Value in Project, Program, and Portfolio Management - Royal Commission in Jubail City - Literature review Example

Value in Project, Program, and Portfolio Management The report has critically reviewed the concept ofvalue in the project, program and the portfolio management. Literature review suggested that application of portfolio management leads towards the value creation in the organization, where the value is created by reducing the waste and duplicated activities, and pooling the resources in order to achieve the synergy and collaboration benefits. But Portfolio management also faces many challenges, such as lack of strategic alignment, lack of coordination among the working units, and the cultural aspects, which must be overcome to implement it successfully. The implications of the value creation in the portfolio management is also analyzed in the real-world organization, Royal Commission. Then some improvements and approaches with regard to the value enhancements and successful implementation of portfolio management are also specified, where the strategic alignment of the portfolios with the enterprise objectives, inclusion of all the stakeholder in planning and executing the projects, and the diamond approach to select and prioritize the projects in a portfolio, are suggested. Table of Contents Abstract 1 Value Creation through Project, Programme, and Portfolio 3 Introduction 3 Literature Review 3 Summary of literature 6 Implications in the Royal Commission in Jubail city 7 Suggestions for Improvement 9 Conclusion 11 Bibliography 12 Appendix 15 Value Creation through Project, Programme, and Portfolio Introduction There are many organizational advancements seen in the previous ten years, which arises due to the growing work of “project management” throughout the industries and sectors. This is evidenced in the contemporary research over United Kingdom, where the progress has been seen in all the sectors due to the innovative initiatives practiced by projects, programs, and portfolio management (Whittington, et al., 1999). It is argued in the literature that project management along with the programme and portfolio management enhance a substantial “value” into the organizations, as Center for Business Practices has conducted a survey over senior experts in project management which reveals this conclusion (CBP, 2003). The research suggests that the project, programme and portfolios are the three approaches to create value in the organizations. The purpose of this report is to critically review the concept of value creation through the project, programme and portfolio management, and to analyze its practical implications as well as provide suggestions to enhance the performance in the context of real-world organization, which is Royal Commission in Jubail city. Literature Review Before drawing an analysis on the topic, there is need to explore the basic concepts and a distinction is to be made between these three approaches; project, programme, and portfolio management. A project is described as, def. “a temporary endeavor undertaken to create a unique product, service, or result” (Schwalbe, 2012, p. 4), which can be exemplified as, building a home is a project. The definition suggests that each project has specific goal to be achieved and the term “temporary” doesn’t mean it to be a short-term project, rather it means that it has a definite start and end time. Projects are needed to be managed within three limitations, which are cost, time and scope. By effectively managing the project within these limitations, the objectives of the project are successfully achieved. So, Project management can be defined as, def. “the application of knowledge, skills, tools and techniques to project activities to meet project requirements” (PMBOK® Guide, 2004, p. 8). On the other hand, a program is described as the “group of related projects”, where related projects are pooled together in order to manage the resources effectively to gain collaboration benefits, for instance, a construction program includes home, offices, factories construction projects. As argued by Schwalbe (2012), programs can be more beneficial in terms of achieved benefits and control from executing the related projects. While when the organizations cluster and manage the group of projects and programs, they are called as portfolios, which are selected to mitigate the risks of failure in one project with success in other (Schwalbe, 2012). Thus, main distinction among these is based on the objectives to be achieved, such as operational objectives for project, tactical for program, and strategic for the portfolio (Maylor, 2010). Though, there are different levels of objectives in the project, programme, and portfolio, but they all strived for creating the value, as argued by Cleland and Ireland (2004) that project management is a technique to enhance value (Cleland & Ireland, 2004). The question arise here is that what basically the value is. There are different terms and conceptualization with regard to the “value” in literature, where it can be viewed from single or multiple dimensions. Single dimension perspective gives the “financial approach”, where the return on investment, financial ratios, and cost-benefit analysis are performed to define the value, though it is quite reasonable and reliable to find out the value of project in terms of financial value, but still it needs