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EURAM 2014 June 4-7 Valencia Spain
Business Case Control:
The Key to Project Portfolio Success or Merely a Matter of Form?
Julian Kopmann,* Alexander Kock**, Catherine P Killen ***, and Hans Georg
Gemuenden****
* Technical University of Berlin (TU-Berlin), Institut für Technologie und Management
(ITM)
** Technical University of Darmstadt, Department of Law and Economics, [email protected]
darmstadt.de
*** University of Technology Sydney, School of Systems, Management and Leadership,
Faculty of Engineering and IT
**** Technical University of Berlin (TU-Berlin), Institut für Technologie und Management
(ITM)
Citation: Kopmann J, Kock A, Killen C P and Gemuenden H G, (2014) “Business case
control: The key to project portfolio success or merely a matter of form?”, European
Academy of Management, EURAM, 4-7 June, Valencia.
Winner IPMA-PMI Best Paper Award.
Abstract
Practitioner and professional organization literature places strong emphasis on business cases
with the expectation that the use of business cases to inform and drive investment decisions
will produce better results. In particular, from a project portfolio perspective the business case
of a project may provide the underlying rationale for value-oriented management. However,
academic research regarding the use of business cases at a project portfolio level is scarce. By
exploring the facets of business case control – encompassing the initial review of project
business cases, the ongoing monitoring during project execution, and the post-project tracking
until the business case is realized – this study investigates the relationship between business
2
control and project portfolio success. Furthermore, we analyze critical enablers and relevant
contingencies for the application of business case control. The results are based on a cross-
industry sample of 183 medium-sized and large companies and rely on two informants from
each firm. We found significant evidence for the positive relationship between business case
control and project portfolio success. In addition, accountability for business case realization
and corresponding incentive systems increase this positive effect. Finally, we found that
contingencies (portfolio size and external turbulence) also have a moderating effect. This
study contributes to research and practice by developing and validating a multi-dimensional
construct for business case control, providing evidence for its effectiveness and enabling
conditions.
Keywords: Project Portfolio Management, Business Case
3
Business Case Control:
The Key to Project Portfolio Success or Merely a Matter of Form?
Introduction
Practitioner and professional organization literature places strong emphasis on business cases
with the expectation that the use of business cases to inform and drive investment decisions
will produce better results. However, little academic research explores the relationship
between the use of business cases and project or portfolio success. In particular there are no
studies at the project portfolio level that investigate the application of business cases for
projects and the corresponding control mechanisms. Some studies suggest that the
mechanisms of a portfolio management process can become a routine „form-filling‟ exercise
if the purpose and benefits of the activities are not clear. If the right level of engagement is not
brought to the form-filling process, such as when business case templates must be completed,
the resulting information will not be suitable for decision making (Christiansen and Varnes,
2008). This paper takes a project portfolio perspective to investigate whether business case
control does indeed contribute to project portfolio success, or whether business cases can be
seen as merely „a matter of form‟ (or just another form to complete) in the project portfolio
management process.
The interest in portfolio-level management approaches has escalated as more and more
activities in organizations are executed by projects (Bredin and Söderlund, 2006; Midler,
1995). Projects are the preferred modus operandi when specific goals, which differ from the
day-to-day routine of organizations, need to be achieved in a purposeful and efficient manner.
However, a common criticism is that project management too often focuses on technical
aspects or cost and time restrictions rather than on the achievement of purposeful goals
(Atkinson, 1999; Cooke-Davies, 2007). Paradoxically, research has shown that organizations
continue to increase their investments in projects, even while most projects fail to deliver the
intended goals (Zwikael and Smyrk, 2012).
4
Cooke-Davies (2007) suggests that, in the project management discipline, the focus for
success measurement has been influenced by its origins in the engineering and construction
discipline. Success measures in project management tend to rely on the fulfillment of
technical requirements rather than the creation of value. This may be because construction
and engineering projects are typically based on contracts, which draw a strong distinction
between the contractor‟s and the client‟s responsibility. The project contractor is in charge of
delivering certain artifacts that are technically specified in the contract, while it is the client‟s
responsibility to exploit these artifacts and thus create additional value. Hence, the contractor
(project manager) is more concerned about the fulfillment of these requirements than about its
actual exploitation and the generation of benefits.
Despite the traditional focus on narrow technical measures for project success, in recent
decades project management research has advanced the understanding of project success and
has had continuous influence on the corresponding purposeful management of projects (Ika,
2009). The explicit distinction between project output (artifacts produced by a project),
project outcome (desired, measurable end-effect created by the exploitation of project outputs
by certain stakeholders) and benefits (flow of value triggered by the realization of target
outcomes) provides a framework to analyze established project management practices
(Zwikael and Smyrk, 2011; Zwikael and Smyrk, 2012). This research on project success and
benefits management calls for a paradigm shift in the understanding of project success from
output to outcome orientation with an emphasis on value creation rather than product creation
(Cohen and Graham, 2001; Winter and Szczepanek, 2009). These initiatives are not purely an
academic concern; practitioners and professional organizations also emphasize the importance
of methods that focus on the management of benefits and the creation of value (OGC, 2010,
2011a, 2011b; PMI, 2013c).
5
This context highlights the vital relevance of the business case for the project (referred to in
this paper as the „project business case‟ or simply the „business case‟). The business case
describes why and how the execution of a project can be beneficial for an organization. The
Association of Project Management (APM) defines a business case as the justification for a
project that evaluates the benefits and costs and considers alternative options as well as
opportunity costs (APM, 2006). The business case forms the underlying rationale for an
organization to invest in a project and sets the general conditions for the project scope.
Accordingly, the goal of a project is the realization of the benefits described in the business
case. The creation of value requires that the project management process focuses on the
project‟s business case and not solely on technical requirements.
The business case not only provides directions for project management but is also the basis
for decision making on a project portfolio level. Such decisions often involve the allocation of
limited resources through holistic analysis of project proposals, with the aim of maximizing
the value of the selected project portfolio. Furthermore, ongoing projects require regular re-
evaluation of benefits because they compete for the same resources as new project proposals
(Archer and Ghasemzadeh, 1999; Cooper et al., 2001). There is a substantial body of research
on project portfolio selection processes (i.e. Archer and Ghasemzadeh, 1999; Archer and
Ghasemzadeh, 2004; Ghapanchi et al., 2012; Müller et al., 2008) and evidence of wide
adoption of project portfolio processes in practice (OGC, 2011a; PMI, 2013c). However, the
quality of the project portfolio selection is constrained by the quality of the information
available from the business cases provided for each project. It follows that a sound business
case may be an antecedent to both project and project portfolio success.
