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SECTION II

THE MANAGEMENT OF PROJECTS

The Wiley Guide to Managing Projects. Edited by Peter W. G. Morris and Jeffrey K. PintoCopyright © 2004 John Wiley & Sons, Inc.

SECTION II.1

STRATEGY, PORTFOLIO ANDPROGRAM MANAGEMENT

INTRODUCTION

Morris and Hough’s (1987) work signaled the beginning of our recognition that animportant sea change was occurring in the manner with which we might begin to

make sense of the project management discipline. Their ‘‘broadening out’’ of the contextof project-based work, as articulated in the introduction, forced researchers and practitionersalike to reorient the traditional views of project management into a more inclusive andcomprehensive body of knowledge regarding the management of projects. Because projectsare typically initiated with the goal of achieving corporate strategic objectives, it becamenecessary to better understand the positioning of projects to align with strategic portfoliosand programs. Likewise, until and unless we can come to a firmer recognition of the goalsa project is intended to support, it will be difficult and frustrating to ascribe notions ofsuccess or failure to any particular project venture. Is it true, to put it into Shakespeare’swords, that ‘‘ripeness is all,’’ or must we not have a firmer basis for understanding the causesand results of what we attempt?

A good place to start, as we’ve already seen, is the whole debate about project success.In Chapter 5 Terry Cooke-Davies reviews the studies that have been carried out in thisarea since the landmark work by Baker, Murphy, and Fisher in 1974. He concludes thatthere are essentially three levels of success measure: project management success (was theproject done right?), project success (was the right project done?), and consistent projectsuccess (were the right projects done right time after time?). While warning that there areno silver bullets, Terry nevertheless identifies the half dozen or so key factors that he believes,from his research and that of his colleagues, are critical at each level.

Roland Gareis, in Chapter 6, offers a completely different approach. Refreshing, am-bitious, and comprehensive, Roland discusses the characteristics of organizations that areproject- (and program-) oriented. Again building on years of original research as well as

The Wiley Guide to Managing Projects. Edited by Peter W. G. Morris and Jeffrey K. PintoCopyright © 2004 John Wiley & Sons, Inc.

90 The Wiley Guide to Managing Projects

practical consulting, Roland encapsulates most of the ideas this resource book addresses,although using his own distinctive ‘‘management by projects’’ framework (which is justslightly different, as the wording would suggest, from our ‘‘management of projects’’).

In Chapter 7, Karlos Artto and Perttu Dietrich offer another comprehensive and verythorough overview, but this time on strategic business management through multiple proj-ects. Covering a wealth of academic work in the area, Karlos and Perttu examine the waythat companies manage the relationships between portfolios, programs, and projects in dif-ferent situations. They then generalize this into an overall theoretical model, which theyillustrate from a series of research projects they have undertaken with industry.

Ashley Jamieson and Peter Morris, in Chapter 8, similarly survey the literature onmoving from corporate strategy to project strategy, again emphasizing the sequence of mov-ing via portfolios and programs into projects (and subprojects/tasks). Like Artto and Die-trich, their chapter introduces fresh research evidence to substantiate their findings, this timefrom a project funded largely by PMI. The project uses case study data as well as evidencefrom a questionnaire survey of PMI members and shows that most of those who repliedroutinely work in programs and projects, and use techniques to value-optimize the strategy(as is later discussed in Chapter 36).

David Cleland builds on this argument in Chapter 9, drawing on a wealth of experienceto extend the arguments regarding corporate planning and programs with more detail atthe project planning end—for example, explaining how project strategic planning feeds intowork packages via the work breakdown structure.

Joe Lampel and Pushkar Jha, in their chapter on project orientation, Chapter 10, con-tend that many projects fail as a result of poor strategic orientation—of not achieving aproper fit between the enterprise and the project. They hypothesize three types of project/enterprise orientation—project based, project led, and core operations led—and proposethat project scoping, programming, and autonomy shape the interaction between the projectand its corporate parent. They conclude by presenting research findings that explore theseinteractions.

Having reviewed aspects of the linkages between strategy at the corporate, portfolio,program, and project levels, the next two chapters focus more purposefully on, first, portfoliomanagement, and second, program management.

Norm Archer and Fereidoun Ghasemzadeh are two of the world’s leading authoritieson portfolio management (in the project, as opposed to the financial, sense). Their Chapter11 brings out the importance particularly of managing risk and outsourcing options at theportfolio level, and the need for a framework for classifying project type. They then proceedto look at the different characteristics that affect portfolio choice and develop a genericprocess model for portfolio selection.

