Portfolio Management of Virgin Group Ltd - Assignment Example

Running Head: Portfolio Management Portfolio Project Management Name: Grade Course: Tutor’s Name: 30th, November, 2009 Introduction As the world of business changes due to competition, merges, outsourcing, new product development and off shoring, companies are forced to adapt dynamically to the changing market conditions hence the need for multi project management (Rajegopal et al, 2007). The multi-projects form the companies’ portfolio projects and this portfolio has to be managed (Wessels, 2007). The aim of this discussion is to evaluate an international level company portfolio management. A project that had difficulties or has proven to be difficult because of some management issues such as operational environment, stakeholder management, risks, quality issues or funding complications is selected, in this case the project selected had funding complications, and analysis of its management considering project management principles or issues carried out. The company selected in this case is Virgin Group Ltd. Virgin is a portfolio with several projects that have been implemented. A brief description of Virgin Group is given followed by the selected project and then the analysis. Virgin Group Ltd Virgin began in 1968 just by Sir Richard Branson’s Student Magazine. This expanded to what is currently known as a venture capital organization with involvement into different sectors of business such as transportation, financial services, fitness, music and mobile telephony and is one of the leading of such organizations in the world. Currently, there are more than 200 branded companies created by Virgin around the world. It has expanded to 29 countries and employs approximately, 50,000 people. In the year 2008, the Company’s global branded revenue was more than £11 billion (Virgin Group Ltd, 2009). According to the Virgin, the group stands for innovation, fun, and value for money and intellect of competitive challenge. Thorough research is done before setting up another venture considering the customers’ needs and analysis of customer feedback carried out to ensure delivery of quality services (2009). General Management of the Group The company manages its ventures through the Virgin Management Ltd (VML). This company provides managerial and advisory support to all Virgin companies. The central management has 3 regional support locations, that is, New York, Sydney and London, which provide regional support to the group while working together with the VML (Virgin Group Ltd, 2009). The group of companies are however individually managed and operated. Virgin Railways for example, has its own corporate governance, board of directors, Chief Executive Officer and other managerial resources. This means that corporate responsibility is done by individual companies as well. Virgins Current Projects Virgin Group as noted earlier has expanded and developed into so many companies. The group has more than 200 companies some of which are: Virgin Radio International, Virgin megastores, Virgin Atlantic Airways, Virgin Mobile India, Virgin Drinks, Virgin Connect, Virgin Active UK, Virgin Earth Challenge, Virgin Money UK, Virgin Green Fund, Virgin Unite, Virgin Active Italia, Virgin Holidays and Hip Hotels and so may others. These companies are spread all over Asia, North America, Africa, Europe and Australia (Virgin Group Ltd, 2009; Grant, 2005). The Company has a history of selling non-performing ventures and starting new ventures as a way to remain in business and be competitive apart from just the ‘Virgin’ brand that it has (Virgin Group b, 2009). The Selected Project in the Portfolio: Virgin America Airline Virgin America is part of the projects of Virgin group that is proving difficult because of the investors. According to Snyder, as at January 18th 2009, Virgin Group Ltd was looking for new investors for Virgin America. Virgin Group feared that the project’s investors of the time would cash out (Snyder, 2009). The investors of the time were the Cyrus Capital Partners and the Black Canyon. The kind of ownership structure that the investors agreed upon allows the investors to get back their money by giving back their shares to Virgin Group. As at January 2009, Virgin Group’s ownership of shares was complete as required by the American Law, that is, a maximum of 24% voting shares and a maximum of 49% total shares. This means that the company cannot buy more of the shares without breaking the law if in any case the investors return their shares. It has to look for new investors (Snyder, 2009). Project Portfolio Management requires a critical analysis of the company’s projects to determine the most appropriate at different times of business operations (Andersen et al, 2004; Gasse, 2009). In this case, a review of the portfolio project information is required. Classification and prioritization of the projects is required again (Gasse, 2009). If this project is found to be more important considering adherence to company aims and strategies and also considering other project management factors such as availability of investors, it will be approved to continue operating, if not, then the company could drop it to continue with other projects or sell it to fund other projects that have been given priority over it (Rajegopal et al, 2007; Virgin Group b, 2009). Project Governance: