i Portfolio Strategic Control and Portfolio Management Performance

PORTFOLIO STRATEGIC CONTROL AND PORTFOLIO MANAGEMENT

PERFORMANCE

Reza Alimohammadi Bachelor of Science in Mechanical Engineering

Submitted in fulfilment of the requirements for the degree of

Master of Engineering (Research)

School of Civil Engineering & Built Environment

Faculty of Science and Engineering Faculty

Queensland University of Technology

2016

ii Portfolio Strategic Control and Portfolio Management Performance

Keywords

Portfolio Control; Portfolio Complexity; Portfolio Dynamic; Portfolio Management;

Portfolio Strategic Control; Portfolio Performance; Premise Control; Special alert

Control; Strategic Implementation Control; Strategic Control; Strategic Surveillance

Control;

iii Portfolio Strategic Control and Portfolio Management Performance

Abstract

BACKGROUND: Todays business challenges, fierce global competition and

the growing complexity of the business environment force organisations to gain

efficiency through their existing management processes and improve

competitiveness by implementing new management mechanisms. Project portfolio

management as one of the major competitive drivers for gaining efficiency and

effectiveness requires new methods of turning it into a powerful and competitive

weapon in organisation. This new approach, called Portfolio Strategic Control,

prepares portfolios for future environments by aligning portfolio objectives with

organisational strategy, managing resources, risks and opportunities in an integrated

fashion, and adding elements of flexibility and learning to the portfolios. Portfolio

strategic control combines elements of the portfolio management process and

functions of strategic control mechanism, in order to control portfolios in a strategic

manner and improve the performance of portfolio management.

THE PROBLEM: The main objective of this research was to investigate the

implementation of strategic control mechanism in portfolio management

environments and to assess the interaction between the use of four types of strategic

control (premise control, implementation control, strategic surveillance and special

alert control) and portfolio management performance in different contexts.

METHOD: A sequential dual research approach was selected for this study,

combining qualitative and quantitative techniques in order to obtain an optimum

level of quality and credibility. The qualitative part of the study consisted of semi-

structured interviews with ten individuals who hold key organisational positions in

seven high-performance, market-leading organisations. The purpose of this

qualitative part was to study the nature of using strategic control in portfolio

environment and to obtain better understanding of the practices, tools and techniques

that organisations use to apply strategic control mechanism in their portfolios. For

the quantitative part of the study, a survey was administered within 48 organisations

and 130 responses were collected and analysed by a series of statistical methods, in

order to analyse the use of a strategic control mechanism in portfolios and to assess

the relationship between strategic control and portfolio management performance in

iv Portfolio Strategic Control and Portfolio Management Performance

different contexts. While quantitative data were used to provide accurate empirical

results without bias, the qualitative part added richness to those findings.

RESULTS: The research results indicated that organisational tendency to use a

strategic control mechanism in portfolios increases when organisations experience a

high level of portfolio complexity and high level of portfolio dynamic. Also, the

results revealed that there is a positive and significant relationship between the use of

a strategic control mechanism in portfolio and portfolio management performance.

This direct relationship is moderated by contextual factors of portfolio size, portfolio

interdependency, portfolio dynamic and organisational governance type.

v Portfolio Strategic Control and Portfolio Management Performance

Table of Contents

Keywords.............................................................................................................................ii

Abstract ............................................................................................................................. iii

Table of Contents ................................................................................................................. v

List of Figures .................................................................................................................... vii

List of Tables ...................................................................................................................... ix

Statement of Original Authorship ........................................................................................ xi

Acknowledgements ............................................................................................................ xii

Chapter 1: Introduction .................................................................................... 1 1.1 Background ................................................................................................................ 1

1.2 Research Problem ...................................................................................................... 2

1.3 Purposes ..................................................................................................................... 4

1.4 Significance and Scope............................................................................................... 6

1.5 Definitions ................................................................................................................. 8

1.6 Thesis Outline ............................................................................................................ 8

Chapter 2: Literature Review......................................................................... 11 2.1 Historical Background .............................................................................................. 11

2.2 Strategic Management: Control and Evaluation ........................................................ 12 2.2.1 Strategic Control ............................................................................................ 13 2.2.2 Theoretical Frameworks in Modern Strategic Control Literature ..................... 15 2.2.2.1 Schreygg and Steinmann Model (1987) ...................................................... 15 2.2.2.2 Goold and Quinn; the Paradox of Strategic Control (1992) ........................... 19 2.2.2.3 Preble Strategic Control Model (1992) ......................................................... 21 2.2.2.4 Strategic Control for Fast Moving Market (Muralidharan 1997) ................... 22 2.2.2.5 Strategic Control for in Triggering Strategic Changes (Julian and

Scifres 2002) .................................................................................................. 24 2.2.2.6 Summary of Strategic Control Theories and Frameworks ............................. 25 2.2.3 Role of Balanced Scorecard Methodologies and Critical Success Factors

in Strategic Control ........................................................................................ 27

2.3 Project Portfolio Management .................................................................................. 30 2.3.1 Strategic Portfolio Management...................................................................... 31 2.3.1.1 Portfolio Definition and Organisational Strategy .......................................... 31 2.3.1.2 Portfolio Control .......................................................................................... 36 2.3.2 Portfolio Management Success and Portfolio Performance.............................. 39

2.4 Contextual Factors ................................................................................................... 41

2.5 Summary and Implications ....................................................................................... 44

2.6 Research Questions and Hypotheses ......................................................................... 46

Chapter 3: Research Design ........................................................................... 50 3.1 Methodology and Research Design ........................................................................... 51

vi Portfolio Strategic Control and Portfolio Management Performance

3.1.1 Methodology .................................................................................................. 51 3.1.2 Research Design............................................................................................. 52

3.2 Data Source and Selection ........................................................................................ 61

3.3 Instruments .............................................................................................................. 62

3.4 Procedure and Timeline ........................................................................................... 64

3.5 Analysis ................................................................................................................... 65

3.6 Ethics and Li