While the importance of benefits management and the management of value is well
acknowledged (Morris et al., 2011) and the relevance of the business case is recognized
(Cooke-Davies, 2007), research on project business cases is scarce. In particular, from a
6
project portfolio perspective, where the main decisions in terms of project prioritization,
selection, control and termination are made, the project business case has not been subject to
academic research. Since there is no quantitative empirical analysis regarding application of
project business cases on a portfolio level, no measurement procedures are available. In
addition, although practitioners describe benefits management practices as key success factors
for project and project portfolio success, to the best of our knowledge there is no quantitative
empirical evidence for this claim.
This paper therefore analyzes the application of project business cases and the corresponding
control mechanisms at the project portfolio level, which we call business case control. The
following research questions guide this study in addressing the existence, effectiveness, and
contingencies of business case control:
1. What is business case control in project portfolio management and how can its application
be measured?
2. Does the application of project business case control contribute to project portfolio
success?
3. Which enablers and contingencies affect the performance contribution of business case
control?
This study empirically addresses these questions using an analysis of a cross-industry sample
of 183 firms. We use a double-informant design to address the issue of common method bias
(Podsakoff et al., 2003). This research offers several contributions to the literature on project
and project portfolio management: First, by combining literature streams from several aspects
of business case control we conceptually develop and empirically validate a multidimensional
construct called business case control. We demonstrate its relevance by empirically showing
the positive impact of business case control on project portfolio success. Next, we consider
the influence of the actors in the process and identify and empirically validate critical
7
enabling conditions for business case control. We find that accountability for business cases
and portfolio-based incentives both increase the positive effect of business case control.
Finally, we identify critical internal and external contingencies for the benefits of business
case control. The performance effects of business case control differ depending on the size of
the portfolio and the turbulence of the environment.
The paper is structured as follows. In the next section, research from project management,
project portfolio management, and benefits realization literature is reviewed to define the
construct business case control and to develop a framework for its relationship to project
portfolio success. After describing the sample and methods in the subsequent section, we
present the empirical results and discuss their implications for theory and practice.
Conceptual Framework and Hypotheses
Business case
The business case forms the raison d`être for any project (Cooke-Davies, 2007). It
demonstrates the advantages of organizational investment in a project and illustrates how the
project aims to create value (Jenner, 2010). Although the term „business case‟ is in common
use commercially, there is no accepted definition of the term for research purposes. Similarly,
in the rich entrepreneurship literature the analogous concept of business models also lacks a
common understanding (Zott et al., 2011).
In reflection of the established application of business cases in commercial environments,
professional organizations and practitioner-oriented literature provide a wide range of
business case definitions. Table 1 summarizes the definitions offered by the main project
management institutions.
-----------------------
Insert Table 1 here
-----------------------
8
These definitions reflect perspectives from the project, program, and portfolio level and differ
in terms of explicitness and their level of detail. However, the definitions are consistent
regarding the business case scope and also in their inclusion of recommendations for the use
of the business case throughout the project‟s life-cycle. Drawing upon these definitions, for
the purposes of this study we characterize a project business case as follows:
A project business case provides the necessary information to enable management to
prioritize projects and decide whether or not a project is worth funding and contains
estimates regarding the benefits, timescales, costs, and risks of a project.
Furthermore, several definitions refer also to the application of a business case and state that a
business case needs to be reviewed periodically and may require independent reviews (in the
case of complex business cases).
The business case definition and the recommendations for its application refer to a superior
level where funding decisions are made and the project portfolio is administered. Project
portfolio management prioritizes projects, makes funding and resource allocation decisions,
and constantly monitors the project portfolio (Blichfeldt and Eskerod, 2008). To facilitate
comparison of project information, the portfolio management process often dictates that
business case information is input on a standard form or template. The business case is
expected to provide essential information for the decisions on the portfolio level.
Furthermore, the use of business cases from a project portfolio perspective is not supposed to
maximize the benefits of a single project, but rather maximize the value of the entirety of the
investment in projects, namely project portfolio success. Hence, we consider the project
portfolio management literature to establish an understanding of the relevant management
system.
9
Project portfolio management and project portfolio success
A portfolio is a group of projects that are carried out and managed within an organization
(Archer and Ghasemzadeh, 1999) and compete for a shared pool of resources (Turner and
Müller, 2003). Cooper et al. (2001) summarized the purpose of project portfolio management
as “doing the right things” and contrasted it with project management that is about “doing
things right”. According to Cooper (2001), the right projects are the ones that provide
maximum value, achieve a balance and align with strategy. More recently researchers have
sought to develop a more comprehensive definition of project portfolio success (Cooper et al.,
2004a, 2004b; Killen et al., 2008; Martinsuo and Lehtonen, 2007; Meskendahl, 2010; Müller
et al., 2008; Teller and Kock, 2013). The present study defines project portfolio success
through five dimensions following prior research (Jonas et al., 2013; Teller and Kock, 2013;
Voss and Kock, 2013).
Projects are the main vehicles for the implementation of corporate strategies in many
organizations (Artto et al., 2008; Dietrich and Lehtonen, 2005; Killen et al., 2008; Morris and
Jamieson, 2005; Yelin, 2005). Hence, the strategy implementation success of a project
portfolio (Meskendahl, 2010) reflects successful project portfolio management and constitutes
the first success dimension. Future preparedness reflects the long-term perspective on
portfolio success and describes the organizations preparedness for the future in terms of
technological assets and competences (Shenhar et al., 2001). It evaluates the long-term
benefits offered by a project portfolio (i.e. creation of new markets and development of new
technologies and capabilities) (Voss and Kock, 2013). Portfolio balance concerns the
equilibrium of risks, long- and short-term opportunities and the steady utilization of resources
within the project portfolio‟s execution (Killen et al., 2008; Teller et al., 2012). Synergy
exploitation represents the added value that emerges from dedicated portfolio management in
addition to the single projects‟ contribution through the capitalization of interdependencies
10
and the avoidance of redundancies (Jonas, 2010; Meskendahl, 2010). The dimension average
project success corresponds to the assertion that project portfolio management is an
antecedent to project success (Killen et al., 2008; Martinsuo and Lehtonen, 2007). Following
the research on project success, the respective indicators for average project success should
not refer to the adherence to cost, time and scope (which reflects project management
success), but rather to quality of the project‟s outcome and the satisfaction of the project
customer (Atkinson, 1999). Hence, it focuses on project effectiveness instead of efficiency
(Lechler and Dvir, 2010).