Virgin Group has individual companies all governed by the board of directors (Virgin Group b, 2009). Virgin America for example, has Sir Richard Branson as a minority share holder and the rest of the shares owned by board of investors (Snyder, 2009). Project Reporting and Monitoring: Virgin group has so many companies all which are considered ventures. All these ventures are managed separately therefore have their own management systems. Virgin America as one of the ventures has its own CEO, CFO, its chairman, Project managers, Marketing Managers and so on. This company has sub projects that also have to be managed as part of Virgin Group’s objectives. Identified projects are managed by lower division project managers and progress communicated to the top level management. The CEO of Virgin America manages Virgin America and ensures its efficient running. He/she receives information from the departmental/ or project level managers and in turn reports progress to the top level management which as indicated earlier, is to the Virgin Management Ltd (Virgin Group b, 2009). Project Stakeholder Management: Stakeholder management is very important for any company. According to TNS, stakeholder management is classified into three parts. That is, employee experience management, customer experience management and corporate reputation management (2009). Virgin’s Stakeholder management involves all these parties. The company ensures that customers are satisfied and are not lost for its expansion and development through incorporating consumer feedback in their project management system as well as research about their needs. Virgin Group has also maintained a good reputation making use of its ‘Virgin’ brand and its founder’s reputation (Shan, 2005). The employee experience is managed by the human resource department which also has its manager that ensures his/her department performs according to organization requirements and meets organization objectives (Virgin Group b, 2009). Virgin America’s stakeholder management also involves the board of directors who make decisions based on information provided after research on what type of investors the company accepts considering the legal requirements of the area of operation (Snyder, 2009; Virgin Group b, 2009). Each company however, has its own investors making it difficult to affect other companies whenever investor problems occur (Virgin Group b, 2009). It is the project governance, stakeholder management, leadership and reporting and monitoring that are important considering the case of Virgin America. The company is faced with funding problems. The previous investors are feared that they could return their shares. Decision making process therefore needs information from its stakeholder management department and its performance (Frigenti & Comninos, 2002). Virgin America’s Leadership: The Company is lead by Sir Richard Branson who is a silent partner with 49% of the shares and the CEO of the Virgin Group Ltd, Don Carty as the company’s chairman and David Cush as the president and the CEO of Virgin America. The other leaders responsible for the management and running of the company are; the CIO, the CFO, VP Guest Services and Airports, the Vice President planning and Sales, VP Marketing and Communications and Senior VP People and In-Flight Services (Overby, 2006; Virgin America a, 2008). Procurement Strategies: Just like Virgin Group, Virgin America identifies opportunities through research in the market, identifies the customers’ needs and incorporates them in their management system. Information about an opportunity in the market creates a project for the company. The company sets objectives all which are met by assigned project managers and employees. The company ensures the market capability is exploited by developing ways to meet its objectives. Risk analysis however is also done to ensure there is a balance between the risk, innovation and control of funding. Generally, the company identifies a project, sets objectives, develops approaches to meeting the objectives, assigns a project manager to it and evaluates the project’s performance as it progresses (Virgin America b, 2009). Corporate Social Responsibility: According to the corporate fact sheet, Virgin America ensures business is conducted considering their values and their stakeholder’s values (Virgin America b, 2009). The company ensures it achieves it social responsibility goals by supporting community organizations for example the SF-based KIPP, Knowledge is Power Program and California State Parks Foundation. The company is also committed to supporting policies and developments that deal with climate and environmental issues. As at 2007, Virgin America was ready to incorporate sustainability into its business model to support climate issues (Virgin America b, 2009). In 2008 it was approved by the Ceres board of directors for its commitment to environmental sustainability (Ceres, 2008). Conflict Management: Virgin America’s conflict management is through training the employees about conflict management (Virgin America c, 2009). Training about conflict management involves creating awareness about conflict at the workplace and how to avoid them. The company has a Conflict management system that trains its employees on how to deal effectively with different conflict situations (Virgin America c, 2009). Sometimes it involves