An integrated framework for project portfolio selection
Introduction
Project portfolio selection and the associated activity of managing selected projects throughout their life cycles are important activities in many organizations,1, 2, 3since project management approaches are so commonly used in many industries for activities such as research and development of new products, implementing new systems and processes in manufacturing and information systems, and contracting engineering and construction projects. But there are usually more projects available for selection than can be undertaken within the physical and financial constraints of a firm, so choices must be made in making up a suitable project portfolio.
There are many relatively divergent techniques that can be used to estimate, evaluate, and choose project portfolios.[4]Many of these techniques are not widely used because they are too complex and require too much input data, they provide an inadequate treatment of risk and uncertainty, they fail to recognize interrelationships and interrelated criteria, they may just be too difficult to understand and use, or they may not be used in the form of an organized process.[1]But because of growing competitive pressures in the global economy, it has been suggested[5]that project portfolio analysis and planning will grow in the 1990s to become as important as business portfolio planning became in the 1970s and 1980s. Firms that wish to be competitive by selecting the most appropriate projects must therefore use techniques and procedures for portfolio selection that are based on the most critical project measures, but these techniques will not be used if they cannot be understood readily by managerial decision makers. Although there is no lack of techniques for project evaluation and portfolio selection, there is a total lack of a framework for organizing these techniques logically in a flexible process which supports the project portfolio selection process.
The objectives of this paper are to: (a) evaluate briefly the current state of the art in project portfolio selection methods and to develop a number of related propositions for effective portfolio selection, based on the literature, (b) suggest an integrated framework to provide decision support for portfolio selection, allowing decision makers to utilize a desired subset of available methodologies in a flexible and logical manner, and (c) describe a decision support system which can embody this framework in the support of portfolio selection activities.
Tools for decision support, not decision making tools, are emphasized in this discussion, since the thought processes in decision making should be supported and not supplanted by the tools used. This support is provided through techniques or models, data, and management of large amounts of information, so decision makers can make informed decisions based on the most important facts. To bring these points forward, we examine the literature and develop a series of propositions that must be met if a framework is to be developed that will succeed in practice. Then an integrated framework is proposed which allows decision makers to choose from a variety of techniques or models, based on these propositions. This integrated approach can help decision maker(s) to select a project portfolio that maximizes the criteria of interest, suitably balanced on both quantitative and qualitative measures they choose. The approach also has provision for built-in assistance to account for different types of resource limitations and project interdependencies. Finally, a prototype decision support system is described for modeling, managing, and displaying project and portfolio information during portfolio selection.
Section snippets
Propositions for project portfolio selection
A project can be defined as “a complex effort, usually less than three years in duration, made up of interrelated tasks, performed by various organizations, with a well-defined objective, schedule, and budget”.[6]A project portfolio is a group of projects that are carried out under the sponsorship and/or management of a particular organization. These projects must compete for scarce resources (people, finances, time, etc.) available from the sponsor, since there are usually not enough resources
Project portfolio selection framework
Among published methodologies for project portfolio selection, there has been little progress towards achieving an integrated framework that decomposes the process into a flexible and logical series of activities that involve full participation by the selection committee. Such an approach could take advantage of the best characteristics of a combination of existing methods well grounded in theory. Other attempts to build integrated support for portfolio selection have been reported.7, 34, 35
Decision support systems considerations
The framework we have outlined can be used for project portfolio selection in an environment which is only partially supported by computerized modeling and databases, since users are given the flexibility of choosing their own techniques or models at each stage. However, the set of main stages (heavy outlined boxes) in the framework (Fig. 1) can be integrated into a Decision Support System (DSS), including a carefully designed model management module that handles models of the many different
Discussion
The framework we propose is basically an attempt to simplify and organize the project portfolio selection process. It matches considerations which are important to decision makers who need to make portfolio selection decisions. Since decision makers should be directly involved with the selection process at each of its stages, support tools (either manual or computer-based) will be essential to implement each technique used, and the framework leaves the choice of specific techniques up to the
Acknowledgements
This research was supported by a grant from the Innovation Research Centre, Michael G. DeGroote School of Business, McMaster University.
Norm Archer is a professor of management science and information systems at the Michael G. DeGroote School of Business, McMaster University. He teaches courses in project selection and management, telecommunications, information systems, and statistics. His research interests are in project portfolio selection, the human computer interface, and electronic commerce. He has presented seminars on these topics, co-authored a number of working papers, and published a number of research papers on
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Norm Archer is a professor of management science and information systems at the Michael G. DeGroote School of Business, McMaster University. He teaches courses in project selection and management, telecommunications, information systems, and statistics. His research interests are in project portfolio selection, the human computer interface, and electronic commerce. He has presented seminars on these topics, co-authored a number of working papers, and published a number of research papers on these and other topics.
Fereidoun Ghasemzadeh has a B.Sc. and an M.S. in industrial engineering from Sharif and Tarbiat Modarres Universities respectively, in Iran. He recently completed his Ph.D. in management science/systems at the Michael G. DeGroote School of Business, McMaster University. He has a considerable amount of experience in project planning and management, and his research interests are in project selection and management, executive support systems, and decision support systems. He has co-authored three working papers, published two research papers on project portfolio selection, and submitted two more research papers for publication.