What does the paper cover?
The paper suggests that applying a rigid project portfolio management (PPM) framework as a rational-decision approach does not fully reflect real-life scenarios.
Furthermore, whilst PPM standards are globally accepted, there is a gap in knowledge of how practice (that is, what managers actually do) and context (that is, the conditions in which the project portfolio is being managed) affect the success of PPM.
Three key research questions were applied to a review of empirical literature.
- In what ways is current project portfolio management understanding limited?
- How are the practice and context of project portfolio management accounted for in recent empirical research?
- How should forthcoming research on project portfolio management be guided to enable better awareness of practice and context?
Note: the reviewed literature was primarily from product development portfolios.
A summary of the literature review is as follows:
1. Limitations of understanding in project portfolio management
There are four underlying assumptions of PPM as a rational decision process, which do not reflect actual practice.
- Projects are static and independent of each other, aiming to fulfil the overall strategy set by the parent organisation.
- Projects are competing for the same resources, which are known in advance and are fixed.
- Companies are aware of all possible factors influencing the projects – internal and external.
- Portfolio managers are informed of all aspects of all projects and can align multi-projects clearly with criteria and routines to bring overall strategic benefits.
These assumptions do not recognise: the environmental or fluid nature of many projects; inclusion of external partners and strategies; interdependencies between projects or the lack of information that portfolio managers often have. These assumptions have a major impact on how PPM has been studied and applied in companies.
2a. How is practice of project portfolio management accounted for in recent empirical research?
Three major tendencies are revealed through an analysis of research.
- Mangers have a significant impact on PPM through their personal and social decisions.
- Competencies of those in charge play a part in the overall success of PPM.
- PPM should not be considered as ‘one size fits all’ and should be applied as appropriate to each situation.
2b. How is context of project portfolio management accounted for in recent empirical research?
Recent studies confirm that PPM success is contingent on context. Factors such as organisational complexity and managerial structure have been proven to have an impact on the relationship between portfolio management and success.
There is a greater need to understand risks, uncertainties and changes in the project portfolio and its context to truly understand the dynamic of the PPM in question. This can lead to proactive, instead of reactive, strategies being employed.
3. What is needed in future research?
It is clear from recent research that negotiation, bargaining, influence and power dynamics
affect decisions taken in the PPM process. More research is needed in this area at microlevel to understand how it fits into the overall framework of PPM.
Another crucial factor in PPM effectiveness is the unstable and evolving context in which most projects take place. This is not sufficiently explored in rational project portfolio management and should include reaction to, and implementation of, change. Moreover, the interplay amongst projects within the portfolio is complex and innately influences PPM decision making; yet is poorly accounted for in the research so far completed in this area.
The dynamic relationship between the parent organisation and PPM is also yet to be studied as a decisive factor in allocation of resources and setting of strategic goals.
Inclusion of these aspects of PPM would incorporate wider theoretical perspectives, such as cognitive theories, agency theory, structuration theory, information processing theory, complexity and evolution theories, and institutional theory.
Whilst PPM is an effective framework, the assumption of it as a rational decision process discounts the reality where human, organisational and strategic interactions play a big part.
Several areas of further research are highlighted in order to encourage a multi-disciplinary, holistic approach to PPM which could move its application forward to embrace a dynamic and evolving business environment.