a third party intervention which comes from the general management company, VML (Virgin America a, 2009). Project Portfolio Management Process Project Portfolio Management Maturity Model This model has five levels of maturity and each level examines the implementation of project portfolio management components. The components are: Portfolio Governance Project opportunity assessment Project prioritization and selection Portfolio and project communications management (Rad & Levin, 2006; Crawford, 2006; OGC, 2009) a) Portfolio Governance Portfolio governance deals with processes that aid the governance of the project’s portfolio (Crawford, 2006). Portfolio governance focuses on: the project’s alignment to the organization’s objectives, vision, and strategies, the governance process, the process for establishing division level review boards, the policies and procedures of the portfolio review board and the board membership (Crawford, 2006). All these make up the portfolio governance decision making, procedures and processes that evolve over time and form different maturity levels of portfolios. The portfolio s managed following a strategic criteria and ensures accomplishment of the organization’s strategies (Crawford, 2006). Portfolio governance is done by the company’s board. The board of directors The board is responsible for the internal leadership of the corporate entity. The board has other roles which are external. The board links the shareholders with the managers of the company. They have to have control and maintain it while performing their duties which require performance encouragement. Boards monitor the company’s management performance and the company; make major decisions and offer advice and counsel to management (Clarke, 2007). Clarke notes that, by monitoring the management of the company and making sure there is accountability, the board controls the company (2007). By providing advice and counseling the company executives, the board plays the role of a counsel, by approving and monitoring the strategic direction of the company, the board guides the company on the appropriate strategies; and by being a link between the investors, stakeholders and the community, the board builds an institutional relationship (Clarke, 2007). b) Project Opportunity Assessment This is a component that describes the processes and tools used in identifying and assessing opportunities for project development. Its areas of focus include; positions and their respective tasks, identification of opportunities and assessment of the projects, portfolio review board and determination of business value (Crawford, 2006). Maturity level is determined by the constant application of and the refinement of opportunity identification, project approval, business case development and post implementation project review processes. The review board ensures schedule, risk data and cost-benefit analysis is done (Crawford, 2006). c) Project Prioritization and Selection This component involves prioritization, selection and review of projects. This concerns the review board, prioritization process and criteria and selection of the projects and funding (Crawford, 2006). Maturity of this component is measured by consistent prioritization in the organization. This enables better understanding of the criteria and processes hence good interpretation and application always (Crawford, 2006). In this component, the review board’s role is to select the appropriate project/decision making and review the projects already selected before. d) Portfolio and Project Communications Management This involves the collection and sharing of information about the project. It focuses on the approved projects from the lowest levels, the project management process, information about the portfolio projects (that is consistent data for each project), sharing information processes and categorization and balancing of projects in relation to organizational goals (Crawford, 2006). Maturity level is determined by the adherence of the management process to the corporate project management processes from the division level to the enterprise level (Remington & Pollack, 2007). Adherence to corporate processes leads to improvement in the portfolio database which provides information for sharing (Hamilton, 2004). Virgin Group’s Project Portfolio Management Maturity Model Level According to the above information, Virgin group has a level 4 maturity model. Under this level, the process should be a managed process (Crawford, 2006; OGC, 2009). That is, The company should have already established database where portfolio development information is stored, updated and maintained. Virgin group was established in 1970 and since then has improved overtime. The group of companies has a record of how it manages its ventures, how it enters into new businesses and has even established a general management company for the management of its ventures (Virgin Group, 2009). It should have common objectives and metrics for portfolio decision making and analysis (Crawford, 2006; OGC, 2009). Virgin group stands for innovation, fun, and value for money and intellect of competitive challenge (Virgin Group a, 2009; Shan, 2005). It should have a strategic criterion that it uses to maximize portfolio value (Crawford, 2006; OGC, 2009). Virgin group makes use of its famous ‘Virgin’ brand and its founder Sir