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Evaluating the Use of Portfolio Management

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Kharat, V. J., & Naik, B. K. R. (2018). Best practices in project portfolio management for dynamic decision making. Journal of Modern Project Management, 88-95.

88 JOURNAL OF MODERN PROJECT MANAGEMENT • MAY/AUGUST • 2018 2018 • JOURNALMODERNPM.COM 89

DOI NUMBER: 10.19255/JMPM01609

PROCESSES FOR BUSINESS SUCCESS

• ABSTRACT •

KEYWORDS
Project portfolio management • Decision making • Best practices.

The industrial world is witnessing decision making in a very dynamic and
competitive environment. Project portfolio management (PPM) is one of
the aspects, where, it plays a vital role in dynamic decision-making. Project
portfolio management has evolved from a mere strategy to a complete man-
agement consisting of decision making at strategic level to implementation
at its best level. Researchers have proved that companies following standard
procedures of PPM did not strive hard for success. Success for any organi-
zation has become synonymous with the correct implementation of PPM.
Some organizations do focus on their own signature processes than to fol-
low certain standard methods. These signature processes may prove fruitful
to the organizations having varied experience in their own field but for new
organizations or not so experienced organizations, developing signature
processes may boomerang in long run. Project Portfolio Management sets
a standard for processes for business success for such organizations. This
paper reviews the best practices of PPM been followed in the organizations.

DYNAMIC
DECISION

MAKING

Best Practices in Project
Portfolio Management for

MR. V J KHARAT
• National Institute of Industrial Engineering (Mumbai, INDIA)
• vilas.kharat.2013@nitie.ac.in

DR. B K R NAIK
• National Institute of Industrial Engineering (Mumbai, INDIA)
• email@domain.com

INTRODUCTION
———————
Successful innovation has become the major player for revenue growth and ability to provide
competitive margins. The ability to innovate and present it to the customer efficiently and mov-
ing forward in competition is becoming very important. A successful product launch needs
integration of and coordination among multiple areas, including product design, procurement,
planning, manufacturing and quality control. Consequently, the organization needs to integrate
itself internally and also externally with suppliers and consumers, creating end- to- end supply
chain processes and capabilities which will help fulfill product and customer requirements.
Along with these aspects, dynamic capability building is an aspect which has been under rated

in many studies. Dynamic capability is an organizational capability
that allows heightened responsiveness to a dynamic, realistic work
environment and is a method to achieve a unique competitive ad-
vantage due to the part it plays in enabling deployment, integration
and building of other capabilities and organizational resources in
situations which are practically and realistically bound to be ahead.
PPM (Project Portfolio Management) processes are the policies, ac-
tivities practices, methods, procedures, and tools that managers use
for on-going resource allocation and reallocation among a portfolio
of innovation projects to increase the contribution of projects to the
overall welfare and success of the enterprise (Cooper et al., 2001,
Levine, 2005). An organization’s PPM capability is responsible for
the effective deployment of the innovation strategy and provides a
holistic look for on-going decision-making to maintain the better
combination of projects when implemented properly and conduct-
ed on a regular basis, PPM helps in achieving the following in any
organization (Cooper, 2000)

• Maximizing the return on product development investments.

• Achieving efficient allocation of resources.

• Maintains your competitive position.

• Establishes a strong link between project selection and busi-
ness strategy.

• Enables objective project selection.

• Communicates priorities effectively.

LITERATURE REVIEW
———————
As Harvey A Levine (2005) states, the emergency of PPM as a recog-
nized set of practices, may be considered the biggest leap in project
management technology since the development of Program Evalu-
ation Review Technique (PERT) and Critical Path Method (CPM) in
the late 1950s.Project portfolio management is critical for decision
making, governance and to ensure the business objectives are sup-
ported by the right set of projects while project management is the
critical one to ensure that budget, activity, resource allocation, and
the work are accurate and are delivered on time. It appears clear
that project portfolio management differs significantly from man-
agement of individual projects and program. Project portfolio Man-
agement and the associated activity of handling selected projects
throughout their life cycles are critical activities in many organiza-
tions, since project management practices are so commonly used in
many industries for activities such as R & D of new products, imple-
menting new systems and processes in manufacturing, information
systems, and construction projects and contracting engineering.
(Cooper et al ,1999). There are usually more projects available for
selection than can be considered within the physical and financial
constraints of an organization, so choices must be made in making
up a suitable project portfolio. Unlike project management which
focuses on only single projects and program management, which
deals with the management of a set of projects that are related by
sharing common aspects through interdependencies and common
resources, PPM considers the entire portfolio of projects an organi-
zation is engaged in, in order to make decisions in terms of which
projects are to be given priority, and which projects are to be added

