintaining a maximum opportunity and flexibility while providing sufficient control to avoid unmanageable variability. A viable system is defined as a system that is able to survive in a particular sort of environment. Survival here means maintaining many of its important features over the short term and some fundamental (identifying) feature over the long term. This link between the short term (projects, deliverables) and long term (programs, benefits) with a focus on maintaining an identity (portfolio, strategic direction) in a changing environment makes the model particularly suitable for integrated project, program, and portfolio management.
The Cybernetic Components of the VSM
All systems can be considered recursive or re-entrant, with each level able to be split into a set of similar systems. Here we give a brief introduction to the cybernetic description of the organisation encapsulated in a single level of the VSM.
The viable system model is composed of five interacting subsystems (see Exhibit 1) which may be mapped onto aspects of organisational structure. In broad terms, Systems 1–3 are concerned with the “here and now” of the organisation's operations, System 4 is concerned with the “there and then”—strategic responses to the effects of external, environmental and future demands on the organisation. System 5 is concerned with balancing the “here and now” and the “there and then” to give policy directives that maintain the organisation as a viable entity.
System 1 (transformation implementation) in a viable system contains several primary activities. Each System 1 primary activity is itself a viable system due to the recursive nature of systems as described above. These are concerned with performing a function that implements at least part of the key transformation of the organisation.
System 2 (information management) represents the information channels and bodies that allow the primary activities in System 1 to communicate between each other and which allow System 3 to monitor and co-ordinate the activities within System 1.
System 3 (structures and controls) represents the structures and controls that are put into place to establish the rules, resources, rights, and responsibilities of System 1 and to provide an interface with Systems 4/5.
System 4 (organizational adaptation) is responsible for looking outward to the environment to monitor how the organisation needs to adapt to remain viable.
System 5 (strategic direction) is responsible for policy decisions within the organisation as a whole to balance demands from different parts of the organisation and steer the organisation as a whole.
In addition to these subsystems that make up the first level of recursion, the environment is also represented in the model. This is fundamental, as it is the domain of action of the system and without it there is no way in the model to characterize and address the internal interactions of the organisation.
Exhibit 1 – The Communications Channels within the Viable System Model
The main communications channels include horizontal channels (within a system) and vertical channels (between systems). The principal vertical channels with their main roles are as follows:
- S2–S1: to collect data
- S2–S3: to provide status and other management-related information
- S3–S1: resource bargaining
- S3–S1: command and control; smoothing of instabilities
- S4–S3: balancing the options (“homeostasis”)
- S5–S4: monitoring and alignment
- S*–S*: priority (emergency) information (“algedonic channel” – Exhibit 3)
- S3* is the “audit channel” for occasional reviews and, as necessary, initiating corrective actions.
The VSM and Probernetics
The way in which the five systems can be mapped into the probernetics environment is given below. The brief names in parentheses for each system have been provided as an aid to understanding and are not part of the formal VSM terminology:
System 1 (transformation implementation) corresponds to project management. As described in the PMBOK® Guide (PMI, 2004) the project management plan comprises subsidiary plans such as the risk response plan. These give rise to one class of system-within-system recursion. Another class of recursion is generated by the fact that projects are decomposed into work packages. Work packages can be outsourced and become projects within the supplier organization, and so on.
System 2 (information management) corresponds to activity management, tracking and performance reporting.
System 3 (structures and controls) is provided by monitoring control in general and project integration management in particular.
System 4 (organizational adaptation) is provided by program management.
System 5 (strategic direction) corresponds to portfolio management.
The recursive nature of the VSM is mirrored in portfolios, programs, and projects by the fact that a portfolio can be composed of projects and programs, and that programs can be composed of projects, portfolios, and non-project (such as operational) activities. It should be noted that the PMI standards do not consider including portfolios within programs as shown in Exhibit 2. The general Probernetics approach does allow this—with the benefit that the corresponding techniques from portfolio management, such as optimal selection and prioritisation of components for execution, are directly available to the program manager.
Exhibit 2 – The Recursive Structure of Programs and Portfolios
The Concept of Variety
In the VSM, issues of control are regarded as problems of handling variety. If there is enough stability in a control function to manage a situation we say that it has “requisite variety.” If there is not, the situation will be out of control and unintended effects will arise unless the surrounding circumstances are very forgiving. Sometimes control can be introduced simply by reducing permitted variety, such as in the convention of driving on one side of the road and obeying traffic signals. In projects, for example, the objective of risk management can be seen as reducing the variety of the project environment and increasing the variety of the project solution to achieve viability.
