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Thought Leadership in Project Management

This month’s article is based on the study of the authors Michael G. Kaiser, Fedi El Arbi and Frederik Ahlemann about Successful project portfolio management beyond project selection techniques: Understanding the role of structural alignment. First, the authors study the effect of the project selection and evaluation criteria on the company’s structure and its organizational transformation. Afterward, the structural alignment is shown to be an important approach for successful project portfolio management (PPM). The analysis performed by the authors resulted in a theory that associates PPM, strategy and the organizational alignment driven by the strategic PPM implementation. Based on literature, the authors state the idea that particularly in project-based businesses there is a bidirectional effect between strategic management and PPM. An effective strategic management process is a prerequisite for strategy and project portfolio alignment. Likewise, PPM is crucial for the implementation of formulated strategies.   

To develop a theory of structural alignment to strategic PPM implementation, the authors used a qualitative research method and a multi-case study approach. The study was focused on publicly traded large construction companies and the analysis was based on their strategies, PPM and organizational structures. 

As the authors state, the organization’s limited resources set a constant demand for the project portfolio to have the right projects in an optimal financial and strategic condition. In a portfolio, the projects do not need to have the same goal, but they compete for the same resources. Usually, the project portfolio actions include the gathering of potential projects, their prioritization and selection, taking into account existing resources. Also, PPM continuously evaluates existing projects to determine the appropriateness of their execution. This primary and continuous evaluation of the projects gathered in the portfolio demands high-quality, up-to-date internal and external information that generates organizational pressure.

The authors found out that PPM implementation shapes the organizational structure, additional to defining the project selection techniques. This course of action starts with a strategic management process that is the foundation for the development of an organizational strategy with particular goals, which constitute the input for defining the strategic selection criteria for projects and project portfolio goals. As proposed by the authors, the implementation of PPM will require the alignment of the organization’s structure with the information requirements generated by the project selection criteria. Then, depending on the information demands, the organization undergoes structural changes to establish the information flows between different centralized departments of the organization (e.g. risk information from risk management, resource information from resource management and HR management, scheduling information from PMO). This alignment relates to processes, systems and organizational units to transmit the information needed by the project selection criteria. The authors propose that an adequate structural alignment will foster successful PPM in terms of acceptance, decision-making quality and strategy implementation.

            In conclusion, the model developed by the authors explains the structural changes that take place in project-based organizations when strategy implementation is carried out using project portfolio management. The authors propose the idea that the design of PPM by means of strategic information requirements will allow organizations to establish a close connection between the strategy and the PPM processes, which at the same time will promote the successful implementation of the strategies.  

  

Featured Column by Carmen Pascente, PMP

Reference: Kaiser, M. G., El Arbi, F., Ahlemann, F. (2015).Successful project portfolio management beyond project selection techniques: Understanding the role of structural alignment. International Journal of Project Management, 33, 126-139.

 

 

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