CONTENTS OF THE PAPER
I. CAUSES WHY PPM IS SIGNIFICANT TO ORGANIZATIONS
1. Risks of Poor Management
2. Inherent Complexity of Projects
II. CASE STUDIES
1. Outsourced PPM
2. PPM Strategy Created Internally
3. Project-Based Firm Thirsty for PPM Methodologies
III. JUSTIFICATION IN USING MODERN PPM
1. Why PPM should be continued and get away with traditional?
2. Alliance concept to fill inadequacies of Partnering
CAUSES WHY PPM IS SIGNIFICANT TO ORGANIZATIONS
This section defines the characteristic of projects in general with particular reference to the critical issues confronting organizations. The difficulties that will emerge in this discussion can be readily implicates to the benefits of Program and Portfolio Management (PPM). Since PPM has the ability to offer leadership structures and planning/ implementation strategies that are formidable for up-and-coming problems to penetrate, its use should be easily appreciated.
1. Risks of Poor Management
Project life-cycle generally consists of four phases (in order); namely: concept and initiation, design and development, implementation or construction, and commission or handover (Burke, 2003, p. 24). Planning and execution stage are likely synonymous to the second and third stages which situate them in the middle of the project life-cycle. In this position, planning has the highest potential to add value as well as the level of influence throughout the whole project. On the other hand, execution has the highest cost of change (p. 24). Since the success of the latter is precedent to the success of the former, poor management in planning alone can cost one to several objectives of the project. However, underestimating execution contingencies to support or enhance planning inadequacies and loopholes can cause the same.
Planning can also refer to several planning steps throughout the whole project not just a single or overlapping phase. In fact, it is what the project participants used to build key objectives under project charter (p. 95). As poor management takeovers this crucial undertaking, they may be installing over- or under-estimated value of the project. Thus, irrational objectives could be created. In addition, going further back into project selection, inability to carry-on key objectives that initially made the project acceptable as the project accelerates can entirely deter its value-adding potential. For example, new technology (selected for customer-value centrism) is cheaply funded (cost-savings centrism) which resulted to sub-standard parts (defeats the former and supports the latter).
Theoretically, poor project management can be a cause of internal conflict and inadequate authority (1981, p. 9). The former is characterized by poor schedule and budget control because of the absence of cooperation between the project team and functional organizations. This readily explains how the planning stage under the project life-cycle can be ineffectively made with this situation. As a result, time and cost objectives are at risk of distortion. As the project team would want to keep the objectives, the conflict can induce bottlenecks especially in coordination. In effect, the project team is bound to devise tactics to solve such bottlenecks which ultimately result in limiting the scope of the project, revising the original objectives and attempting to stand on their own.
The latter is highlighted by non-commitment of resources, personnel and facilities to the project as the top-management failed to provide backing on the project manager. The negative symptom of this is likely to emerge in the execution phase where the planned schedule and resource proposals are not diligently followed. There can be delays in issuing budgets to pay for supplier invoice or using project members to do other responsibilities that can hamper project efficiency. As a result, output targets like cash flows or early completion are reduced on their probability to be obtained. Task floats that can be used for flexibility to delay or expedite certain activities can be exhausted due to such symptoms.
However, with these circumstances, project objectives are not entirely unattainable because usually there are trade-offs. Using the integrated risk management model, project objectives can be transcribed to three most crucial project elements which is time, cost and quality (Burke, 2003, p. 257). Quality is the most complex and difficult to discern making it also difficult to evaluate. The management can simply choose their best engineers and maybe in the right position to assume a quality output. However, their assessment can only be figured out after testing and completion of the project. As such, this situates cost and time in the forefront of project analysis and consideration to become the foundation of objectives.
The banana curve clearly shows the trade-off between time and cost (Burke, 2003, p. 207). When project time is reduced, the cost usually escalates while the reverse is likely true. For a project initiated by an average manufacturer, the curve is very useful to obtain optimal returns from the project. This trade-off can be represented by two conflicting project objectives such as “To be able to finish the project as early as possible to position resources on their regular responsibilities and early inflows from the finished project” and “To implement the project efficiently to reduce the risk of loss and maximize project returns”. From this, priority is necessary for effective decision-making. This goes beyond time, cost or quality aspects but on how much the company believes on the feasibility of the project to provide benefits. But the question is “What is the ultimate objective of the project?”
As such, when a poor project management occurred in the planning phase, task schedules may not obtain their optimal levels (e.g. allow maximum floatation for flexibility and contingencies) but the conflict may as well teach project members to be resourceful and put the project to a greater level. Thus, a certain project objective (maybe an implicit one) that contributes to other project management knowledge areas like information communications is achieved even though schedule optimization has been a failure. This is the same for execution stage. When a contingent action is proposed and there is no support from the top-management, governance mechanisms (maybe another implicit objective) are adopted.
