Making decisions to pursue the appropriate projects is the key task in project portfolio management (PPM) in order to sustain competitive advantage and thus prolong business success (Cooper et al., 2000, Dye and Pennypacker, 1999 and Roussel et al., 1991). Handling a project portfolio is generally challenging, because it is about deciding upon and thus mastering the competition for the firm's limited resources between all individual projects (Chao and Kavadias, 2008 and Dye and Pennypacker, 1999). Additionally the firm's conflict of interest between innovation and efficiency may manifest itself in the portfolio (Green et al., 2003), a characteristic typical for a collection of new product development projects, making these portfolios notoriously difficult to structure.
Ensuring strategic fit is one of senior management's core mandates in PPM. Senior managers here are understood as financially responsible for project portfolios. This puts them in charge of making ultimate go/kill decisions at the gates of the portfolio review process to select the fitting projects and to stop inappropriate ones. In practice first-tier senior managers of an organisation or a business unit take up this role and are also recognised as sponsors (Project Management Institute (PMI), 2008). Senior management involvement (SMI) is therefore the extent to which the role senior management is actually fulfilled by the people involved. The literature acknowledges the importance of senior management involvement in steering single projects ( Balachandra, 1984, Chakrabarti, 1974, Johne and Snelson, 1988b and Zwikael, 2008) and project portfolios ( Cooper and Kleinschmidt, 1995 and Johne and Snelson, 1988a) towards success. If in a project portfolio a given project is characterised only by low congruence to corporate strategy, senior management should withdraw resources. Thereby they steer the resource competition to the disadvantage of this particular project, but in favour of the strategic fit of the aggregate portfolio ( de Brentani et al., 2010, Pinto and Mantel, 1990 and Swink, 2000). Withdrawing resources from unfitting projects effectively is project termination and of fundamental interest to firms for two reasons: First, collective resources are not worn down in vain. Second, strategy is implemented and executed consciously as only those projects remain in the project portfolio that are in line with corporate strategy.
At the same time project termination has been identified as major managerial challenge for example by Cooper (2008), who highlights that for new product development portfolios weak and late decisions are shortcomings detected in 77% of the firms that claim to have a structured idea-to-launch process. There are several reasons that prevent project abortion to happen including reluctance to terminate on the side of managers (Schmidt and Calantone, 1998), missing prerequisites for termination (Kumar et al., 1996) as well as the difficulty of timing (Tadisina, 1986). Consequently too many bad and troubled projects linger on and decrease overall project portfolio effectiveness.
Numerous studies acknowledge senior management's role in the course of terminating a project to be problematic (Cooper et al., 2000, Gomes et al., 2001 and Pinto and Covin, 1989). Cause is primarily senior management's overestimation of own capabilities and over-optimism to allocate resources appropriately (Lovallo and Kahneman, 2003 and Staw, 1981). Cooper (2008) presents comprehensive evidence on that matter: senior managers foster their “pet projects”, miss important resource meetings, take single-person decisions by “executive edict” and only apply personal instead of transparent prioritisation criteria. There is indication that SMI may have dysfunctional effects (Balachandra, 1984) and thus might limit success (Young and Jordan, 2008). Dilts and Pence (2006) could not conclusively answer if senior management's role impacts on project termination decisions, and reiterated the need to address this question in future studies. Cooper (2008) confirms this demand also from a practitioner's perspective and calls for a definition of governance roles and responsibilities to establish effective “gatekeepers”. Furthermore the inquiry into how management actually decides to terminate a new product development project remains unresolved ( Green et al., 2003 and Montoya-Weiss and Calantone, 1994). Moreover, project termination has been identified in past studies as vital activity to structure a project portfolio strategically ( Blau et al., 2004 and Seider, 2006), whereas the quality of the project termination process in the execution of project portfolio management is an open issue. Thus our first research question is: What is project termination quality (PTQ) and how is it relevant to achieve strategic fit, the necessary project portfolio success dimension? Despite previous research that showed SMI's significant role in executing resource allocation in project portfolio management, senior management's type of activity and degree of involvement are still controversial topics. Specifically, the matter of effective SMI in terms of project termination remains open. The second research question of this paper therefore is: What is the adequate degree of senior management involvement in project termination?