Richard Branson’s reputation to expand to other business areas (Shan, 2005). It should have project investment information available when required (Crawford, 2006; OGC, 2009). According to Virgin Group Ltd, Virgin Group ensures thorough research is done before venturing into a new business (2009 a). The project portfolio information is reviewed (Crawford, 2006). Virgin group reviews its projects to find out its contribution to the group considering aims, objectives, strategies and profits. It is this kind of review that leads to decision making on selling some of the ventures (Virgin Group b, 2009). Uses quantitative and qualitative data to conduct post implementation reviews (Crawford, 2006). Earned Value Management This is a performance measuring method that incorporates project scope, schedule and resources to determine a portfolio’s projects performance (Cable et al, 2004; Federal CIO Council, 2005). Projects implementation occurs after establishment of aims to be accomplished. Accomplishment of such aims involves planning which involves the cost and the time it will take. Earned value management evaluates the work done by the project while comparing it to the planned cost and schedule (Cable et al, 2004; Federal CIO Council, 2005). It may also be an evaluation of the project’s expenditure while considering the planned expenditure and determining the technical performance (Cable et al, 2004). This analysis enables prediction of future performance of a project which is necessary for decision making in portfolio management. Virgin group can use this to analyze its projects and make informed decisions. The analysis of the Earned values involves calculation of Earned Value, Actual Cost and The Planned Value (Cable et al, 2004; Federal CIO Council, 2005). Analysis Based on the above information, portfolio management is all controlled by the board of directors of a company who as noted above, make major decisions and guide the company’s leaders and project managers in accordance with maturity model level (presented case: level four) portfolio management. These directors however, cannot act on anything without information. They have to have the necessary information about the company’s or the projects progress in order to make decisions (Frigenti & Comninos, 2002). This information is only obtained from the project managers who also obtain them from other employees. This is a clear indication of the role of stakeholder management in portfolio management. It is clear in the above case that portfolio management is done by the VML’s Board of directors even though individual companies’ Boards of directors are also involved in decision making at individual company levels. The board of directors will make decisions based on already available data considering common objectives and the group’s strategic criteria (Monks & Minow, 2004; Lewis, 2002). This is an already established project experiencing problems and so there is no opportunity assessment being conducted. A review of the project’s opportunities, performance, available funds and future direction has however to be done. This means that project prioritization and selection is done to determine if this project is still important to the company (Kerzner, 2004). If the investors return their shares to the company, the Company may have problems with the US corporate legislators. A report about this problem should be submitted to the general managing company which will conduct an analysis of its importance, necessity and impacts on the organization and take necessary steps (Howes & Tah, 2003). The VML board of directors can decide to negotiate with the American corporate legislators to acquire more time to get the right investors or otherwise decide to sell the company. So many actions can be taken depending on the available information about the project and the priorities of the group (Company) (Sanwal, 2007). Analysis of the project should also be done considering the earned value of the project. As indicated above, level 4 uses both qualitative and qualitative data to review projects and make decisions. This requires the earned value management of the portfolio. According to the information given above about Virgin Group, there is no proof that this organization involves itself with earned value management. Earned value management also assists in decision making as it gives the performance of the project. It predicts how the project can progress given the analysis of how it has performed in the past times. An evaluation of the projects earned value should therefore be conducted and appropriate decisions made (Oracle Data Sheet, 2009). Conclusion In portfolio management, analysis should be done considering if the project can still contribute to the overall achievement of the portfolio, its performance, if it can have some negative impacts on the other projects, to determine if its approval will help in the delivery if desired objectives and benefits or if its cancellation and approval of another will lead to the achievement of aims. Virgin Group Ltd is known for its prioritization process. If a project cannot meet its objectives, it is sold and another identified. Analysis as noted earlier depends on the company values, objectives and strategies and is also depended on how established the portfolio management processes. 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