Executive Summary
The literature survey on the use of project portfolios in strategy delivery and relationships between portfolios and individual projects had the goal of drawing a list of recommendations for project management offices (PMOs). Since the organizational context of Telstra, one of the largest Australian telecommunications companies, implied an active use of project portfolios, the report mainly served the purpose of current trends and best practices review. The contemporary scholarly sources on the previously mentioned subjects allowed to accomplish the task.
In regard to the strategic use of portfolios, the effectiveness of the risk-aversion approach to portfolio selection and management and the importance of various operational risks were revealed. In addition, the literature survey highlighted such matters as the need for constant monitoring of techniques used in solving the possible issues in portfolio management. Lastly, the strategic role and two-way influence of portfolios on stakeholders demonstrated the importance of portfolio managers’ leadership and communication skills. The review section dedicated to relationships between portfolios and individual projects further highlighted the bridging role of portfolios that contributes to success rates of individual projects and increased customer satisfaction. These findings were translated into a list of practical recommendations, useful for PMOs of large-scale organizations. Overall, the survey confirms a beneficial influence of project portfolios in project management if the significant requirements for organizational and manager’s competence are met.
Introduction
The purpose of this report lies in exploring the relevant, recently-published credible scholarly sources on portfolio project management and creating a list of practical recommendations for organizations. The introductory part of the report contains organizational context based on the case of Telstra, one of the largest telecommunications companies in Australia. The organizational context segment is followed by the literature review divided into two major sections. The first section is dedicated to sources exploring the use of project portfolios in delivering the business strategy. The second section explores scholarly sources that focus on relationships between portfolios, programs, and projects. Consequently, a special section is left for practical recommendations for the project management offices (PMOs), which stem from the reviewed scholarly sources. Lastly, a brief conclusion summarizes the ideas present in the contemporary academic writings on project portfolio management and restates recommendations for decision-makers and project managers in a concise manner.
Organizational Context
This report is prepared on the basis of Telstra, one of the largest telecommunications companies in Australia. Extensive use of the project portfolio approach allows 1,500 project managers to track 3,500 projects annually (Telstra, 2018). All Telstra customer projects are divided into portfolios according to the industries, customer challenges, and segments (Telstra, n.d.). A combination of these factors results in highly-individualized customer outcomes. For example, the integrated services segment offers optimization of technology investments and cost reduction for the clients in the government industry (Telstra, n.d.). Overall, Telstra can boast a significant experience in portfolio use, so this report serves as a review of the current trends and best practices rather than a comprehensive manual for portfolio management implementation.
Literature Review
Project portfolios can be considered a valuable and powerful tool for implementing corporate strategy. This report section provides and compares examples of project portfolio use in strategy delivery. Publication dates and credibility justify the selection of sources — all reviewed articles were published in peer-reviewed academic journals no later than in 2018. Overall, the sources cover such topics as decision-making, risk management, strategic management, and factors of project portfolio success.
The Use of Project Portfolios to Deliver Strategy
Projects in a portfolio are exposed to different risk types depending on the business sphere — financial, technical, organizational, or political. Dixit and Tivari (2020) presented three project portfolio and selection models — risk-neutral, risk-averse, and combined compromise. After a comparison of output produced by these models, Dixit and Tivari (2020) recommended a risk-averse approach to the strategic use of project portfolios since it maximized returns in worst-case scenarios. In addition, the risk-averse strategy yielded high returns even when the confidence level was low.
The use of project portfolios in strategy delivery can be undermined due to operational risks. In contrast to Dixit and Tivari, Mican et al. (2019) explored operational risks in project portfolio management and identified four key risk categories: portfolio management level, project interactions, environmental conditions, and internal processes. Portfolio management level risks include improper information sharing between decision levels, flawed corporate culture, and inadequate prioritization between portfolio components. Project interactions risks are related to resource and project interdependency issues when problems in one portfolio component negatively affect the others. Environmental conditions are associated with contracts, suppliers, and changes in active norms. Lastly, internal processes include such problems in strategy delivery as sudden changes in scope and schedule (Mican et al., 2019, p. 776). Decision-makers and project portfolio managers must consider these operational risks in order to succeed.