much more than simply assessing tangible value. On contrary to tangible value, the project management also create value in terms of intangible profits to the culture, effectiveness, learning, knowledge base, development and the customer satisfaction (Zhai, et al., 2009). Nogeste and Walker (2005) has also claimed that the intangible benefits of learning and development are attained in the program and portfolio management, in achieving the strategic objectives (Nogeste & Walker, 2005). So, value creation in organization doesn’t necessarily mean to enhance the financial value, rather it include much more. Winter and Szczepanek (2008) has also claimed an important viewpoint by arguing that there has been a shift in the focus from coping with the constraints and just executing the projects towards the enhancement of value and achieving the strategic objectives for business success (Winter & Szczepanek, 2008). This entails that value can be created by implementation of portfolio management as it focuses on the strategic objectives which would benefit the whole enterprise, as argued by many researchers (Cooper, et al., 2002; Schwalbe, 2012; Amason, 2011; Jenner, 2010). In the portfolio management, there is need to choose proper projects and programs that organization must work on, and they must be aligned with the organizational strategic objectives. In this scenario, value is created by reducing the waste and duplication of activities. As there are number of activities and resources, which would be overlapping among the projects, can be managed properly and reduced the costs and wastes. So, portfolio management results in creating the organization-wide value, while the proper selection of projects is made (Ainsworth, 2009; Jenner, 2010). Furthermore, the portfolio management can be better explained by the framework given (appendix) by Hope and Moehler (2014), where it is argued that portfolio management has three main objectives, such as value creation, achievement of strategic objectives, and long term direction (Hope & Moehler, 2014). On contrary to employ only portfolio management as the approach of value creation, Ernst and Young (2012) has argued that value is created by focusing on these three approaches as together in the organization (Ernst & Young, 2012; Winter & Szczepanek, 2008). Moreover, a number of challenges are there which can impede the value creation in portfolio management, such as improper strategic alignment, bad governance, inefficient management, and ineffective reporting (Ernst & Young, 2012). In this scenario, the (Walk, 2012) has suggested a value engineering approach to overcome the challenges. The project’s value creation is not limited to the customer or the organization only, rather it has many stakeholders for whom value is created. These included individuals and organizations, such as clients, sponsors, and companies doing the project, public who are involved in the project, or others have vested their interests and are impacted by the project implementation. So, this entails that there is need to see from the stakeholder’s perspective that what value they want to be delivered (Freeman, 1984). It is also evidenced by the research on Australian Defense that stakeholder perspective is essential in creation of value in any project, where the problems of culture and coordination among working units are also discussed with highlighting the stakeholder involvement being critical aspect in project success (Chang, et al., 2013). Summary of literature In summarizing the findings from the literature, it can be said that among the project, program and portfolio, the value creation approach in organization can be said as portfolio management which includes all of the three approaches, and the selection of projects and programs in the portfolio is of key importance (Jenner, 2010). Much of the literature shows that the value is created in the portfolio by achieving the strategic objectives of the organization and delivering the value as per expectations of stakeholders. As for businesses, the value is to achieve the strategic objectives or enhancements as well as the satisfaction of all the stakeholders (Zwikael & Smyrk, 2011). Moreover, (Hope & Moehler, 2014) has also argued that program and portfolio, both are aligned with the strategy of the enterprise, but there are number of challenges in portfolio management. Implications in the Royal Commission in Jubail city Royal Commission in Jubail, Saudi Arabia, is one of the well-known semi-governmental organizations in the Kingdom. It executes infrastructure programs and projects, and also oversees the establishment and operation of the Jubail Industrial City, where the programs are related to the citys public services. The Royal Commission organization has adopted the portfolio management in which the Organization Board specifies and prioritizes the programs and projects to be undertaken. Also, the portfolio management works to monitor and control the alignment of all the programs and projects to the organizations strategic objectives, which leads to value creation in the organization as suggested by literature too. After this level of portfolio management, the program management is executed, where many different programs serve several vital sectors in the city. These programs are related to residential and industrial parts of the city, where different project are integrated