Post on 27-Dec-2021
FUNDAÇÃO GETULIO VARGAS
ESCOLA BRASILEIRA DE ADMINISTRAÇÃO PÚBLICA E DE EMPRESAS
MESTRADO EXECUTIVO EM GESTÃO EMPRESARIAL
PROJECT PORTFOLIO MANAGEMENT: AN
ANALYSIS FROM THE INSURANCE INDUSTRY IT
AREA
Case Study
DISSERTAÇÃO APRESENTADA À ESCOLA BRASILEIRA DE ADMINISTRAÇÃO
PÚBLICA E DE EMPRESAS PARA OBTENÇÃO DO GRAU DE MESTRE
Fabio Pitorri Rio de Janeiro - 2014
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Ficha catalográfica elaborada pela Biblioteca Mario Henrique Simonsen/FGV
Pitorri, Fabio
Project portfolio management: an analysis from the insurance industry IT area / Fabio Pitorri. – 2013. 63 f.
Dissertação (mestrado) - Escola Brasileira de Administração Pública e de Empresas, Centro de Formação Acadêmica e Pesquisa.
Inclui bibliografia.
1. Administração de projetos. 2. Escritório de gerenciamento de projetos. 3.
Planejamento estratégico. 4. Investimentos – Administração. I. Escola Brasileira de
Administração Pública e de Empresas. Centro de Formação Acadêmica e Pesquisa.
II. Título.
CDD – 658.404
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Table of Content
Table of Content ......................................................................................................................... 1
Figures List ................................................................................................................................. 6
Chart List .................................................................................................................................... 7
1 Introduction ........................................................................................................................ 8
2 Theoretical Reference ....................................................................................................... 11
2.1 Main Concepts for Portfolio Management ................................................................ 11
2.2 The Standard for Portfolio Management (SPM) ........................................................ 14
2.2.1 Structure.............................................................................................................. 14
2.3 Management of Portfolios (MoP) .............................................................................. 19
2.3.1 Structure.............................................................................................................. 19
2.4 Key Portfolio Roles.................................................................................................... 21
2.4.1 Portfolio Direction Committee ........................................................................... 21
2.4.2 Portfolio Manager ............................................................................................... 21
2.5 Portfolio Definition Best Practices ............................................................................ 22
2.5.1 Understand .......................................................................................................... 23
2.5.2 Categorize ........................................................................................................... 24
2.5.3 Prioritize ............................................................................................................. 25
2.5.4 Balance ............................................................................................................... 29
2.5.5 Plan ..................................................................................................................... 31
2.6 Portfolio Delivery Best Practices ............................................................................... 32
2.6.1 Benefits Management ......................................................................................... 33
2.6.2 Financial Management ....................................................................................... 34
2.6.3 Risk Management ............................................................................................... 35
2.6.4 Resource Management ....................................................................................... 35
2.6.5 Stakeholder Engagement .................................................................................... 36
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2.6.6 Management Control .......................................................................................... 36
2.6.7 Organizational Governance ................................................................................ 37
2.7 Discrepancies between the References ...................................................................... 38
3 Research Methodology ..................................................................................................... 39
3.1 Research Strategy....................................................................................................... 39
3.2 Research Protocol ...................................................................................................... 40
4 Case Study ........................................................................................................................ 44
4.1 Company Profile ........................................................................................................ 44
4.2 Practices for Portfolio Definition ............................................................................... 45
4.3 Practices for Portfolio Delivery ................................................................................. 49
5 Conclusion ........................................................................................................................ 55
6 Abbreviations and Acronyms ........................................................................................... 58
7 Appendix A - Interview transcription ............................................................................... 59
8 Bibliography ..................................................................................................................... 64
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Figures List
Figure 1: PPM organizational context ...................................................................................... 12
Figure 2: PPM processes and process groups ........................................................................... 15
Figure 3: MoP structure - principles, cycles and practices ....................................................... 20
Figure 4: Portfolio components separated by business area ..................................................... 24
Figure 5: Single qualitative criteria prioritization model (comparison between projects) ....... 27
Figure 6: Multi-criteria prioritization model (comparison between projects) .......................... 28
Figure 7: Bubble graph ............................................................................................................. 29
Figure 8: Bubble graph (depicting categorization and category) ............................................. 30
Figure 9: Portfolio Roadmap .................................................................................................... 30
Figure 10: Capacity and Demand ............................................................................................. 31
Figure 11: Chinese ideogram for Risk ...................................................................................... 35
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Chart List
Chart 1: Relationship between Processes and Tools & Techniques (part 1) ............................ 16
Chart 2: Relationship between Processes and Tools & Techniques (part 2) ............................ 17
Chart 3: Relationship between Processes and Inputs & Outputs.............................................. 18
Chart 4: Interrelationships between MoP practices and SPM processes ................................. 22
Chart 5: Prioritization criteria for IT Portfolio ........................................................................ 27
Chart 6: Interrelationships between MoP practices and SPM processes ................................. 33
Chart 7: Research questionnaire .............................................................................................. 41
Chart 8: Interview transcription - understand practice ............................................................ 45
Chart 9: Interview transcription - categorize practice ............................................................. 46
Chart 10: Interview transcription - prioritize practice ............................................................. 47
Chart 11: Interview transcription - balance practice ............................................................... 48
Chart 12: Interview transcription - plan practice ..................................................................... 49
Chart 13: Interview transcription - benefits management practice.......................................... 50
Chart 14: Interview transcription - financial management practice ........................................ 50
Chart 15: Interview transcription - risk management practice ................................................ 51
Chart 16: Interview transcription - resource management practice ......................................... 52
Chart 17: Interview transcription - stakeholder engagement practice ..................................... 52
Chart 18: Interview transcription - management control practice ........................................... 53
Chart 19: Interview transcription - governance practice ......................................................... 54
Chart 20: Consolidated survey results (by protocol question) ................................................ 56
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PROJECT PORTFOLIO MANAGEMENT: AN ANALYSIS FROM THE INSURANCE
INDUSTRY IT AREA
Introduction
The essence of a company is its strategic initiatives. These components will
determine where the company will be in the future and, therefore, whether this company will
achieve its own vision and mission. The abovementioned strategic initiatives are the strategy
related operations, projects and programs that are a part of a group called Portfolio, which
must be properly managed to ensure that their benefits will be delivered and objectives will be
met (OGC, 2011). This path begins with selecting which components (operations, projects
and programs) will be chartered to constitute this Portfolio and finish with the delivering each
of its components including, among others, adequate delivering the communications, properly
managing the risks and appropriately controlling the resources.
Due to the strategic importance of this topic, any failure in the selection or execution
of these projects can lead to a significant impact in the future results of the organization. In
this context, several institutions (Project Management Institute, Office of Government
Commerce, among others) develop and maintain guidelines that can help these corporations to
better convert their vision and mission into reality, thru well managed operations, programs
and projects. These guidelines are composed by a collection of best practices designed to help
them to enhance their probability of success in the field of Project Portfolio Management
(PPM).
A recent study published by Project Management Institute and The Economist (2013)
shows that just 56% of the strategic initiatives have been successful in the last three years.
The same research acknowledged that only 62% of the strategic initiatives received the
required resources. These datas show that organizations are underestimating their Portfolio
and, probably, are having difficulties to deliver their proposed strategies.
In addition to the abovementioned data, Jeffery and Leliveld (2004) discovered,
based on a Portfolio management study in IT companies that, when a company reaches a
higher level of maturity in this area, it can conquer cost savings of up to 40% in its overall
project Portfolio expenditure. These datas show the benefits that PPM can provide to the
corporations that adopt this framework in a proper way. Moreover, the same authors (2004)
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warn that only 25% of the researched companies measure the ROI of the projects after its
deployment, depicting the deficiency of control over these initiatives.
Furthermore, Brown (2008, p. 2) declared that "leaders now look to innovation as a
principal source of differentiation and competitive advantage" and that "need for
transformation is greater now than before". Nevertheless the importance of the PPM to deliver
these innovations, studies done in the past 25 years indicate that 60% to 80% of companies
fall short of the success predicted from their new strategies (Kaplan & Norton, 2008).
Based on all this arguments (lack of adoption, deficiency of control and pace of
change), the main goal of this research is to evaluate how well IT areas of the insurance
organizations are managing its Portfolios. Within this context, the following question can be
highlighted: How IT areas of insurance companies are, in the present moment, defining and
delivering their strategic initiatives Portfolios?
To address the question above, two (02) assumptions will be the starting point of this
study:
Assumption 1: IT areas of these organizations are applying the best practices in the
definition of their strategic initiatives Portfolios.
Assumption 2: IT areas of these organizations are applying the best practices in the
delivery of their strategic initiatives Portfolios.
It is hoped that this study contribute for the understanding of how PPM is established
in the organizations, compare this information with existing theory and find gaps between
theory and practice. It is not intended to find answers to the gaps found, which will result in
new studies. Furthermore, this research focused only in the insurance industry information
technology area to narrow the scope and to improve the knowledge about how PPM is done
inside this specific extract of the largely population.
This master thesis, to adequately answer the question and verify the presented
assumptions, will be structured on the following topics:
Introduction: present the objective to the reader;
Theoretical reference: in-depth study about the theme (Portfolio management);
Research methodology: explain the methodology that was applied and the research
protocol;
Case study: presenting the case study and its analysis, demonstrating all evidence found to
answer the research question;
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Final results and conclusions: where conclusions will be made and suggestions for future
work will be presented;
Abbreviations and acronyms: explains all the abbreviations and acronyms contained in this
thesis;
Bibliography: showing all reference sources used in this thesis;
Appendices: containing the results and transcripts of interviews.
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Theoretical Reference
The aim of this chapter is to study and comprehend the main concepts, publications
and articles covering the Portfolio Management theme. The searching for theoretical
references will be concerned about their scientific legitimacy and the quality of the
publication. Due to this, the main references will be the articles published in the renowned
journals covering this field and, another important source of references, will be the well-
known books and authors covering this theme.
Main Concepts for Portfolio Management
There are some concepts and acronyms that need to be described for proper
understanding of the content and to establish a standardized lexicon for this study - and this
topic will be dedicated to it.
The first item to be discussed should be the heading of our topic of study: Portfolio
management. The acronym that is adopted to represent this field in most of the academic
papers (Castro & Carvalho, 2010) and, therefore, will be used to denote strategic initiatives.
Portfolio management in this study will be the PPM acronym (meaning Project Portfolio
Management). The main benefit of adopting this nomenclature is that it differentiates the
strategic initiatives Portfolio management in relation to Portfolio management of other
disciplines (finance, marketing and so on), since Portfolio is not only adopted by this
management field to describe their collectives. Regarding the meaning, Cooper, Edgett e
Kleinschmidt (1998) define PPM as:
Project Portfolio Management is a dynamic decision process wherein a list
of active development projects is constantly revised. In this process, new
projects are evaluated, selected and prioritized; existing projects may be
accelerated, killed or reprioritized, and resources are allocated and
reallocated among the projects in the Portfolio
Furthermore, PMI (2013b, p. 21) describes PPM as: "Portfolio management is a
discipline that enables executive management to meet organizational strategy and objectives
through efficient decision making...". And OGC (2011) includes the PPM definition in this
context:
Portfolio management is a coordinated collection of strategic processes and
decisions that together enable the most effective balance of organizational
change and business as usual (BAU).