In accordance with the definition of success, the interpretation of project portfolio
management extends beyond the initial evaluation, prioritization, and selection of projects and
also incorporates the allocation of resources, concurrent re-evaluation of projects, and
exploitation of the project portfolio (Blichfeldt and Eskerod, 2008; Engwall and Jerbrant,
2003; Hendriks et al., 1999). Jonas (2010) analyzed the project portfolio manager‟s tasks and
defined four phases of project portfolio management:
The first phase (portfolio structuring) refers to the definition of a target portfolio in alignment
with the corporate strategy (Morris and Jamieson, 2005; Platje et al., 1994) and comprises the
evaluation, prioritization, and selection of projects. Previous studies have identified
information quality and transparency over the project portfolio as the basis for successful
decision making and prioritization of projects (Jonas et al., 2013; Teller et al., 2012). Cooper
et al. (2001) described the lack of information quality as a major barrier to project portfolio
success.
The second phase (resource allocation) concerns the cross-project planning and allocation of
resources that reflect the projects priorities and aim for optimal utilization of available
resources (in particular human resources). In theory, this phase is very closely linked to the
portfolio structuring phase. However, in practice resource allocation is often not aligned with
11
the strategic priorities of the portfolio. Research identified the resource allocation as a main
challenge for multi-project organizations (Hendriks et al., 1999). Due to the competition for
scarce common resources, conflicts may arise between projects and between projects and the
line organization (Engwall and Jerbrant, 2003). Two reasons for the failure of resource
allocation have been identified by Engwall and Jerbrandt: 1) the dysfunction of classical
management accounting systems for multi-project environments which leads to contradicting
goals of projects as resource users and line management as resource providers and 2) the
opportunistic behavior of project management which overstates project priority and urgency
in order to get required resources assigned.
The third phase (portfolio steering) comprises continuous project portfolio management tasks
for the coordination and control of the project portfolio (Müller et al., 2008). Research has
shown that the organization‟s ability to proactively decide about a project‟s continued
existence or termination is an antecedent to portfolio success in terms of strategic fit (Unger et
al., 2012). These capabilities, as well as the overall project portfolio management
performance, depend heavily on the information available to management. Empirical studies
have shown that information quality is a linchpin of project portfolio management success
(Dietrich and Lehtonen, 2005; Jonas et al., 2013; Teller et al., 2012).
The fourth phase (organizational learning and portfolio exploitation) has rarely been
discussed in project portfolio management literature and addresses activities which are located
at the end of the project‟s life-cycle (Jonas, 2010). The importance of post-project evaluation
and reviews is highlighted from a learning perspective. There is a common agreement in this
research stream that post-project evaluation and the development of lessons learned helps to
advance the project management practice of an organization and contributes to the success of
subsequent projects (Anbari et al., 2008; Collier et al., 1996; Huemann and Anbari, 2007;
Koners and Goffin, 2007; von Zedtwitz, 2002, 2003). Portfolio exploitation refers to the
12
transition of project outputs to the customer and the transformation of these outputs to
outcomes and benefits. In particular, at the interface between the temporary organization of a
project and the line organization of the customer, essential knowledge and competence may
be lost (Winter and Szczepanek, 2009). Thus, benefits realization management literature
highlights the importance of clearly defined roles acting at this interface (Cooke-Davies,
2007).
These four phases of project portfolio management contribute to portfolio success in different
ways and brings certain challenges. In the structuring phase, portfolio management seeks to
define a target project portfolio that contributes the highest value to the organization. The
main challenge is to establish a sound information basis in terms of accuracy, validity, and
comparability to evaluate and prioritize project proposals for funding. Transparency about the
project portfolio and the relative importance of each project also is a major challenge in the
resource allocation phase. Often the required information for decision making is flawed:
benefits are overstated, costs underestimated (optimism bias), and exaggerated urgency is
proclaimed to undermine the selection process and falsely achieve high priority when it comes
to resource allocation (Engwall and Jerbrant, 2003; Gardiner and Stewart, 2000; Jenner,
2009).
In the steering phase, portfolio management aims to assure that the project portfolio will
contribute to the organizational goals as planned in terms of benefits, costs, progress, and
strategic contribution (OGC, 2011a). For a purposeful steering of the portfolio, information
about the projects and the external environment needs to be considered. Deviations from
project plans and changing external conditions both have the potential to result in the loss of
expected project benefits; these conditions may require re-evaluation and re-prioritization of
these projects through the portfolio management process. However, in practice ongoing
13
control mechanisms to ensure the validity of a project‟s business case are rarely implemented
(Gardiner and Stewart, 2000).
In the learning and portfolio exploitation phase, portfolio management tries to improve its
practice by reviewing the results of former decisions. Here, the main problem is that most
companies simply have not implemented respective processes successfully (Anbari et al.,
2008; Newell et al., 2006). After project closure, the motivation to invest further effort is
relatively low for several reasons (Busby, 1999). From a project-level perspective this is
understandable - the project team has already gained learning from the project and does not
benefit from a further formal process. Nevertheless, from an organizational or portfolio level
valuable assets are lost if learning and exploitation processes are not in place.
With the project portfolio management phases and the respective goals and challenges in
mind, we describe the role of the project business case and its application from a project
portfolio perspective (business case control) in the following section.
Business Case Control
In the present study, business case control describes the application of business cases from a
project portfolio-level control perspective. The scope of control comprises more than merely
monitoring; it encompasses planning, monitoring, reporting, taking necessary corrective
action, and re-planning (Morris, 2013).
We propose that business case control comprises three elements: 1) the use of business cases
for the evaluation and prioritization of project proposals (business case existence), 2) the
continuous monitoring of the validity of ongoing projects (business case monitoring) and 3)
the tracking of the business case in terms of benefits realized after project completion
(business case tracking). These three elements are consecutive in their application, in that
each dimension requires a certain proficiency of the previous one, and can be assigned to the
14
four project portfolio phases. Hereafter, each of the three dimensions of business case control
is described in more detail and its contribution to project portfolio success is analyzed.
Business case existence refers to application of business cases within the portfolio structuring
and resource allocation phases. Addressing the main issues of these phases, business case
existence not only encompasses the presence of a business case, but rather its quality in terms
of accuracy, validity, and comparability. To ensure high quality business cases, project
portfolio management have to establish common rules and guidelines for the business case
design (often through standard templates for forms) and perform rigor and independent
business case reviews (Cooke-Davies, 2007; GAPPS, 2011).
Business case monitoring is an activity that accompanies the project from initiation until
closure and is processed in the portfolio steering phase. It refers to the revalidation of a
project‟s business case considering changing project scope and timing as well as changing
environmental conditions. Gardiner and Steward (2000) emphasized the importance of the
continuous monitoring and stated that most companies discover deviations and changing
conditions too late to react. In the same vein, Dvir and Lechler (2004) suggests that the effect
of initial planning quality cannot compensate the effect on project success that changes during
a project life-cycle have. Hence, the ongoing monitoring of the business case enables
management to make proactive decisions about the portfolio of projects; early access to
information will widen options and may involve the adjustment of project scope or urgency –
or the cancelation of projects to make way for alternate opportunities.
