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Extensive Summary Notes for MNB2601 Business Management by Portfolio)
- Course
- MNB2601 (MNB2601)
- Institution
- University Of South Africa (Unisa)
Exam notes for MNB2601 (Business Management by Portfolio)
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LEARNING UNIT 1 THE BUSINESS MANAGEMENT FRAMEWORKOVERVIEW OF THE EVOLUTION OF MANAGEMENT THEORY
1. The classical approach to management
2. The behavioural approach to management
3. The quantitative management theory
4. The quality movement
5. The systems approach to management
6. The contingency theory of management
7. Business Management by Portfolio
The Classical Approach to Management
Three management theories – the industrial revolution has a considerable impact on the evolution
of management theory. The classical approach to management developed on the premises that
organisations are rational systems that should operate in the most efficient manner possible.
1. Scientific management approach developed by FW Taylor which focused on production
efficiency.
2. Second approach (name omitted) was developed by Max Weber, focusing on the best
possible structure of the organisation.
3. Administrative management - developed by Henri Fayol, which provided managers with the
general duties and functions of managers within a framework of clear guidelines.
The Behavioural Approach to Management.
The focus of this approach was to find ways to change individual and group behaviour to improve
organisational efficiency. The human relations movement contributed an important view on the
importance of the human factor in organisations.
The Quantitative Management Theory
Both the classical and behavioural approaches to management fell short in terms of mathematics
content, which lead to the development of the quantitative management theory. As a result of this
approach, techniques such as statistics, linear programming, waiting line or queuing theory, game
theory, decision trees and Monte Carlo simulations were developed. These techniques are still in use
today
The Quality Movement
Whilst the quantitative management theory focused mainly on the application of quantitative tools
and techniques as a solution to managerial problems, the quality movement was established to
focus on the quality of products and services delivered, not only on the quantity delivered. Total
Quality Management (TQM) became the new management approach. As part of TQM, the
knowledge, tools, and techniques of quality are applied in a coordinated way throughout the
organisation, to all organisational functions and at all managerial levels
The four pillars of TQM implementation involve
1. Satisfying Customers,
2. Systems/Processes,
3. People Involvement And
4. Continuous Business Improvement.
,The Systems Approach to Management.
Organisations are comprised of many different parts such as sections, departments, groups, teams
and even individuals. All these parts are interdependent so as to achieve organisational goals. By
combining the efforts of all of these parts, managers can achieve more than those parts can achieve
on their own – the whole is greater than the sum of the individual parts. An organisation is an open
system – in other words, it has an influence on the environment in which it functions. By the same
token, the environment has an influence in the organisation – the organisation relies on inputs from
the environment which are transformed, with the application of business processes, into need-
satisfying products and services and returned to the environment. For this reason, the organisation
becomes a subsystem of the bigger system.
The Contingency Theory of Management.
This approach proposes that there is no best way of managing an organisation. The best
management approach depends on a number of contingency factors, such as the complexity of the
environment in which the organisation functions, technology, organisational strategy and the size of
the organisation.
Business Management by Portfolio
The evolution of management theory, as explained above, has brought us to Business Management
by Portfolio – a framework that allows business managers to
• Define business systems boundaries;
• Structure business organisations; and
• Structure organisational leadership.
Business Management by Portfolio provides business managers with an efficient, value-adding
business process framework to deliver the required business results efficiently and effectively and
through teamwork, taking the turbulent business environment into consideration. It contains
elements of all the above approaches to management, as you will see as we go on our journey and
discover the art and science of Business Management by Portfolio.