It is necessary for project managers and top-management to provide an identity to the project at hand. This will concretize the importance of the project objectives compared to organizational/ functional ones. In this way, poor project management can be prevented in the planning and execution stages. This will also limit the likelihood of the project to adversely affect implicit objectives that is beyond its scope. Prioritization can be applied and trade-offs can be measured. As this is in place, the final task is to prevent poor project management to emerge in both planning and execution stage. The ideal situation is to filter planning problems and correct it under execution stage. Otherwise, the project can face total failure of completion and all attached objectives will be bound also to demise.
2. Inherent Complexity of Projects
In reality, decisions are based from incomplete information and uncertainty about the outcome that gives rise to an intrinsic element of every project which is risks (Burke, 2003, p. 252). As much as a project wants to avoid risks, it is unlikely to do so because the general rule is that higher (lower) risks post higher (lower) returns (Macmenamin, 1999). This is concretized with the universal business doctrine to profit. In addition, as the project not simply wants to have a partial competitive edge rather a sustainable one, complying with the four criteria on having sustainable competitive advantage necessarily accumulates greater risks (Hitt, 2003, p. 88-92). When the project embraces valuable, costly-to-imitate, rare and non-substitutable capabilities, it already initiated to move its risks continuum towards total risks and away from no risk and limiting the assurance of the scope of risk management (Burke, 2003, p. 252).
For example, one of the root causes of a failed project is due to the level of innovation (p. 259). A high level of innovation is a candidate of producing a competitive platform like Amazon’s website that acts like a human salesperson (Hitt et al 2003 p. 90). The project is likely to result to high design costs as “one-click” technology should be developed including purchase of necessary rights/ license to execute the project. On the other hand, a low level of innovation may emerge from Amazon’s homogeneity with industry standards that restrains project initiation because it does not have the willingness to exploit the absence of innovation in the industry. Due to this, a project feature usually entails high level of innovation. This necessarily requires huge funding, technical expertise and restructuring from the company. In the contrary, as risks are high, the company has to gamble. It has to rely with the untested procedures, technology and techniques by exposing its liquidity and strategy to complete the project and derive anticipated returns.
In this situation, external and internal scanning including competitor intelligence is of little help because uncertainty goes beyond the risk management scope. Risks are identifiable but are hardly quantifiable because there is yet to provide systematic trend of risk occurrence associated with the innovation. Thus, probability and consequences/ impact of innovation risks (Burke, 2003, p. 261) are difficult to indicate. This positions any risk response under a highly subjective framework. In heuristic studies like that of (1983), information involving formal and probability characteristics that tend to obligate a person was less regarded than the more natural, informal and easier way of cognition (p. 293-315). According to Burke (2003), other common reasons of project failure are port estimation, inadequate planning, insufficient control and lack of commitment (p. 260) which are the most probable consequences of non-objective approach.
As observed, a successful feasibility study regarding an innovation is not an assurance that the project will also be triumphant. In concept phase, poor estimation will emerge in indirect costing. In the design phase, flexibility of task schedules is tightened by certain innovation dilemma like being the first-mover. In the implementation phase, human resource aspect of the project can be neglected as managerial skills would be overly-focus on anticipating difficulties from new and ambiguous technology. In the commission phase, innovation testing can result to persistent problems that require overtime and extension of the completion date. The overall phases of the project post threats to costs, quality and time due to the presence of large amount of uncertainties and risks. This particular phenomenon can be associated with innovation’s integrated approach to companies (2003).
Aside from innovation, projects typically affect a set of stakeholders which includes customers, employees, suppliers, the government and the public. What the project team and the company want are to minimize the negative effects of the project to them and maximize positive effects to aid in profitability and longer product life. This is where legitimacy theory takes place (1996, p. 53) where an entity is required to provide evidence that it is indeed legitimate to be operating within a societal framework. Indication of failure to legitimize includes environmental pollution, employee abuse and fraudulent marketing. But stakeholders have their way to counter the company through hostile lobbying, product boycott and employee strikes.
In the contrary, the project is not perfectly funded, scheduled and customized according to specific needs of individual stakeholders. The project requires prioritization as it cannot satisfy all of them (Hitt et al 2003 p. 25). This is a rational strategy because the project has its own specific objectives that may not be intended to indirect stakeholders. The inability to obtain this goal can also be caused by the lack of stakeholder focus. As a result, most companies go on with stakeholder priority (e.g. customers) and leave others with minimum attention (e.g. environmentalists). The latter, however, can pose project closure even when successfully completed if the product does not meet certain standards. Due to this, environmental disclosures are used for corporate image-building (1996, p. 62).