Business case tracking refers to the evaluation of project results regarding the realization of
the business case. As the added value described in the business case usually does not refer to
the direct project output, but rather to the outcomes and benefits which result from the output,
business case tracking takes place after project completion. While the contribution of post-
project reviews to organizational learning is widely acknowledged in literature (Anbari et al.,
15
2008; Collier et al., 1996; Huemann and Anbari, 2007; Koners and Goffin, 2007; von
Zedtwitz, 2002, 2003), we propose an additional benefit of business case tracking. The very
existence of post-project reviews affects the behavior of those responsible for the business
case and prevents them from overstating benefits and understating efforts in the business case.
These definitions show how each of three dimensions of business case control supports
project portfolio management and has the potential to address some of the main challenges in
project portfolio management. In this way, business case control corresponds to prior
research, which claims that project portfolio controlling should not only applied for project
evaluation and selection (Archer and Ghasemzadeh, 1999; Archer and Ghasemzadeh, 2004;
Müller et al., 2008).
-----------------------
Insert Table 2 here
-----------------------
Business case control contributes to project portfolio success by increasing the transparency
over benefits of project proposals, reducing the optimism bias and flawed information, by
enabling the portfolio management to answer to changing conditions in a timely manner and
by fostering organizational learning. Hence, we argue that the application of business case
control is beneficial for project portfolio success. Table 2 summarizes how business case
control supports the project portfolio management process and by that contributes to project
portfolio success.
H1: The application of business case control is positively related to project portfolio success.
Enablers of Business Case Control
Business case control emphasizes the relevance of the value created by a project portfolio. We
have hypothesized that the process of business case control contributes to project portfolio
success. But drawing only on the existence of a process would show an incomplete picture.
16
The process forms the basis for a purposeful management, but the actors are of pivotal
importance when it comes to successful implementation (Beringer et al., 2013; Jonas, 2010).
In the same vein, Elonen and Artto (2003) stated that a lack of commitment, and unclear roles
and responsibilities are some of the major problem areas in multi-project management.
The benefits management literature often highlights the importance of „benefits owners‟ who
are in charge of benefits realization (Cooke-Davies, 2007; Morris, 2013; OGC, 2010, 2011a,
2011b; Zwikael and Smyrk, 2012). However, there is no agreement in literature where this
role is located in an organization. The OGC stated that a separate tier of management is not
required, but roles and responsibilities of the actors related to project, program, and portfolio
management should be extended (OGC, 2010). However, role assignment is a „toothless tiger‟
if it lacks corresponding stimuli to assure that respective actors perform as intended. Hence,
this study not so much examines the location or organizational level of the roles for benefits
realization, but rather the drivers that facilitate responsibility and motivation in terms of
accountability and incentive systems.
Accountability for the business case
Morris (Morris, 2013) stated that it is very important to identify benefits owners who are in
charge of „harvesting‟ project outcomes. Since benefits are mostly realized after project
completion (Zwikael and Smyrk, 2012), an overarching responsibility is required that outlives
the project (Cooke-Davies, 2007). In addition, a quantitative study conducted by Dvir (2005)
provides evidence that the project management support for the turn-over of project outputs to
the customer is positively related to project success. Furthermore, over-optimistic estimates
are associated with a lack of accountability that can cause the business case to be flawed
(Jenner, 2009). Nevertheless, in practice the assignment of such responsibilities is often a
difficult issue. (OGC, 2011a).
17
Zwikael and Smyrk (2011) described the key players within the outcome (business case)
realization phase. They underpinned the importance of the benefits owner and the line
manager in the utilization of project outputs, whereas the responsibility of the project manager
ends with delivery these outputs. Hence, the benefits owner and the line management are
responsible for the realization of the business case. However, they acknowledge that the
project manager may be the best candidate to support the realization phase, due to their
“intimate familiarity with the outputs that have been implemented”(Zwikael and Smyrk, 2011,
p. 264) is required.
It is quite common to evaluate the project managers‟ success based on the project
management performance (adherence to cost, time and scope/quality) (IPMA, 2006).
Information regarding adherence to cost and time are usually maintained quite well in the
course of a project, while the scope and quality are specified in the project scope statement
and verified at project close-out (PMI, 2013a). The success of the benefits ownership, on the
other hand, is measured against the business case realization (Zwikael and Smyrk, 2011).
Hence, those responsible and accountable for the business case realization will be highly
interested in information regarding business case realization.
Altogether, based on previous research it can be assumed that the assignment of
accountabilities plays an important role in the context of business case realization. We argue
that these accountabilities facilitate the effect of business case control on project portfolio
success by reducing optimism bias and increasing the relevance and utilization of the
information provided by business case control. By that, business case accountability fosters
the relationship between business case control and project portfolio success.
H2: The relationship between business case control and project portfolio success is stronger
when business case accountability is high (positive interaction).
Incentives for the business case
18
Monetary incentive systems have become increasingly popular in recent years (Gneezy et al.,
2011). Eisenhardt (1989) draws upon principal-agent theory to describe how incentive
systems are designed to align the interest of the agents with goals of the principal. However,
the impact incentive systems have on motivation is controversially discussed in research (Frey
and Jegen, 2001). Critics argue that intrinsic motivation, which is important to produce a
desired behavior, is undermined by extrinsic incentives, an issue also known as crowding-out
effect. (Deci et al., 1999; Frey and Jegen, 2001; Gneezy et al., 2011; Ryan and Deci, 2000).
In project management research the use of incentives or disincentives within project
contracting is generally supported and has been subject to several studies (Bubshait, 2003;
Jaafari, 1996; Meng and Gallagher, 2012; Shr and Chen, 2004). However, in the context of
business case control the drafting of contracts is rather a pre-condition and may be an input
factor to the evaluation of a business case. Hence, the present study does not focus on contract
design but rather on individual incentives for the actors involved in the realization of a
business case.
Tosi et al. (1997) provided evidence that incentive alignment has a stronger effect than
monitoring in order to ensure that agents are acting in the interest of the owner. Although,
their study could not provide evidence for the interaction effect between monitoring and
incentives, Tosi et al. highlighted the relevance of this effect as described Milgrom and
Roberts (1992). Accordingly, accurate monitoring is a required prerequisite to align the
actors‟ behavior with the owner‟s interest by setting respective incentives.
In the context of this study the owner is the organization that invests in the project proposals.
The interest of the organization is not necessarily the success of single projects in terms of its
outputs, but rather the value added by the whole portfolio (Zwikael and Smyrk, 2012). In this
context, the information provided by business case control constitutes the basis for an
incentive system that aligns the behavior of the actors to the owner‟s interest. Hence, only if
19
an organization is transparent about the value added by the project portfolio, do incentives
result in purposeful management behavior and contribute to project portfolio success.