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To better understand the abovementioned concept, it is important to comprehend the
meaning of some related and cited ideas. The figure 1 presents some of these main topics
related to the PPM area.
Figure 1: PPM organizational context
Source: PMI (2014)
The first element is the meaning of the isolated Portfolio word for the PPM context.
The Standard for Portfolio Management, published by the Project Management Institute
(2013b, p. 3), describes Portfolio as: "A Portfolio is a component collection of programs,
projects, or operations managed as a group to achieve strategic objectives". And complements
this definition with the following sentence: "A Portfolio should be a representation of an
organization's intent, direction and progress".
Another explanation of the same expression comes from OGC (2011, p. 131), and it
defines Portfolio as: "An organization's Portfolio is the totality of its investment (or segment
thereof) in the changes required to achieve its strategic objectives".
Since a Portfolio is established to enable the company's strategy, it is imperative to
understand what strategy is: "a careful plan or method for achieving a particular goal usually
over a long period of time" (Merriam-Webster, 2014).
Based on the abovementioned definition that a Portfolio is a group of programs,
projects, or operations, the correct comprehension of these concepts are important to the
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development of this content. PMI (2013b, p. 180) describes Program as: "A group of related
projects, subprograms, and program activities that are managed in a coordinated way to obtain
benefits not available from managing them individually".
In addition, PMI (2013a, p. 3) describes Project as: "A project is a temporary
endeavor undertaken to create a unique product, service, or result".
However, to group all these concepts (programs, projects and operations) into just
one denomination, PMI (2013b, p. 176) introduced the notion of Components, meaning: "A
discrete element of a Portfolio that is a program, project, or other work". For a similar
purpose, OGC (2011, p. 130) adopts the concept of Initiative, that excludes operations from
this list and denotes just a program or a project. Moreover, Kaplan and Norton (2008, p. 7)
described a discretionary project or program, of finite duration, designed to close a
performance gap as a Strategic Initiative (Kaplan & Norton, 2008, p. 7)
Since PPM is a way to improve the creation of Value to the organization, another
important concept that is usually linked to its theory is the Value notion. PMI (2013b, p. 10)
states that Value:
[...] may be created through the effective management of ongoing operations
[...] however, through the effective use of Portfolio, program and project
management, organization will possess the ability [...] to meet strategic
objectives and obtain grater business value from their project investments.
And it also defines the meaning of Value: "[...] the entire value of the Business - the
total sum of all tangible and intangible elements [...] business value scope can be short,
medium or long-term."
To sum up to the same concept, Levine (2005, p. 34) states that: "Definition of value
will certainly differ in accordance with the firm's focus, strategies, and types of projects."
In order to deliver value to the business, the Portfolio components must deliver its
benefits. Benefits that are described by OGC (2011, p. 129) as: "The measurable improvement
resulting from an outcome perceived as advantage by one or more stakeholders."
With the intention to describe the value of the initiatives and the benefits that will be
accrued with each components, a document called business case should be developed for each
of them (OGC, 2011). OGC (OGC, 2009) declares that it contain justifications for a project
like financial feasibility for what is to be made and why it should be done.
Finally, to properly understand the definition of Portfolio effectiveness, the most
preeminent explanation found was provided by Patanakul, Curtis e Koppel (2013, p. 31):
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[...] the organizational capability to (1) form and govern a project Portfolio
such that the Portfolio aligns with the organization’s strategic direction,
addresses risks and opportunities, and is adaptive to the internal and external
changes in order to provides short and long-term value or benefits to the
organization, and (2) to manage projects in the Portfolio to promote
transparency, process consistency, visibility and predictability of projects in
the Portfolio, and to promote integrity, cohesion, and the morale of the
project community.
The Standard for Portfolio Management1 (SPM)
The Standard for Portfolio Management (SPM) is a document composed of a
collection of Portfolio management best practices cataloged and compiled by the Project
Management Institute (PMI). PMI was founded in 1969 and it is the world’s largest not-for-
profit association for the project management profession. Among PMI's core values, is the
intent to engage the community and facilitate the growth of the profession (PMI, 2013d) and,
to accomplish this objective, the SPM is reviewed by PMI's volunteers at every 4 years to
ensure its validity for the practitioners (the last edition was published on January 1st, 2013).
SPM intends to depict Portfolio management processes generally recognized as good
practices and promote a common vocabulary, unfolding a guide rather than a methodology
that is valid to most Portfolios on the most of the time. It focuses on processes that are unique
to the Portfolio management field and its relationships with allied disciplines. Regarding its
application, the standard recommends an adequate adaptation of its content to the given
context to maximize the benefits of its adoption (tailoring its content to the reality of the
situation). With the adequate tailoring, the knowledge provided by this reference can be
applied by all type of organizations (profit, nonprofit and government).
Structure
This standard organizes the best practices (Portfolio management processes) into a
two dimensions matrix: process groups and knowledge areas. The best practices are
represented by processes and each one belongs only to one knowledge area and one process
group as depicted in figure 2.
1 Unless otherwise noted, the entire chapter content are based on The Standard for Portfolio Management (PMI,
2013b)
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The first aspect that organizes the best practices are the process groups and it cluster
the best practices based on its purpose for the PPM.
The Defining process group contains the process that are responsible for converting
the organizational strategy and its related objectives into a group of policies describing how
the components (operations, projects and programs) will be identified, authorized and
managed.
Figure 2: PPM processes and process groups
Source: Standard for Portfolio Management (PMI, 2013b)
Moreover, the Aligning process group executes the processes necessary to manage
and optimize the Portfolio. Among the activities that occurs during these process group are:
the management and report of the Portfolio components (operations, projects and programs),
the Portfolio value management and the fine-tuning between resource supply and demand.
These activities should respect and align to the standards established during the Defining
process group.
The last process group, Authorizing and Controlling, is responsible for the
authorization of the Portfolio components and for the ongoing Portfolio oversight. In the same
way as the Aligning process group, these activities should respect and align to the standards
established during the Defining process group.
The second aspect that organizes the best practices are the knowledge areas and it
groups the best practices based on its knowledge domain:
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The first knowledge area is the Portfolio Strategic Management, is related to the strategic
aspects of the Portfolio, ranging from alignment with corporate strategy to the realignment
necessary due to changes in initially established assumptions;
The second knowledge area is the Portfolio Governance Management, which is responsible
for the decisions related to the Portfolio, also including the completion of the studies
necessary for this to occur properly;
After is the Portfolio Performance Management knowledge area and this segment contains
the processes that set out how to measure the efficiency and effectiveness of the Portfolio
and, also, it comprises the effective implementation of these practices;
Chart 1: Relationship between Processes and Tools & Techniques (part 1)
Source: Standard for Portfolio Management (PMI, 2013b)
Next is the Portfolio Communications Management knowledge area, which develop the
communications plan and implement the guidelines established;
Pro
cess
Gro
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Pro
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Nu
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Process / Tools & Technique
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4.1 Develop Portfolio Strategic Plan x x
4.2 Develop Portfolio Charter x x
4.3 Define Portfolio Roadmap x x x
5.1 Develop Portfolio Management Plan x
5.2 Define Portfolio
6.1 Develop Portfolio Performance Management Plan x
7.1 Develop Portfolio Communication Management Plan x x
8.1 Develop Portfolio Risk Management Plan x x
4.4 Manage Strategic Change x x x
5.3 Optimize Portfolio x x x
6.2 Manage Supply and Demand x x x
6.3 Manage Portfolio Value x x
7.2 Manage Portfolio Information x
8.2 Manage Portfolio Risks x
5.4 Authorize Portfolio
5.5 Provide Portfolio Oversight
Th
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tan
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Defining
Aligning
Authorizing and
Controlling
Tools & Techniques
An
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The last knowledge area is Portfolio Risk Management, which is responsible for increasing
the exposure of the Portfolio to positive uncertain events and to reduce the exposure to
adverse uncertain events.
The last element of these matrix, representing the best practices, are the sixteen
processes that are distributed in the intersections between process groups and the knowledge
areas. To adequately accomplish its objectives, each of these processes contains inputs, tools
& techniques and outputs (called ITTOs). The premise adopted by the standard is that the
appropriate use of these tools & techniques to transform inputs into outputs will maximize the
likelihood of successful PPM initiative.
Chart 2: Relationship between Processes and Tools & Techniques (part 2)
Source: Standard for Portfolio Management (PMI, 2013b)
There are twenty four tools & techniques recommended by this standard and they are
distributed between the sixteen processes (as depicted by chart 1 and 2) based on their utility
Pro
cess
Gro
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Pro
cess
Nu
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Process / Tools & Technique
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s4.1 Develop Portfolio Strategic Plan x
4.2 Develop Portfolio Charter
4.3 Define Portfolio Roadmap
5.1 Develop Portfolio Management Plan x x
5.2 Define Portfolio x x x
6.1 Develop Portfolio Performance Management Plan x x
7.1 Develop Portfolio Communication Management Plan x
8.1 Develop Portfolio Risk Management Plan x
4.4 Manage Strategic Change
5.3 Optimize Portfolio x
6.2 Manage Supply and Demand
6.3 Manage Portfolio Value x
7.2 Manage Portfolio Information x x x
8.2 Manage Portfolio Risks x
5.4 Authorize Portfolio x x
5.5 Provide Portfolio Oversight x x
Tools & Techniques
Sele
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MI)
Defining
Aligning
Authorizing and
Controlling
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related to the transformation of the input into the output. For example: it is extremely
important to do a Stakeholder Analysis while developing the Portfolio Communication Plan.
Some of these tools & techniques are adopted by more than one process and they are grouped
into four categories based on its usefulness:
Analyzing: create additional information;
Selecting: select the appropriate components;
Meeting: provide information and decision making during a reunion;
Informing: collect and disseminate consistent information.
Chart 3: Relationship between Processes and Inputs & Outputs
Source: Standard for Portfolio Management (PMI, 2013b)
Moreover, the artifacts generated or required as inputs or outputs of these sixteen
processes are the documents that will help to accomplish the PPM activities. There are twelve
Pro
cess
Gro
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Pro
cess
Nu
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Process / I/O
Org
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4.1 Develop Portfolio Strategic Plan I I O I I I O
4.2 Develop Portfolio Charter O I I/O I/O
4.3 Define Portfolio Roadmap I O I I
5.1 Develop Portfolio Management Plan I I I I I/O I/O O
5.2 Define Portfolio I/O I/O I I I I/O
6.1 Develop Portfolio Performance Management Plan I I I/O I/O
7.1 Develop Portfolio Communication Management Plan I I I/O I/O I
8.1 Develop Portfolio Risk Management Plan I I/O I/O I/O
4.4 Manage Strategic Change I/O I/O I/O I/O I/O I/O
5.3 Optimize Portfolio I/O I/O I/O I/O I/O
6.2 Manage Supply and Demand I/O I/O I/O
6.3 Manage Portfolio Value I O I/O I/O
7.2 Manage Portfolio Information I I/O I/O I/O I
8.2 Manage Portfolio Risks I I I/O I/O I/O I/O
5.4 Authorize Portfolio I/O O I/O I/O
5.5 Provide Portfolio Oversight I/O I I/O I/O I/O
Th
e S
tan
dard
fo
r P
ort
foli
o M
an
ag
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t (P
MI)
Input / Output
Gu
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g
Su
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ing
Pla
nn
ing
Rep
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ing
Defining
Aligning
Authorizing and
Controlling
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documents (as depicted by chart 3) cited by the SPM and, in the same way as the tools &
techniques, they are organized into four categories based on its purpose:
Guiding: high-level direction to the PPM;
Supporting: facilitate the operation of the PPM;
Planning: provide guidelines on how to execute the PPM activities;
Reporting: grant PPM communication.