90 JOURNAL OF MODERN PROJECT MANAGEMENT • MAY/AUGUST • 2018 2018 • JOURNALMODERNPM.COM 91

AUDIT AS A TOOL FOR PROJECT MATURITY CERTIFICATION IN HEAVY CIVIL CONSTRUCTION

to or killed from the portfolio.’ (Reyck et al. 2005). Project Portfolio Management
applied to R&D projects is also defined as: “a dynamic decision process, whereby
a business’s list of active new product projects is constantly updated and revised.
In this process, new projects are evaluated, selected, and prioritized; existing
projects may be accelerated, killed, or reprioritized, and resources are allocated a
reallocated to the active projects. The portfolio decision process is characterized
by uncertain and changing information, dynamic opportunities, multiple goals
and strategic considerations, interdependence among projects, and multiple de-
cision-makers and locations” (Cooper, Edgett, &Kleinschmidt, 2001). Cooper et
al. (2001) sought to learn about the importance of support of senior manage-
ment to Project portfolio management, the most similar techniques implement-
ed and what distinguishes the best organizations from the worst. As part of the
analysis of project management, it is important to list some of the elements that
affect project success (Leintz and Rea, 1995);

• The integration of project objectives and scope in the organization.

• The project objectives should be explicit and clear.

• The communication between the project and the organization’s strategy.

• The skills of the PMO in implementing the project’s objectives.

There are many relatively distinguished techniques that can be used to evaluate,
estimate and choose project portfolios. Many of these techniques are not widely
used because they are too complex and require too much input data, they provide
an insufficient treatment of risk and uncertainty, they fail to recognize interrelat-
ed criteria, they may just be too difficult to understand and use, or they may not
be used in the form of an organized process (Santos, B. L.,1989).Firms that wish
to sustain in the competition by selecting the most appropriate projects must
therefore use techniques that are based on the most critical project measures, but
these techniques will not be used if they are not explicit and clearly understood
by the decision makers. Although there is no shortage of different techniques for
project evaluation and portfolio selection, there is flexibility in the framework for
organizing these techniques missing. The strategic effect of portfolio selection is
complex and it involves considerations of factors, including the marketplace and
the company’s strengths and weaknesses. These can be used to build a broad
perspective of strategic direction and focus, and very specific initiatives for com-
petitive advantage. Wheelwright and Clark (1992) suggested a project mapping
approach which helps in developing a strategic direction for the organization, but
Khurana and Rosenthal (1998), mentioned that the front-end planning process
is often done poorly. It is very clear that the strategic direction of the firm must
be given importance before individual projects can be considered for a project
portfolio; many firms do preparation and planning extensively of strategy be-
fore considering individual projects. The Project portfolio concept, according to
Rajegopal (2007) and PMI (2006) shown in the figure 1 which explains Project
portfolio as a collection of projects and programs and other work that are bound
together to facilitate the effective management of work and to meet strategic ob-
jectives of the business.

There are diverse ways how the portfolios can likely be organized within a given
organization. One way can be linked to the domain or scope of organizational cov-
erage, i.e business groups, units, departments and teams. Domains are spawned
by business strategy and they enable projects to be grouped based on strategic
significance to the organization, as shown in table 1.

The Hernandez et al. (2011) fortifies on views that the optimal project that is to
be selected in the prevailing portfolio would not necessarily a project with the
highest present value. The communication and Interactions between the cash
flow structure and project’s capital cost may distress in a big way to the value
and the capital cost of a final portfolio. A project can be termed as “a complex ef-
fort, of indefinite duration, made up of interrelated tasks, performed by various

companies, with a well-defined objective, schedule, and resources”. The Project
Portfolio is a collection of projects that are carried out in the sponsorship and/
or the management of the company. These projects must struggle with others
for scarce resources (like machinery, finances, people, time, etc.) that are avail-
able from a sponsor, as there are usually not sufficient resources to carry out
each proposed project that meets the company’s least requirements on par-
ticular criteria like sufficiency of equipment, capability of manpower, potential
profitability etc. Portfolio selection process utilizes the project evaluation and
the selection methods in the sequence of three phases in which foremost is
strategic considerations, and then follows the individual project evaluation and
finally the portfolio selection. The techniques used in the first stage could assist
in determination of the planned focus and the overall budget distribution for
portfolio, whereas those in the second could be utilized to assess the project
independently of the other projects, lastly the third stage deals with selection of
the portfolios that are based on the candidate project parameters that include

FIGURE 01. Portfolio Sub-Structure (PMI, 2006, P.5)

TABLE 01. Diff erent approaches to organize a portfolio (Rajegopal et al., 2007)

FIGURE 02. Reasons for Project Termination (Wheelwright and Clark, 1992)

Fig 1: Portfolio Sub-Structure (PMI, 2006, P.5)

There are diverse ways how the portfolios can likely be organized within a given

organization. One way can be linked to the domain or scope of organizational coverage, i.e

business groups, units, departments and teams. Domains are spawned by business strategy

and they enable projects to be grouped based on strategic significance to the organization,

as shown in table 1.