CLASSIFICATION OF BUSINESS MANAGEMENT BY PORTFOLIO (BMP)
Business Management by Portfolio is a business philosophy embraced, in particular, by organisations
with a high level of maturity in business management and leadership and that are able to
1. apply business portfolio management;
2. adapt to high levels of uncertainty in the management environment;
3. adapt or develop business processes and tools for ground breaking work; and
4. innovate new products and services to
5. realise organisational goals and objectives
,The Top-Down and Bottom-Up Approach of Business Management by Portfolio
• senior executives decide on the organisation vision , mission , goals and overall strategy
• strategic goals are formulated by top management and weighted to indicate their strategic
priority
• programmes and or projects are chosen for maximum contribution to the organisations
strategic goals , and portfolios are established to fund and activate them
• portfolio programmes and projects are decomposed to deliverables and activities in
preparation for bottom up planning
• Business portfolio is nothing other than an investment fund which is managed with the aim
of realising organisational goals. When senior management formulates strategic goals, a
weight is usually assigned to each goal to define the strategic priorities of the organisation
Hierarchy of Portfolio Programmes And Or Projects
• PORTFOLIOS that support the strategic goals : each portfolio must fully support the strategic
goals of the organisation
• Portfolio PROGRAMMES : each programme must support the portfolio and strategic goals ,
delivering organisational benefits
• Portfolio PROJECTS : each portfolio must support the portfolio and strategic goals of the org
• DELIVERABLES that support the project: each deliverable must be planned to a sufficient
level of detail to ensure that project goals, programme goals and strategic goals are realised.
Planning to a sufficient level of detail also helps to ensure that business requirements are
met cost –effectively
• ACTIVITIES that support the deliverables each activity must be planned to ensure the
attainment of individual deliverables
,Planning To Achieve Strategic Goals
Activities must be planned and defined to
• Identify , plan and provide the necessary business systems and processes
• Plan, allocate and match skilled human resources to the complexity of the various activities
• Identify , plan and provide materials requirements where applicable
• Estimate the delivery time frames and the associated cost of the activities. these are then
submitted to management for approval
• Identify and contract quality requirements
PROGRAMMES OR PROJECTS TO ACHIEVE STRATEGIC GOALS
A project is considered as a temporary (or single-use) endeavour that works to deliver a unique
product, service or result. A very important point that we need to make is that not all activities may
require to be delivered using project management principles. A substantial number of activities in an
organisation can be delivered in the traditional way – in other words, following a functional process.
Characteristics of a Portfolio
• Is managed as an investment fund aimed at managing and delivering organisational
strategies and goals
• Funds various approved projects
• A weight is assigned to each organisational goal in order to define strategic priorities
• Portfolio performance is aimed at attracting adequate investment for funding of the work
required to attain strategic goals
• Portfolios search for business opportunities , managed as programmes or projects
(depending on the scale of the work) , that contribute optimally to the achievement of
organisational goals
• Each project in a portfolio is prioritised and activated based on its contribution to the
weighted organisational goals
• Portfolio management aims to optimally utilise shared organisational resources assignable
to portfolio projects
• Portfolio programmes and projects are unique and have a definite start and finish
• A portfolio once started, does not have a definite finish. The portfolio is managed in financial
cycles for reporting purposes. Long term programmes and projects supporting the portfolio
may run across multiple financial cycles
Characterises Of a Project
• A project has a clear objective with an organised set of activities
• A project is unique and not repeated exactly
• A project integrates various functions , contractors , organisations and departments
• A project utilises resources , such as equipment , materials , systems , machinery and
facilities
• A project assigns roles and responsibilities to people , functions and organisations
• A project has a definite start and finish
• A project has budget costs
• The project sponsor is the project owner and accountable for the project’s success
• The project manager is responsible for the project’s success
, • A project involves a level of uncertainty that exposes the organisation to sick
• A project is complex in nature. Requiring decomposition or break down of the project work
to make it more manageable
Types of Projects
• Research and development
• Development of new products and services
• Products or service enhancements
• Information systems developments
• Process improvement
• Business improvement
• Event management
• Mergers and acquisitions
OBERG’S MODEL OF PROJECT CLASSIFICATION
Obeng developed a model of project types that can be used in the application of project
management principles in organisations. This model defines projects as a function of two variables,
namely:
• The maturity of the business processes and tools implemented in the organisation; and
• The certainty of the outcomes of the project.