Management of Portfolios2 (MoP)
This British collection of PPM best practices is on its 2011 edition and it is part of a
bigger collection of standards developed by the Office of Government Commerce (OGC) and
published by The Stationery Office (TSO).
The author (OGC) is an independent office of the British government's economic and
finance ministry and it was established to support it to optimize their investments (Office of
Government Commerce, 2009). OGC responsibilities encompasses the effective use of sixty
per cent of the overall British government spending (OGC, 2013).
To help the government to accomplish this, OGC developed and regularly reviews
seven interconnected standards related to Portfolio, program, project and service
management: PRINCE2, MSP, MoP, M_o_R, MoV, ITIL and P3O (OGC, 2011) - and
Management of Portfolios (MoP) is one of these. These standards set the government
expectations in relation to how the British government and its supplier should manage its
initiatives and operations.
Structure
Management of Portfolios (MoP) has its structure based on five principles, two
management cycles (delivery and definition) and twelve processes distributed among these
two management cycles as depicted by the figure 6.
One main aspect about this guide of best practices is how it highlights the relevance
of five principles as prerequisites for the success of the overall PPM: strategy alignment,
governance alignment, senior management commitment, energized change culture and
2 Unless otherwise noted, the entire chapter content are based on the Management of Portfolios book (OGC,
2011)
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Portfolio office. OGC states clearly that these principles are pre-requisites to an effective
Portfolio management and it also declares that they should be adapted to the level of the goal
that is trying to be achieved.
The first one of these principles is the strategy alignment, highlighting the
importance of aligning the Portfolio and PPM with organizational goals and values. The
second principle is governance alignment, demanding transparency about the PPM decisions
and consistency with the organizational governance model. Next principle is the senior
management commitment, advocating that proactive and visible senior management
involvement is a valuable asset to a PPM initiative. Energized change culture is the fourth
principle and it embrace the human aspect, declaring that people must be engaged, focus on
the goals and work as a team. The last principle is the Portfolio office, stating that a PPM
corporative function is very important inside an organization and that this area can be labeled
as Portfolio Office.
Figure 3: MoP structure - principles, cycles and practices
Source: Management of Portfolios (Office of Government Commerce, 2011)
To implement a reliable PPM framework, MoP presents a set of twelve practices that
should be tailored to the reality of the context and it groups this set of processes into two
cycles: the Portfolio definition cycle and the Portfolio delivery cycle.
Portfolio definition management cycle groups five practices projected to understand,
categorize, prioritize, balance and plan the Portfolio and the Portfolio management. To
21
accomplish this cycle goal, these practices are usually performed in sequence, for example: it
is necessary to understand a Portfolio before categorize them.
Furthermore, the Portfolio delivery management cycle contains the practices
accountable for the benefits management, financial management, management control, risk
management, stakeholder engagement, organizational governance and resource management
in the Portfolio level. In this management cycle the practices are not performed sequentially,
they can overlap to deliver the value proposed by the Portfolio.
Finally, in the center of the principles and the practices, are an element called
organizational energy, which means: "The extent to which an organization has mobilized its
emotional, cognitive and behavioral potential to pursue its goals".
Key Portfolio Roles
Portfolio Direction Committee
The Portfolio direction committee is the PPM government council, and it is charged
with the responsibility for the key decisions that affect the project Portfolio (Levine, 2005).
Usually these decisions are made at relevant points in time through gate-reviews, with ad-hoc
reunions scheduled for high severity issues or during periodic Portfolio management meetings
programmed to discuss recurrent themes or new issues (OGC, 2011).
Portfolio Manager
According to PMI (2013b, p. 14) , the Portfolio manager is: "...responsible for the
execution of the Portfolio management process".
The main difference between Portfolio, program and project managers is that
Portfolio managers must be worried about doing the right work, the program manager are
concerned about delivering their benefits and project managers are concerned about delivering
the scope according to the constraints (PMI, 2013b).
The role of a Portfolio manager can be occupied by an individual, a group or a
governing body, depending on the organizational needs and on the Portfolio size and its
responsibilities may include (PMI, 2013b):
Establish and maintain framework, methodology, processes and its related infrastructure;
22
Ensure that Portfolio components are aligned to the company strategy;
Progressively elaborate the Portfolio;
Measure and monitor the value;
Support Portfolio related decision making;
Engage and influence stakeholders.
Portfolio Definition Best Practices
The Portfolio definition best practices will be separated, for research purposes,
adopting the OGC (2011) practices model (as described on section 2.3): it will be composed
of the Understand, Categorize, Prioritize, Balance and Plan practices. Each practice will be
studied along with its goals, tools and techniques to ensure the proper development of the
research protocol and adequate consistency during the data collection.
Chart 4: Interrelationships between MoP practices and SPM processes
Source: author
Since we are adopting the OGC (2011) recommended practices to organize this
section content and, relied on the assumption that MoP and SPM are the main references for
Management Cycle
Practice Number 1 2 3 4 5 6 7 8 9 10 11 12
Pro
cess
Gro
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Pro
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Nu
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Process / Practice
Un
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Prio
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Ris
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Sta
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Reso
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4.1 Develop Portfolio Strategic Plan W W W W
4.2 Develop Portfolio Charter
4.3 Define Portfolio Roadmap S S
5.1 Develop Portfolio Management Plan S
5.2 Define Portfolio S S S W
6.1 Develop Portfolio Performance Management Plan W
7.1 Develop Portfolio Communication Management Plan W
8.1 Develop Portfolio Risk Management Plan W
Aligning 5.3 Optimize Portfolio W S
Auth. and Cont. 5.4 Authorize Portfolio W
S
W
Management of Portfolios (OGC)
Definition Delivery
Th
e S
tan
dard
fo
r P
ort
foli
o M
an
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t (P
MI)
Defining
Strong relationship
Weak Relationship
23
this study, it is relevant to understand the relationship of the MoP practices with the SPM
processes. These interrelationships are depicted in the chart 4.
The group of Portfolio Definition best practices are carried out in sequence at
specific times of PPM (OGC, 2011), i.e., there is an arbitrary dependence between these
practices to ensure effectiveness in their implementation.
Understand
The aim of the Portfolio Understand practice is to appreciate what constitutes the
current Portfolio and to obtain information to comprehend these components (Levine, 2005)
in order to permit the Categorize, Prioritize, and Balance and Plan practices to be executed
properly. This practice covers the identification and data collection not only of components
that are candidates to be chartered, but also the components that are ongoing and, often, of the
closed components (PMI, 2013b).
Since the main output of this practice is a list of components that constitute the
Portfolio (also called pipeline) and their data, a best practice that is suggested is the adoption
of a template for the proper recording of these components. The sponsor must fill this
document to request the inclusion of the new component, a change in a current component or
to add an ongoing component to the Portfolio (OGC, 2011).
To be effective, the abovementioned document should include some relevant
descriptors for the PPM processes. The main descriptors cited by SPM (PMI, 2013b) as
relevant to be detailed at the time of component inclusion into the Portfolio are: Portfolio
component number, Portfolio component code, and Portfolio component description, type of
Portfolio component, strategic goals supported, quantitative benefits, qualitative benefits,
Portfolio component customer, Portfolio component sponsor, key stakeholders and resources
required. Furthermore, OGC (2011) recommends the addition of the following data to this
list: key deliverables, risk level, business changes required, key dependencies, current status
(for ongoing components) and key milestones to be accomplished.
After the Portfolio is initially understood and inventoried, it is significant to establish
a process for the inclusion of new components into this pipeline. There are two main
strategies of Portfolio component addition: bottom-up or top-down. The main difference
between the two types is the source of the request: in the top-down method the requests are
24
originated only by top management and, in the bottom-up method, the requests are made by
lower corporate levels (Office of Government Commerce, 2011).
Categorize
The Categorize practice, according to OGC (2011, p. 53) has as its main goal: "[...]
organize changes initiatives into groups, segments or sub-Portfolios based on the strategic
objectives or other grouping as required". These groups, segments or sub-Portfolios help to
perform an appropriate comparison between the components that cover the same strategic
goal or organizational need.
A visual diagram or a spreadsheet is a useful tool to help to evaluate how the
components are separated between the categories. The figure 4 shows an example of how a
graph can be built to depict it. Thanks to this evaluation and comparison, the Portfolio
components categorization also allows the balancing of risks and investment between these
strategic goals and organizational needs (PMI, 2013b).
Figure 4: Portfolio components separated by business area
Source: SPM (Project Management Institute, 2013)
25
Additionally, OGC (2011) recommends that the categories have entry criteria to help
to adequately place the components into them. The entry criteria must be set accordingly the
related category, for example: to be allowed to incorporate the Compliance category of
Portfolio initiatives, the project must include evidence of the legislation and provide an
explanation that links it with the component deliverables.
Number of categories should be limited (not infinite) and some examples are (PMI,
2013b):
Increased profitability (revenue increase, generation, cost reduction and avoidance);
Risk reduction;
Efficiency improvement;
Regulatory/compliance;
Market share increase;
Process improvement;
Continuous improvement;
Foundational (e.g., investments that build the infrastructure to grow the business), and
Business imperatives (e.g., internal toolkit, IT compatibility, or upgrades).
Prioritize
After the components are identified and categorized, the next step is to prioritize
them (OGC, 2011). This best practice is recommended to be adopted by the PPM because the
corporations probably will have more identified Portfolio components than capacity to
implement them (Castro & Carvalho, 2010). Based on this assumption, the challenge of PPM
during this practice is to filter the inventory of components so that the programs and projects
that pass though the funnel into the Portfolio best serve the long-term interests of the firm
(Levine, 2005, p. 32).
Two prerequisites are important to properly enable comparison between the Portfolio
components. The first one is that the information provided during the Understand practice are
accurate and reliable (Levine, 2005) and the second one is the requirement that the Portfolio
components exhibit some common characteristics like: be representative of the investments
made, be aligned with the strategic plan, have common features that permits its grouping to
26
manage them more effectively, show some quantifiable characteristics and compete for
company's resources (PMI, 2013b).
Being comparable, the Portfolio components should be prioritized accordingly to
your relevance and contribution to the organization strategy, in a comparative way with the
other future or actual components (Castro & Carvalho, 2010). However, if this comparison is
not possible due to lack of common characteristics, the Portfolio components can be
prioritized by their segments or categories (OGC, 2011).