Table 1: Different approaches to organize a portfolio (Rajegopal et al., 2007)

Strategic/enterprise New products Cost reduction

Smaller portfolios based on scope of work Infrastructure Maintenance

Divisional and departmental portfolio Multiple portfolios per

organization

Mandatory

Cross-organization Experimental Business support

The Hernandez et al. (2011) fortifies on views that the optimal project that is to be

selected in the prevailing portfolio would not necessarily a project with the highest present

value. The communication and Interactions between the cash flow structure and project’s

capital cost may distress in a big way to the value and the capital cost of a final portfolio. A

project can be termed as “a complex effort, of indefinite duration, made up of interrelated

Figure 2: Reasons for Project Termination (Wheelwright and Clark, 1992)

Other than the two reasons, like the lack of understanding of the project significance

and the lack of the focus, all the remaining problems could be regarded as a part of the PPM

practices. Cooper et al. (2001) has revealed that the ‘project portfolio management is

typically poorly handled’. Among difficulties that are associated with execution of effective

PPM models and the methods were short of the strong gates for the Go/No Go decisions and

as well many projects for limited resources that are available. Catherine P Killen (2008), the

author examines the relationship between project portfolio management (PPM) capabilities

and competitive advantage. Projects for the development of new products are of escalating

importance in an increasingly competitive, globalized and deregulated environment

characterized by shortening product lifecycles and dynamic markets. PPM capabilities aim to

improve the success rates for product innovation activities by providing a holistic and

responsive decision-making environment to maximize the long-term value of innovation

investments across the portfolio of innovation projects. This research takes a wide view and

investigates the overall organizational capability for the management of the innovation

project portfolio. Findings support prior PPM studies and suggest a positive relationship

between structured PPM capabilities and improved new product outcomes. It adds to the

understanding of how PPM capabilities work with the resource base and contribute to

competitive advantage. Project portfolio management (PPM) is a relatively new discipline of

project management, which helps to organize and control the projects in company’s

their interactions with the other projects via resource constraints or the other interdepen-
dencies. In the subsequent, each phase is separate. The techniques applicable to every stage
are depicted first, then followed by the series of propositions which specify the requirements
that deal with those phase’s impact in the suitable portfolio selection framework. Wheel-
wright and Clark (1992), in a study on the project management practices at the large man-
ufacturing industry, pointed out where a strain on the human resources and the lack of the
focus were the indications for the projects which were at the risk of failure. When enquired
about other reasons, following explanations were highlighted (Figure 02).

Other than the two reasons, like the lack of understanding of the project significance and the
lack of the focus, all the remaining problems could be regarded as a part of the PPM practices.
Cooper et al. (2001) has revealed that the ‘project portfolio management is typically poorly
handled’. Among difficulties that are associated with execution of effective PPM models and
the methods were short of the strong gates for the Go/No Go decisions and as well many proj-
ects for limited resources that are available. Catherine P Killen (2008), the author examines
the relationship between project portfolio management (PPM) capabilities and competitive
advantage. Projects for the development of new products are of escalating importance in an
increasingly competitive, globalized and deregulated environment characterized by shorten-
ing product lifecycles and dynamic markets. PPM capabilities aim to improve the success rates
for product innovation activities by providing a holistic and responsive decision-making en-
vironment to maximize the long-term value of innovation investments across the portfolio of
innovation projects. This research takes a wide view and investigates the overall organizational
capability for the management of the innovation project portfolio. Findings support prior PPM
studies and suggest a positive relationship between structured PPM capabilities and improved
new product outcomes. It adds to the understanding of how PPM capabilities work with the
resource base and contribute to competitive advantage. Project portfolio management (PPM)
is a relatively new discipline of project management, which helps to organize and control the
projects in company’s portfolio with aims to maximize the results of the projects, to balance
portfolio risks and line up the projects with the strategic objectives of the company. (Rozita
Petrinska, 2014) In a company, PPM is on a top level compared to project management, as the
final goal of PPM is accomplishment of the strategic objectives through the projects included
in the portfolio. Yet, different companies have different attitude towards the implementation of
PPM, so PPM processes differ from one company to another.