into different programs and create a portfolio of diverse projects and programs. By such integration, the portfolio management seeking to maintain value by selecting different programs and projects appropriate to the organizations strategy, establishes a general framework for these programs and projects ensures compatibility with the strategic goals. The programs also strive to coordinate and collaborate the units working in projects, in order to optimize the management quality and utilizing the resources efficiently and effectively. The collaboration between the units enable the organization to get rid of recurring activities and to gain the value by supporting the execution from portfolio level. As suggested by the literature (Ainsworth, 2009; Jenner, 2010) that portfolio approach can maximize the value, if proper selection of project and programs is done, and the coordination among the work units is managed successfully. Programs face many challenges which impede the realization of real values from projects, such as the contemporary culture and differences in the vision and orientation within frameworks of program. In addition to these, bureaucracy also play important role in lowering the value by wasting the resources with activity duplication and delay in the improvement process. The coordination between different departments in executing the project also leads towards the technical defects and delays in activities in project, which in turn, affect the desired value from the project. For the purpose of avoiding such issues in project execution, organization has applied a “value engineering approach” in project management. This approach aims to ensure the value creation from projects and operation units by waste reduction, increasing the savings, quality improvements and satisfying the end user’s expectations. Such management process improves the optimal use of the resources and strengthen the coordination between organizational units through involving the experts from several units in the organization such as engineering, construction and operation units. Experts evaluate the whole plan from design to execution and provides more creative ideas as well as alternative options in order to make it more practical. This review is based on the different perspectives from the different departments and then a final review is done by all the experts before presenting the plan to CEO for final approval. It results in better value by continuously improving the performance and strengthens the channels of communication between entities and creates team work. There is a lot of discussion happened between value makers in the projects and the end user or the clients in order to unite the value concepts within the project constraints. Suggestions for Improvement There are number of issues and problems arise in implementation of the portfolio management in any organization, as it is evidenced in the literature that there are many challenges faced by the portfolio management. The value creation in project, program, and portfolio management can be improved by the following suggestions; In the first place, strategic alignment and creating a set vision are important challenges to overcome for value creation in the organization. This is usually resulted from lack of understanding of linking the portfolio with the enterprise strategy, ineffective selection and prioritization, and having many essential projects which are important to choose (Ernst & Young, 2012). For proper alignment, the organization must develop the strategic objectives first, and then the initiatives should be developed for each objective to be attained. Royal Commission has faced the differences in the orientation or vision, so it must develop a strategic direction and initiatives should be taken right according to the organizational strategic objectives. This way, the organization can properly align the portfolio and organizations’ objectives. Secondly, the coordination among the departments is the essential to create value in the organization. Though, organization has developed the value engineering approach for enhancing the coordination between all work units. But still, it lacks the inclusion of all the clients’ suggestions, contractor’s issues, and many other important parties to be considered. For that purpose, organization must include all the stakeholders of the projects while planning and executing the project (Chang, et al., 2013). This is necessary for successful project and delivering the value according to the stakeholders’ expectations. It will reduce a lot or remaking and correcting the things, if the suggestions are taken from the stakeholders. There is another important consideration that this inclusion of stakeholders should not be limited to the execution phase, rather they must be included during the planning phase. It can reduce many repetition of activities and corrections, which usually result in the cost overruns and delayed project closure. Bhalla (2014) has also provided a framework which can be applied to the organization to include all the stakeholders in value creation and has entailed the application of Information Technology to enhance this collaboration of project team with the clients and all stakeholders (Bhalla, 2014). Additionally, the culture is also a challenge which can be a big obstruction in the way of coordination. The cultural obstruction entails