To provide a solid background for the abovementioned comparison, relevant metrics
ought to be selected and adopted (PMI, 2013b). It is important to evaluate not only the
financial benefits, but the ancillary benefits too (Levine, 2005) and, for this reason, some of
these metrics are qualitative and some of them are qualitative. Examples of metrics classes
may include, but are not limited to (OGC, 2011):
Organizational strategy alignment;
Goals and objectives;
Benefits, financial and nonfinancial;
Market share, market growth, or new markets;
Costs (lost opportunity costs);
Dependencies, internal and external;
Risks, internal and external;
Legal/regulatory compliance;
Human resources capabilities and capacities;
Technology capabilities and capacities; and
Urgency.
In accordance to the abovementioned criteria categories, Jolly (2003) developed a
more detailed list of criteria pertinent to IT Portfolio that is listed in the chart 5. A number of
these items justify a particular attention because of its strategic relevance, for instance the
mandatory group of criteria encompassing regulatory or operational requirements (PMI,
2013b). In addition, apart from the type of criteria, it is very important that each of these
factors should be tailored to the reality of the firm (Levine, 2005) to adequately reflect its
intents.
After deciding on the right metrics, the next step is to choose the right prioritization
tool to properly assess the information provided by these inputs. Some prioritization models
27
account for just one metric and another ones takes into account more than exclusively one
variable.
Chart 5: Prioritization criteria for IT Portfolio
Source: Jolly (2003)
Single criteria prioritization models can be qualitative or quantitative. Qualitative
models include the single criterion prioritization model, which compares all the components
and shows the priority between them as shown in the figure 5 (PMI, 2013b). Within the same
context, one of the quantitative single criteria existing alternative is the financial analysis of
the components, encompassing the NPV, IRR and Payback calculation and analysis.
Figure 5: Single qualitative criteria prioritization model (comparison between projects)
Source: SPM (Project Management Institute, 2013)
28
Another prioritization tool alternative is the multi-criteria analysis of the Portfolio
prospective components (PMI, 2013b). The adoption of multi-criteria generates more
reliability than adopting just one criteria but it requires more team effort to implement. One of
the strengths of this tool is that it can include qualitative and quantitative data into just one
analysis.
Figure 6: Multi-criteria prioritization model (comparison between projects)
Source: SPM (Project Management Institute, 2013)
Conquering even more reliability in its application, the multi-criteria prioritization
model can also include weights for each criteria. Weights are applied since different criteria
does not have the same strategic relevance, for example: if ROI is more significant than
resource capabilities it should be confirmed in the weights assigned to both (the weight of the
ROI should be proportionately larger than the weight of the resource capabilities).
As well as during Categorization practice, graphical tools are also applied in this
stage of the Portfolio Definition. The most known and applied visual diagram is the bubble
chart that, through its three elements (X axis, Y axis and size of bubble), helps to demonstrate
the most appropriate Components to compose the Portfolio. In the application of this tool, the
most adopted alternative is to use the X axis to represent the benefit of the component, the Y
axis to represent the likelihood of achieving its objectives and size of the bubble to represent
the cost, as shown in the figure 7.
29
Figure 7: Bubble graph
Source: PMI (2013)
Finally, to adequately pursue this objective, two additional conditions are also
fundamental: the first is to formalize a process and a policy to accomplish this set of tasks in
order to eliminate any common political, power or emotional bias (Levine, 2005) and, the
second one, is to request and store evidences that supports the information provided before
and during this decision making process (OGC, 2011).
Balance
The input for this practice is a list of prioritized (or screened) components and,
during the development of this inventory, some details are not accounted for; as an example:
resource capacity, overall coverage of strategic objectives, dependencies between
components, delivery strategies, synergy between components, overall risk-return and balance
between categories (OGC, 2011). This lack of information related to the complete set of
prioritized components happens because all the analysis done during the Prioritize practice is
performed on each component separately. For this reason this practice was established with
the goal of ensure that the final Portfolio is balanced and consistent with the overall corporate
intents.
30
As abovementioned, there are several items that are recommended to be evaluated
during this practice. The first item is the balance of the Portfolio (OGC, 2011) and it can be
measured regarding any criteria collected and analyzed in the aforementioned practiced, for
instance: the balance among various types of projects, i.e. maintenance, opportunity,
competitive edge, among others (Levine, 2005). The figure 8 shows a graphical depicts the
investments separated by categories and business unit and it is very useful to detect GAP's in
the prioritized Portfolio.
Figure 8: Bubble graph (depicting categorization and category)
Source: PMI (2013)
Furthermore, the second item is to ensure that interrelationships between
components are identified (PMI, 2013b). Sometimes, one component is dependent of another
one and it must be adequately detected to avoid any problems during the Portfolio delivery.
To accomplish this analysis, PMI (2013b) recommends the confection of a Portfolio Roadmap
depicting the relationship between the programs, projects and operations.
Figure 9: Portfolio Roadmap
Source: PMI (2013)
31
The third aspect that must be accounted for during this practice is the availability of
resources, since several components share the same resources (Castro & Carvalho, 2010).
Some organizations assume unlimited resources and some organizations are resource
constrained. Organizations that assume unlimited resources, usually outsource their
components to be able to deliver them (PMI, 2013b).
Figure 10: Capacity and Demand
Source: SPM (Project Management Institute, 2013)
Finally, an important decision that should be made during this practice is in relation
to the compromise between the speed of Portfolio components’ delivery and the number of
active programs and projects. Based on this, Levine (2005, p. 39) states that:
There is significant feedback from successful firms that tends to show that
doing fewer projects actually improves the bottom line. Limiting the amount
of work in the pipeline so that the projects can be completed as quickly as
possible results in increased profits or savings and more satisfied clients.
Plan
PMI (2013b, p. 39) describes the main deliverable produced during this practice, the
Portfolio Management Plan, as:
The portfolio management plan describes the approach and intent of
management in identifying, approving, procuring, prioritizing, balancing,
managing, and reporting a portfolio of programs, projects, and other work to
meet the organization’s strategic objectives.
Additionally, SPM (OGC, 2011) declares that this document must summarize every
part of the information created during the Portfolio Definition Cycle to produce a consistent
overview of all the Portfolio management areas, with to purpose to provide a clear line of
32
sight during the Portfolio delivery and describe the steps and measures needed to effectively
manage performance as a whole (PMI, 2013b)
Furthermore, it is recommended that this Plan should be tailored to the specific needs
of the Portfolio. To be able to add more value to the PPM, its adaptation must consider the
stakeholder expectations, the size and complexity of the portfolio, its purpose and the
environment (PMI, 2013b).
To sum up all these definitions, PMI (2013b, p. 39) recommends that the Plan should
contain the following topics:
Governance model;
Portfolio oversight;
Managing strategic changes;
Change control and management;
Balancing portfolio and managing dependencies;
Measuring and monitoring performance and value;
Portfolio performance reporting and review;
Communication model as part of the communication management plan;
Portfolio risk management planning (ABNT NBR ISO, 2009);
Procurement procedures;
Managing compliance;
Portfolio prioritization model.
Another relevant purpose of this document, is the mission of motivating all the
stakeholders to the delivery of shared goals of the PPM initiatives (OGC, 2011). To conclude,
it is imperative that, to be valid for all the organization and be recognized as a baseline, the
Portfolio Management Plan must be approved by the portfolio direction committee (OGC,
2011).
Portfolio Delivery Best Practices
In the same way as section 2.5, the Portfolio delivery best practices will be separated,
for research purposes, adopting the OGC (2011) practices model (as described on section 2.3):
it will be composed of the Benefits Management, Financial Management, Risk Management,
Resource Management, Management Control, Stakeholder Engagement and Organizational
33
Governance practices. Each practice will be studied along with its goals, tools and techniques
to ensure the proper development of the research protocol and adequate consistency during
the data collection.
Since we are adopting the OGC (2011) recommended practices to organize this
section content and, relied on the assumption that MoP and SPM are the main references for
this study, it is relevant to understand the relationship of the MoP practices with the SPM
processes. These interrelationships are shown in the chart 6:
Chart 6: Interrelationships between MoP practices and SPM processes
Source: author
The group of Portfolio Delivery best practices are not needed to be carried out in
sequence during the PPM (OGC, 2011), ie, there is a no arbitrary dependence between these
practices to ensure effectiveness in their implementation (it may overlap).
Benefits Management
As mentioned in section 2.1 of this document, a Portfolio exists to deliver benefits
that enable the organization to achieve the goals that was set in its strategic plan (PMI,
2013b). Based on the assumption that the benefits are the drivers to conquer what was
Management Cycle
Practice Number 1 2 3 4 5 6 7 8 9 10 11 12
Pro
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Gro
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Pro
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Nu
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Process / Practice
Un
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Cate
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4.4 Manage Strategic Change S
5.3 Optimize Portfolio W S
6.2 Manage Supply and Demand S
6.3 Manage Portfolio Value S
7.2 Manage Portfolio Information S
8.2 Manage Portfolio Risks S
5.4 Authorize Portfolio W
5.5 Provide Portfolio Oversight S W
S
W
Management of Portfolios (OGC)
Definition Delivery
Weak Relationship
Th
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an
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t (P
MI)
Aligning
Authorizing and
Controlling
Strong relationship
34
contemplated in that strategic plan, they need to be properly monitored and controlled using
the components' baselines as a reference and this is the main goal of this practice (OGC,
2011).
However, there are some elements to be observed to be able to implement this
practice effectively. The first item to be considered is the fact that the benefits can often be
delivered even after the end of the components (Barcaui, 2012), and this will demand an extra
effort of the Portfolio management team to adequately assess the results achieved. The second
and more complex item, relies on the fact that sometimes the component can affect two or
three value areas (PMI, 2013b), which increases the effort and difficulty to measure the
achieved benefits.
An important aspect of the benefits management practice is the fact that, for the
proper use of the benefits delivered by components, the transfer of deliverables generated for
the associated operations must be managed effectively (PMI, 2013b).
Financial Management
The first thing that must be done to establish a financial management process is to
seek advice from the company’s financial department that is hosting the Portfolio. It is critical
that the financial department is fully consulted (OGC, 2011) because the Portfolio financial
management must be tightly linked to the organization governance.
Two different moments should be part of this step: the initiatives initial appraisal and
the Portfolio control. During the appraisal, it is important to select the appropriate investment
criteria and tailor it to the organization, to describe rules for business cases analysis, to adjust
the optimism bias (for the costs and the benefits), to consider the risk of the components as a
business case modifier and to establish thresholds (OGC, 2011). For the moment of Portfolio
control, it is relevant to consider staged release of capital and to evaluate the consolidated
portfolio financial budget (OGC, 2011).
All these mechanisms will provide a more accurate and precise view of what is
proposed to happen with the Portfolio and what is really happening with this set of
components and, the provided information, will led to a better transparency and decision
making.
35
Risk Management
The Risk Management practice aims to increase the probability and/or impact of
positive risk events happen and to decrease the probability and/or impact of negative risk
events become fact (PMI, 2013a), reducing the overall exposure of the Portfolio to the risks.
This definition explains why the Chinese ideogram for risk shows these two aspects for the
risk: the opportunities and the threats (Damodaran, 2008).
Figure 11: Chinese ideogram for Risk
Source: Gestão Estratégica do Risco (Damodaran, 2008)
In order to accomplish this goal, it is relevant to first understand the approach of the
stakeholders in relation to the risk: they may be risk-averse or risk-takers and this will
influence the way in which this practice will be implemented. Once you understand them, the
risk management processes should be designed and implemented so that the goal could be
accomplished. According to ABNT (2009), this risk management process must follow a
process of identification, analysis, evaluation, and treatment.