The table 2 gave the results/consequences of not establishing proper PPM practices within a
company. It further determined that PPM represents an ideal model for helping decision mak-
ers in framing situations for investing resources in projects, which have greatest impact on
the company. The conclusion of the review study was that globalization, rapid development
of technologies and some other factors influence the modern business environment and as a
direct impact, the new business environment is determined by a lot of opportunities. However,
the same factors make the business environment very competitive, challenging, and filled with
various kinds of risks at the same time. Project portfolio management is the solution which best
fits business strategies and maximizes the results of the projects. There is an obvious lack of
information about implementation of integrated project portfolio management in companies

from developing countries that desperately needs to be addressed.
Nowadays many companies are facing a number of the four biggest
universal problems such as too many active projects, often double
what an company should have; many of these are wrong projects
that will not provide value to the company; projects are not linked
with the strategic goals of an company and thus they do not meet
the goals of the company; furthermore, even if every active project
is a positive one, there is an overall imbalance in resource utilization,
and in short and long term projects.

The main problem that was identified was evident wastage
through improper selection of projects or their improper for-
mulation, an or unclear ROI. Projects are forced to
compete for resources. (Rasiha Delilbasic , 2012). There is an
unclear understanding of what project portfolio management is.
Some units claim that the application of project portfolio man-
agement is in full pace; others show an interest in the discipline,
conceding that they do not know enough about it; others view
project portfolio management as just another technique of proj-
ect management with a new label to what has been practiced for
many years, namely project management. A successful project is
strategic in nature because when a project is planned, its concept
should contribute to the company’s objectives, goals, and mis-
sion and should be Standard in the way that the project can be
managed. Moreover, it should also handle the market and other
environmental factors, which have an impact on the project and
the company. (Cleland, 1999). Every project manager is expected
to understand strategy so as to make appropriate decisions and
adjustments and also, they can be effective project advocates.
Those reasons support the needs for project managers to under-
stand the strategic management. The process of strategizing is
encompassed in Project Portfolio Management as a whole. If a
PPM process thoroughly encompasses these points, then it can
be used as a very efficient model. Portfolio management prac-
tices were found to not only support managerial decisions, but
also helped to take faster and better decisions towards product
development and accelerate improvements in processes. (Paulo
Augusto, 2011). The key benefits of PPM practices found in an
Australian study were linked to enhancement in decision mak-
ing, alignment to business strategies, maximizing resource usage
and organizational risk management moreover the significant
barriers to PPM practices were found to be internal politics and
change resistance culture, disagreement on a common project
prioritization method as well as lacking organizational manage-
ment support. (Nick Hadjinicolaou & Jantanee Dumrak ,2017).

BEST PRACTICES OF PROJECT PORTFOLIO MAN-
AGEMENT
———————
Many organizations have different scales and parameters based on
which they can work to make their organization successful. In the
world of projectized environment, efficient tackling of the multiple
projects right from inception to implementation is very important.
These projects when handled with standardized procedures can
lead to successful implementation and will contribute in the organi-
zation’s growth. Organizations striving hard for success will either
follow the best practices of PPM in the run or will develop some sig-TABLE 02. Results of not establishing proper PPM Practices (Source: Moustafaev, 2011)

portfolio with aims to maximize the results of the projects, to balance portfolio risks and line

up the projects with the strategic objectives of the company. (Rozita Petrinska, 2014) In a

company, PPM is on a top level compared to project management, as the final goal of PPM is

accomplishment of the strategic objectives through the projects included in the portfolio.

Yet, different companies have different attitude towards the implementation of PPM, so

PPM processes differ from one company to another.

Table2: Results of not establishing proper PPM Practices (Source: Moustafaev, 2011)

No PPM Short term effect Long term effect

No strategic fit criteria

for project selection.

Projects are not aligned with the

company strategy.

Resources are wasted on

wrong ventures.

Unwillingness to cancel

projects; Many projects

end up on the to do list.

Too many projects; Resources thinly

spread; Quality declines.

Increased time to market;

Commercial failure rates

increase;

Weak go/kill decisions Excessive number of low value projects;

Good projects are starved for resources.

Too few stellar projects.

Lack of rigorous

selection of process;

Bad projects are selected. Commercial and technical

failures

The table 2 gave the results/consequences of not establishing proper PPM practices within a

company. It further determined that PPM represents an ideal model for helping decision

makers in framing situations for investing resources in projects, which have greatest impact

on the company. The conclusion of the review study was that globalization, rapid

development of technologies and some other factors influence the modern business

environment and as a direct impact, the new business environment is determined by a lot of

opportunities. However, the same factors make the business environment very competitive,

challenging, and filled with various kinds of risks at the same time. Project portfolio

management is the solution which best fits business strategies and maximizes the results of

the projects. There is an obvious lack of information about implementation of integrated

project portfolio management in companies from developing countries that desperately

needs to be addressed. Nowadays many companies are facing a number of the four biggest

universal problems such as too many active projects, often double what an company should