the role of leaders and managers in creating such a culture which allow such inclusion of all stakeholders in the planning and executing phases, as well as the enhanced collaboration among all the working units. Thirdly, a new approach towards the value creation in the project management is given by the Shenhar and Dvir (2007), which is known as the “Diamond Approach” that can be applied to selection and prioritization of the projects. They suggested that with such ever demanding and ever changing dynamic and competitive environment, there is need to focus on the better approach which would be useful in coping with such environment. The diamond framework suggests four key aspects which would help in analyzing the projects and selection of projects and programs in order to cope with the changing environment. These four key aspects are the bases to select the projects, which are “novelty”, “technology”, “pace”, and “complexity”. To select the project in the portfolio, the newness and innovativeness is to be considered, and it must be prioritized on the basis of a range from low-tech to high-tech scale. Then the complication involved and urgency of the project should be analyzed. Additionally, the training and education of the workforce and project team is an important aspect, which needs to be focused for better value creation. This would enhance the value of the organization in a way that it will make the firm competitive in the dynamic environment, by choosing the projects which are the need of current market (Shenhar & Dvir, 2007). Thus, the diamond approach can be used for selection and prioritization of the project. Conclusion The report has critically reviewed the concept of value in the project, program and the portfolio management. Literature review suggested that application of portfolio management leads towards the value creation in the organization, but it also faces many challenges that must be overcome to implement it successfully. The implications of the value creation in the portfolio management is also analyzed in the real-world organization, Royal Commission. Then some improvements and approaches with regard to the value enhancements and successful implementation of portfolio management is also given, where the strategic alignment, inclusion of all the stakeholder in planning, and the diamond approach to select the portfolio are suggested. Bibliography Ainsworth, H., 2009. Can project management create organization value? Necessary, but not sufficient!. Project Management and Organizational Value , 3(1), pp. 1-5. Amason, A., 2011. Strategic Management: From Theory to Practice. 1st ed. London: Routledge. Bhalla, G., 2014. How to plan and manage a project to co-create value with stakeholders. Strategy & Leadership, 42(2), pp. 19-25. CBP, 2003. Center of Business Practices, Havertown: PA 19083. Chang, A., Chih, Y.-Y., Chew, E. & Pisarski, A., 2013. Reconceptualising mega project success in Australian Defence: Recognising the importance of value co-creation. International Journal of Project Management , 31(1), p. 1139–1153. Cleland, D. I. & Ireland, L. R., 2004. Project Manager’s Portable Handbook. 2nd ed. New York: McGraw-Hill. Cooper, R., Edgett, S. & Kleinschmidt, E., 2002. Portfolio Management; Fundamental to New Product Success. 1st ed. New York: John Wiley & Sons. Ernst & Young, 2012. Insights on governance, risk and compliance, England: EYGM Limited. Freeman, R. E., 1984. Strategic management-A stakeholder approach. 1st ed. Marshfield: Pitman Publishing. Hope, A. J. & Moehler, R., 2014. Balancing projects with society and the environment: A project, programme and portfolio approach. Procedia - Social and Behavioral Sciences, 119(1), p. 358 – 367. Jenner, S., 2010. Transforming Government and Public Services: Realising Benefits Through Project Portfolio Management. 1st ed. Burlington: Ashgate. Maylor, H., 2010. Project Management. 4th ed. London: Prentice Hall. Nogeste, K. & Walker, D. H., 2005. Project outcomes and outputs: making the intangible tangible. Measuring Business Excellence , 9(4), pp. 55-68. PMBOK® Guide, 2004. A Guide to the Project Management Body of Knowledge, London: Project Management Institute, Inc.. Schwalbe, K., 2012. Information Technology Project Management. 6th ed. Boston: Course Technology, Cengigng Learning. Shenhar, A. J. & Dvir, D., 2007. Reinventing Project Management; The Diamond Approach to Successful Growth and Innovation. 1st ed. New York: Harvard Business School Publishing. Walk, T., 2012. Value Engineering Approach to Increase Cost Efficiency, London: Special Edition Engineering and Construction. Whittington, R. et al., 1999. Change and Complementarities in the New Competitive Landscape: A European Panel Study, 1992–1996. Organizational Science, 10(5), pp. 583-600. Winter, M. & Szczepanek, T., 2008. Projects and programmes as value creation processes: A new perspective and some practical implications. International Journal of Project Management , 26(1), p. 95–103. Zhai, L., Xin, Y. & Cheng, C., 2009. Understanding the Value of Project Management from stakeholders perspective; The case of a Mega Project. Project Management Journal, 40(1), p. 99–109. Zwikael, O. & Smyrk, J., 2011. Project Management for the Creation of Organisational Value. 1st ed. London : Springer-Verlag London Limited. Appendix Figure 1: Framework of Project Portfolio Management given by (Hope & Moehler, 2014) Read More