It is noteworthy that the risks discussed in each context (portfolio, program and
project) are different, because they must be identified and treated in relation to the objectives
of each level (PMI, 2013b), and they are different. In a Portfolio, risks that cover all
components will be addressed, being under the responsibility of each initiative treat localized
risks.
Resource Management
This practice was conceived to guarantee and manage the sourcing of key resources
(PMI, 2013b). How resource capacity will be managed is the main issue that must be
addressed during this management step (PMI, 2013b). Resources, for the purpose of this
36
practice, encompasses not just human resources but all the resources required to deliver the
Portfolio components.
Different types of organization, Portfolio goals and resources allocation strategies
require tailored management approaches. If one of the Portfolio objectives is the effective and
efficient use of resources, it will demand for a stable workforce to be achieved, since it will be
easier to schedule all the available resources with a minimum non-scheduled periods under
this situation (Levine, 2005). In addition, transient resources may be used by the initiatives to
meet specific needs but it is best to avoid this as a standard source of resources. Furthermore,
the mix of components should be balanced, as declared by Levine (2005, p. 38):
The mix of projects the mix of resources should be manipulated to best use
the firm's resources on work that is well matched to the available strengths
and skills.
Stakeholder Engagement
PPM is a set of practices that involves the company as a whole and requires the
involvement of a large number of stakeholders (Levine, 2005) and, because of this, this
structure demands a strong and visible sponsorship.
To increase the chances of Portfolio success, stakeholders should be properly
recognized and prioritized so that their expectations and requirements are identified,
communication strategies are developed and objectives are appropriately discovered (PMI,
2013a). The key factor in this practice is the detection and monitoring of key executives and
change agents of the corporation to make sure that these leaders are part of the PPM
leadership. (Levine, 2005).
Management Control
Kaplan and Norton (2008, p. 7) declare that "if you don't measure progress toward an
objective, you cannot manage and improve it" and this is the main purpose of this practice:
obtain transparency regarding what is happening with the Portfolio (OGC, 2011). By
establishing a closed loop management system, the Portfolio manager can avoid shortfalls and
be proactive toward their objectives (Kaplan & Norton, 2008).
To conquer the mentioned transparency, performance metrics are the mechanism
used to evaluate how the Portfolio components are performing (PMI, 2013b). The large
37
majority of the Portfolio metrics are the result of the aggregation of the initiatives metrics
with a periodicity not necessarily equal (Barcaui, 2012). Feeding these metrics into these
components are very important, as cited by Levine (2005, p. 91):
Feeding the results of project status and performance back into the Portfolio
management system provides a loop ensuring that the project selection
process encompasses both proposed and active projects.
An important point to note, seeking proper implementation of this practice, is the fact
that not only the consolidated the aspects of components should be monitored, but also the
internal and external environment (OGC, 2011), evaluating whether the assumptions initially
established remain valid:
During the selection process, we make assumptions about the value of
candidate projects. But the project and business environments are not cast in
concrete. Projects don’t always go as planned. The assumptions may become
less valid with time. (Levine, 2005, p. 44)
The observation of this Portfolio aspect is very important because a change in
strategic direction or in the external environment may result in components categorization and
prioritization changes, which will generate the need to balance again the Portfolio (Barcaui,
2012).
During these practice, valuable information are produced by the Portfolio
management team and these information should be used to alter strategies and investment
decision during the Organizational Governance practice (OGC, 2011).
Besides all the managerial elements of this practice, it is very important that the
Portfolio Manager motivate everybody in order stimulate them to deliver the best
performance (Goleman, 2000).
Organizational Governance
Decisions must be made during the Portfolio management because this set of
activities are dynamic and encompasses processes that requires recurrent judgments (Barcaui,
2012). The basis for the decision-making are the data generated by other practices and
compiled by Management Control practice (OGC, 2011). To optimize this practice, it is
recommended that thresholds are agreed during the institution of the Portfolio:
The governance council approves a set of targets of limits, such as delivery
dates, cash flow, projected returns, and performance metrics. As long as the
38
project stays within the boundaries, the project team will control most of the
action and decisions. (Levine, 2005, p. 49)
Two management strategies are widely used for the governance of Portfolios: the
adoption of management committees (Barcaui, 2012) and the creation of stage gates for the
components (Castro & Carvalho, 2010). Sometimes both management approaches are adopted
and, if it happens, it is recommended to integrate them in a harmonic way (Castro &
Carvalho, 2010).
Portfolio committees are regularly spaced meetings conducted with the presence of
key stakeholders to present the status of the Portfolio and where decisions or directions are
collected (Merrow, 2011). The frequency of these events is determined according to the
characteristics of Portfolio being managed. A special committee, outside the regular schedule,
can be performed if an event with a huge impact happens.
Stage gates are control points (milestones) established in the components baselines to
discuss and decide whether if it should stop, recycle or proceed (Merrow, 2011): "At the end
of a stage, a cross-functional team evaluates the status against the pass/no-pass conditions"
(Levine, 2005, p. 48). The Portfolio initiatives should continue active while they remain valid
for the strategy and while it presents an adequate performance (Levine, 2005).
Discrepancies between the References
The study of the PPM definitions and concepts noticed that some discrepancies exist
between the references. One of the examples is: OGC (2011) states that Portfolio is a set of
projects and PMI (PMI, 2013b) affirms that it is broader and includes any component that
helps the organization to achieve their strategic objectives, encompassing programs, projects
and operations. It is outside the scope of this research to discuss what is the correct meaning
for the discrepancies found or the most adequate best practice to apply on. However, it is
scope of this research to discover what is being done by the organization being studied and
compare it with the best practices and definitions described in this chapter.
39
Research Methodology
This chapter of this research contains the theoretical insights and the description of
the strategy that was developed for the case study as a means to deliver meaningful findings
for the scientific community. Its main objective is to define the logical sequence that connects
the empirical data and the study question with the conclusions, guaranteeing that this paper
deliver the initially proposed goal (Yin, 2010).
Research Strategy
As aforementioned, the aim of this thesis is to answer the following question: How
IT areas of insurance organizations are, in the present moment, defining and delivering their
strategic initiatives Portfolios? To accomplish this, Yin (2010) describes that when a question
such as "how" or "why" is being done on a set of contemporary events (similar to the question
we aim to answer) and in a situation where the researcher has little or no control over
behavioral events, the use of the case study method is appropriate.
In order to deliver a meaningful case study it is recommended that, during its
development and deployment, the case study follows a set of steps (Gil, 2010). This case
study will respect the following steps to ensure its integrity and validity:
Question statement;
Theoretical revision;
Research strategy;
Study protocol development;
Data collection;
Data analysis.
For this purpose, the question statement was introduced in the first chapter and the
theoretical review of the related contents was developed and presented into the second
chapter. Also, the research strategy and the study protocol will be presented in this chapter
and information regarding the data collection and data analysis will be available in the
subsequent chapters (chapter 4 and 5 respectively).
To materialize the research’s objectives, a case study can be done in the following
formats:
40
Holistic single case: contains a single case and a single unit of analysis;
Integrated single case: contains a single case and several units of analysis;
Multiple holistic cases: contains several cases and each case contains only one unit of
analysis;
Integrated multiple cases: contains several cases and each case contains several units of
analysis.
For the purpose of this study and attendance to the proposed objectives, this case
study will adopted the holistic single case approach and, to ensure the quality, validity and
integrity of the data collection, this research will implement the following strategies during
this step (Yin, 2010):
Use of a protocol for the case study (presented in the section 3.2);
Use of multiple sources of evidence (documents and interviews);
Adoption of 1 interviewee;
Have key stakeholders to review the draft of the report.
To ensure proper execution of this research, it was established that the case study
should be realized in a company that meets the following criteria:
The company should have more than 4000 employees;
Must be situated in São Paulo;
Should already make use of project management practices;
Have availability and agreement of the company and participants to collaborate with this
study, including granting access to documents.
In addition, the selection criteria for the survey respondent and the reviewers were
created as follows:
Be an employee of the company for more than one year;
Be in constant contact with the PPM practices;
Have access to evidentiary documentation of the implemented practices.
This study does not want to exhaust the subject, so there are limitations on it which
does not allow to make generalizations or the development of new theories. Otherwise, this
study aims to stimulate the search for understanding about the way that Portfolios are
managed and implemented in the organizations.
Research Protocol
41
Yin (2010) orients that the protocol is an important way of increasing the reliability
of the research and is intended to guide the investigator in carrying out the data collection for
a case study. For this purpose the research protocol presented in chart 7 will be applied during
the data collection. These questions were designed based on the literature review and aims to
make the connection between this stage of the study and the data collection.
Chart 7: Research questionnaire
C Management
Cycle Process Question
Q1 Definition Understand Is the Portfolio scope clear?
Q2 Definition Understand Is there a template to introduce the components into the Portfolio?
Q3 Definition Understand Are business cases adopted / required?
Q4 Definition Understand Are the components presented to the Portfolio in a bottom-up or
top-down way?
Q5 Definition Understand Are all the components identified and registered (programs,
projects and operations)?
Q6 Definition Categorize Are categories established?
Q7 Definition Categorize Are these categories related to strategic objectives?
Q8 Definition Categorize Are entry criteria set for these categories?
Q9 Definition Categorize Are visual diagrams adopted?
Q10 Definition Prioritize There are financial analysis of the components?
Q11 Definition Prioritize Is it clear how each component contributes to the corporate
strategy?
Q12 Definition Prioritize Is risk of achieving the desired result evaluated?
Q13 Definition Prioritize Are prioritization models adopted?
Q14 Definition Prioritize Are the prioritization criteria and their weights aligned with the
strategy?
Q15 Definition Prioritize Are prioritization criteria tailored to each category?
Q16 Definition Prioritize Are supporting evidences provided with the projects' evaluation?
Q17 Definition Prioritize Are visual diagrams adopted?
Q18 Definition Balance Do investment decisions consider individual projects or it analyses
all components of the Portfolio together?
Q19 Definition Balance Are bottlenecks considered (resources and finance)?
Q20 Definition Balance Are inter-dependencies identified?
Q21 Definition Balance Are visual diagrams adopted (roadmap, graphics, etc.)?
Q22 Definition Plan Is there a Portfolio governance model?
Q23 Definition Plan Is there a change management process for the Portfolio?
Q24 Definition Plan Is there a communication plan for the Portfolio?
Q25 Definition Plan Is there a risk management framework for the Portfolio?
Q26 Definition Plan Are KPIs aligned with the strategic objectives?
Q27 Definition Plan Is clear to everyone their individual responsibilities to allow the
success of the Portfolio?
Q28 Definition Plan Is there an established methodology for managing projects and
programs?
42
Q29 Delivery Benefits
Management Do estimates (baselines) of the components exists and are reliable?
Q30 Delivery Benefits
Management Is the measurement regularly made?
Q31 Delivery Benefits
Management Are the information validated?
Q32 Delivery Benefits
Management Are trends and deviations evaluated?
Q33 Delivery Benefits
Management
Is the analysis of inter-dependencies between different components
done?
Q34 Delivery Financial
Management Do estimates (baselines) of the components exists and are reliable?