92 JOURNAL OF MODERN PROJECT MANAGEMENT • MAY/AUGUST • 2018 2018 • JOURNALMODERNPM.COM 93

AUDIT AS A TOOL FOR PROJECT MATURITY CERTIFICATION IN HEAVY CIVIL CONSTRUCTION

nature processes based on the experience and expertise developed in handling the processes
being in the field for so long. No amateur companies will try to develop their own signature
processes unless they are backed by experienced professional or thorough knowledge of the
processes. Agreeably, organizations should consider both best practices and create signature
processes to sustain in the dynamic competitive world. (Gratton & Ghoshal, 2005). The differ-
ence between Best practices are uniquely summarized form the table given below:

treatment of risk and uncertainty, they fail to identify interrelation-
ships and the interrelated criteria, they may be too complex to un-
derstand and also use, or they could not be employed in the form of
an organized process (Santos, B. L, 1989). Even though there is no
short of techniques for project evaluation and the portfolio selection,
there is a complete lack of a framework for organizing methods ra-
tionally in the simple process that keep up project portfolio selection
procedure. Nowadays many companies are facing a number of the
four biggest universal problems such as too many active projects,
often double what a company should have; many of these are wrong
projects that will not provide value to the company; projects are not
linked with the strategic goals of an company and thus they do not
meet the goals of the company. (RasihaDelilbasic, 2012). The process
of creating the portfolio component mix with the greatest potential,
under various constraints, is complex and knowledge consuming
(Elbok and Berrado.2017) , Portfolio management practices were
found to not only support managerial decisions, but also helped to
take faster and better decisions towards product development and
accelerate improvements in processes. The only issue point where
the project was inconclusive was the ranking criteria for the proj-
ects. This shows that it becomes objectively feasible to theoretically
rank projects using incomplete constraints without seeing what the
outcome is. (Paulo Augusto et el.2011).

— Alignment of PPM with business strategy —
The objectives of project portfolio management suggested by Coo-
per et al. (2002) are well established in the project management
literature (Artto, 2003; Killen et al., 2008). The main goals are: max-
imization of the financial value of the portfolio, linking the portfolio
to the firm’s strategy, and balancing the projects within the portfolio
in consideration of the firm’s capacities. Research on fit or alignment
has been examined by different areas in management literature. The
strategic fit of the project portfolio describes the degree to which the
sum of all projects reflects the business strategy. Despite the accep-
tance of strategic fit as one of the major objectives of portfolio man-
agement, the literature on it is limited (Srivannaboon and Milosevic,
2006). Coulon et al. (2009) constitute that firms with a qualitatively
high portfolio management achieve a higher level of strategic align-
ment. Hence, portfolio management has to achieve an optimal align-
ment of projects to each other and should only pursue projects that
are in line with the business strategy. Still, there is not much litera-
ture on a theoretical construct strategic fit for project portfolios.

— Project Portfolio Management Implementation —
PPM is unthinkable without commitment and devotion of all mem-
bers of the organization, and specifically, its senior executives. In
fact, PMI’s (2006) The Standard for Portfolio Management devotes
a section to the link between PPM and organization. Specifically, it
describes roles of all actors involved in PPM – executive managers,
sponsors, portfolio managers, programme managers, project man-
agers, etc. These descriptions, however, are very generic and do not
provide insights in how such system can function in practice. Yelin
(2005) argues that the role of executives in the PPM processes is
one of the determinants of PPM success. Firstly, it is crucial to start
with a clear organizational structure of PPM. Within this structure
all roles, accountabilities, sources of information and other elements
are clearly defined. Moreover, the implementation of PPM practices
comes with change in the organization. Because each organization

TABLE 03. Comparison of Best Practices and Signature Process

Best Practices of Project Portfolio Management

Many organizations have different scales and parameters based on which they can

work to make their organization successful. In the world of projectized environment,

efficient tackling of the multiple projects right from inception to implementation is very

important. These projects when handled with standardized procedures can lead to

successful implementation and will contribute in the organization’s growth. Organizations

striving hard for success will either follow the best practices of PPM in the run or will

develop some signature processes based on the experience and expertise developed in

handling the processes being in the field for so long. No amateur companies will try to

develop their own signature processes unless they are backed by experienced professional

or thorough knowledge of the processes. Agreeably, organizations should consider both best

practices and create signature processes to sustain in the dynamic competitive world.

(Gratton & Ghoshal, 2005). The difference between Best practices are uniquely summarized

form the table given below:

Table 3: Comparison of Best Practices and Signature Process

Signature process Best Practices

Origin It deals with ‘bringing the inside

out’: evolves from a company

specific history.

It deals with ‘bringing the outside in’:

starts with external and internal search

for best practice processes.

Development Needs championing by

executives.

Needs careful adaptation and

alignment to the business goal.

