GM591 Unit3 Team Paper RevB

Running head: PORTFOLIO PROJECT MANAGEMENT AT MORRIS CORPORATION 1

Portfolio Project Management at Morris Corporation

Team A (Heather Ault, Thomas Bailey, James Creamer)

GM591-01

Strategic Project Management

May 15, 2012

Professor

Jeff Tyler


Table of ContentsIntroduction......................................................................................................................................1

Content and Analysis.......................................................................................................................1

Projects Group.................................................................................................................................1

Level of Risk....................................................................................................................................2

Portfolio Managers..........................................................................................................................3

Portfolio Concept.............................................................................................................................4

Selection Process and Selection Team............................................................................................5

Recommendations............................................................................................................................7

Conclusion.......................................................................................................................................7

References........................................................................................................................................9


Portfolio Project Management at Morris Corporation

Introduction

According to Cleland and Ireland (2007), the decision to use project portfolio

management is a strategy to align projects with organizational goals. Portfolio project

management moves the selection and implementation of projects from a random process to one

with structure and discipline. Morris Corporation had successfully transitioned to portfolio

project management organization. At the surface, the decision and the transition were

successful, as the company continues to get new work and high rate of customer satisfaction.

However, as more profitable projects failed, questions were raised of the selection process and

the selection team.

This paper attempts to develop a model of portfolio project management organization, to

document the project selection criteria, and to perhaps improve the project selection process to

eliminate projects failure.

Content and Analysis

Project Portfolio Management is about more than running multiple projects. Each

portfolio of projects needs to be assessed by its business value and adherence to strategy. The

portfolio should be designed to achieve a defined business objective or benefit.

Projects Group

The projects are grouped together to facilitate effective management of efforts to meet

strategic business objectives. These projects are not necessarily interdependent or directly

related. The first step in grouping the projects together would be to develop an approval flow for

current and new projects. You will need to identify the elements of the business strategy that

PORTFOLIO PROJECT MANAGEMENT AT MORRIS CORPORATION 2

will be achieved by the portfolio and the timeframes in which it must be delivered. The strategy

must state the objectives, scope, constraints and risks of the portfolio.

Individual projects are assessed, the results are balanced and the projects grouped

together based on similar needs and resources. A selection model allows consistent application

of criteria for an informed project selection process that can optimize and support the strategic

goals and objectives (Cleland & Ireland, 2007).

Elements of a project selection process are as varied as the organization’s strategic

goals and objectives. Profit margin, project risk and process change are just a few of the

elements used in the selection process.

Level of Risk

Project selection risk should be addressed using qualitative methods to determine if the

risk has a high, medium or low probability. A risk matrix is often used to determine these

consequences. Failure to recognize, understand and accept risk leads to project portfolios

skewed toward low risk projects with little upside potential. It can also lead to an occasional,

high-risk project that endangers the enterprise (Merkhofer, 2010).

Although qualitative screening methods are adequate for screening purposes and in

situations where the risks may not be all that serious, they are limited in determining the risk

impact on the project or portfolio. So, in addition to using the qualitative screening process, the

manager must also employ some type of quantitative method to place a value on the risk. As

stated by Merkhofer (2010), there are two quantitative methods for valuing risk:

1. Compute the decrement (or increment) to the worth of the project caused by project

and project deferral risk.


2. Adjust the discount rate (cost of capital) to reflect the specific level of project risk for

each project.

The former approach requires that risks be quantified using probabilities and the latter

involves using hurdle rates. When quantifying probabilities, you must take into consideration

the impact of the range of possible outcomes and estimate when they may occur (risk timing).

Impact is the cost, time or quality a risk can have on a project. Without the benefit of a

quantitative assessment of the probability of an event occurring, an assessment remains largely

subjective and has to be based mainly on common sense and experience (Bliss, 2005).

The hurdle rate is often referred to as the required rate of return and is generally a poor

way of accounting for risks when prioritizing projects. The rates tend to be biased toward short-

term, quick payoff projects because projects are rejected long before the qualitative and

quantitative processes can be implemented.

Portfolio Managers

Cleland and Ireland (2007) note that using “portfolio management of projects is a

strategy that moves the selection and implementation of projects from a random process to one

with structure and discipline” (p. 209). It seems as though the Morris Corporation can use this

advice due to the issues raised at the meeting.

The organization has a lot of projects on going at the same time that competes for all

resources including people, money, and time. As a firm, there needs to be criteria for the project

selection process and portfolio managers can help do the following:

1. Introduce procedures that will help to guide the organization.

2. Provide balance that will be needed between people, resources and projects.


3. Develop an integrated approach to projects so that each department can still meet

their objectives.

4. Decide on the right projects for implementation and their timing.

5. Identify projects that do not meet a specific need.

6. Assist with defining the scope of a project so that there is clarity and hence reduce

delays that results in its absence.

7. Develop an organizational tool for tracking all projects so that the information is

available to everyone in a central location.

a. Maintain list of all current projects.

b. Provide status report to management based on information.

8. Evaluate all projects post-completion and submit to management.

Project portfolio managers are needed to oversee the organization of projects in the firm

and establish whether these projects are meeting their goals and are in keeping with the firm’s

overall objectives and strategies.

Portfolio Concept

If an organization is going to be characterized as being projectized it must review all of

its current projects and determine which ones match the organization’s strategic objectives and

are also aligned with the company’s mission. Some projects may have to be terminated

immediately if it does not satisfy the criteria. Other projects may not be fully aligned and a

decision also has to be made on whether to continue or terminate the project (Cleland & Ireland,

2007).