Since there is usually too much knowledge and information residing in too many heads and archives to be comprehended without some roadmaps, a filtering function is also necessary. Management needs filters to select what is important from the mountain of available information and models to expand their ability to understand and use it.
The Probernetics approach is designed to provide this level of control while preserving the variety required for developing new capabilities for the organization: effective control must not stifle innovation.
Managing within the VSM
The VSM addresses the variety implicit in a management situation from two angles. The first is the horizontal relationship, depicted as the link between the environment of customers and others with the overall organization and senior management. The second is a vertical link that connects the management of the project with that of the larger organization. Beer has indicated that these two tend to balance out—although not always optimally.
Vertical communications reduce the autonomy of component parts by constraining their conversations and transactions or overriding the application of lower level “on-the-ground knowledge” for the good of the larger system. Some common purposes are satisfied if everyone is moving in the same general direction in their own way. Others require close cooperation and tight scheduling to succeed. Still others are subject to higher levels of control because of the safety and security considerations of what they do or the risk to the larger system or the environment if things go wrong. Both horizontal and vertical communications channels are used for formal and informal conversations and transactions.
Viability is enhanced when the ground-level operations have the maximum amount of autonomy consistent with their purposes, because any intervention from above sacrifices some of the variety that the lower level can use. To justify intervention, there need to be good reasons for incurring the opportunity costs of not fully using the lower level's greater familiarity with the immediate situation.
Second, the Viable System Model distinguishes among five types of management work along the vertical lines and the interactions associated with each: a process is required to determine the most effective way of meeting routine requirements or deploying common resources; others are aimed at getting the most synergy out of their combined strengths, preparing for the future, or at finding answers to questions about their goals and adopting policies to implement them.
It is important that the VSM management structure does not lead to a version of the traditional organization chart that indicates individuals and their formal connections to one another. On the contrary, what is distinguished is not the individuals themselves but the roles they are playing in particular exchanges. It is rare that a person would play only a single role even in a traditional hierarchical organization; rarer still in the flatter more networked structures common today. Individuals may also play messenger roles or have different functions at different levels of recursion.
We will begin by stepping through the five functions of the VSM and noting the management activities associated with each and the activities that support them, with a focus on the management of projects, programs, and portfolios.
Managing System 1 (Transformation Implementation)
There is a lot more variety in the environment than the project needs to know about and a lot more variety in project management than senior management needs to address. Efficient projects and senior managers develop skills to select the information they need and ignore the rest while remaining alert to signs of change and incipient instability.
Customer (or client) knowledge is a very important aspect of the knowledge an individual practitioner, a small group, or an organization must integrate and manage. It includes both general knowledge based on demographics, markets, and preferences; and specific confidential information about who bought what for how much and what they liked or complained about. This information is crucial to attract and retain customers. Customer knowledge also contributes to improving the speed to market of new or modified products—a major competitive advantage.
Individual practitioners and private, public, and voluntary operations all engage in iterative exchanges with their environments, seeking information from contractors, suppliers, competitors, outside experts, and others, as well as from their past, current, and potential customers. They vary their activities on the basis of this information and evaluate whether the desired results were obtained.
It is worth noting that the boundary between a project and its environment is often fuzzy or shifting. Customers or suppliers are brought in to contribute to redesign, sales people take on the role of brokers, and collaboration takes place between those providing different products to the same clients. Sometimes contractors take responsibility for internal functions central to the organization's activities.
Managing System 2 (Information Management)
System 2 provides a very specific type of regulation. It exists to damp oscillations among different System 1 units and to coordinate their activities. Much of System 2's work is focused on implementing decisions about common services and resources as smoothly as possible. The decisions may have been made among different System 1 units or by higher levels in the organization.
One of System 2's major tasks is keeping track of the information on hand. Proprietary and non-proprietary knowledge, skills, and information need to be accessible to be used.
Formally, System 2 will concentrate on schedules, budgets, scope and the project baselines.