Core Values. Share knowledge from across the

sector.

Adapting the best practices sometimes may not help the organizations to reach on the top

as some of the organizations may develop their own signature processes after years of

Adapting the best practices sometimes may not help the organizations to reach on the top as
some of the organizations may develop their own signature processes after years of following
the best practices in the long run. Based on the literature review, following are the best practic-
es of PPM followed by the successful organizations:

— Awareness of PPM in the organization —
Project portfolio management is critical for decision making, governance and to ensure the
business objectives are supported by the right set of projects (Levine,2005). Project Portfolio
Management (PPM) helps in maximizing the return on product development investments in
any company (Cooper, 2000). As per (Cooper et al. 2001), the best players in the PPM are those
as below:

1. Have the explicit and established method of the portfolio management.

2. The Procedure has clear rules and methods.

3. It treats the projects as the portfolio (by considering all the projects together and also
treat them as a single portfolio).

4. It is regularly applied across all the appropriate projects.

Project portfolio management (PPM) is a relatively new discipline of project management
which helps to organize and control the projects in company’s portfolio with aims to maximize
the results of the projects, to balance portfolio risks and line up the projects with the strategic
objectives of the company. (Rozita et el. 2013). There is an unclear understanding of what proj-
ect portfolio management is. Some units claim that the application of project portfolio man-
agement is in full pace; others show an interest in the discipline, conceding that they do not
know enough about it; others view project portfolio management as just another technique
of project management with a new label to what has been practiced for many years, namely
project management (Rasiha Delilbasic ,2012).

— Project portfolio selection —
Many companies have Project portfolio selection and associated action of managing selected
projects throughout their life time as the significant aspects (Cooper, 1993). But there are reg-
ularly more projects available for the selection than that can be undertaken within physical
and financial constraints of the firm, so selection must be made in making up the suitable proj-
ect portfolio. Project Portfolio Management considers the complete portfolio of the projects
a company is occupied in, so as to make decisions in terms of which the projects are to be
given importance, and which the projects are to be added to or taken out from the portfolio
(Reyck et al. 2005). There are a lot of relatively divergent methods that can be utilized to es-
timate, assess, and choose project portfolios . Scores of these techniques are not extensively
used because they are too multifaceted and require much input data, they offer an inadequate

is different in terms of its maturity level and the ability to manage change, a planned phased
approach should be used to implement PPM.

— Resource utilization in PPM —
Successful firms have been shown to have a systematic approach for their portfolio evaluation,
decision-making and resource allocations (Cooper et al., 2002; Shenhar, 2001). Resource al-
location and utilization must be interconnected with strategy. According to Hendriks (1999)
resource allocation can be divided into five elements: long term resource allocation, medium
term resource allocation, short-term resource allocation, links, and feedback. Problems in re-
source allocation rise with cross-functional projects covering several business units. The line
units with business responsibility are not always that willing to share their best resources in
cross-organizational projects. Careful allocation of resources is especially important when
there are many simultaneous projects competing for the same specific competencies. The
large number of projects, however, makes the allocation more difficult because delays in all
other projects for which the same resource is scheduled. In case of external project deliveries,
contracts of new projects must be negotiated so that resource demands fit in into the existing
portfolio of projects without too much re-arrangement or re-negotiation with other clients to
avoid conflicts and unnecessary competition in sharing resources between different projects,
the resources should often be planned both at project and at portfolio level. One way to orga-
nize this is to have a resource leader in the organization that takes care of mapping the uses
of resources.

— Knowledge Management in Project portfolio. —
Managing a project portfolio is a daunting task in today’s challenging times. The pending, ongo-
ing, potential or dormant projects are all accumulated in a project portfolio in any organization.
(Unger et.al,2012;Levine 2005).Moreover the quality of project portfolio management relies
on the quality of the knowledge shared between project managers and portfolio managers.
(Lindner and wald,2011).The knowledge management in Project portfolio involves knowl-
edge acquisition, different processes of personal and interpersonal knowledge exchange and
adequate knowledge for PPM planning and prioritization process by the top management
(Patankul,2015).Professionals working in the organizations are assumed to work within
knowledge sharing and knowledge management (KM) processes with stakeholders and PPM
functions(Melo et.al 2013;Mastriogiocomo et al. 2014).Jonas (2010),mentions that PPM relies
upon unambiguous knowledge sharing processes to ensure projects within the organization
to be managed properly to assure success. Knowledge sharing is a broad term used widely
across many companies and institutions (Yang and Wu, 2008). Melo et al. (2013), distinguishes
between tacit and explicit knowledge that is bit hard to understand as it is subjective and per-
sonal and difficult to share. The organization must provide a conducive environment to share
knowledge so that the knowledge sharing between the source and the receipient is not lost.
The six key attributes about effective PPM are identified (Patanakul, 2015) in the successful
study of PPM practices are:

• Strategic Alignment: Alignment between the organizational strategy and portfolio.