Therefore, we suggest that incentive systems that are based on project portfolio success and
business case control are complementary in their effect on success.
H3: The relationship between business case control and project portfolio success is stronger
when incentives for the project portfolio success are high (positive interaction).
Contingencies of business case control
Not all portfolios are alike (Teller et al., 2012; Voss and Kock, 2013). Therefore, with
reference to the contingency theory (Donaldson, 2001), we hypothesize that there are further
moderating effects that affect the relationship between business case control and project
portfolio success. While the previously discussed enablers of business case control are part of
the management system itself, contingencies represents circumstances that are outside the
management‟s area of influence. Project portfolio management research often refers to
complexity as a main contingency (Heising, 2012; Teller et al., 2012; Voss and Kock, 2013).
However, there are numerous interpretations of complexity (Kim and Wilemon, 2009). The
present study differentiates internal complexity, in terms of portfolio size, and external
complexity, measured by external turbulence (Sethi and Iqbal, 2008).
Portfolio size matters. Researchers argue that the relevance of project portfolio management
and the formalization of portfolio processes increases with the size of an organization
(Martinsuo and Lehtonen, 2007) and its project portfolio (Teller et al., 2012). One of the main
outcomes of business case control is the provision of transparency. The larger a project
portfolio is, the more difficult it is to maintain transparency without dedicated control
functions. Conversely, in small project portfolios the effort to implement and maintain
business case control may not justify the value it contributes. Hence, we argue that the
20
contribution of business case control to project portfolio success increases with the number of
projects that the portfolio comprises.
H4: The relationship between business case controlling and project portfolio success is
stronger with increasing number of projects (positive moderation)
External turbulence affects business cases in two ways. First, a business cases is required to
make assumption regarding future environmental conditions (i.e., exchange rates, behavior of
competitors, market and technological developments). With increasing turbulence, there is
elevated uncertainty about future developments which is generally reflected in the business
case in terms of risk. From a business case control perspective this increases complexity of
the business case, which results in the need for even more rigorous reviews. Second,
unforeseeable and rapidly changing environmental conditions may affect the validity and
longevity of a business case. Hence, close monitoring is required to detect and respond to
these affects in a timely manner. Altogether, we propose that the relevance of business case
control is higher when external turbulence is high.
H5: The relationship between business case controlling and project portfolio success is
stronger in more turbulent environments (positive moderation).
-----------------------
Insert Figure 1 here
-----------------------
Figure 1 summarizes the conceptual model and all hypotheses.
Method
Sample
We use a cross-industry sample of medium-sized to large firms in Germany to test the
hypotheses. The object of analysis is the project portfolio of the firm or a business unit in case
21
of large firms. For each project portfolio we contacted two key informants – a decision maker
and a coordinator. Decision maker informants had to have decision authority over the
portfolio in deciding on initiation, termination, or reprioritization of projects. Typical
positions were CEO, CIO, head of business unit or head of R&D. Coordinator informants had
to have a good overview of the project landscape and were in charge of actively managing the
portfolio. They had typical titles such as portfolio manager, department manager, or head of
PMO. This two-informant approach allowed integrating information from different
perspectives and hierarchies within each firm. More importantly, this study design avoids
common method bias (Podsakoff et al., 2003), because decision maker informants assessed
the dependent variable project portfolio success and coordinator informants assessed the
independent variables.
We contacted firms with mail solicitation explaining the study in general and we sent a call
for registration to potential coordinator informants or their superiors. Afterwards we contacted
them by phone to encourage their participation and to register for the study. All registered
informants received e-mail with a personal letter explaining the multi-informant design and
the questionnaires with an introduction describing the terms and definitions. To increase the
response rate, follow-up phone calls were conducted and reminder e-mails were sent. We
received 189 decision maker questionnaires and 195 coordinator questionnaires from 200
firms, resulting in 184 matched dyads with data from both types of informants. One
observation had to be removed from analysis due to missing data. After study evaluation each
firm received an individual report of the findings and the overall study results were presented,
discussed, and validated on a conference with about 90 participants. The 183 firms
representing the final sample come from diverse industries (26% automotive, 18 %
electronics/IT, 16% finance, 11 % construction and utility, 8 % health care, 7 % logistics, 5%
pharmaceuticals/chemicals, 9 % others). The sample shows a reasonable spread according to
22
firm size with 32 % having less than 500, 29 % between 500 and 2000, and 39 % more than
2.000 employees. Portfolio budget was less than 20 million € in 37 %, between 20 and 100
million € in 39 %, and higher than 100 million € in 24 % of the portfolios. The median
number of projects in a portfolio is 50.
Measurement
We use multi-item scales for the constructs, which are anchored from 1, “strongly disagree”,
to 7, “strongly agree”. Since for most of the variables, there were no existing scales available
in the literature, we operationalized these scales following previous conceptual work: all
scales were pretested with 12 representatives from academia and industry to assure face
validity of constructs, improve item wording, and remove ambiguity. We validated the scales
using principal components factor analysis (PCFA) and confirmatory factor analysis (CFA)
(Ahire and Devaraj, 2001). PCFA tests for unidimensionality of each scale by checking
whether all items load onto a single factor. Cronbach‟s Alpha is used to assess scale reliability
with acceptable values larger than 0.7. The CFA confirmed the measurement model and the
second-order structure of business case control and project portfolio success. We follow the
guidelines of Hu and Bentler (1998) to evaluate structural equation models. They suggest a
Comparative Fit Index (CFI) of 0.95 for good and of 0.90 for acceptable fit, and a
Standardized Root Mean Squared Residual (SRMSR) below 0.08 and a Root Mean Squared
Error of Approximation (RMSEA) below 0.06 for good fit.
Dependent variable. Project portfolio success is measured as a five-dimensional second-order
construct using dimensions and their items from existing literature (Jonas et al., 2013; Teller
and Kock, 2013; Voss and Kock, 2013): strategy implementation (4 items), future
preparedness (3 items), portfolio balance (3 items), average project outcome (4 items), and
synergy exploitation (3). PCFA showed that all items load highly on their respective
dimensions with no cross-loadings above 0.30. The CFA confirms the second-order structure
23
in that all dimensions load highly on the overall construct project portfolio success and the
model fit is acceptable. The results and item wordings are shown in Appendix A. The
coordinator informant also assessed all items for project portfolio success. Although we do
not use it for hypothesis testing, we can use the information for further validation of the scale.
The coordinator assessment results in the same factor structure with similar loadings and is
highly correlated with the decision maker assessment (r=0.57, p<0.000), which gives strong
confidence in the validity of our measure.