Options to mitigate possible retaliation of non-priority stakeholders are available to the company. However, such are in nature, are simply reactive tactics where ambiguity of success are minimally analyze throughout the life of the project. In addition, they are also necessarily includes unethical execution (e.g. greasing and fraud) to address any stakeholder difficulty. As a result, project members are squeezed in a challenging situation. If they will not use these options, they may risk not exploiting opportunities because of the associated substantial costs, time and quality constraints of a project with diversified stakeholders. On the other hand, not having second thoughts to refuse such options may lead to risking reputation and conscience that can have strategic and personal complications (e.g. Enron scandal).
CASE STUDIES
In this section, it will highlight the ability of PPM in addressing strategic problems and issues of a firm. Either it chooses to create its own PPM plan or outsource it, the results are positive. This explains the real case scenarios where PPM application proved to be useful.
1. Outsourced PPM
PPM was used by a Fortune 100 finance subsidiary when confronted inconsistent project implementation, insufficient resource allocation for leading projects and minimal participation of actors in IT programs (Celerity. COM). These bottlenecks disabled efforts to push funding to increase IT capabilities and be more competitive. Thus, the subsidiary decided to get advice from opinion leaders in the industry. The consultant had initially assessed environmental factors that face PPM of the client. This is followed by creation of several frameworks on how to improve current PPM structure including appropriate leadership structure in PPM.
The focus of the engagement is human resource particularly recruitment of right personnel to head the chosen governance and PPM strategies (Celerity. COM). This is also emphasized when the consultant mentioned the core role of developing commitment of the employees regarding changes in current PPM. As a result of this effort, the client had accelerated the required platform for appropriate PPM to be accepted and integrated into operations. Funding requirements are addressed triggering the renewed competitive vigor of the subsidiary. In the management side, it learned how to prioritize projects emanated in establishing IT components. The commitment resulted into increased cooperation and communication across departments which led to efficiently allocating budgets and resources.
2. PPM Strategy Created Internally
In 2001, Gering and NCU merger initiated the cornerstone of the business combination through a project that will integrate their IT capabilities (1990). This project is considered a crucial step to achieve synergy in three strategic dimensions such as strength of international network, range of product offering and size of market base. In the onset, the success of the project can provide savings of over 15 Million Euros (i.e. 30% of combined IT budgets). Since the companies are two of the biggest insurer in the world, the undertaking is taken seriously. PPM strategy is focused on the alignment of IT strategy with business strategy. This is assured by means of tapping external consultants, top-level management, pool of task groups and close coordination. Time is the driving force in completing milestones and assessing results at each project stage.
There are three IT project phases (1990). Due diligence is the evaluation of resources of two firms and addressing combination difficulties. Pre-merger integration focused on anti-trust laws of the merger. Post-merger integration is where IT development is actually held. Results are phenomenal. By time-boxing each activities, substantial time is saved. For example, instead of consuming time and money in choosing a target IT system, the existing system of NCU was used not only because it is more strategic but also its integration with the system of Gering can save time. Further, time-boxing also allows other benefits to ensue such as finding the right channels where consultant evaluators, task groups and management committees can communicate. The project concept of time and cost trade-offs shown in the banana curve is adhered. As a result, the merged firm enjoyed IT benefits and savings while recovered easily the investments needed to expedite the project.
3. Project-Based Firm Thirsty for PPM Methodologies
Option is a global manufacturer of quality hearing aids which is one of the pioneers of project-based organization. In 1991, it adopted a project-based structure referred as spaghetti organization in an effort to retain leadership in the sector (Adam-Smith & Peacock 1994). The primary goal of such move is to increase innovation by creating strategic circles and groups to prevent slipping under the competitive products being offered by other companies. The basic tenet of each project is to “Find something to do or loose your job”. Employees have the independence to choose at least one project group. Rewards are highly based on contribution to the group and feedback from the project leader. There are no specific leaders to report rather to focus on the project. Each group has high flexibility in terms of time, place and nature of accomplishing targets. The basis of group appraisal is based on results rather than processes. There are minimal departments with administrative staff serving the significant part in assisting project teams regarding administrative issues.
Without PPM, project groups at Option would be unguided. The absence of reporting manager can aggravate complexity attached in project management. Lack of experience proved to be large contributory factor in managing projects. PPM use is also eminent in the high heterogeneity of the composition of each group. As employee would be exposed to various personalities and group work ethics, absence of project plan can detriment identification of member strengths and inability to anticipate attitude clashes. Planning and taking course of action inherent to PPM is useful in these circumstances. Setting the group goal to project results can minimize behavioral differences and focus effort according to project plan. The structure is compatible with PPM because uncertainty is obvious when an employee enters a new group from time-to-time. As a result, certainty measures become insignificant shaping innovative and individual ideas. Members are not sure whether their ideas will be readily accepted but otherwise should push them as inactiveness can lead to lay-off.