Q35 Delivery Financial
Management Is the measurement regularly made?
Q36 Delivery Financial
Management Are the information validated?
Q37 Delivery Financial
Management Are trends and deviations evaluated?
Q38 Delivery Financial
Management
Is the analysis of inter-dependencies between different components
done?
Q39 Delivery Risk
Management Are risks to the Portfolio identified?
Q40 Delivery Risk
Management Are risks to the Portfolio qualified?
Q41 Delivery Risk
Management Are risks to the Portfolio quantified?
Q42 Delivery Risk
Management Are responses to the risks to the Portfolio planned?
Q43 Delivery Risk
Management Are risks to the Portfolio controlled?
Q44 Delivery Risk
Management Are trends and deviations evaluated?
Q45 Delivery Resource
Management Do estimates (baselines) of the components exists and are reliable?
Q46 Delivery Resource
Management Is the measurement regularly made?
Q47 Delivery Resource
Management Are the information validated?
Q48 Delivery Resource
Management Are trends and deviations evaluated?
Q49 Delivery Resource
Management
Is the analysis of inter-dependencies between different components
done?
Q50 Delivery Stakeholder
Engagement Are stakeholders mapped?
Q51 Delivery Stakeholder
Engagement
Are communications planned (based on the profile of the
Stakeholders)?
Q52 Delivery Stakeholder
Engagement
Is there a proactive and bi-directional communication with
stakeholders?
Q53 Delivery Stakeholder
Engagement Are stakeholders engaged in the change process?
43
Q54 Delivery Management
Control
Is the Status of the Portfolio disseminated using appropriate
channels of communication?
Q55 Delivery Management
Control Are the components' budget provided in incremental stages?
Q56 Delivery Management
Control Are deviations and risks treated or addressed?
Q57 Delivery Management
Control Are interdependencies between components managed?
Q58 Delivery Management
Control Are lessons learned collected and disseminated?
Q59 Delivery Management
Control Are internal and external environment monitored?
Q60 Delivery Management
Control
Is there a components' reassessment to verify that the results were
achieved (at the end of the component)?
Q61 Delivery Governance Are there "gates" for Portfolio decision making?
Q62 Delivery Governance Are there committees established?
Q63 Delivery Governance Are there rules for convening an emergency committee?
Source: author
44
Case Study
The aim of this chapter is to present what was found during the application of the
research protocol on the selected company. Firstly, a summary about the selected organization
will be presented for contextualization and, secondly, the findings will be presented separated
in the parts: Portfolio Definition and Portfolio Delivery.
Company Profile
The company selected for data collection, which will be referenced in this study as
INS_COMP, operates mainly in the insurance business and has another business units that
also works with telecommunications, financial management, among others.
The INS_COMP was founded in the 40s and currently ranks among the top business
in this field in Brazil. Besides Brazil, Uruguay has a company office too, this country was one
of the first initiatives of expansion involving other nations. The average revenue of the
INS_COMP is three billion Reais (R$) per quarter.
The data were collected in the IT area of the selected organization. This department
provides services to all areas of the company and has approximately 1,000 employees. The
main activities of this area includes: maintenance of existing information systems,
maintenance of infrastructure, and expansion of infrastructure, improvement of existing
information systems and construction of new information systems.
The IT area of the INS_COMP has a very high demand for the design of new
information systems and for changes in existing information systems. Because of this, the
infrastructure (servers, network, and storage, among others) must be modified to
accommodate the increased capacity requirements, which creates a number of additional
initiatives for this department. Despite its high number of direct employees and a large
number of additional labor and services suppliers, all the demand cannot be absorbed and
there is strong competition between initiatives to determine which one will be executed.
Due to the nature and size of the business, almost all strategic initiatives to increase
or maintain the revenue and to adhere to legal regulations require changes in the IT systems of
the organization. This fact only helps to increase the pressure on the Portfolio management of
the INS_COMP.
45
To add even more complexity to this context, projects are originated from various
customer areas and each of them wants to manage its Portfolio independently. To lessen the
impact of the competition from this areas for IT resources, annual capacity planning is done
with a view to the necessary productive capability (in hours) for each of these areas. In
possession of this information, the department is structured to allow the services to be
provided accordingly to the needs established in this plan and this is considered a constraint to
the Portfolio. A circumstance that, due to the adopted model, still generates some discomfort
is when a project involves more than one client area (called a 'cross' project). When this
occurs, the project should be prioritized by all related customers together and the initiative
budget should be divided by them.
Another element that adds further difficulty is the fact that the human resources
employed by this area are not scalable and, therefore, the productive capacity of this
department is not easily enhanced when required. The company hires IT software factories to
generate more production capacity but, due to the high customization of the environment and
the elevated complexity of the IT systems, this strategy hardly achieves satisfactory
productivity.
Practices for Portfolio Definition
After better understood the context in which the Portfolio Definition is enclosed, the
findings regarding the modus operandi of this PPM step in INS_COMP will be presented.
These information will be offered in the logical sequence that is intended to happen
(Understand, Categorize, Prioritize, Balance and Plan) and will be illustrated based on the
interviews conducted and documents reviewed.
Chart 8: Interview transcription - understand practice
Q Management
Cycle Process Question
Q1 Definition Understand
Is the Portfolio scope clear?
The Portfolio scope is clear and consists of IT components
requested by other areas of the organization and components
created internally.
Q2 Definition Understand Is there a template to introduce the components into the Portfolio?
Does not exist a standardized template. Templates are applied
unevenly.
Q3 Definition Understand Are business cases adopted / required?
46
Business cases are adopted. This document presents financial
return calculations for the components among with qualitative
benefits evaluation. These artifacts are checked to ensure its
accuracy.
Q4 Definition Understand
Are the components presented to the Portfolio in a bottom-up or
top-down way?
Bottom up.
Q5 Definition Understand
Are all the components identified and registered (programs,
projects and operations)?
Yes. There is a tool that supports this process and records
information on all components. IT operations are also controlled in
the same tool because the resources are shared between operations,
projects and programs.
Source: author
As shown in the literature review, the first step is the Portfolio Definition is the
Understand the practice. The company assessed has a clear goal for the Portfolio, but does not
apply standardized templates for the registration of the candidates to be components. These
documents could help considerably to obtain initial information for the inclusion of the
initiative in the Portfolio. Due to the lack of this document, it is often necessary to stop the
analysis to collect further information, delaying the process. Despite not having a
standardized registration, all components are recorded and the organization is aware of all
projects and programs that are in the Portfolio pipeline. Furthermore, business cases are
adopted to assess the financial viability of projects and to determine quantitative and
qualitative goals for them.
Chart 9: Interview transcription - categorize practice
Q Management
Cycle Process Question
Q6 Definition Categorize
Are categories established?
Yes. The components are categorized when it were introduced in
the Portfolio. The categories are established by the type of benefit
that will be delivered by the component.
Q7 Definition Categorize
Are these categories related to strategic objectives?
No. It is not clear the relationship of the components with the
company's strategic objectives.
Q8 Definition Categorize Are entry criteria set for these categories?
No. The IT customer selects the category where the project should
be positioned.
Q9 Definition Categorize Are visual diagrams adopted?
Yes, there are reports that illustrate the contribution of each
category.
Source: author
47
After the Portfolio was understood, the INS_COMP categorizes the components
based on the type of benefit to be delivered by the initiative. Despite the fact that this
categorization is done based on the benefits, there is no clear vision of the relationship
between the project outcome and the strategic goals of the corporation. This lack of strategic
visibility creates an enormous difficulty in Portfolio Definition, since one of the most
important aspects during this step is understanding how these initiatives will assist to enable
to company to conquer its vision. Nevertheless, visual diagrams are adopted to demonstrate
the placement of components in relation to the categories. The use of these diagrams is greatly
appreciated by stakeholders and helps to compose a more effective prioritization and
balancing of the Portfolio.
Chart 10: Interview transcription - prioritize practice
Q Management
Cycle Process Question
Q10 Definition Prioritize
There are financial analysis of the components?
The analysis is performed, but the results are not used to support
the selection. These evaluation is only applied to verify if the
component is feasible or not.
Q11 Definition Prioritize
Is it clear how each component contributes to the corporate
strategy?
No. It is not clear the relationship of the components with the
company's strategic objectives.
Q12 Definition Prioritize
Is risk of achieving the desired result evaluated?
No. The component risk is not evaluated and this information is not
considered as part of the decision process.
Q13 Definition Prioritize
Are prioritization models adopted?
No. The prioritization is done by the client area, which does not
use any tool. The parameter that the client observes is the
productive capacity of IT and the available budget. There is a great
personal influence on this decision.
Q14 Definition Prioritize
Are the prioritization criteria and their weights aligned with the
strategy?
This question does not apply because question 13 detected that no
prioritization model is adopted.
Q15 Definition Prioritize Are prioritization criteria tailored to each category?
This question does not apply because question 13 detected that no
prioritization model is adopted.
Q16 Definition Prioritize
Are supporting evidences provided with the projects' evaluation?
Yes. The controller requires documentary evidence to assess the
quantitative (financial) evaluation of the components.
Q17 Definition Prioritize Are visual diagrams adopted?
Each area adopts a different model.
Source: author
48
As mentioned in the interpretation of the data collected from the predecessor
practices (Plan and Categorize), the data for prioritizing the Portfolio are not always available
or reliable, which can lead to poor decisions. Despite the fact that the financial analysis is
done and the projects have a documented business case with qualitative and quantitative
goals, the calculations presented in these documents do not follow a clear and comparable
pattern. Another concern is the lack of strategic vision for the initiatives and the absence of a
risk analysis to calculate their probability of success, often leading to unfair comparisons
between projects. The prioritization of the components is performed by the client area, since
each of these areas has a productive capacity dedicated to their projects and these areas often
select their projects based on personal influence and not on the evidence presented. However,
it is clear that there is some stage of prioritization and awareness of the stakeholders to this
necessity, a fact apparent through the use of common terminology and the massive support of
the organization for adoption of the business case.
Chart 11: Interview transcription - balance practice
Q Management
Cycle Process Question
Q18 Definition Balance
Do investment decisions consider individual projects or it analyses
all components of the Portfolio together?
Individual projects.
Q19 Definition Balance Are bottlenecks considered (resources and finance)?
Yes. Availability of IT resources and budget of the client area are
evaluated.
Q20 Definition Balance
Are inter-dependencies identified?
Yes. There is a visibility between the dependencies but without
proper standardization.
Q21 Definition Balance Are visual diagrams adopted (roadmap, graphics, etc.)?
Yes. Roadmaps are applied in a timely manner and without
standardization.
Source: author
After prioritizing the components in INS_COMP, an analysis of the Portfolio as a
whole is performed. Although relevant, the investment decisions are not reassessed during
this step to optimize the overall return and to obtain synergy between projects. In this
moment, the organization evaluates only financial capacity, infrastructure and productive
bottlenecks. All initiatives of the Portfolio are recorded and managed on a PMIS (Project
Management Information System), which supports immensely this stage because it allows the
visualization of constraints through spreadsheets and charts. One of the major difficulties
49
perceived in the assessed company is the existence of many concurrent components, which
creates a feeling of lack of effectiveness for the client, because all of them compete for the
same resources impacting the total length of each Portfolio element.