Managing System 3 (Structures and Controls)
System 3 is where the decisions about the day-to-day running of affairs are made. Its role is to say what the distribution of resources should be among the component System 1 parts. Management of the project, program, or portfolio all make choices about how they divide time, attention, and money among their different priorities. They also try to find synergy among activities where they can.
Much of the variety attenuation exercised by System 3 takes place in the resource bargains struck with the System 1 units. Such arrangements set boundaries based on a resources-for-results exchange. The terms of this agreement substantially narrow the variety available to the project. Within this accountability relationship, the project should be able to draw on its full measure of variety and retain substantial autonomy. System 3's resource bargaining with the System 1 units is frequently conducted in real time as adjustments are made to changing conditions.
System 3 oversees the procedures that are implemented through System 2 and remains alert to new sources of oscillation that may arise.
System 3 also exercises a command function: making executive decisions and relaying requirements from more comprehensive levels such as laws and regulations imposed by outside authorities.
System 3 for the networked organization is likely to be concerned with contract negotiation and compliance and on the resource bargains between different projects and subgroups.
System 3 has a special function called “Three Star” which is an audit function to monitor various aspects of the accountability relations between System 3 and the System 1 units. It provides assurances that budgets and financial information, internal control, quality, safety standards, and other particulars are in order. It also provides a means to “mop up” extra variety with sporadic or one-off investigations such as reviewing the status of the subsidiary planning. This could, for example, impact the management of risk by initiating specific actions (such as the reassessment of the project's risks).
Managing System 4 (Organizational Adaptation)
System 4 brings together all the functions that look to the future and must be in communication with each other.
Individuals, functions, and organizations must maintain a balance between their activities in the present and those oriented toward the future. In cutting-edge technology businesses, this balance is likely to be tilted more toward the future than it is in manufacturing organizations.
One of the challenges of this balance for organizations is to transfer innovations from the staff of System 4 where they originate to the line managers who will implement them. Frequent informal meetings are necessary, supplemented by periodic in-depth opportunities for Systems Three and Four to become familiar with one another's perspectives.
Managing System 5 (Strategic Direction)
Without a framework of meaning, data and information are only potentially valuable. System 5's functions include setting context, building and maintaining identity, fostering coherence, and making strategic decisions. System 5's role in monitoring the balance between the activities of System 3 and System 4 is also important as the optimum balance point tends to fluctuate over time. Beer used the term “homeostasis” to define the technique of maintaining this optimum balance point—it can be seen as a stable feedback loop.
The general and specific manifestations of individual, functional, and organizational culture also reside in System 5. One specific example is the reward system. Perhaps nothing is more damaging to an environment of shared knowledge than a reward system that gives no credit for building on a predecessor's work. While not all new executives immediately kill off existing projects like lions taking over a new pride, many will let them starve to death with the attendant loss of information, value and morale unless there are sufficient resources both to build on existing initiatives and to begin new ones. Shooting messengers is another destructive process. Unless bad news can be delivered in safety, the chances are that it won't be delivered - at least in time to correct a problem while it is manageable.
A large amount of strategic awareness is required to be able to determine which option should be pursued and which should not. It provides the focus that makes it possible to choose and follow a direction. An individual, a function or an organization can have conflicting priorities and multiple internal voices that arise from history of their past experiences, their relationships, the social, business and economic environment in which they exist, their age or level of development. They may all reflect legitimate concerns. Somehow, though, all of this needs to be integrated into a coherent whole so that efforts can be coordinated and goals attained.
The Viable System Model includes a special alarm signal to alert System 5 to a threat or opportunity that has implications for the whole. It signals the need for rapid response and can come from any part of the system at any level of recursion. It is known as the algedonic signal.
Exhibit 3 – The Algedonic Channel and the Homeostatic Loop
Consolidated Management: Probernetics
Although the concepts and language of the viable system model have been around for over 40 years, barring some rare exceptions (Britton and Parker 1991, Piney 2007), they have not been applied in the field of project management. To be usable in the project environment, these concepts therefore need to be translated into the language more commonly used by project practitioners in order to provide a scientific basis for the integrated “Probernetics” management model.