Michel Thiry, in Chapter 12, develops a number of interesting perspectives to betterunderstand the characteristics of program management. Building on the ideas already pre-sented in the previous chapters on strategy and portfolio management, Michel emphasizesthe importance of learning in developing a strategic response to evolving conditions; in hisprocess model of program management, learning needs understanding as clearly as per-formance delivery. (This leads him to define project management in the more specific senseof being primarily about uncertainty reduction.) He then elaborates this into a two-dimensional phase model linking strategy, programs, projects, and operations cyclicallyaround the activities of formulation, organization, deployment, appraisal, and dissolution.

Strategy, Portfolio and Program Management 91

Ali Jaafari, in Chapter 13, focuses on the characteristics of large (engineering) projects,emphasizing in particular how they are subject to environmental uncertainty and may needmuch more front-end, strategic management than the smaller project. Ali then walks thereader through a high-level process model of the major things that need doing in the man-agement of large projects.

Graham Winch, in Chapter 14, provides an enormously useful practical account of theimportance of stakeholder management in achieving successful project outcomes. Taking asystems development project as an example (the computerization of share dealing on theLondon Stock Exchange), Graham shows how the failure to identify and manage differentparties’ expectations can not only lead to ‘‘academic’’ discussions of whether and for whomthe project was or was not a success, but can in a very real sense lead to loss of control andultimately project disaster. Graham concludes by drawing out nine key lessons for managingstakeholders effectively.

Finance is an important dimension to the strategic development of projects. The avail-ability of money will affect what can be done, and when. In the public area particularly,changes in the way projects are funded have had a huge effect on the whole way projectsare set up and carried out. The next two chapters, by Rodney Turner and Graham Ive,illustrate this.

In Chapter 15 Rodney Turner gives a masterful overview of the characteristics andmeans of financing projects as well as the process of financial management on projects. Oneof the newer forms of project finance to have developed over the last 20 or so years (comingout of the oil sector in the 1970s) has been that of basing the project’s funding solely onthe revenues generated specifically by the project itself, with no other security from otherparties. This form, strictly termed ‘‘project financing,’’ has become very important in manyparts of the world in bringing ways of using private funds to finance public infrastructureprojects. It is no exaggeration to say that this has had a revolutionary impact on the man-agement of public sector projects where it has been applied.

Graham Ive, in Chapter 16, discusses this form of project financing in detail, withparticular reference to its application in the British public sector, which is widely regardedas leading the field in this area. He outlines the origin of this form of financing, known inthe United Kingdom as PFI (for Private Finance Initiative), and shows how it impacts onthe management of projects, for example by requiring increased clarity on project objectives,risk management, value management, securing stakeholder consent, capturing users’ re-quirements, and on procurement and bidding practices. (All issues either already addressedat this point or to be covered later in the book.) Interestingly, with regard to the procurementchallenges, Graham uses an economic tool (agency theory) to analyze the problems of de-vising the reward structure, selection of resources, and moral hazard. Throughout, he illus-trates his points with reference to a real PFI project, a new hospital.

About the Authors

Terry Cooke-Davies

Terry has been a practitioner of both general and project management continuously sincethe end of the 1960s. He is the Managing Director of Human Systems Limited, which he


founded in 1985 to provide services to organizations in support of their innovation projectsand ventures. Through the family of project management knowledge networks created andsupported by Human Systems, he is in close touch with the best project management prac-tices of more than 70 leading organizations globally. The methods developed in support ofthe networks are soundly based in theory, as well as having practical application to members,and this was recognized by the award of a PhD to Terry by Leeds Metropolitan Universityin 2000 for a thesis entitled, ‘‘Towards Improved Project Management Practice: Uncoveringthe Evidence for Effective Practices through Empirical Research.’’ He is now an AdjunctProfessor of Project Management at the University of Technology, Sydney and an HonoraryResearch Fellow at University College, London. Terry is a regular speaker at internationalproject management conferences in Europe, North America, Australia, and Asia and haspublished more than 30 book chapters, journal and magazine articles, and research papers.He has a bachelor’s degree in Theology, and qualifications in electrical engineering, man-agement accounting, and counseling, in addition to his doctor’s degree in Project Manage-ment.