Chart 12: Interview transcription - plan practice
Q Management
Cycle Process Question
Q22 Definition Plan Is there a Portfolio governance model?
There is no standardized model.
Q23 Definition Plan Is there a change management process for the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q24 Definition Plan Is there a communication plan for the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q25 Definition Plan Is there a risk management framework for the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q26 Definition Plan Are KPIs aligned with the strategic objectives?
This question does not apply because question 22 detected that no
governance model is adopted.
Q27 Definition Plan
Is clear to everyone their individual responsibilities to allow the
success of the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q28 Definition Plan
Is there an established methodology for managing projects and
programs?
Yes. There is a methodology developed and disseminated.
Source: author
As can be seen in chart 12, there are a huge number of gaps in relation to the Plan
practice in the INS_COMP. The projects and programs management methodologies are
established and widespread, but there is only a modest work in relation to the Portfolio
methodology. Thanks to the absence of a corporate standard, there are ad-hoc Portfolio
Management Plan models that meet the specific needs of each area, but are incomplete and/or
misaligned with the corporation intents.
Practices for Portfolio Delivery
After presenting the data regarding the Portfolio Definition, this section will present
the findings regarding the modus operandi of the PPM Portfolio Delivery in INS_COMP. The
information will be presented in the sequence adopted for the theoretical review (Benefits
50
Management, Financial Management, Risk Management, Resource Management, Stakeholder
Engagement, Management Control and Governance) and will be illustrated based on the
interviews conducted and documents reviewed.
Chart 13: Interview transcription - benefits management practice
Q Management
Cycle Process Question
Q29 Delivery Benefits
Management
Do estimates (baselines) of the components exists and are reliable?
Yes. There is a document that is published and describes the
benefits of the component.
Q30 Delivery Benefits
Management
Is the measurement regularly made?
Yes. There is a measurement after the closure of the component to
validate that the benefits were achieved. This evaluation is
combined before the start of the component.
Q31 Delivery Benefits
Management
Are the information validated?
Yes, the governance area validates this information.
Q32 Delivery Benefits
Management
Are trends and deviations evaluated?
No. Control is passive. Only a warning is issued by the governance
team when trends are deteriorating very fast (no clear criteria).
Q33 Delivery Benefits
Management
Is the analysis of inter-dependencies between different components
done?
Each component is assessed separately, there is no joint
assessment.
Source: author
Due to the importance given by the organization, the Benefits Management Practice
is treated with prudence by INS_COMP. This is demonstrated by the results of the
questionnaire and by the documents analyzed. The organization establishes and formalizes
baselines of the benefits to be delivered by the components and, after the execution of these
initiatives, checks if the expected results were achieved. Moreover, there is a policy that
demands that the benefits baseline have to be approved by the governance area before the
project is started, a fact that helps in improving the quality of the estimative produced. Despite
this, the initiatives are always evaluated in a isolated way and dependencies between benefits
are not identified and treated properly, meaning that the organization does not create the
proper synergy between the Portfolio components.
Chart 14: Interview transcription - financial management practice
Q Management
Cycle Process Question
Q34 Delivery Financial Do estimates (baselines) of the components exists and are reliable?
51
Management Yes. According to the methodology applied, the components must
have a cost baseline and its manager must control it to ensure its
adherence.
Q35 Delivery Financial
Management
Is the measurement regularly made?
Yes.
Q36 Delivery Financial
Management
Are the information validated?
Yes.
Q37 Delivery Financial
Management
Are trends and deviations evaluated?
Yes. There are indicators linked to the bonuses of the managers
that control these metrics.
Q38 Delivery Financial
Management
Is the analysis of inter-dependencies between different components
done?
No.
Source: author
The financial management of the entire Portfolio and Sub-Portfolios of each
company area is done with considerable caution in the assessed organization. As the areas that
demand projects are billed by the efforts devoted for its initiatives, the financial information is
extremely important to control the Portfolio and, because of that, data are collected through
the PMIS and reports are issued regularly to the main stakeholders. Furthermore, to ensure the
results and adherence to established goals, managers have their goals and rewards connected
to the results related to this practice.
Chart 15: Interview transcription - risk management practice
Q Management
Cycle Process Question
Q39 Delivery Risk
Management
Are risks to the Portfolio identified?
No.
Q40 Delivery Risk
Management
Are risks to the Portfolio qualified?
No.
Q41 Delivery Risk
Management
Are risks to the Portfolio quantified?
No.
Q42 Delivery Risk
Management
Are responses to the risks to the Portfolio planned?
No.
Q43 Delivery Risk
Management
Are risks to the Portfolio controlled?
No.
Q44 Delivery Risk
Management
Are trends and deviations evaluated?
No.
Source: author
52
In the next practice, the risk management, there is no evidence or statement that any
activity is implemented. The most interesting fact is that the company line of business
(insurance) is very risk averse and even has corporate areas for this activity.
Chart 16: Interview transcription - resource management practice
Q Management
Cycle Process Question
Q45 Delivery Resource
Management
Do estimates (baselines) of the components exists and are reliable?
Yes. At first there is a need for verification of the components and
of its features and, at the second time, the resources are mobilized
according to availability.
Q46 Delivery Resource
Management
Is the measurement regularly made?
Yes.
Q47 Delivery Resource
Management
Are the information validated?
No.
Q48 Delivery Resource
Management
Are trends and deviations evaluated?
Yes. The component managers is responsible for determining the
necessary actions.
Q49 Delivery Resource
Management
Is the analysis of inter-dependencies between different components
done?
Yes. It is performed by the functional manager of the resource.
Source: author
As well as cost management, resource management is also quite mature in the
assessed company. The reasons for this to happen are similar, because the use of resources
generates a direct impact on costs. In addition to this reason, human resources are the main
bottleneck of INS_COMP and, to avoid issues in this area, this practice is strictly adopted.
The first step is the establishment of a proposed schedule for the components based on roles.
With this proposal, the resource pool manager will indicate people to build the project team
and, with this data, the official schedule baseline that will have the availability of the resource
as a constraint will be generated. During the initiative execution, the performance of resource
allocation is compared to this reference and the component manager will be evaluated by this
result. This whole process is supported by a software (PMIS) which allows the stakeholders to
check how resources are being used by the Portfolio.
Chart 17: Interview transcription - stakeholder engagement practice
Q Management
Cycle Process Question
Q50 Delivery Stakeholder Are stakeholders mapped?
53
Engagement Partially.
Q51 Delivery Stakeholder
Engagement
Are communications planned (based on the profile of the
Stakeholders)?
No.
Q52 Delivery Stakeholder
Engagement
Is there a proactive and bi-directional communication with
stakeholders?
No.
Q53 Delivery Stakeholder
Engagement
Are stakeholders engaged in the change process?
No.
Source: author
The stakeholder engagement is very superficial and the evidence found shows that
this practice is not being applied despite of its tremendous importance (PMI, 2013a). As
depicted in chart 17, the organization does not have a communication plan for the Portfolio,
does not create communication channels and not engage the stakeholders in the change
process. The only activity that is partially performed is the stakeholders mapping.
Chart 18: Interview transcription - management control practice
Q Management
Cycle Process Question
Q54 Delivery Management
Control
Is the Status of the Portfolio disseminated using appropriate
channels of communication?
Timely Portfolio report are issued in certain contexts.
Q55 Delivery Management
Control
Are the components' budget provided in incremental stages?
No. The funds are available in their entirety at the beginning.
Q56 Delivery Management
Control
Are deviations and risks treated or addressed?
Specific negotiations are established without the vision of the
whole.
Q57 Delivery Management
Control
Are interdependencies between components managed?
No.
Q58 Delivery Management
Control
Are lessons learned collected and disseminated?
No.
Q59 Delivery Management
Control
Are internal and external environment monitored?
No.
Q60 Delivery Management
Control
Is there a components' reassessment to verify that the results were
achieved (at the end of the component)?
Yes. Components are revalued according to the objectives initially
presented to verify if it was successful or not.
Source: author
As elucidated during the theoretical review, the Portfolio Delivery practices
presented earlier provide several inputs for Management Control Practice (OGC, 2011). This
practice consolidates these data, extract the information regarding the performance and
54
manage the Portfolio in its decision-making capacity (all other decisions are made by the
Portfolio direction committee). According to these best practices, the INS_COMP distributes
status reports providing information about the components and an overview of the Portfolio,
but there is no standard periodicity and content for this report. Another activity that is
performed to improve the PPM is to monitor the results achieved after the implementation of
the initiatives, with the aim of ensure that the results planned during the conception of the
projects were delivered. Although some control mechanisms are present, through the
questionnaire presented in chart 18, was noticed that some of them are not being applied:
deviations and risks are not properly addressed, interdependencies are not managed,
environment are no monitored and funds are not released in a timely manner.
Chart 19: Interview transcription - governance practice
Q Management
Cycle Process Question
Q61 Delivery Governance Are there "gates" for Portfolio decision making?
No.
Q62 Delivery Governance Are there committees established?
No.
Q63 Delivery Governance Are there rules for convening an emergency committee?
No.
Source: author
One of the most relevant findings for this research was the identification of the
organization's approach regarding the implementation of the Governance Practice. The
INS_COMP has no type of management committee for the Portfolio management and no
presence of component gates as a mechanism for decision making. Decisions are made only
when there is a severe need or when an executive is summoned to attend regular events. This
approach demonstrates a low maturity in this aspect of PPM and probably, the fact of not
involving the executives more appropriately (as had been identified in the stakeholder
engagement practice), brings severe consequences for the quality and effectiveness of the
Portfolio.
55
Conclusion
To initiate the conclusion of this master thesis, it is prudent to recall the reasons for
which a Portfolio is established. PMI (2013b, p. 3), states Portfolio that: "A Portfolio is a
component collection of programs, projects, or operations managed as a group to achieve
strategic objectives." and complements this definition with the following sentence: "A
Portfolio should be a representation of an organization's intent, direction and progress".
Furthermore, OGC (2011, p. 131), defines Portfolio as: "An organization's Portfolio is the
totality of its investment (or segment thereof) in the changes required to achieve its strategic
objectives".
Based on these statements, the following question was highlighted in the introduction
of this document:
How IT areas of insurance companies are, in the present moment, defining and delivering
their strategic initiatives Portfolios?
And two (02) assumptions were made as the starting point of this study:
Assumption 1: IT areas of these organizations are applying the best practices in the
definition of their strategic initiatives Portfolios.
Assumption 2: IT areas of these organizations are applying the best practices in the
delivery of their strategic initiatives Portfolios.
After the establishment of the question and assumptions, the main premise adopted
during this study is that the application of the practices and activities studied during the
theoretical review have a strong correlation with the success of the Portfolio, this is the reason
why the study protocol was based on these Portfolio elements. In this chapter, conclusions to
answer the initial question will be made evaluating the results presented on the section 4 (case
study) and proposal for future researchers on this subject will be offered.
First, it's interesting to evaluate the whole context assessed through a consolidation
of the applied protocol. For this combination, each positive response from the questionnaire
will be considered as a ratio (relative to the number of questions - with equal weight) relative
to the best practices adopted. After evaluating the number of positive responses, the overall
percentage of practice and management cycle adoption can support the conclusions that will
be presented in this section. This consolidation, with their respective proportions, are
presented in chart 20.
