Chapter 1
Introduction
This study was conducted to investigate PPM effectiveness in real-life business settings in order to propose a definition of PPM effectiveness, identify factors impacting PPM effectiveness, and propose criteria for measuring such effectiveness.
4/11/2013
Current Research on Project Portfolio Management Effectiveness
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 (PMI, 2008). A typical goal of PPM is to ensure that an organization is doing the right work rather than doing the work right (PMI, 2008). From industry practices, Cooper, Edgett, & 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 portfolios 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 (Bard, Balachandra, & Kaufmann, 1988; Chiu & Gear, 1979; Golabi, 1987; Khorramshahgol & Gousty, 1986; Madey & Dean, 1985; Spharim & Szakonyi, 1984). This trend continues and methodologies have been 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). Besides the methodologies proposed in a 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, and expected commercial value (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 roadmaps and strategic buckets were suggested in part for strategy-portfolio alignment (Cooper et al., 2001). The stage-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 (PMI, 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 comprehension of PPM effectiveness cannot be overlooked. The use of the proposed frameworks and methodologies may be the means for achieving PPM effectiveness; 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, identify factors impacting PPM effectiveness, and propose criteria for measuring such effectiveness. A case-study research methodology was employed. To establish a better understanding of effectiveness in an organizational context, the literature on organizational, team, and project management effectiveness was reviewed and summarized in the following section.
Literature on Effectiveness
In the literature, effectiveness has been the center of attention of several scholars of management research. Several studies have been conducted to investigate effectiveness at the organizational and team levels. An attempt to define organizational effectiveness dates 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 the human relations’ view, several researchers refer to effectiveness as productivity through employee satisfaction (Likert, 1961; Mayo, 1933; McGregor, 1960). From the 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 and Goodman (1977) indicated that “organizations are effective if relevant constraints can be satisfied and if organizational results approximate or exceed a set of referents for multiple goals.” Later, other researchers such as Brundney and Englund (1982) and Elmes and Wilemon (1988) had similar perceptions. 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 suggest 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). The 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 (Denison, Hart, & Kahn, 1996; Mathieu, Maynard, Rapp, & Gilson, 2008; McGrath, 1964;). 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 teams, 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, Hart, and Kahn (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 it. 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) propose 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 a 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 smoothly integrating project management into organization's workflow.
The review of the literature helped this research in many ways. The understanding of organizational, team, and project management effectiveness helps guide the development of research instruments and the development of a definition for PPM effectiveness.