In this paper we investigate the central role of senior management involvement for project portfolio success (Calantone et al., 2003, Kleinschmidt et al., 2007 and Markham and Griffin, 1998), because they are most relevant for decision-making on portfolios and thus for project termination. In doing so, we make several contributions by clarifying the contradictory findings on SMI (Balachandra, 1996, Brockhoff, 1994, de Brentani et al., 2010 and Gomes et al., 2001). First, we adopt a multi-project perspective (Söderlund, 2004) and consider direct and indirect effects of SMI in this project portfolio context. This is especially meaningful when judging the appropriate extent of SMI with regard to a global optimum across a bundle of projects. Second, in contrast to Cooper and Kleinschmidt (1995), who suggested intimate involvement, we propose that the adequate degree of involvement is optimal for fit, meaning that more SMI is not always beneficial. Third, we show PTQ is important for strategic fit, thus promote a lever to achieve systematic and consequently effective project termination (Kumar et al., 1996). Fourth, this paper contributes to the literature by showing that the influence of SMI on success is partially mediated by PTQ, giving more insights into the actual mechanisms in contrast to studies that only investigate the direct effect (Henard and Szymanski, 2001). In our methodology we use multiple informants and measure at two different points in time in order to differentiate cause and effect. This avoids ex-post rationalisation or attribution, which has been acknowledged as concern in studies on SMI (Bonner et al., 2002).
The objective of this paper is to examine the role of SMI for project portfolio success, while investigating the relevance and impact of PTQ. This includes clarifying what PTQ is and how it is relevant for strategic fit. Four findings of this study are worth discussing:
First, in our framework strategic fit is positively influenced by SMI, which acknowledges the importance of SMI as shown in past studies (Cooper and Kleinschmidt, 1995 and Johne and Snelson, 1988a). This positive relationship between SMI and strategic fit emphasises that senior management can facilitate strategic alignment and thus directly implement advocated strategy. For senior managers this calls for a re-focus from the need of doing the projects that are sound taken individually (Cooper et al., 2000) to the demand of executing “fitting” projects to corporate strategy. It also reveals the significance of selecting fitting projects rigorously before including them to the project portfolio. The hypothesised inverted u-shaped relationship between SMI and strategic fit could not be identified. A reason might be that the effect is rather small, which would require a larger sample size to detect it. Also, the positive effects might be inflated and therefore overcompensate the negative effects. A highly involved senior manager is likely to judge strategic fit of a portfolio more positively than a less involved one.
Second, we also find an indirect relationship between SMI and strategic fit. Here PTQ is identified as integral aspect that impacts positively on strategic fit. The positive relationship between PTQ and strategic fit means that it is vital to ensure correct and strict termination: projects not in line with corporate strategy should be detected timely and terminated rigorously (Boulding et al., 1997 and Kumar et al., 1996). Our finding moreover clarifies a potentially negative influence extending from SMI, indicated by previous studies (Balachandra, 1984 and Ernst, 2001). SMI's overall positive impact on PTQ shows that SMI is required to induce sustained termination decisions (Crawford et al., 2008). Consequently, once a single project is identified for termination, it needs to be discontinued irrevocably in order to effectuate an overall improved strategic fit of the portfolio. Finally, SMI's inverted u-shaped relationship towards PTQ also shows that there is a dark side to SMI. This means that too heavy involvement (i.e. intervention or micro-management) may lead to an over-steering of the portfolio, typically manifested in continuing sick pet projects (Bonner et al., 2002).
This paper makes several contributions by clarifying the contradictory findings on SMI from past studies (Balachandra, 1996, Brockhoff, 1994, de Brentani et al., 2010, Gomes et al., 2001 and McComb et al., 2008). First, although we confirm SMI as an important success factor (Cooper and Kleinschmidt, 1995), we show that there is an optimal degree of SMI for PTQ. The adopted multi-project perspective (Söderlund, 2004) also newly outlines PTQ and adequate involvement as particular predictors for project portfolio success. This implies different meanings for success factors on a project portfolio level compared to single project management (Artto et al., 2009). This is exemplified for SMI under the aspect of “resource allocation”: In a single project context, quantity of available resources positively influences success, i.e. the more resources assigned to a project the more likely it is that this project is completed successfully (Gomes et al., 2001). On a project portfolio level however resources endowed or withdrawn according to a project's congruence to corporate strategy are fundamental for strategic fit, thus portfolio success. This implies that adequacy of endowment is crucial on a project portfolio level, as shown in this study. Second, with the construct PTQ we propose a lever to achieve systematic and effective project termination, a necessary condition for strategic fit (Kumar et al., 1996). While success factors of project portfolio management have been put forward some time ago (Ernst, 2002 and Johne and Snelson, 1988b), the underlying mechanisms that interact between processes and the role of senior management are detailed in this study. Lastly, this study sheds light on the link between strategy and project portfolio management, thus adding a fresh perspective to the current debate by providing quantitative evidence for the importance of strategy implementation for portfolios (Artto et al., 2008 and Srivannaboon and Milosevic, 2006).