A special part of scholarly articles on the strategic use of project portfolios is dedicated to assisting portfolio managers and decision-makers in the choice of proper tools. For instance, Killen, Geraldi, and Kock (2020) argue that project portfolio management requires the use of appropriate visualizations. Therefore, the portfolio manager’s task lies in supporting strategic decisions with a defined set of visualization techniques such as charts and treemaps (Killen, Geraldi, and Kock, 2020). In particular, visualization is useful for overcoming the adverse effects of heuristics in strategic decision-making.
It is essential to realize that strategy delivery in project portfolio management is associated with multiple challenges. For example, mutual links between portfolio levels may be overly complex; there might be a lack of the necessary supporting data, or decisions might require a group consensus. In this regard, Danesh, Ryan, and Abbasi (2018) identify the multi-criteria decision-making techniques (MCDM) as the most suitable for dealing with project portfolio management issues. Furthermore, the multi-attribute decision-making (MADM) techniques, such as utility-based techniques (UBTs), are generally preferable for the portfolio project management due to their simplicity (Danesh, Ryan, and Abbasi, 2018, p. 87). However, the choice of the optimal MCDM technique in strategic portfolio project management still depends on other factors, such as local organizational culture.
Finally, the last body of scholarly research delves into the embeddedness of project portfolios in their contexts. Martinsuo and Geraldi (2020) connected project portfolios to external context and showed that each portfolio has unique templates, stakeholder relationships, and resource dependencies. In addition, the researchers highlighted the existence of two-way influences between the portfolio and the stakeholders (Martinsuo and Geraldi, 2020, p. 11). Therefore, the project portfolio manager occupies a central role in the strategic renewal process and plays an active role in the formulation and deployment of strategy. From this perspective, Zaman, Nadeem, and Nawaz. (2020) illustrated the importance of transformational leadership in making portfolio management, resource allocation, and strategic decision-making more successful. In addition, the strategic contribution of successful project portfolios appeared to be much more significant than the impact of successful individual projects (Zaman, Nadeem, and Nawaz, 2020). Overall, the existing scholarly evidence points to the immense importance of well-managed project portfolios for business strategy delivery.
Relationships Between Portfolio, Programs, and Projects
Several scholarly sources explore the relationships between portfolios and their elements, such as programs and projects. For instance, Ko and Kim (2019) found that portfolios are crucial for aligning particular projects and programs to the business goals. Furthermore, project benefits management was found to be especially important due to the linkage between project portfolio and corporate strategic goals (Ko and Kim, 2019). In this regard, project portfolios serve as an overarching instrument that enhances the impact of separate projects and programs.
Additionally, portfolios were associated with increased customer satisfaction with the results of particular projects. According to Anantatmula and Rad (2018), the presence of portfolios and portfolio management leads to improvement in project prioritization. Consequently, organizations see improvements in meeting project objectives, quality expectations, and customer satisfaction levels (Anantatmula and Rad, 2018). In addition, the presence of portfolios and portfolio management was positively associated with the promotion of formal management practices and project success rates (Anantatmula and Rad, 2018). Therefore, portfolios were related to an increase in the organization’s maturity and operational efficiency.
Overall, portfolios and project portfolio management can be considered a bridge between the corporate strategy and its operational execution in the form of specific projects and programs. According to Clegg et al. (2018), the portfolio approach includes an ongoing prioritizing, resourcing, adjustment, or termination of individual projects. In this regard, portfolios should be perceived as a complex tool that requires excellent communication, prioritization, and leadership skills from a portfolio manager.