• Expected value: The ability to estimate and maximize the value of projects.

• Adaptability to internal and external exchanges: The ability of the Project Portfolio Man-
ager to address risks and uncertainties.

• Project visibility: The degree of visibility that a project has in the organization.

• Transparency in portfolio decision-making: Explain the reason behind portfolio deci-
sions to the stakeholders.

• Predictability of the project delivery: The ability to predict project performance.

Patanakul (2015) further stresses the need of conscious knowledge management (KM) in
order to meet all six attributes.

— PPM tools and techniques —
The decision making in the dynamic times has to be quick and reliable. The different software
tools used in Project portfolio management have a great impact on the way the business is car-
ried out. (Killen et al. 2008). The effectiveness of PPM can be substantially improved using dif-

ferent software tools and techniques. It supports in decision-mak-
ing and can be more accurate. As the pressure to deliver higher ROI
is constantly increasing, many organizations are turning to PPM
software for the project investment visibility they need to make the
best project decisions. Levine (2005) presented common features
that are often included in these kinds of software:

• A database for proposed and active projects.

• Project Selection criteria and weight factors different param-
eters in the criteria.

• A database for financial and resource allocation data.

• Tools to compute potential project benefits, incorporating
risks and costs.

• Project prioritization and ranking.

• Project selection.

These kinds software also often provide progress-reporting, com-
munication of key project data through dashboards along with cost
and benefit tracking. These features allow the users to review the
portfolio of projects and help them to make key financial and busi-
ness decisions. Levine (2005) described that many of the PPM soft-
ware solutions were merely an addition to other existing software
that was originally intended for critical path method, earned value
analysis, risk management etc. Nowadays there are many software
solutions that organization can implement in order to support their
PPM practices. But these software solutions are large, complex and
expensive. The software providers seem to be competing to include
as many features as they can, which results in higher complexity and
prices. Symmons (2009) illustrated in his article what total econom-
ic impact the PPM software can have on organizations, he claims
that these investments could return over 255% ROI. That of course
depends on the organization, but he claims that organizations, es-
pecially the ones working with project that are expensive and sen-
sitive to market change can benefit significantly from investing in
PPM software. Moreover, the ease of using the software and regular
trainings on these tools is found to be very useful.

— Risk Management —
There are many authors who have related effective risk manage-
ment to organizational success. Kwak and Soddard (2004), men-
tions that organizations that have prominent risk management
processes are comparatively more successful to others. Cost factor
and justification may become a hurdle for risk management imple-
mentation in some organization. The Project Management Institute
(PMI) proposes four process steps for risk management in project
portfolios (PMI,2008b):

• Portfolio risk identification.

• Portfolio Risk Analysis.

• Risk prevention.

• Risk monitoring.

The risk management should be an inherent part of PPM process.
A well-defined risk management process will help the manager to
recognize and resolve critical problems in time and will increase the
probability of success. According to empirical research conducted
by J. Teller and A. Kock (2012) on German industries, they found a
mediating effect of risk management quality between risk manage-

94 JOURNAL OF MODERN PROJECT MANAGEMENT • MAY/AUGUST • 2018 2018 • JOURNALMODERNPM.COM 95

AUDIT AS A TOOL FOR PROJECT MATURITY CERTIFICATION IN HEAVY CIVIL CONSTRUCTION

ment and project portfolio success. They described risk management quality by considering
two dimensions.

• Risk Transparency.

• Risk coping capacity.

According to Rolf Olsson (2007), Risk analysis in any company can be done in three steps -Ana-
lyzing project issues between projects, Analyzing one project’s issues with all the projects’ risk
data (repeat for all projects) and Including risk data from all projects into the analysis. The last
step in the analysis methodology is to compare risk data from different projects. This analysis
is the most time-consuming analysis, mainly because of the large amount of data. Although this
methodology only analyses the adverse outcome of uncertainty, i.e. risk, it is implied that this
methodology also considers opportunities.

