Project Selection Frameworks and Methodologies for Reducing Risks in Project Portfolio Management

Extracting and consolidating knowledge from past projects can help managers in selecting projects with the correct level of riskiness, while market analysis gives directions for reaching the objective of a balanced project portfolio. To this extent, the chapter discusses strategic importance of project selection and the role of risks and uncertainties in project portfolio management and presents some fundamental and innovative frameworks and project selection methodologies for balancing risks. Finally, the chapter proposes a model containing an innovative methodology, based on artificial neural networks, to help managers in balancing project portfolio and assessing projects during the selection phase on the basis of risks, uncertainties and critical success factors.

Adaptive Portfolio Management

Portfolio management methodology is usually linked with the concept of “portfolio cycle” (often 1 year of activities). This means that organizations experience, once a year, a time in which ongoing activities are analyzed and their status reported; new initiatives are collected, assessed, prioritized and selected in competition with ongoing components. Being the aim of portfolio management to select the best set of components supporting the organization in achieving the strategic objectives, strategy should drive the preparation of the “next portfolio cycle”. It may be the case that the strategy is not clear, not ready to be used, not stable. Adaptive Portfolio Management requires to move away from the collect-assess-prioritize-select-implement-control-review approach (all these actions are performed during each and every “portfolio cycle”) towards a more flexible model where organizations manage these important activities “continuously”.

Project Portfolio Selection Using a D.E.A. Approach

The project management area uses several techniques and tools to identify, select, monitor and manage the projects portfolio of the organizations. However, these techniques still present problems and difficulties which, sometimes, inhibit their use. Project Portfolio Management (PPM) is considered a problem of considerable difficulty and complexity, which requires its constant monitoring by the organization, according to the strategic guidelines chosen. Thus, this paper presents an innovative approach for selecting the portfolio of projects by using DEA, and the development of a set of generic indicators, to support the decision makers in considering multiple projects. Each decision maker can use all or some of the indicators proposed, thus each one's knowledge, sensitivity and intuition are taken into account, namely for indicators such as risk perception, level of innovation, market clock speed, project's complexity.

Demand Management as a Success Factor in Project Portfolio Management

Demand Management is the process an organization puts in place to internally collect new ideas, projects and needs during the creation of a Portfolio (from now on PTF). This collection is done internally but should also consider the external market situation and the general Strategy of the Organization. Demand contains two main actions: initiatives Collection and Assessment (following the Strategic Objectives definition) and preceding the start of the Portfolio budgeting, prioritization and selection phases. What is possible to do to better manage Demand and maximize the value added to Portfolio Management? The first opportunity is that Demand can represent a connection with the business and the entire Organization. A second opportunity is that a continuous Demand Management approach can simplify the portfolio collection, prioritization and selection. For Demand Management to be a real opportunity in Portfolio Management should be organized and planned respecting the interpretation of the matter and the maturity of the Organisation and should be also treated as a specific matter.

Inter-Relationships between an Enterprise's Strategic Management Process and Its Program/Project Portfolio Management Process

This chapter describes and clarifies the boundaries between strategic management and project/program portfolio management (PPPM) processes, and identifies who holds primary responsibilities for key elements of these inter-related sets of management processes. The main issues considered include: The differences between strategic project management and operational project management. The elements in the strategic project management practices and processes that should be considered to be within the responsibility of ‘project management.' The role of a typical PMO in relation to 1) strategic management processes, and 2) both the strategic and operational project management processes. The importance of identifying the differences between transformative and commercial projects and programs and also between the major categories of projects and programs within enterprises. The origins of the two basic types of projects within project-driven compared to project-dependent enterprises.

Managing Change

The falling price of crude oil has caused the price of diesel and gasoline to drop, workers to be laid off, and competitors to consider merging. It has also provided a real-world view of companies applying project portfolio management as projects have been delayed, put on hold indefinitely, or closed down completely. Energy companies have shelved $400bn of spending on new oil and gas projects since the price collapse, delaying millions of barrels a day in future output from the Gulf of Mexico, Africa, Kazakhstan, and other areas (Adams, 2016). The price of crude oil, which traded above $100 since 2011 has dropped over 50% since September 2014 due to a lack of global demand plus continued production by Saudi Arabia and others. This chapter will look at strategies and tactics used by companies including Chevron, Royal Dutch Shell, and Total SA in reviewing and rebalancing their project portfolios. These approaches have application to other industry sectors.

Project Portfolio Management and Organization

The chapter is an overview on organizational models for project management, identifying the characteristics of a possible reference model that joins to the necessity of portfolio management. The approach to portfolio management requires attention to the integrated management of projects; this is why the organizational structure matrix “differentiated” could be a useful reference point. This chapter proposes, therefore, a reworking of the organizational structure design criteria considering both the Value Chain of Porter is the matrix structure “differentiated”. Ultimately, the contribution configures the characteristics of the organizational model for portfolio in relation to the type of project - internal/process, external/product mix - in order to improve the performance of internal projects whose objectives are not always explicit. The basic idea of this work is to apply the concept of Porter's value chain not only functions but also the portfolio of projects that the company has.

Optimizing Portfolio Value through Comprehensive Project Metrics

Project portfolios produce value through the coordinated execution of the projects and programs within the portfolio. The performance of the portfolio is evaluated by the generated business value and potential future opportunities it creates. This same performance measure is not applied to the projects within the portfolio. Projects are evaluated based on an operational measure of project efficiency that considers performance of project scope, budget, and schedule. Inconsistencies between portfolio and project performance decrease the value offered by each project and the overall value of the portfolio. In this study, a framework and solution are presented that expand the measures of project success to include criteria that better align with the goals of the project portfolio. The enhanced project success measures include project efficiency, customer impact, team impact, organizational success, and future preparation. The solution is applied to the project management process to demonstrate potential integration into project management practices.

Preparing the Organization for Portfolio Management

This chapter will discuss how to more effectively implement the enterprise portfolio management system (EPMS). In order to be successful in delivering an EPMS that will benefit the organization, the implementation team must understand that they going to make a significant change to how the organization operates, and that any significant change such as this can expect to encounter resistance. Effective implementation requires an understanding of the organization's current problems and priorities, the creation and implementation of the system that will resolve those problems, and preparations to overcome resistance through effective Organizational Change Management (OCM). The implementers must truly be convinced that this effort is going to make a difference to the larger organization and that their dedication and change leadership will make it successful. This chapter will help the implementing team see the benefits of enterprise portfolio management, help them convince others of those benefits, and become the leader in implementing the EPMS.

Portfolio Management as a Step into the Future

Project Portfolio Management (PPM) is an “old-new” emerging discipline. More and more organizations are discovering PPM as an “alternative” to Strategic Planning. In reality the two disciplines should walk along, obtaining from this coexistence mutual benefits. Strategic Planning is often too far from reality and fails due to this distance. Project Management is too much down-to-earth, being focused on delivering, sometimes without knowing the real rational behind what is produced. PPM is a smart and wise connection between these too distant worlds (it has to be highlighted that also the people involved in the two disciplines are very dissimilar). PPM is a step into the future keeping a tight connection with the near past and with the ongoing activities performed by the organization. PPM supports organizations' need to shape their future. It is a complex process, taking time and resources, but the returns are worth the effort.