Independent and moderator variable. We developed measures for business case control based
on conceptual literature (Cooke-Davies, 2007; OGC, 2010, 2011a; PMI, 2013c, 2013b) along
three dimensions: business case existence (5 items), business case monitoring (4 items), and
business case tracking (5 items). PCFA showed high cross-loadings in one item, which was
consequently eliminated. Accountability was measured using 5 items (Cooke-Davies, 2007;
Winter and Szczepanek, 2009). One item was eliminated. Incentives for portfolio success was
measured using 4 items (based on Milgrom and Roberts, 1992; Tosi et al., 1997).
Environmental turbulence included 3 technology and 3 market turbulence items taken from
(Sethi and Iqbal, 2008). Finally, number of projects is the natural logarithm of the number of
projects that comprise the portfolio. The CFA on all latent independent variables as shown in
Appendix B has an acceptable fit and confirms the second-order structure of business case
control. The three dimensions of business case control are highly correlated as the high
loadings show, yet they are empirically distinct dimensions.
Control variables. We further introduce three variables in our model that might affect project
portfolio success and should be controlled for. The maturity of single project management has
been shown to affect project portfolio management, as it might be a necessary condition for
its effectiveness (Martinsuo and Lehtonen, 2007; Teller et al., 2012). Single project
management maturity (Cronbach‟s Alpha = 0.82) is measured with 6 items based on (Teller et
24
al., 2012). On the level of the portfolio we control for the formalization of the PPM process
(Alpha = 0.93) that we measure with four items (Teller et al., 2012). In addition to the number
of projects in the portfolio, which is a moderator in this study, we finally control for the
budget of the portfolio measured as the natural logarithm of the budget in millions of Euro.
Correlations and descriptives for all variables are shown in table 3.
-----------------------
Insert Table 3 here
-----------------------
Results
We use ordinary least squares regression in order to test the hypotheses. The results are
displayed in table 4. The first model only contains the direct effects of all control and
moderator variables. Only the maturity of single project management and the formalization of
portfolio management are significantly related to project portfolio success (unstandardized
regression coefficient b = 0.17, p<0.01, and b = 0.11, p<0.01, respectively). Model 2
introduces business case control to the model, which has a positive and significant coefficient
(b=0.12, p<0.05). The model explains 21 % of variance in portfolio success, which can be
considered as very satisfactory if we consider that it is not inflated by common method bias.
The basic hypothesis that business case control is positively associated with project portfolio
success is therefore supported by the data. Model 3 to 6 test the moderation hypotheses using
the procedures proposed by (Aiken et al., 1991). In each model we introduce the product-term
between the centered independent variable and the centered moderator variable. If the
coefficient is significant and the explained variance of the model is significantly increased in
comparison to model 2, the moderation hypothesis is supported.
-----------------------
Insert Table 4 here
-----------------------
25
In model 3 the interaction effect with accountability for benefits realization is positive and
significant (b=0.06, p<0.05), which supports hypothesis 2. Incentives for project portfolio
success also show a positive interaction effect (b=0.11, p<0.01) in model 4, which is in
support of hypothesis 3. Also external contingencies significantly influence the benefits of
business case control. With increasing number of projects (b=0.11, p<0.01) and under higher
external turbulence (b=0.12, p<0.01) the relationship between business case control and
project portfolio success becomes stronger, supporting hypotheses 4 and 5, respectively.
For the visualization of the moderation effects we use marginal plots instead of simple slopes
as they show the strength and significance of the effect of business case control on project
portfolio success for each value of the moderator (Brambor et al., 2006). The solid lines in
figures 2 to 5 represent the overall effect over the whole range of moderator values. The
dashed lines represent 95%-confidence intervals. Figure 2 shows that business case control
only has a positive and significant effect on project portfolio success if accountability for
benefits realization is above 4, which is still lower than the mean in this sample (4.5). Lower
values in accountability diminish the effect of business case control on success. A similar
effect can be observed in figure 3. When incentives are higher than approximately 2, the
effect of business case control becomes significantly positive. Since the mean in our sample is
2.22, the results indicate that an above average degree of incentives for portfolio success leads
to a positive effect of business case control and below average incentives lead to a non-
significant effect. Figure 4 shows the effect for the number of projects (ln). Above a value of
4 (i.e. roughly 50 projects) the benefits of business case control become significantly positive,
otherwise the effect is non-significant. Concerning external turbulence, Figure 5 informs that
above the average turbulence of roughly 4 the effects are positive and significant and below
they are insignificant. Notably, none of the moderators leads to significantly negative effects
of business case control.
26
----------------------------
Insert Figures 2-5 here
----------------------------
Discussion
Implications for Research
The present study examined the role of business case control within project portfolio
management by employing literature from project, project portfolio and benefits realization
management and validated our hypotheses by empirical research. By doing so, this paper
provides the following main contributions to future research.
First, this study introduces the construct of business case control and shows its predictive
relevance for project portfolio success. Based on conceptual literature we have developed a
multi-dimensional conceptualization of business case control consisting of the dimensions
existence, monitoring, and tracking. We empirically validated the measurement of this
second-order construct by confirmatory factor analysis and find that the three dimensions are
highly correlated yet distinct. Furthermore, we find considerable variance of the overall
construct in our sample and can differentiate it from other related constructs in project
portfolio management research such as single project management maturity and the
formalization of project portfolio management. The three dimensions of business case control
suggest that project portfolio management concerns more than the initial structuring of a
project portfolio and highlight the importance of the steering and exploitation phases of
portfolio management. The study reveals that some firms currently incorporate business case
control more intensively than others. More importantly, for the very first time the application
of business case control as a method of benefits management on project portfolio level has
been subject to a large-scale quantitative study. Until now, research on benefits management
has mainly been anecdotal and primarily based on case studies. This study provides the
statistical evidence for the effectiveness of business case control with respect to project
27
portfolio success. By demonstrating the relevance of business case control, this study
contributes to research on project and project portfolio management. Future research can
utilize and further test the construct in different contexts.
Second, we have identified core enablers of business case control by showing that the control
process is positively moderated by dedicated roles, which provide accountability and
motivation for business case realization. In particular, the interaction effect between
monitoring and incentives has been subject to discussion while prior studies failed to confirm
this effect (Mahaney and Lederer, 2010; Tosi et al., 1997). These findings are valuable
because they show the conditions under which business case control works. We find that
without accountability and incentives for portfolio success business case control is ineffective.
Third, this research contributes to contingency research in project management by identifying
appropriate management practices depending on the context (Howell et al., 2010; Shenhar,
2001; Teller et al., 2012). We analyzed under which contextual conditions business case
control contributes to project portfolio success and found the control to be more effective in
larger project portfolios and more turbulent environments. These findings may open avenues
for further research that builds upon organizational control theory (Eisenhardt, 1985; Ouchi,
1977, 1979). The theory distinguishes between clan, process and, outcome control; the
effectiveness of each type of control is proposed to vary with the environment in which is it
applied (Ouchi, 1977, 1979). Accordingly, outcome control is the means of choice in complex
environments and when environmental changes are difficult to predict (Turner and Makhija,
2006). While the traditional project management control measures of time, cost, and quality
are types of process control, business case control represents an outcome control method
(Schultz et al., 2013). Hence, the findings in this study correspond with the insights from
organizational control theory and could lead the way for further research facilitating both
streams of literature organizational control and project portfolio management.
