Application of System Dynamics in the Assessment of Project Portfolio Performance

Abstract

Effective assessment of a Project Portfolio Performance (PPP) has been widely claimed to hold great promise for the effective management of organizations. The current literature is confined to assessing a PPP either statically or by taking a separate view of each project within a portfolio. Advocated here is the development of a dynamic assessment model that assists with the understanding of the overall performance of a portfolio at any given point in time. In this context, this paper proposes a System Dynamics (SD) modeling approach by creating a link between a portfolio and its constituent projects. The proposed SD model attempts to answer a question of particular interest: “How changes in the state of projects within a portfolio affect the overall performance of the project portfolio over time?”. Within this framework, a new index as a function of various factors that affect a project portfolio is developed. Using 60 projects under the engineering and construction portfolio, this paper measures the overall performance of the portfolio over time in response to changes in the performance of its projects. As expected, the level of PPM maturity has a direct impact on the performance of the portfolio. On the one hand, the implementation of effective resource management as well as designing a sound measurement system lead to the improvement of the overall status of the portfolio performance. On the other hand, shifting priorities due to the lack of a coherent business strategy as well as resistance to changes because of internal politics and/or insufficient information result in the delay and cost overrun in projects, thereby decelerating the improvement in the status of the projects within a portfolio.

Article history: Received (October 8, 2020); Revised (December 11, 2020); Accepted (December 14, 2020); Published online (December 24, 2020)