IMPACT OF PPM ON BUSINESS PERFORMANCE
———————
Most organizations traditionally follow merely financial measures to evaluate and assess their
business success. But as many studies have shown these measures alone are insufficient indi-
cators for a firm’s long-term success and led to the development of multi-dimensional success
measurement models. Accordingly, it has been proposed in project management research that
project portfolio management and its success should also be examined in a multi-dimensional
way on the project, portfolio, and business level (Blomquist and Müller, 2006; Martinsuo and
Lehtonen, 2007; Müller et al., 2008). According to Shenhar et al. (2001) the success assessment
of projects and therefore also of portfolios must cover the performance during the execution as
well as the success of the result. The business success of any organization can be categorized
into two, short-term (1) economic success and long-term (2) preparing for the future adjusted
to the portfolio perspective. The economic success dimension consists of the two subsets market
performance and commercial performance (Shenhar et al., 2001). This dimension immediately
and directly addresses the impact the project portfolio may have on the firm. In the new product
development literature, it is often referred to as new product success measure (Killen et al., 2008).
Market success describes the extent to which sales objectives like market share or sales volumes
are achieved (Griffin and Page, 1996; Shenhar et al., 2001). These goals are often assessed in
comparison to competitors’ performance to account for environmental changes. Commercial
success measures are derived from the classical financial management criteria like ROI, profit,
or break even (e.g. Griffin and Page, 1996) and are mostly compared to the initial objectives.
Griffin and Page (1996) identify and analyses in their study on project success measures a
broad set of market and commercial criteria and constitute that the combination of measures
depends on the firm’s situation and strategy. Thus, there is no agreed standard upon market
and commercial measures neither for projects nor for portfolios. The firm’s economic success
of the project portfolio considers the share of revenue generated by new products compared
to competitors and the overall revenue share of new products with and without predecessor
products (Brown, 1998; Killen et al., 2008). In addition, the overall compliance of products
with market goals, return targets, and amortization schedules is assessed (Griffin and Page,
1996). Preparing for the future is the longest-term dimension and addresses the preparation
of the organization and the techno- logical infrastructure for prospect needs. This dimension
examines the long-term benefits and opportunities from the projects, which are mostly indirect

and can only be realized long after the projects, have been completed.
Typical perspectives highlighted by Shenhar et al. (2001) are: creation
of new markets, development of new or improved technologies and
processes, building of new skills and competencies. Furthermore,
the ability to react to external challenges like technology or market
changes is examined. Like economic success, this dimension is also
applicable to all different kind of projects respectively portfolios. The
managerial focus of firms has shifted towards the management of
project portfolios as a whole and towards the effective link of this to
the overall business purposes (Artto and Dietrich, 2004; Dietrich and
Lehtonen, 2005). In several latter studies Cooper et al. (2000, 2004a,
b) examine the achievement of their suggested objectives of project
portfolio management and give partial support to a positive relation
between portfolio-level results and business- level results (Martinsuo
and Lehtonen, 2007; Müller et al., 2008).

CONCLUSION
———————
Project Portfolio Management is comparatively a new discipline
of project management that helps in organizing and controlling
the projects in the given portfolio, which aims to maximize profits,
balancing the portfolio with relating up with the company’s strategy.
Yet many authors have reservations about the clarity with which
the PPM implementation is taking place effectively. Rozita Petrinska
(2014) mentions about companies having varied attitude towards
PPM implementation. Moustafaev (2011) presents results of short
term and long-term effects for not establishing proper PPM practices
in company, which may lead to commercial and technical failure of the
projects. Companies studied in North America and Australia revealed
the gap between PPM approach and implementation. The business
strategy works well only if it is implemented properly and further will
ensure success to the company. (Cooper et al 2001, Kleinschmidt et
al 2008, Blomquist 2006). Moreover, lack of proper communication
between top, middle and lower management further lowers the
effectiveness of PPM implementation (Cooper et al 2000, Rasiha
Delibasic 2012, Reycket 2005, Hernandez 2011, Supachart 2013).
Scarce resources too hamper the PPM implementation. (Cooper and
Edgett 1999). Decision making with right tools and at right time can
increase the sustainability of any organization for a very long time.
Project Portfolio Management in that regard will have an impact on
the success of any organization. Establishing signature processes or
to follow the best practices of PPM, may have its pros and cons but
in this dynamic world where businesses are changing fast one has to
really do an introspection in their own organization and decide upon it.

DR. KOTESWARA RAO NAIK BHUKYA is an Associate Professor at Na-
tional Institute of Industrial Engineering (NITIE), India. He is basi-
cally a Chemical Engineering graduate from Andhra University, did
his master’s in business administration from University Hyderabad
and doctorate from Indian Institute of Technology Delhi in the area
of intellectual property management. He has published and pre-
sented more than sixty papers in journals and conferences. He has

more than twelve years of teaching experience and sixteen years of research experience.

• AUTHORS •
MR. VILAS KHARAT is a research Scholar in National Institute
of Industrial Engineering (NITIE), India. He has done his
post-graduation in Mechanical Engineering and also in Busi-
ness Administration. He is having teaching experience of more
than 17 years and 2 years Industrial Experience. His research
area is Project Portfolio Management. He is teaching Under-
graduates as well as post graduate students in different col-

leges. He has presented research papers in National and International conferences.

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