28
Implications for Management
This study provides a comprehensive description of business case control that can be used by
project portfolio managers to benchmark their current practice. In particular, the relevance of
business case monitoring and tracking and the respective relevance of the later phases of
project portfolio management indicate avenues for improving and extending project portfolio
management practices.
Furthermore, this study provides directions for the implementation of a business case control
process. Both the assignment of accountability for the business case, and the setting of
incentives for project portfolio success, facilitate the effect of business case control and hence
should be considered jointly. However, it has been also shown that business case control is
not always an appropriate approach for a project portfolio. Managers can build on this study
in order to evaluate the usefulness of business case control by taking internal and external
contingencies into account.
Altogether, it has been shown that the business case control is not a bureaucratic constraint or
a matter of form, but that it contributes to project portfolio success.
Limitations and Avenues for Future Research
There are some limitations of this research that need to be considered when interpreting the
results. First, although we use a two-informant research design to avoid common method bias,
a methodical limitation is that the analysis relies on cross-sectional data. We assume that
applying business case control in project portfolio management will increase portfolio success
and we could show a positive association even when controlling for the maturity of single
project management and the formality of project portfolio management. However, we cannot
rule out the possibility that the causation is reverse, i.e. that firms invest more in business case
control because they have been successful in the past (e.g. due to more resources at their
disposal). Only a longitudinal study could corroborate the suggested causality.
29
Second, although we could show a significant association between business case control and
success, we do not know the exact mechanisms through which these performance gains come
to pass. Applying business case control may have positive and negative effects that work
simultaneously. For example, too many formal controls may limit creativity and might strain
innovation, which could outweigh the positive effects in some portfolio environments such as
R&D project portfolios. The current study is therefore a good vantage point to further
investigate possible mediation effects and open the black box between business case control
and portfolio success. This type of study could also be done through in-depth qualitative
studies or large-scale quantitative studies.
In this context, an adaption of the success construct might also be adequate. While we used an
established multi-dimensional construct for project portfolio success, there might be other
dependent variables that could be affected by business case control, such as innovativeness of
the portfolio or the motivation of the affected stakeholders. Our results suggest that higher
incentives for portfolio success and more accountability for benefits realization increase the
performance effects of business case control. However, there might by negative effects, such
as the hidden cost of control by undermining motivation (Falk and Kosfeld, 2006). Future
research could therefore also explore other dependent variables that help to uncover the
overall effects of applying business case control in project portfolio management.
Finally, this study concentrated on two enabling conditions and two contingency factors that
facilitate the benefits of business case control. Future research could investigate other
conditions and moderating factors that might be relevant in this context (e.g. type of project,
project customer, industry, strategic orientation and aspects of corporate culture).
30
Appendix A
Confirmatory Factor Analysis for Project Portfolio Success
Construct
Dimension
Item
Description loading
Project Portfolio Success (2nd
order construct)
Strategy Implementation (Cronbach‟s Alpha α = 0.85) 0.78
The project portfolio is consistently aligned with the future of the company. 0.81
The corporate strategy is implemented ideally through our project portfolio. 0.92
Resource allocation to projects reflects our strategic objectives. 0.78
The implementation of the strategy is considered a great success in the organization. 0.78
Future Preparedness (α = 0.88) 0.66 We sufficiently develop new technologies and/or competences in our projects. 0.70
With our projects we are a step ahead of our competition with new products, technologies, or services. 0.90
The projects enable us to shape the future of our industry. 0.74
Portfolio Balance (Cronbach‟s Alpha α = 0.85) 0.68 There is a good balance in our project portfolio ... ... between new and old areas of application. 0.82
... between new and existing technologies. 0.89
… of project risks. 0.60
Avg. Project Outcome Quality (α = 0.88) 0.69 Please assess the average success of completed projects:
Our products/project results achieve the target costs defined in the project. 0.57
Our products/project results achieve the planned market goals (e.g., market share). 0.64
Our products/project results achieve the planned profitability goals (e.g., ROI). 0.94
Our products achieve the planned amortization period. 0.89
Synergy Exploitation (α = 0.88) 0.70
During the project execution, development synergies (e.g. shared use of modules, platforms, technologies
etc.) between projects are rigorously exploited. 0.83
After project completion, exploitation synergies (e.g. shared marketing/sales channels, infrastructure, etc.)
between projects are rigorously exploited. 0.85
We hardly ever have double work or redundant development. 0.66
7-Likert-type Scale; ² = 214.40 (df = 114; p < 0.00); RMSEA = 0.071; SRMR = 0.068; CFI = 0.94; n = 183.
31
Appendix B
Confirmatory Factor Analysis for Independent Variables
Construct
Dimension
Item
Description loading
Business Case Control (2nd
order construct)
Existence (Cronbach‟s Alpha α = 0.85) 0.81
All projects must have a business case in order to enter the selection process. 0.67
“Must-Projects“ also have to prove a business case. 0.66
We closely examine the business case within portfolio structuring. 0.84
The business case is examined by experts from different departments. 0.78
Overall, business cases are elaborated very well and conscientiously. (discarded in PCFA) -
Monitoring (α = 0.88) 0.94
We check the business case for validity at specified points in time or events in the course of the project and adjust if
necessary. 0.93
Once a project is approved a review of the objectives is rare. (reversed) 0.65
We check on a regular basis for each business case whether the necessary conditions are still valid. 0.86
When the project scope or course has changed the implications on the business case is always checked. 0.75
Tracking (α = 0.88) 0.79
Once a project is completed, no further consideration takes place. (reverse) 0.60
At project completion, we not only check the adherence to costs, time and specifications of the project, but also the
fulfillment of the business case. 0.72
Even within a certain period after project completion it is regularly checked if the originally targeted business case could
be realized. 0.92
We systematically analyze the results of the review of the business case. 0.86
The subsequent analysis of business cases provides us with valuable insights. 0.79
Incentives for portfolio success (α = 0.75)
Project managers receive a special bonus, which is based on the success of the project portfolio. 0.65
Portfolio coordinators receive a special bonus, which is based on the success of the project portfolio. 0.86
Line managers receive a special bonus, which is based on the success of the project portfolio. 0.65
Accountability (α = 0.88) For the take-over and exploitation of project results clear responsibilities and roles are defined. (discarded) -
Even after project completion responsibilities for the realization of the business case are clearly defined. 0.66
The role of the project user including certain duties is clearly defined. 0.71
Project users have clearly defined targets regarding the exploitation of the project results. 0.98
The line management on the project user's side have clearly defined targets regarding the exploitation of the project
results. 0.84
Environmental Turbulence (α = 0.84)
The technology in our industry is changing rapidly. 0.87
There are frequent technological breakthroughs in our industry. 0.92
Technological changes provide big opportunities in our industry. 0.71
In our industry, it is difficult to predict how customers‟ needs and requirements will evolve. 0.45
In our kind of business, customers' product preferences change quite a bit over time. 0.54
In our industry, it is difficult to forecast competitive actions. 0.60
7-Likert-type Scale; ² = 445.83 (df = 287; p < 0.00); RMSEA = 0.056; SRMR = 0.064; CFI = 0.94; n = 183.