Roland Gareis

Dr. Roland Gareis graduated from the University of Economics and Business Administra-tion, Vienna; had habilitation at the University of Technology, Vienna, Department ofConstruction Industry; was Professor at the Georgia Institute of Technology in Atlanta; andwas Visiting Professor at the ETH, Zurich, at the Georgia State University, Atlanta and atthe University of Quebec, Montreal. He is currently Professor of Project Management atthe University of Economics and Business Administration, Vienna and Director of the post-graduate program ‘‘International Project Management.’’ He owns the firm ROLANDGAREIS CONSULTING.

Karlos A. Artto

Dr. Karlos Artto is professor at the Department of Industrial Engineering and Managementat the Helsinki University of Technology (HUT), Finland, where he is responsible for de-veloping research and education in the field of project-oriented activities in business. Hiscurrent research interests cover the management of project-based organizations (includingthe area of project portfolio management and strategic management of multiple projects inorganizations); the management of innovation, technology, R&D, new product development,and operational development projects in different organizational contexts; project networksand project delivery chains; and risk management (with the emphasis on management ofbusiness opportunities and considerations of project success and related criteria).

Perttu H. Dietrich

Perttu Dietrich works as a project manager and researcher at the BIT Research Centre atthe Helsinki University of Technology (HUT), Finland. He has pursued research and de-velopment in several companies in the area of project portfolio management. His research


interests include strategic management, multiproject management, and organizational de-velopment in different organizational contexts.

Ashley Jamieson

Ashley Jamieson worked for many years as a business manager, senior program manager,and project manager with global aerospace and defense companies on British, European,North American, Middle East, Southeast Asia, and Australasian aircraft programs and proj-ects. He then took up a career in research and academia. He has worked at the Centre forResearch in the Management of Projects (CRMP) at UMIST, where he carried out researchinto design management in major construction projects and was a visiting lecturer in projectmanagement. More recently, he has worked at University College, London, where througha PMI-funded research project, he investigated how strategy is moved from corporate plan-ning to projects and is currently conducting research for APM on its Bok revision with PeterMorris. He holds an MSc in Business Management and UMIST and is the coauthor (withPeter Morris) of Translating Corporate Strategy into Project Strategy (2004), published by PMI.

Peter W. G. Morris

Peter Morris is Professor of Construction and Project Management at University College,London, Visiting Professor of Engineering Project Management at UMIST, and Directorof the UCL/UMIST-based Centre for Research in the Management of Projects. He is alsoExecutive Director of INDECO Ltd, an international projects-oriented management con-sultancy. He is a past Chairman and Vice President of the UK Association for ProjectManagement and Deputy Chairman of the International Project Management Association.His research has focused significantly around knowledge management and organizationallearning in projects, and in design management. Dr. Morris consults with many majorcompanies on developing enterprise-wide project management competency. Prior to joiningINDECO, he was a Main Board Director of Bovis Limited, the holding company of theBovis Construction Group. Between 1984 and 1989 he was a Research Fellow at the Uni-versity of Oxford and Executive Director of the Major Projects Association. Prior to hiswork at Oxford, he was with Arthur D. Little in Cambridge, Massachusetts, and previouslywith Booz Allen Hamilton in New York and with Sir Robert McAlpine in London. He haswritten approximately 100 papers on project management, as well as the books The Anatomy

of Major Projects (Wiley, 1988), The Management of Projects (Thomas Telford, 1997) and Trans-

lating Corporate Strategy into Project Strategy (PMI, 2004). He is a Fellow of the Association forProject Management, Institution of Civil Engineers, and Chartered Institute of Building andhas a PhD, MSc and BSc, all from UMIST.

David Cleland

David I. Cleland is currently Professor Emeritus in the School of Engineering at the Uni-versity of Pittsburgh. He is the author/editor of 36 books in the fields of project manage-


ment, engineering management, and manufacturing management. He has served as a con-sultant for both national and foreign companies, and has been honored for his original andcontinuing contributions to his disciplines. Dr. Cleland is a Fellow of the Project Manage-ment Institute (PMI) and has received the Distinguished Contribution to Project Manage-ment Award from PMI in 1983, 1993, and 2001. In 1997 he was honored with theestablishment of the ‘‘David I. Cleland Excellence in Project Management LiteratureAward’’ sponsored by PMI.