Taken together, the five systems of the VSM include the aspects of project, program, and portfolio management that must be considered and managed as a whole by organizations, functions, and individuals. It helps to balance attention to detail with attention to relationships, and integration of parts into the whole. The recursive structure of the VSM allows for these relationships to be followed and compared through all the levels that are affected by particular activities and decisions. For example, does the scenario building that occurs in System 4 take into account the pictures of the future held one level up or down in the organization? Each of the five management functions can (and probably should) have at least a general knowledge of how their counterparts are proceeding. This enhances their coordination and is likely to reveal if there are any gaps or duplications. Finally, attention to the variety of the VSM's functions and communications channels increases the likelihood that the system will perceive and be able to act on circumstances that could have an impact on its viability.
One other benefit of this model is that it shows the scope of responsibilities of each system level. This is particularly valuable in the context of dysfunctional situations, where, for example, senior managers responsible for portfolios of programs attempt to take direct control at the project level. This is most likely to happen when a crisis occurs, and results in the large picture getting lost and instability being released in the overall system with ill-considered short-term actions that can exacerbate the situation. Correct application of the Probernetics model, especially in such situations, can remove the temptation of micro-management and other similar counterproductive management behaviours.
As a starting position, Exhibit 1 has been translated into a Probernetics environment—see Exhibit 4.
Exhibit 4: The Probernetics view of the VSM
One important point that this diagram shows is that two systems interface directly with the environment: S1, in which project execution takes place and S4, where programs are managed. This initially raises the question, “How are projects ever created then, if only their execution interacts with the environment?” The answer serves to provide a key insight into the coherence and strength of the probernetics concept:
- Projects, by their execution, make things that add to the environment, but
- Programs are devised to make things happen.
As shown in Exhibit 4, this shows that program management (S4) will:
- Determine which projects it needs in order to create the desired change in the environment
- Use the chartering and support channel (S4–S3) to set up the structure in S3 to launch the project, using the command and control (S3–S1) channel
Probernetics management roles
This probernetics model can be applied in order to provide a sound basis for defining the roles, responsibilities, authority, and areas of responsibility of the various probernetics stakeholders with their interfaces. Correctly applied, this reduces the risk of interference and misunderstandings:
- Project team members: responsible for execution (S1)
- Project managers: operate at the level of the structures, controls, and project communication (S3 and its communications channels)
- Project office: provides information management (S2)
- Sponsors: operate at the level of chartering and support (interface between S3 and S4)
- Program managers: responsible for management and all communications at the S4 level
- Portfolio managers: responsible for management and all communications at the S5 level
- Program office: support for a specific program under the control of the program manager (S4–S3 links)
- Program management office: support for all program work under the control of the program board or portfolio management (S5-S4 links)
- Organizational governance functions: consolidated control of the “homeostatic loop”: balance, structures, and control
The value of the model as a basis for defining management scope of control is that it provides a structure by which synergy (collaborative management) and maximum flexibility (effective management) can be achieved while maintaining control over the environment.
Organizations, functions, and individuals are all faced with the constant need to innovate to adapt to their environments. Those participating in project-driven activities are faced with short time cycles and considerable uncertainty. There is no lack of evidence that the majority of projects experience major problems during their lifetime and that very few are considered fully successful (Johnson, 2006). This leads to massive waste of tangible and intangible resources and sometimes to disaster. Making improvements in the management of projects, programs and portfolios is probably the greatest source of untapped value and security available to any organization. It must include improvements in the relations among parts as well as within them because probernetics is a whole-system issue. Whatever our role in project management, we can all benefit from improving the appreciation of how our role fits with those of others. The process begins with individuals taking responsibility for their places in the project environment and thinking through their ability to exercise autonomy and control over the use of their productive capacities. This could improve the transparency and understanding of the implications of different choices involved in strategic decisions, and highlight the issues where social, political, and commercial interests intersect.
The Viable System Model provides an effective framework to bring together and discuss all the aspects of project, program, and portfolio management relevant to an organization, and to model them dynamically over time. Practitioners will also find it helpful as a basis from which to explore how perspectives on probernetics vary depending on their specific functional and organizational contexts and what direction future developments might take. This can support the development of a formal standard for Organizational Project Management (to support the OPM3 standard), as well as forming a consistent basis for the Project Management Competency Development Framework and the corresponding certification tests.
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© 2008, Crispin Piney
Originally published as a part of 2008 PMI European Congress Proceedings – Portomaso, Malta