JUSTIFICATION IN USING MODERN PPM
This section explains the advantages of using PPM continuously as it will absorb contemporary improvements in the field of project management. Being satisfied with historical successes of current and past PPM schemes can undermine the ability of PPM to achieve new heights and exploit new opportunities that the organization has yet to discover.
1. Why PPM should be continued and get away with traditional?
There are various advantages that a firm can derive when it has an appropriate PPM (Dobbins 2004). The world of today is exposed to abrupt changes that can disrupt business operations. As the Newtonian view of the world focus on certainty and facts, it cannot address the problems posted by the environment. If the firm will cease adoption of PPM, it may not adjust its decision-making framework based on modern view which embraces strategy, continuous change, various outlooks and leadership. Pluralist environments are mitigated by PPM that results to development of capabilities and efficiency in operations. Inherent to PPM, each project assessment is applied with systems thinking, complex theory and other combinations of field of knowledge to provide integrated conclusions. Common applications of modern PPM are used in business areas such as defense, information technology, outsourcing and change management.
If PPM in a project-based firm will be discontinued, they will forever be trapped in a certainty-based scheme (Dobbins 2004). They will not be able to appreciate the importance of risk-taking and learning curve. For example, if a project is new to the firm, it will likely not take the project due to certainty limitations. As a result, the opportunity is lost while the company aggravates its inexperience in the issues because of the lack of confidence and initiative to tackle substantial risks. On the other hand, an alternative PPM route is tried by risk-averse firms. Partnering enables them to commit on specific projects that could be new to them by spreading the risks to partners. Although a creative position to replace PPM, incompatibility of organizational goals and complex contractual obligations posted challenges to success. This is because traditional project management concepts are still in used. As a result, certainty assumptions cannot fit because there are really no complete contracts as they are subject to incomplete information and opportunistic behavior.
Other feats to displace modern PPM include six sigma, evolutionary acquisition and strategies applied in IT adoption (Dobbins 2004). They are focused in minimizing the time required to finish the project for the purpose of maintaining certainty to acceptable level. Thus, they are coinciding with traditional project management techniques. However, they are highly tarnished by unexpected events during the short-term projects. Although completion time is reduced, it is but right to conclude that they are not exempted from untoward incidents that can delay the project. Further, leadership in these kinds of project is autocratic while disabling motivation to the workforce. They are also prejudice to the learning of a core group rather the entire organization and undermine synergy implications.
Modern PPM such as Next Generation Project Management (NP) is a system rather a collection of procedures eminent in traditional PPM (Dobbins 2004). In effect, limitations of myopic approach to project areas are mitigated by hastening the dogma, “the whole is more important than the sum of its parts”. It appreciates not only complexity of social systems within an organization rather its evolving mechanisms. It adheres to the idea that people changes over time and governance structures must adjust accordingly. Process governance, thus is created, which is applied to expecting emergent situations as opposed to static environments. It is to note that this appreciation of NP automatically undermines certainty and facts in favor of vigilance to emerging events within the organization. Autocratic leadership is dissolved as opposing views are studied, accepted and applied with managerial voluntarism. This approach ultimately falsifies “complex panic” and send message to organizational actors to relax because they have simplified the impact to determine solutions easily.
2. Alliance concept to fill inadequacies of Partnering
Alliance concept is gaining ground in project management in Australia (Cowen & Davis ?). It is flexible as it can be used in both simple and complex situations. As observed in the earlier adoption of the concept by major utilities company in the country, one of its advantages is the “last voice” engrained in the relationship between the former and contractors. However, in the latter stages of the adoption by several Councils, issues such as limited resources and inability to impose provisions for litigation against contractors in case of failure to deliver triggered the upgrade of some features. Some modifications are the following; contractors can optimize the purchasing system accordingly, open communication of Council to its limited resources, exchange of employees between Contractor and Council and Contractor is responsible to the delivery of intended results. As the insurance market had experienced downturn in recent years, this structure had become the framework of alliances.
The case above shows the importance of embracing PPM continuously as operations, contractor relationships and environment undergo significant change. If a company wants to be successful, it has to keep its planning and implementation framework vigilant to the contemporary demands to business model. PPM is not static and inability to incorporate realistic events that have shaken past knowledge would lead to inefficiency of its use. Organizations that see the ineffectiveness of PPM in their operations as they cannot see tangible results can be categorized on those organizations using traditional project management techniques. Aggravatingly, when PPM will cease use, it can forever lock the firm “inside the box” and hide potential from being tapped. It will continue to calculate and measure all possibilities until the time of its collapse where it finds it does nothing to tackle the issues that attack the firm. Early in its conception, organizations existed due to ideas generated by its founders. It will not be established if they are risk-averse of untoward events. Through PPM, this thrust will continuously be prevalent in operations as the organization is not afraid of risks and have plans on how to face or address them when attacked.
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