A MULTI-CRITERIA DECISION MODEL FOR DYNAMICALLY MANAGING THE
PROJECTS PORTFOLIO
University of Minho
School of Engineering
CITEPE
Introduction
Project management has been, over time, an area with tremendous
growth and prominence within organizations. Nevertheless,
organizations continue to face tremendous difficulties in meeting
schedule and cost estimates. According to the 10th edition of the
CHAOS report, almost 51% of all projects in the survey fail in attaining
the cost and schedule estimates and functionality requirements.
The challenge that every organization faces in managing the portfolio
of projects is extremely high. The decision process is complex and
demands making decisions rapidly, with a better allocation of the
enterprise‘s scarce resources, and a clearer strategy focus. This
factor, compels the organisation to become more efficient, flexible and
far quicker to answer to the rapid changes of the business
environments. The Project Portfolio Management (PPM) requires a
broad view of the entire organizational system. Hence, an integrated
view of the PPM provides more flexibility and is beneficial to the
organization's overall performance even if through it the decision
making complexity is increased.
Background of PPM phases framework
According to the authors‘ view, tailored by the literature review, the
project portfolio selection normally, involves five distinctive phases:
a) the strategic consideration and orientation, towards the selection of
the projects with better strategic alignment;
b) the project evaluation phase, where the benefits derived through
the evaluation methods are to be determined, as well as the
individual contribution of each project to the portfolio objectives;
c) the portfolio selection, involving a continuous comparison of
projects, which compete between each other, with the final
intention of ranking in the top positions to achieve the entrance to
the organisational portfolio;
d) the organisational resources assignment (portfolio scheduling),
because the organisational assets are limited and constantly
requested for different projects, which can cause an extremely
complex managerial problem;
e) and the monitoring and control phase, which is responsible for
assessing, recurrently, the portfolio performance and all that is
related to the portfolio range.
MCDM Framework
The MCDM framework, proposed by the authors, in Figure 1
highlights the important decision moments of each PPM phase. In the
following subsections, each phase of the PPM, the technique used
and relevancy to the entire system will be briefly mentioned.
Engenharia para a Qualidade de Vida: CIDADE – Semana da Escola de Engenharia -11 a 16 de Outubro de 2010
António Amaral
Supervisor: Maria Madalena Araújo
* antonio.amaral@dps.uminho.pt
Figure 1- MCDM Framework
Market Attractiveness Index
The market attractiveness index calculation phase intends to quantify
the data collected from the multiple Indicators identified under three
strategic relevant types: Macro-Environment (Economic Globalization;
Macro-Economic Trends; Technology Profile; Quality of life and
welfare; Labour; Public Finance; Productivity; Demographic profile),
Micro-Environment (Business Opportunity; Costumers; Competitors;
Suppliers), and Organizational. Thereafter, determining an index for
each market in the evaluation process.
Technique for Strategy Alignment
This technique is divided in three main steps, which consist of: 1) Set
the minimum values of attractiveness by indicator; 2) calculate the
indicators score by project; and finally 3) sort the different projects in
study. The indicators proposed to guarantee the project alignment with
the organisational strategy, are the following Degree of Innovation
Expected , Risk Perception, ROI, Critical Resources per Project,
Project Schedule / Market Clock-speed .
A DEA approach for Project Portfolio Selection
To apply the DEA, we began by defining a group of indicators. The
indicators proposed came from different elements whose combination
produces information considered critical to guarantee the project
alignment, the economic, financial and operational assessment of the
project towards selecting the proper portfolio. The Projects that
achieved 1 are the ones who reached the maximum level of efficiency.
Projects which are not efficient can be adjusted based on assessing
the data provided by the DEA output pointing which indicators must be
improved in order to reach the efficiency level. Therefore, it shows the
potential for future reassessment – where projects can be improved.
Priority Rules heuristic approach for Project Portfolio
Scheduling
Using the work developed by Browning and Yassine (2010) in the
utilization of the most suited Priority Rules according to the values of
the network complexity, resource distribution and resource contention.
The values obtained on each of the indicators considered, shows a
set of PRs, which can be used to schedule the portfolio of projects.
This procedure can be tested using different PRs and evaluating
which of them produce better results to the PPS in the moment. This
approach can streamline the scheduling process, allowing that the
time saved from performing complex optimization algorithms could be
invested in other important elements like the sensitivity analysis and
the diffusion of learning mechanisms.
Earned Value Management – technique for PPM monitoring
and control
The utilization of the EVM technique, as a project portfolio monitoring
and control system we intend to use the common equations of the
EVM. eg. EV; CPI; SPI; CV; SV; CR.
Knowledge Management and Project Learning
Projects play an important role in achieving the learning that takes
place within many organizations. Organizations also acquire new
knowledge through experience or learning by doing. Through trial and
error experimentation, organizations can learn about new approaches
to accomplish the work at hand. An organization can also learn from
feedback on the consequences of its actions, learning about projects
by feedback and experience, developing project work, and
transferring the lessons learned to other projects.
Conclusions
The organisational urge for using and applying new tools, methods
and techniques is tremendous. Despite that, there is no consensus
about the type of method or technique that automatically improves
any organization, despite their own problems or status, restrictions
and competitive advantages, strengths and weaknesses.
The MCDM proposed, allows the creation of an excellent base of
information that, with some extension and analysis may be
transformed into organizational knowledge, facilitating the post-
mortem analysis of the decisions taken in a specific period of time.
This ability can enhance the organizational learning, gathering
valuable lessons in order to avoid the repetition of past errors.
Acknowledgement
The main author benefits from a grant from Fundação para a Ciência
a Tecnologia (F.C.T.) for the development of this work. (SFRH / BD /
31014 / 2006).