Joseph Lampel

Joseph Lampel is a Professor of Strategy at Cass Business School, City University, London.He obtained his undergraduate degree in Physics from McGill University, Canada, and laterpursued his MSc in Technology Policy at the Institut d’Histoire et Sociopolitique des Sci-ences at Universite de Montreal, Canada. After working for the Science Council of Canadaand the Ontario government, he returned to McGill University to pursue doctoral studiesin Strategic Management. His dissertation ‘‘Strategy in Thin Industries’’ won the Best Dis-sertation Award from the Administrative Science Association of Canada in 1992. He wasAssistant Professor at the Stern School of Business, New York University from 1989 to 1996.Subsequently, he was Reader at the University of St. Andrews from 1996 to 1999, andProfessor of Strategic Management at University of Nottingham Business School from 1999to 2001. He has also taught at McGill University, Concordia University, Montreal, and theUniversity of Illinois at Urbana-Champaign. Joseph Lampel is the author with Henry Mintz-berg and Bruch Ahlstrand of the Strategy Safari (Free Press/Prentice Hall, 1998). He is alsothe editor with Henry Mintzberg, James Brian Quinn, and Sumantra Ghoshal of the fourthedition of The Strategy Process (Prentice Hall, 2003). He edited a Special Issue of InternationalJournal of Project Management, on Strategic Project Management (2001, Vol. 19, No. 8). Hehas published in Strategic Management Journal, Sloan Management Review, Organization Science, Jour-nal of Management, Journal of Management Studies, R&D Management, International Journal of Tech-nology Management, and Fortune Magazine.

Pushkar P. Jha

Pushkar Jha holds an MPhil in process engineering from the University of Newcastle-upon-Tyne and degrees in management and commerce. He is currently a research fellow at CassBusiness School, London, working in the area of project-based organizational learning. Hewas a member of the Advanced Process Control Group at the University of Newcastle uponTyne, and prior to this he worked on development projects in India.

Norman P. Archer

Dr. Norm Archer is Professor Emeritus in the Management Science and Information Sys-tems Area of the Michael G. DeGroote School of Business at McMaster University and isSpecial Advisor to the McMaster eBusiness Research Centre (MeRC). Dr. Archer consults,teaches, and supervises graduate student research projects. He is active in the study oforganizational problems relating to the implementation of e-business approaches in existing


organizations, and the resulting impacts on processes, employees, customers, and suppliers.Current research projects include the study of knowledge transfer in network organizations,supply chain management issues, change management in organizations, and managementof e-business projects. Together with his students, he has published more than 70 papers inrefereed journals and conference proceedings, primarily on project management, business-to-business e-commerce, intelligent agents, and the human-computer interface, in Decision

Support Systems; Internet Research; International Journal of Management Theory and Practice; IEEE

Transactions on Systems, Man, and Cybernetics; International Journal of Human-Computer Studies; Journal

of the Operational Research Society, Communications of the ACM; and many others.

Fereidoun Ghasemzadeh

Dr. Fereidoun Ghasemzadeh is an assistant professor in the Management and EconomicsSchool at Sharif University of Technology. Dr. Ghasemzadeh has been involved in teachingMIS, DSS, and e-commerce courses to MBA students, and supervises graduate students intheir research projects. He is the cofounder and currently the CEO of Afranet, a leadingInternet and e-commerce company in Iran, and is heavily involved in advanced e-commerceand e-government research and applied projects. Articles by, or interviews with, Dr. Ghas-emzadeh have appeared more than 50 times in the media, and he has organized manyconferences, symposia, and workshops. With his colleagues and students, Dr. Ghasemzadehhas published ten academic papers in refereed journals and conference proceedings, pri-marily on project management, e-commerce, and e-government.

Michel Thiry

Michel Thiry is managing partner of Valeuse Ltd, a European-based organizational con-sultancy. He has 30 years’ experience in project management in North America and Europeand has worked in Canada, the United States, Australia, the United Kingdom, and conti-nental Europe. He is currently adjunct professor for the Lille Graduate School of Manage-ment (France) and seminar leader for PMI Seminars World. He is also visiting professor atUIS (Australia) and external lecturer at Reading University (UK). He holds a MSc in Or-ganizational Behaviour from the School of Management and Organizational Behaviour,University of London and is currently reading for a PhD at University College London. Heregularly speaks and publishes at the international level. He has also provided value andproject or program management expertise to major organizations, in various fields, includingconstruction, pharmaceutical, IT and IS, telecom, water treatment, transportation (air andrail), and others. He has authored the book Value Management Practice and coauthored the‘‘Managing Programmes of Projects’’ chapter in the Gower Handbook of Project Management,3rd Edition. He also authored the program management and value management chaptersin Project Management Pathways, published by the Association for Project Management (UK)in early 2003. In addition, he regularly writes and reviews for the International Journal of Project

Management. Mr. Thiry is also past Director of the Project Management Institute’s Montrealand UK chapters and past President of the European Governing Board for Value Man-agement Certification and Training, based in Paris.