Uncertain outcome
MOVIE FOG
-systems -business
development - transformation
product -reserch
development change initiatives
Mature business processes
No Business process and tools
and tools
QUEST
PAINT BY
NUMBERS -business
improvment
-high certainty
product
functional work
improvment
Certain outcome
MOVIE FOG
PAINT BY NUMBERS QUEST
,Paint by Number
• Outcome if high certainty with mature business process and tools
• Repetitive work is produced through processes which have been systematically improved to
perfection. Predictable results
• The organisation does not tolerate any deviance from the process , methods and systems
application
• Due to the low complexity of the work performed, and the risk of failure being minimal,
organisations in this quadrant are ideal for developing skills, and skills performed under
supervision can then lead to more complex work.
• The traditional organisation, organised in a functional manner, operates well in this
quadrant.
• This quadrant is labelled “functional work”
• Products and services are classified as commodities 9finished goods) and supplied on a large
scale
• Quality is designed into the production phase
• The chance of success of the organisation in this quadrant depends on the market relevancy
of the products and services, the organisations ability to reach its market cost –effectively,
and its ability to grow market share.
Movie
• Organisation have mature businesses processes and tolls
• Uncertain outcomes
• Typically associated with business development strategies
• Work in this quadrant is accomplished through project management
• Project management methods , procedures and work instructions are well documented and
readily available to replicate quality results
Quest
• Characterised by certainty in terms of outcomes
• No business processes and tools in place
• The organisation has a low level of maturity
• Quadrant is ladled “business improvement “ and product improvement
• Work is accomplished through project management to improve efficiency
• Project management methods , procedures and work instructions are well documented and
readily available to replicate quality results
• Business improvement and process development are usually priorities in this quadrant.
Fog
• Characterised by a high level of uncertainty of the outcome
• No proven processes , methods and systems
• Labelled “business transformation “
• Business processes and tools need to be developed before executing the project
• Typical projects in this quadrant are research-based and change initiatives.
• Business transformation is associated with organisations working in this quadrant with the
emphasis on innovation and creativity
ORGANISATIONAL STRUCTURES
Masaaki Imai, founder of the kaizen institute, believes that rom a quality perspective, organisation
management may take two different approaches in the delivery process
1. Policy development
2. Cross functional management
, Policy Development
1. Functional organisation
2. Projected organisation
Figure 1 FUNCTIONAL ORGANISATION
Functional Organisations
Organisations is structured hierarchically (top to bottom) with the directors reporting directly to the
chief executive officer (CEO). Business mangers report directly to directors, while assistant business
mangers report directly to business managers. This structure ensures that functional processes are
streamlined.
CEO
DIRECTOR DIRECTOR DIRECTOR PM
PM1 PM2 3
PROJECT PROJECT
PROJECT 2.1
MANAGER 1.1 MANGER 3.1
PROJECT PROJECT PROJECT
MANGER 1.2 MANAGER 2.2 MANGER 3.2
Figure 2 PROJECTED ORGANISATION
,Projected Organisation
In a projected organisation, the directors of project management portfolio (directors pm 1, PM 2,
PM 3) are responsible for managing project managers. A projected organisational structure is
appropriate for an organisation when revenue is solely derived from project work
Cross Functional Management
Figure 3 MATRIX ORGANISATION
The Matrix Organisation
The matrix organisation attempts to capitalise on the advantages of both the functional organisation
and the projected organisation.
1. Weak matrix
2. Balanced matrix
3. Strong matrix
Weak Matrix
A weak matrix is characterised by functional staff who are assigned to work partly on project
activities. Functional managers take responsibility for the coordination of the project work across
the various functions. For example, an organisation works on Project A, and assigns a marketing
manager, a human resources manager and a financial manager to the project. These managers are
still responsible for their day-to-day work, but they are also assigned to manage the finances, human
resources and marketing activities related to Project A. Together, these managers are responsible for
the completion of Project A, reporting to the functional manager responsible for the project.