The projects that have been identified as necessary to achieve the goals and objectives of

the organization would have to be ranked by the portfolio manager. These projects would be


evaluated based on their value, cost and revenue generation and ranked accordingly. This is

necessary since it is important to identify which project would benefit from limited or scarce

resources.

The ability to allocate scarce resources for strategic or important projects is a major

advantage when adopting portfolio management as an approach. The most strategically

important projects should be given priority and other projects reevaluated for either continuation,

changes or termination.

Selection Process and Selection Team

The project selection process should be designed to ensure that project proposals are

evaluated fairly and objectively, with a focus on business value and project viability. Every

project begins with a proposal, but not every proposal can or should become a project. In a

world of limited resources, choices have to be made. Not every project has viability, and

amongst those that do, limited resources (people, time, money and equipment), must be applied

judiciously (Enterprise Project, 2012). Morris Corporation has learned it the hard way, as profits

for projects were declining and profitable projects were failing. Figure 1 below illustrated the

project selection process model of Morris Corporation adapted from Project Management

Knowhow (2012).


Morris Corporate Project Selection Process

Identify projects that support the strategy

Evaluate and prioritize projects

Select and initiate projects

Clearly defined and communicated

strategy

Integrated strategy development process

with project identification and project selection

Net Present Value (NPV)

Benefit / Cost Ratio (BCR)

Internal Rate of Return (IRR)

Staffing of project teams

Review projects regularly

Opportunity Cost (OC)

Regularly review to ensure projects are

still in-line with strategy

Payback Period (PP)

Initial Risk Assessment

Project management reviews

Pre-defined set of selection criteria

Figure 1 – Morris Corporation Project Selection Process Model

The model showcased the important of strategy in the project selection, a set of pre-

defined selection criteria to be used for evaluation of comparative viability, staffing, and the

program management review. Staffing is important in any project because resources are scarce


and in most organizations is the most limiting factor in project selection. That what Morris

Corporation found out as it has more projects than the resources. Morris Corporation took on too

many projects and overloaded its resources. Project selection is the first important part of project

portfolio management. The responsibility for the selection and review of projects lies with the

leadership team of the organization. That was what went wrong with Morris Corporation; the

sales department was successful in selling more products but without the participation of the

leadership team. Typically, the leadership team establishes a steering committee that overlooks

the project selection process including project monitoring, and directly reporting to the CEO

(Project Management Knowhow, 2012).

Recommendations

A project selection process provides a value to many organizations that embraces the

needs of business and provides a method to determine if a project will have a strategic impact to

improve business by analysis and measurement of the project assessment. The goal of the

project selection process is to analyze project viability, and to approve or reject project proposals

based on established criteria, following a set of structured steps and checkpoints. This type of

structured process offers seven key benefits: (1) set useful standards to guide decisions; review

project proposals with a critical eye; save time and minimizes redundancies; minimize knee-jerk

responses to project requests; promote cooperation and collaboration; provide a “big picture”

perspective; promotes priorities, ensuring that resources are applied to projects as needed, and

based on the expected “return on investment” (Enterprise Project, 2012).

Conclusion

Project portfolio management refers to the means, techniques and concepts used to run a

group of projects based on numerous key characteristics and achieve their objectives. By


formulating a direct relationship between the projects with the strategic objectives of the

organization, one will be able to identify, justify, and invest in only those projects that have high

success potential and impact the bottom line. For selecting the best project a project manager

can use different project selection models. Project selection model is used for ongoing

evaluation as well as initial selection. It is a key to allocation of the organization’s scarce

resources. The process selection model, when properly uses, facilitates faster, better, more cost-

competitive decisions by implementing a systematic, rational, and proven approach. It is

important to keep the project selection process in perspective. The project selection process

must be tailored to suit the needs of the organization and the types of projects faced. Project

must also make business sense (Miller, 2002).

By considering both strategic and tactical criteria within the project selection process, the

company will develop a logical, well-justified business case for the company’s investment

decision.


References

Bliss, Z. (2005, March 11). Risk management and contingency planning. Retrieved from

http://www.ahds.ac.uk/creating/information-papers/risk-management/

Cleland, D. I. & Ireland, L. R. (2007). Project management: Strategic design and

implementation (5th ed.). New York, NY: McGraw-Hill Professional.

Enterprise Project. (2012). Managing the project selection process. Retrieved from

http://www.enterpriseproject.org/managing-the-project-selection-process

Merkhofer, L. (2010). Project selection risk. Retrieved from

http://www.prioritysystem.com/reasons4b.html

Miller, B. (2002, January). Portfolio management: Linking corporate strategy to project priority

and selection. PM Solutions’ Expert Series. Retrieved from

http://ww.pmsolutions.com/uploads/pdfs/port_mgmt.pdf

Project Management Knowhow. (2012). Project selection. Retrieved from http://www.project-

management-knowhow.com/project_selection.html

http://www.project-management-knowhow.com/project_selection.html

http://www.project-management-knowhow.com/project_selection.html

http://ww.pmsolutions.com/uploads/pdfs/port_mgmt.pdf

http://www.prioritysystem.com/reasons4b.html

http://www.enterpriseproject.org/managing-the-project-selection-process

http://www.ahds.ac.uk/creating/information-papers/risk-management/

Documents

GM591 Unit3 Team Paper RevB