56
Chart 20: Consolidated survey results (by protocol question)
Management
Cycle Practice
Question (Practice-oriented activities)
Adopted Total % Adopted Adopted Total % Adopted
Definition Understand 4 5 80%
12 28 43%
Definition Balance 3 4 75%
Definition Categorize 2 4 50%
Definition Prioritize 3 8 38%
Definition Plan 0 7 0%
Delivery Financial Management 4 5 80%
14 35 40%
Delivery Resource Management 4 5 80%
Delivery Benefits Management 3 5 60%
Delivery Management Control 3 7 43%
Delivery Risk Management 0 6 0%
Delivery Stakeholder Engagement 0 4 0%
Delivery Governance 0 3 0%
Source: author
Regarding the first assumption made (application of Portfolio Definition best
practices), the research detected that 43% of the questions were answered positively. The
practices that were further adopted were Understand e Balance with, respectively, 80% e 75%
of adoption. In the last place resides the practice Plan, which had 0% of application.
The first steps of the Portfolio Definition are performed with caution, but at the end
of this set of successor’s practices, the adoption of best practices is very low or even null. The
Portfolio of INS_COMP is well understood initially, but falls short in its categorization and
prioritization. The situation is even more immature when it comes to Portfolio management
planning, as were not identified the application of best practices during this stage.
Concerning the second assumption done (application of Portfolio Delivery best
practices), the research noticed that only 40% of them were adopted. The practices that were
more adopted were Financial and Resource Management, with 80% of adoption for both.
Were tied in last place with 0% of adoption the following practices: Risk Management,
Stakeholder Management e Governance.
The results presented for the Portfolio Delivery clearly demonstrate that the
organization's approach is highly driven by cost management, a fact that also explains the
high compliance with the Resource Management practices. Despite this practices being
mature and almost fully implemented, the other elements of Portfolio management are
immature (with the exception of Benefits Management) and applied only superficially. The
57
biggest surprise is in relation to the governance activities, whose implementation was 0%,
since these elements are extremely important for stakeholder engagement and direction of the
Portfolio (OGC, 2011).
This research did not evaluate causal conditions or relations between the
environment and the results presents so, our recommendations for future studies are to study
this relationships and the cultural aspects of the Portfolio management. Furthermore, there are
several opportunities of studying specific segments of PPM inside this industry to obtain a
better insight of each one. Another recommendations for potential studies are to adopt weights
related to each question in order to compensate the value of each practice associated to the
benefits delivered and to explore the origin of the best practices lack of adoption.
Concluding this study, considering the interviews conducted and evaluated artifacts,
the answer to the question posed is that initially established assumptions are not correct, based
on the fact that the means of adoption of each Management Cycle is less than 50% with
various practices achieving 0%. Therefore, INS_COMP in this study is considered as an
organization that:
are not applying the best practices in the definition of their strategic initiatives Portfolios
and;
are not applying the best practices in the delivery of their strategic initiatives Portfolios.
58
Abbreviations and Acronyms
ABNT - Associação Brasileira de Normas Técnicas
BAU - Business as Usual
ISO - International Organization for Standardization
IT - Information Technology
MoP - Management of Portfolios
OGC - Office of Government Commerce
PMBoK - Project Management Body of Knowledge
PMI - Project Management Institute
PMIS - Project Management Information System
PPM - Project Portfolio Management
SPM - The Standard for Program Management
TSO - The Stationery Office
59
Appendix A - Interview transcription
Q Management
Cycle Process Question
Q1 Definition Understand
Is the Portfolio scope clear?
The Portfolio scope is clear and consists of IT components
requested by other areas of the organization and components
created internally .
Q2 Definition Understand
Is there a template to introduce the components into the Portfolio?
Does not exist a standardized template. Templates are applied
unevenly.
Q3 Definition Understand
Are business cases adopted / required?
Business cases are adopted. This document presents financial
return calculations for the components among with qualitative
benefits evaluation. These artifacts are checked to ensure its
accuracy.
Q4 Definition Understand
Are the components presented to the Portfolio in a bottom-up or
top-down way?
Bottom up.
Q5 Definition Understand
Are all the components identified and registered (programs,
projects and operations)?
Yes. There is a tool that supports this process and records
information on all components. IT operations are also controlled in
the same tool because the resources are shared between operations,
projects and programs.
Q6 Definition Categorize
Are categories established?
Yes. The components are categorized when it were introduced in
the Portfolio. The categories are established by the type of benefit
that will be delivered by the component.
Q7 Definition Categorize
Are these categories related to strategic objectives?
No. It is not clear the relationship of the components with the
company's strategic objectives.
Q8 Definition Categorize
Are entry criteria set for these categories?
No. The IT customer selects the category where the project should
be positioned.
Q9 Definition Categorize
Are visual diagrams adopted?
Yes, there are reports that illustrate the contribution of each
category.
Q10 Definition Prioritize
There are financial analysis of the components?
The analysis is performed, but the results are not used to support
the selection. These evaluation is only applied to verify if the
component is feasible or not.
Q11 Definition Prioritize
Is it clear how each component contributes to the corporate
strategy?
No. It is not clear the relationship of the components with the
company's strategic objectives.
60
Q12 Definition Prioritize
Is risk of achieving the desired result evaluated?
No. The component risk is not evaluated and this information is
not considered as part of the decision process.
Q13 Definition Prioritize
Are prioritization models adopted?
No. The prioritization is done by the client area, which does not
use any tool. The parameter that the client observes is the
productive capacity of IT and the available budget. There is a great
personal influence on this decision.
Q14 Definition Prioritize
Are the prioritization criteria and their weights aligned with the
strategy?
This question does not apply because question 13 detected that no
prioritization model is adopted.
Q15 Definition Prioritize
Are prioritization criteria tailored to each category?
This question does not apply because question 13 detected that no
prioritization model is adopted.
Q16 Definition Prioritize
Are supporting evidences provided with the projects' evaluation?
Yes. The controller requires documentary evidence to assess the
quantitative (financial) evaluation of the components.
Q17 Definition Prioritize Are visual diagrams adopted?
Each area adopts a different model.
Q18 Definition Balance
Do investment decisions consider individual projects or it analyses
all components of the Portfolio together?
Individual projects.
Q19 Definition Balance
Are bottlenecks considered (resources and finance)?
Yes. Availability of IT resources and budget of the client area are
evaluated.
Q20 Definition Balance
Are inter-dependencies identified?
Yes. There is a visibility between the dependencies but without
proper standardization.
Q21 Definition Balance
Are visual diagrams adopted (roadmap, graphics, etc.)?
Yes. Roadmaps are applied in a timely manner and without
standardization.
Q22 Definition Plan Is there a Portfolio governance model?
There is no standardized model.
Q23 Definition Plan
Is there a change management process for the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q24 Definition Plan
Is there a communication plan for the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q25 Definition Plan
Is there a risk management framework for the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q26 Definition Plan
Are KPIs aligned with the strategic objectives?
This question does not apply because question 22 detected that no
governance model is adopted.
61
Q27 Definition Plan
Is clear to everyone their individual responsibilities to allow the
success of the Portfolio?
This question does not apply because question 22 detected that no
governance model is adopted.
Q28 Definition Plan
Is there an established methodology for managing projects and
programs?
Yes. There is a methodology developed and disseminated.
Q29 Delivery Benefits
Management
Do estimates (baselines) of the components exists and are reliable?
Yes. There is a document that is published and describes the
benefits of the component.
Q30 Delivery Benefits
Management
Is the measurement regularly made?
Yes. There is a measurement after the closure of the component to
validate that the benefits were achieved. This evaluation is
combined before the start of the component.
Q31 Delivery Benefits
Management
Are the information validated?
Yes, the governance area validates this information.
Q32 Delivery Benefits
Management
Are trends and deviations evaluated?
No. Control is passive. Only a warning is issued by the governance
team when trends are deteriorating very fast (no clear criteria).
Q33 Delivery Benefits
Management
Is the analysis of inter-dependencies between different components
done?
Each component is assessed separately, there is no joint
assessment.
Q34 Delivery Financial
Management
Do estimates (baselines) of the components exists and are reliable?
Yes. According to the methodology applied, the components must
have a cost baseline and its manager must control it to ensure its
adherence.
Q35 Delivery Financial
Management
Is the measurement regularly made?
Yes.
Q36 Delivery Financial
Management
Are the information validated?
Yes.
Q37 Delivery Financial
Management
Are trends and deviations evaluated?
Yes. There are indicators linked to the bonuses of the managers
that control these metrics.
Q38 Delivery Financial
Management
Is the analysis of inter-dependencies between different components
done?
No.
Q39 Delivery Risk
Management
Are risks to the Portfolio identified?
No.
Q40 Delivery Risk
Management
Are risks to the Portfolio qualified?
No.
Q41 Delivery Risk
Management
Are risks to the Portfolio quantified?
No.
Q42 Delivery Risk
Management
Are responses to the risks to the Portfolio planned?
No.
62
Q43 Delivery Risk
Management
Are risks to the Portfolio controlled?
No.
Q44 Delivery Risk
Management
Are trends and deviations evaluated?
No.
Q45 Delivery Resource
Management
Do estimates (baselines) of the components exists and are reliable?
Yes. At first there is a need for verification of the components and
of its features and, at the second time, the resources are mobilized
according to availability.
Q46 Delivery Resource
Management
Is the measurement regularly made?
Yes.
Q47 Delivery Resource
Management
Are the information validated?
No.
Q48 Delivery Resource
Management
Are trends and deviations evaluated?
Yes. The component managers is responsible for determining the
necessary actions.
Q49 Delivery Resource
Management
Is the analysis of inter-dependencies between different components
done?
Yes. It is performed by the functional manager of the resource.
Q50 Delivery Stakeholder
Engagement
Are stakeholders mapped?
Partially.
Q51 Delivery Stakeholder
Engagement
Are communications planned (based on the profile of the
Stakeholders)?
No.
Q52 Delivery Stakeholder
Engagement
Is there a proactive and bi-directional communication with
stakeholders?
No.
Q53 Delivery Stakeholder
Engagement
Are stakeholders engaged in the change process?
No.
Q54 Delivery Management
Control
Is the Status of the Portfolio disseminated using appropriate
channels of communication?
Timely Portfolio report are issued in certain contexts.
Q55 Delivery Management
Control
Are the components' budget provided in incremental stages?
No. The funds are available in their entirety at the beginning.
Q56 Delivery Management
Control
Are deviations and risks treated or addressed?
Specific negotiations are established without the vision of the
whole.
Q57 Delivery Management
Control
Are interdependencies between components managed?
No.
Q58 Delivery Management
Control
Are lessons learned collected and disseminated?
No.
Q59 Delivery Management
Control
Are internal and external environment monitored?
No.
Q60 Delivery Management
Control Is there a components' reassessment to verify that the results were
achieved (at the end of the component)?
63
Yes. Components are revalued according to the objectives initially
presented to verify if it was successful or not.
Q61 Delivery Governance Are there "gates" for Portfolio decision making?
No.
Q62 Delivery Governance Are there committees established?
No.
Q63 Delivery Governance Are there rules for convening an emergency committee?
No.
64
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