6.1. Implications for management
This study has some implications for senior managers regarding the necessity of termination and the impact of their involvement in project portfolio management. SMI should be adequate in intensity, encouraging managers to choose an appropriate management style (i.e., bewaring of over-steering the portfolio) that is considered essential in project portfolio management ( Fricke and Shenhar, 2000). This may help to overcome fear and reluctance to terminate rigorously. It also highlights the importance of diligent selection of projects upon entry in the project portfolio ( Ghasemzadeh and Archer, 2000). Rigorously resorting to a strict selection routine and standardised termination process will lead to transparency and thus better decisions, and ultimately to adequate allocation of resources ( Blichfeldt and Eskerod, 2008). Moreover, a structured process, as well as early detection and abortion of projects can help to eliminate delays which may save the organisation considerable money ( Kumar et al., 1996). Project portfolio coordinators benefit from this study indirectly as they learn about a number of activities that should not be part of their job description: decisions on project termination, as well as project selection are shown to be outside scope. So a clearer role understanding for project portfolio coordinators and portfolio review board or strategic PMOs, when considered as joint group of project portfolio managers, is delivered here. This contribution to role clarity helps project portfolio coordinators to better position as actors in PPM. Thus they can be assumed to perform more effectively when it is clear what needs to be done and what not ( Hall, 2008 and Tubre and Collins, 2000).
In summary, the findings encourage senior management to assume their role as strategic managers by adopting and cultivating a pro-active project portfolio culture in which termination of projects is not considered a failure, but a valid option. Their focus should also be on effective communication, which will encourage other stakeholders of the project portfolio to openly and truthfully report on project proposals and progress. This way of reporting is also considered a critical success factor in project portfolio management (Herfert and Arbige, 2008).
6.2. Limitations and future research
As with every empirical study there are some limitations that need to be taken into account. First, this study relies on a relatively small sample size. This is due to the longitudinal research design with multiple informants. Gathering information from two informants repeatedly at two points in time is difficult, as they might have moved on to other jobs or even left the company. Even though, small sample sizes increase the probability of type II error. Non-significant relationships such as H3b might therefore still be present and should be re-examined in future studies. However, the significant findings of this study can be considered much stronger than in single-informant and cross-sectional studies. The results are neither prone to common method bias due to multiple informants nor to hindsight bias by measuring with an interval of two years. Both issues have been noted as potential methodical problems in research on SMI (Bonner et al., 2002). A second limitation might be that the factor SMI comprises a rather broad set of items that cover different elements of management involvement, such as attention, resource allocation, and decision-making. While this enables us to include different aspects of SMI, which in their entirety comprise the construct of SMI. Finally, role conflicts during the decision-making process are not included in this study, but could be critical for the effectiveness of senior managers. There are three possible sources for role conflict: First, there might be conflicts between different management roles in PPM, e.g., between senior managers and middle managers such as the portfolio coordinator (Jonas, 2010). Especially in the context of strategy implementation the interface between senior and middle management is critical and worthwhile for future investigations (Raes et al., 2011). Second, there could be a lack of consensus within the senior management team ( Knight et al., 1999). In the context of project termination, these types of conflicts might be fruitful to analyse. Third, there might also be multi-role conflicts for senior managers who are also project owners, which poses additional challenges.
Future studies could investigate different types of involvement separately and evaluate their respective impacts on termination quality and project portfolio success. Alternatively, it may be of interest to consider different influential roles that operate simultaneously in a project portfolio context and to shed light on role conflicts. Focus may be the whole group of senior managers involved in project portfolio management like portfolio boards (Artto and Dietrich, 2004), steering committees (Lechler and Cohen, 2009) or also project portfolio management offices (Unger et al., 2011). The composition of senior management groups might have an essential impact on portfolio decisions (Talke et al., in press). Distinct senior management roles could be considered that pose contradictory effects in their involvement, e.g. in termination decisions towards project portfolio success (Dilts and Pence, 2006). Here an empirical study may be especially valuable to contrast and measure the impact of line management and heavy weights of the temporary organisation context on project portfolio success. Conflicting effects might be a symptom of wrong management involvement (Jonas, 2010 and Laslo and Goldberg, 2008).
