PROJECT PORTFOLIO MANAGEMENT DEFINITION

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Chapter 3 – Literature Review

Introduction

PfM is an allied discipline of project management and can be contextualised through an understanding of the following established theories: a) modern portfolio theory, b) organizational theory, c) systems theory, d) multi-criteria utility theory and e) complexity theory. The relationship between these theories and PfM are discussed in this chapter.
The provision of a context for PfM is necessary in this chapter as the context provides a foundation for the remaining chapters in the thesis. PfM is not a self-standing theory and is a relatively young discipline compared to project management. The concepts and definition of PfM need to be fully understood and considered in light of these various established theories referred to above in the first paragraph.
The goal to provide the context for PfM is achieved by confirming its definition and by discussing the theories identified and illustrating their relevance to PfM. The literature pertaining to PfM as well as the related theories are reviewed and the theoretical background and analysis of the theories are presented.
The remainder of this chapter explores a definition for PfM and reviews the literature on the theories identified above. The chapter concludes with a summary and illustration of the inter-relationship of the theories with PfM.

In this section, a definition of PfM from various sources is presented. Key phrases that provide commonality among the definitions have been italicised. A diagram, which encapsulates the key ideas from the definition of PfM, is then presented at the end of this section, followed by an elaboration of the key elements.
To place PfM in perspective, Jiang and Klein (1999) identified PfM as a discipline under the broader categorization of IS (Information Systems) planning which assists organisations in executing business plans and realizing business goals.
Cooper, Edgett and Kleinschmidt (2000:14) defined PfM as “a dynamic decision making process whereby, a business’s list of active new products and projects is constantly updated and revised; new projects are evaluated, selected, and prioritised; existing projects are accelerated, terminated, or de-prioritised; and resources are allocated and re-allocated to the active projects.”
META Group (2002:3) defined the management of the IT portfolio as the management of a “set of assets (hardware, software, human capital, processes and projects), mapped to investment strategies (based on risk tolerance and business goals), according to an optimal mix (the percentage or range of investment made in each business area), based on assumptions about future performance, (strategic and tactical growth expectations of the business), to maximize the value/risk trade-offs (ensuring that the selected IT investments provide the desired level of business value for the cost and risk involved) in optimizing the organisation’s return on IT investment”. The META Group’s definition considered the broader aspects of IT beyond just projects, but the essence of portfolio management was maintained in the definition.
Leliveld and Jeffery (2003:3) defined PfM as “the combination of tools and methods used to measure, control and increase the return on both individual IT investments and aggregate enterprise level”. They also defined a portfolio as “including all direct and indirect IT projects and assets, including components such as infrastructure, outsourcing contracts and software licences”.
Maizlish and Handler (2005) defined PfM as a combination of people, processes, and corresponding information and technology that sensed and responded to change by:
reprioritizing and rebalancing investments and assets; b) cataloguing a value-based risk assessment of existing assets; c) eliminating redundancies while maximizing reuse; d) scheduling resources optimally; and e) monitoring and measuring project plans from development through post-implementation and disposal.
Levine (2005:17) stated that project portfolio management was “the bridge between traditional operations management and project management”. He defined project portfolio management as “the management of the project portfolio so as to maximise the contribution of projects to the overall welfare and success of the enterprise” (Levine, 2005:22).
Project Management Institute (2006, 2008b, 2013) defined PfM as the centralised or coordinated management of one or more portfolios, which included identifying, prioritizing, authorizing, managing, and controlling projects, programmes, and other related work, to achieve specific strategic business objectives. They recognised that “portfolio management produces valuable information to support or alter organizational strategies and investment decisions” (Project Management Institute, 2013:5) and allowed decision-making that controlled the direction of portfolio components as they achieved specific outcomes. They added that resources are allocated according to organizational priorities and are managed to achieve the identified benefits. They further elaborated that: “the organizational strategy is a result of the strategic planning cycle, where the vision and mission are translated into a strategic plan” (Project Management Institute, 2008b:9) and that: “Portfolio Management, through the alignment of the strategic planning establishes the portfolios required to achieve organizational strategy and objectives and performance goals. Management of authorized programs and projects and management of ongoing operations are required to execute portfolios consisting of programs, projects and operations activities to realize the organizational strategy and objectives” (Project Management Institute, 2013:9)
The management of the portfolio requires that the alignment between objectives and portfolio components be maintained. A change in circumstances (external or internal) could result in a change in the portfolio mix. The Standard (3^rd edition, 2013:71) describes this process as “Optimize Portfolio” and describes this process as “evaluating the portfolio based on the organisation’s selection criteria, … creating the portfolio component mix with the greatest potential to support the organizational strategy.”
The key phrases from the preceding definitions that describe PfM and its impact are summarised as:

The translation of strategy and objectives (organizational objectives) into projects, programmes, and operations (identification, prioritization, authorization of portfolio components).
The allocation of resources to portfolio components according to organizational priorities.
Maintaining the portfolio alignment requires each component being aligned to one or more organizational objectives and the extent to which the components support the achievement of the objectives (i.e., the degree of contribution) must be understood.