Recommendations
Based on the literature review of contemporary scholarly sources on the strategic use of project portfolios and relationships between portfolios, projects, and programs, it is possible to give the following recommendations to Telstra PMO:
- A risk-averse approach to project portfolio management is preferable due to the maximization of returns in worst-case scenarios. In addition, risk-averse portfolio management yields better results in the circumstances of low confidence;
- It is necessary to timely address operational risks, such as inadequate prioritization, improper information sharing between portfolio levels, or problems in supply chains. Otherwise, the positive effect of portfolio’s use in strategy delivery might be severely undermined;
- The project portfolio is a complex strategic tool, which creates a possibility for the emergence of various challenges in implementation. As such, an organization needs to constantly review available tools and techniques of project portfolio management. Such tools as visualizations or MCDMs can be crucial for prompt discovery and troubleshooting of severe issues in project portfolio;
- The aspects of leadership and communication have critical importance for a portfolio manager due to the embeddedness of portfolios in stakeholder relationships and profound interdependencies between portfolio components. Therefore, project portfolio managers should receive specific training in these departments;
- If an organization utilizes a project portfolio approach, it is vital to emphasize the maturity or skills and competencies of project portfolio managers. Project portfolios are directly aligned with corporate strategic goals, so incompetence and significant flaws in portfolio management are highly harmful in the long run;
- Overall, the use of project portfolios as a bridge between strategic and operational levels of the large-scale organization is highly advised for several reasons. Most importantly, portfolios enhance strategic prioritization, thus improving resource allocation within the organization. Furthermore, portfolios reinforce formal management practices and contribute to increased success rates of individual projects. Lastly, portfolios enable improvements in quality expectations and positively contribute to customer satisfaction.
Conclusion
The literature review of contemporary academic sources on project portfolios and project portfolio management allowed making several important conclusions. In regard to the use of project portfolios in the delivery of strategy, the effectiveness of the risk-aversion approach, the importance of operational risks, and the value of portfolio management tools, communication, and leadership skills were highlighted. In addition, the positive relationships between portfolio approach, individual project success rates, and customer satisfaction levels were confirmed.
The information obtained during the literature review process was sufficient for composing a list of practical recommendations. These recommendations emphasize the role of project portfolios in the strategic dimension and cover the aspects of risk aversion, project portfolio management tools, and managers’ skills and competencies. Overall, the project portfolio approach can be considered beneficial for large organizations such as Telstra. However, senior management must ensure that proper portfolio selection and management requirements are met. In particular, the overarching nature of the portfolio approach demands exceptional communication and leadership skills from a manager and constant monitoring of risks and existing tools of their mitigation.
Reference List
Anantatmula, V. S. and Rad, P. F. (2018). ‘Role of organizational project management maturity factors on project success’, Engineering Management Journal, 30(3), pp. 165-178.
Clegg, S., Killen, C. P., Biesenthal, C. and Sankaran, S. (2018). ‘Practices, projects and portfolios: current research trends and new directions, International Journal of Project Management, 36(5), pp. 762-772.
Danesh, D., Ryan, M. J. and Abbasi, A. (2018). ‘Multi-criteria decision-making methods for project portfolio management: a literature review’, International Journal of Management and Decision Making, 17(1), pp. 75-94.
Dixit, V. and Tiwari, M. K. (2020). ‘Project portfolio selection and scheduling optimization based on risk measure: a conditional value at risk approach’, Annals of Operations Research, 285(1), pp. 9-33.
Killen, C. P., Geraldi, J. and Kock, A. (2020). ‘The role of decision makers’ use of visualizations in project portfolio decision making’, International Journal of Project Management, 38(5), pp. 267-277.
Ko, J. H. and Kim, D. (2019). ‘The effects of maturity of project portfolio management and business alignment on PMO efficiency’, Sustainability, 11(1), 238.
Martinsuo, M. and Geraldi, J. (2020). ‘Management of project portfolios: relationships of project portfolios with their contexts’, International Journal of Project Management, 38(7), pp. 441-453.
Micán, C., Fernandes, G., Araújo, M. and Ares, E. (2019). ‘Operational risk categorization in project-based organizations: a theoretical perspective from a project portfolio risk lens’, Procedia Manufacturing, 41, pp. 771-778.
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Telstra. Telstra global services practices (n.d.) Web.
Zaman, U., Nadeem, R. D. and Nawaz, S. (2020). ‘Cross-country evidence on project portfolio success in the Asia-Pacific region: role of CEO transformational leadership, portfolio governance and strategic innovation orientation’, Cogent Business & Management, 7(1), 1727681.