Balanced Matrix
In this structure, a project manager reports to a functional manager and he/ she (the project
manager) is dedicated to delivering project work across functional boundaries. For example, an
organisation working on Project A appoints project manager A who is responsible for the delivery of
,the project. Staff from the finance, marketing and human resources departments are assigned to
Project A and they report to the project manager concerning project work performed. They also
report to the finance manager, marketing manager and human resources manager regarding
functional work performed.
Strong Matrix
Project work is accomplished through formal project management structures (that work across
functional boundaries in a matrix configuration, maintaining the functional environment while
having the ability to perform complex project work.
Characteristics of a Matrix Organisation
• Business project maturity
• Level of authority and autonomy of the business project manager
• Organisational dependence/support
• Cross functional resource allocation
• Communication
• The role of the business project office
Business Project Maturity
The higher the level of maturity in the organisation, the better the calibre of employee it can attract
and retain. A projectised organisation always has the highest level of business maturity
Level of Authority and Autonomy of the Business Project Manager
The level of authority and autonomy of the business project manager relates to the decision making
abilities and the degree to which the decision is binding. Weak organisation (no support structure for
project management), project manager plays more of a co-ordinator role due to a lack of authority
and autonomy. Strong organisation offers a higher level of authority and autonomy to the business
project manager. A projectised organisation also offers the highest authority and autonomy to the
project manager
Organisational dependence/support
In most organisations, business project managers are generalists with enough product or service
knowledge to make the delivery process work. The business project manager therefore remains
dependent on functional management for specialist product or service support, and especially for
detailed design and implementation.
Cross Functional Resource Allocation
Business project managers compete for limited and scarce resources, which may include, but are not
limited to, people money, machines and materials. In a weak matrix organisation, the competition
between business project managers is fierce. In a strong matrix organisation, competition for
resources is more manageable because the business project office keeps an up to date list of high
priority projects, together with a human resources availability list.
, Communication
Horizontal communication in most large organisations remains a challenge, and even more so for
business project managers working in a weak matrix organisation. A lack of authority makes it
difficult to establish and maintain channels of communication. In a strong matrix organisation, the
authority and autonomy enjoyed by the business programme manager or project directors allows
the business project manager to rely on the programme manager or project director to negotiate
and open channels of communication. The effectiveness of vertical communication relies mainly on
executive management skill to communicate effectively
The Role of the Business Project Office
The role of the business project office is directly affected by the level of maturity in the organisation.
In the organisation that are functionally structured, there are no dedicated project structures and,
by implication, no business project office. The business project office features in the strong matrix
organisation and, even there, project maturity influences the role or function it performs in the
organisation.
Project maturity can be classified at three progressive levels
1. Start-up phase – the project office plays a supporting role consulting on best practice.
Working towards strengthening the role of the project office, it focuses on the availability of
tools, techniques and skills development.
2. Second level – the project office as increased control, ensuring process compliance and
governance and working within the boundaries set by the organisations project framework.
3. The third level – the project office directs all project work, with all project managers under
the control of, and reporting directly to, the project office.
Responsibilities of the Director of the project management office ( pg 18)
• Develop methodologies and standards for business projects based on foundational
standards
• Acquire and manage business project systems and tools
• Develop business project policies, procedures, methods and templates
• Manage the development of business project skills
• Manage the availability and allocation of resources
• Manage the mentoring and coaching of inexperienced workers
• Provide insight on business project administration
• Monitor and control compliance with business project policies and procedures
• Coordinate business project communication
• Manage organisational and business risks
• Coordinate business project quality
BUSINESS MANAGEMENT BY PORTFOLIO LIFE CYCLE
What Is a Business Life Cycle
Generally speaking, a life cycle is the timeline and processes that take an entity from its creation to
the termination thereof. A business life cycle would start with the conception of a new business
idea, and then move through conducting feasibility and viability studies, the establishment of a new
business, the growth thereof and, finally, the termination of the business. A value proposition can
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