- The portfolio components are managed and controlled in order to achieve organizational objectives and benefits.
  The following diagram is an adaptation of the organizational context for portfolio management from the 3^rd edition of the Standard for Portfolio Management (2013:8). It illustrates the key aspects from the PfM definitions described above.

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1 CHAPTER 1 – INTRODUCTION
1.1 INTRODUCTION
1.2 MOTIVATION FOR THIS RESEARCH
1.3 PROJECT PORTFOLIO MANAGEMENT – OVERVIEW
1.4 RESEARCH PROBLEM
1.5 LAYOUT OF THE THESIS
1.6 CONCLUSION
2 CHAPTER 2 – RESEARCH METHODOLOGY
2.1 INTRODUCTION
2.2 RESEARCH DESIGN
2.3 CONCLUSION
3 CHAPTER 3 – LITERATURE REVIEW
3.1 INTRODUCTION
3.2 PROJECT PORTFOLIO MANAGEMENT DEFINITION
3.3 MODERN PORTFOLIO THEORY (MPT)
3.4 MULTI CRITERIA UTILITY THEORY (MCUT)
3.5 ORGANISATION THEORY
3.6 SYSTEMS THEORY
3.7 COMPLEXITY THEORY
3.8 PROJECT PORTFOLIO MANAGEMENT THEORETICAL FOUNDATIONS
3.9 CONCLUSION
4 CHAPTER 4 – AN INVESTIGATION INTO THE PRACTICE OF PROJECT PORTFOLIO
MANAGEMENT
4.1 INTRODUCTION
4.2 EXTENDED LITERATURE REVIEW
4.3 PROJECT PORTFOLIO MANAGEMENT LITERATURE VERSUS PRACTICE
4.4 CONCLUSION
5 CHAPTER 5 – CONCEPTUAL MODEL
5.1 INTRODUCTION
5.2 MOTIVATION FOR A CONCEPTUAL MODEL
5.3 THE RELATIONSHIP BETWEEN PORTFOLIO COMPONENTS AND ORGANIZATIONAL OBJECTIVES.
5.4 CONCEPTUAL MODEL
5.5 INTERPRETATION AND UTILITY OF THE MODEL
5.6 VALUE OF THE MODEL
5.7 CONCLUSION
6 CHAPTER 6: EXTENSION OF THE CONCEPTUAL MODEL
6.1 INTRODUCTION
6.2 DETERMINING THE CONTRIBUTION OF SINGLE PORTFOLIO COMPONENTS TO MULTIPLE OBJECTIVES
6.2.1 The degree of contribution of a single component (PC1) to multiple objectives.
6.3 CALCULATE THE CUMULATIVE CONTRIBUTION OF A SINGLE COMPONENT TO MULTIPLE OBJECTIVES
6.4 DETERMINE THE RELATIVE CONTRIBUTION OF SINGLE PORTFOLIO COMPONENTS TO MULTIPLE OBJECTIVES.
6.5 CONCLUSION
7 CHAPTER 7: MODEL VERIFICATION
7.1 INTRODUCTION
7.2 MODEL EVALUATION AND VERIFICATION
7.3 ORGANIZATIONAL CONTEXT
7.4 INFORMATION GATHERING FOR THE VERIFICATION PROCESS
7.5 VERIFICATION PROCESS
7.6 SCENARIO – WHAT IF A PORTFOLIO COMPONENT IS TERMINATED?
7.7 OBSERVATIONS
7.8 THE BENEFIT OF USING THIS MODEL
7.9 CONCLUSION
8 CHAPTER 8: MODEL VALIDATION
8.1 INTRODUCTION
8.2 MODEL VALIDATION
8.3 CONCLUSION
9 CHAPTER 9: CONCLUSION
9.1 INTRODUCTION
9.2 SUMMARY OF CHAPTERS .
9.3 OBJECTIVE 1: CONTEXT FOR PROJECT PORTFOLIO MANAGEMENT.
9.4 OBJECTIVE 2: THE PRACTICE OF PROJECT PORTFOLIO MANAGEMENT IN SOUTH AFRICA
9.5 OBJECTIVE 3: A CONCEPTUAL MODEL AS A QUALITATIVE SOLUTION TO THE PROBLEM
9.6 OBJECTIVE 4: VERIFICATION AND VALIDATION OF THE MODEL
9.7 THE PROBLEM ADDRESSED
9.8 CONTRIBUTION OF THE RESEARCH
9.9 RESEARCH LIMITATIONS
9.10 RECOMMENDATIONS FOR FUTURE RESEARCH
9.11 PERSONAL REFLECTION .
10 REFERENCE