Ali Jaafari

Professor Jaafari was, until his recent retirement, Professor of Project Management at theUniversity of Sydney. He received his PhD in Business Economics (Quantitative Modellingand Forecasting) from Surrey University in the United Kingdom (Joint SSRC-SRC schol-arship holder and Swan Award) in 1977, and his Master of Science (Distinction) in HighwayEngineering and Transportation Management in 1974 from the same university. He has aMaster of Engineering (Distinction) from Tehran University awarded in 1968. He has morethan 15 years of executive experience gained on major projects and programs in some 20countries in Europe, mid East, Australia, and Asia. He has acted as an expert consultant toindustry and governments worldwide for more than 15 years. In 1994 he acted as a specialconsultant to the European Community on the management of the Productivity InitiativeProgramme as part of TACIS. He has, to date, authored over 130 publications in projectand program management, including strategy-based project management, whole-of-lifeframework and philosophy, concurrency, management of technology and innovations, in-formation management systems, Total Quality Management, risk, opportunity and uncer-tainty analysis and management, and education of professionals. Since 1982 he hasconducted courses and seminars for over 3,000 executives, managers, and professionals inAustralia, Asia, and Europe. He specializes in graduate education and professional devel-opment, and has developed innovative online graduate programs that have won three Ex-cellence Awards. He has been a member of the International Project ManagementAssociation since 1984, and a regular contributor to the World Congresses on Project Man-agement. Professor Jaafari has chaired many functions both nationally and internationallyand is the winner of many prizes and awards. Professor Jaafari has held visiting professorialappointments at a number of universities, in the United States, the United Kingdom, Eu-rope, and Asia.

Graham Winch

Graham Winch is Professor of Construction Project Management at the Manchester Centrefor Civil and Construction Engineering, UMIST, where he is head of the Project Manage-ment Division. He taught for ten years at the Bartlett School, University College, Londonafter a career in management research in business schools and managing construction proj-ects. He is author of Managing Construction Projects: An Information Processing Approach (Blackwell,2002), as well as three other books and over 30 refereed journal articles, complemented bynumerous book chapters, conference papers, and research reports. His research currentlyfocuses on the strategic management of projects and on innovation in the constructionindustry. In addition to the work on stakeholder management, he is also investigating theprocesses of risk identification using cognitive mapping.

Rodney Turner

Rodney Turner is Professor of Project Management at The Lille Graduate School of Man-agement and at Erasmus University, Rotterdam, in the Faculty of Economics. He is alsoan Adjunct Professor at the University of Technology Sydney, and Visiting Professor atHenley Management College. He studied engineering at Auckland University and did his


doctorate at Oxford University, where he was also for two years a post-doctoral researchfellow. He worked for six years for ICI as a mechanical engineer and project manager onthe design, construction, and maintenance of heavy process plant, and for three years withCoopers and Lybrand as a management consultant. He joined Henley in 1989, Erasmus in1997, and Lille in 2004. Rodney Turner is the author or editor of seven books, includingThe Handbook of Project-Based Management, the best-selling book published by McGraw-Hill,and the Gower Handbook of Project Management. He is editor of The International Journal of Project

Management and has written articles for journals, conferences, and magazines. He lectureson and teaches project management worldwide. From 1999 and 2000 he was President ofthe International Project Management Association, and Chairman for 2001 to 2002. Hehas also helped establish the Benelux Region of the European Construction Institute asfoundation Operations Director. In addition, he is a Fellow of the Institution of MechanicalEngineers and the Association for Project Management.

Graham Ive

At University College London since 1977, Graham Ive is responsible for the overall directionof the MSc Construction Economics and Management (CEM) course, and for economicsteaching on the masters program. His research has focused on aspects of the industrialeconomics of the construction sector, embracing the structure of the construction industries;the strategies, behaviour, and performance of construction firms; and the complex andspecific economic institutions of the construction process, specifically contracting and pro-curement systems. Current research within this theme focuses on the Private Finance Ini-tiative (build-own-operate-transfer projects). Much of his research has been undertaken withpartners from the UK construction sector, coordinated through the United Kingdom’s Con-struction Industry Council, to whom Graham is an economic advisor. He is author/coauthorof two studies of PFI for the Construction Industry Council (The Constructors’ Key Guide to PFI

and The Role of Cost-Saving and Innovation in PFI Projects), published by Thomas Telford, andtwo books, The Economics of the Modern Construction Sector and The Economics of the Modern Con-

struction Firm, published by Palgrave Macmilllan.