32
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Figures and Tables
Figure 1. Conceptual Model and Hypotheses
Figure 2. Marginal Effects of Business Case Control Depending on Accountability
38
Figure 3. Marginal Effects of Business Case Control Depending on Incentives
Figure 4. Marginal Effects of Business Case Control Depending on Number of Projects
Figure 5. Marginal Effects of Business Case Control Depending on External Turbulence
39
Table 1. Definitions of Business Cases
Source Definition
Project
management Institute (PMI)
Project management body of knowledge
“The business case or similar document provides the necessary information from a business standpoint to determine whether or not the project is worth the required investment. […]
In the case of multi-phase projects, the business case may be periodically reviewed to ensure that the project is on track to
deliver the business benefits. In the early stages of the project life cycle, periodic review of the business case by the sponsoring organization also helps to confirm that the project is still required.”
Standard of program management (PMI, 2013b)
“The business case may include details about problems or opportunities; business and operations impact; cost benefit analysis; alternative solutions; financial analysis; intrinsic and extrinsic benefits; market demands or barriers; potential
profit; social need; environmental influence; legal implication; risk; time to market; constraints and the extent to which the
program aligns with the organizations strategic objectives. The business case establishes the authority, intent, and
philosophy of the business need. […] The business case also serves as a formal declaration of the value that the program is
expected to deliver and a justification for the resources that will be expended to deliver it.”
Standard for portfolio management 3rd Edition (PMI, 2013c)
“During the optimization process, component proposals provide initial assessment of expected business value and the
(often intangible) contributions to organizational objectives. The expected value to be returned by the portfolio component
is a significant attribute of the weighting and scoring leading to authorization. Once authorized, accountability for the delivering the consequent value is assigned. Also, expected value will continue to be measured throughout the component‟s
life cycle.”
International project
management
association (IPMA)
IPMA Competence Baseline (IPMA, 2006, p. 139)
“On a tactical level the business and the legal context is linked to a project or programme through the business case. The
business case states what is expected from the programme or project in terms of cost, acceptable risks and revenues, the
functionality required of the results, the time-frame and resources required.”
Office of
Government Commerce
(OGC)
Management of Value / Prince2
“The justification for an organizational activity (strategic, programme, project, operational) which typically contains costs, benefits, risks and timescales and against which continuing viability is tested”
Global Alliance
for Project Performance
Standards
(GAPPS)
Project Manager Standards (GAPPS, 2011) (p.12)
“The business case will generally be based on a feasibility study or other analysis that predates the program. The business case should include expected benefits and the associated financial considerations, risks, and costs. It may be contained in
multiple documents. […] Complex business cases may require independent reviews.”
Further
practitioner-
oriented literature
Transforming government and public services: Realising benefits through project portfolio management (Jenner, 2010,
p. xi)
“A document which explores the rationale for investment and the options for achieving the desired business outcomes.”
Gower handbook of project management (Cooke-Davies, 2007, p. 255-256)
“Business cases are not simply documents to be used for gaining access to the necessary resources; they are the project‟s
raison d`être. Using the to drive all decision calls for a further. […] Review the integrity of the business case in the light of both project performance and the changings business environment at each „stage gate‟ review point of the life of the
project.”
Making the business case (Gambles, 2009, p.1)
“A business case is a recommendation to decision makers to take a particular course of action for the organisation,
supported by an analysis of its benefits, costs and risks compared to the realistic alternatives, with an explanation of how it
can best be implemented.”
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Table 2. Business Case Control along the Project Portfolio Management Phases
Phase Challenges Role of BCC Contribution to PPM
success
Structuring Project business cases suffer from
flawed information, incomparable
statements, and inaccurate
estimates.
Scrutinizing reviews
across all project
proposals in regards to
their business case
Increased portfolio value by
informed investment
decisions (based on
improved validity and
accuracy of project business
cases)
Resource
allocation
Optimal resource allocation is
aggravated by a lack of
transparency regarding the
relative priority and urgency of
projects.
Establishment of
common requirements
and quality standards
for business cases
aiming for
comparability
Improved resource
allocation in accordance to
priorities (based on
transparent and comparable
project benefits)
Steering Go/no-go decision can be flawed
due to unseen changes of
environmental developments and
late detection of (creeping)
deviations from project plans.
Monitoring the validity
of business cases in
regards to changing
internal and external
conditions
Enhanced responsiveness
and capability of early
detection of unprofitable
investments
Learning and
exploitation
Organizational learning lacks
motivation and sufficient effort.
Tracking of business
case realization
Increased business case
planning capabilities
through organizational
learning
Table 3. Correlations and Descriptives
Variable Mea
n
Std.
dev (1) (2) (3) (4) (5) (6) (7) (8)
(1) Project Portfolio
Success 4.58 0.80 1.00
(2) Portfolio Budget (ln) 74.08 182.40 -0.07 1.00
(3) Number of Projects
(ln) 4.03 1.21 0.03 0.02 1.00
(4) Maturity of Single
Project Management 5.28 1.09 0.34 -0.08 0.03 1.00
(5)
Formalization of
Portfolio
Management
4.71 1.74 0.32 -0.01 0.21 0.33 1.00
(6) External Turbulence 4.01 1.07 0.11 -0.01 0.08 0.03 0.02 1.00
(7) Accountability 4.49 1.41 0.16 0.03 0.05 0.42 0.10 -0.03 1.00
(8) Incentives 2.22 1.26 0.12 0.08 0.19 0.09 0.11 0.04 0.12 1.00
(9) Business Case
Control 4.20 1.28 0.30 0.12 0.09 0.43 0.24 -0.02 0.54 0.20
n = 183
41
Table 4. Regression Results
Project Portfolio Success
Independent Variables (1) (2) (3) (4) (5) (6)
Portfolio Budget (ln) 0.00 0.00 0.00 0.00 0.00 0.00
Number of Projects (ln) -0.03 -0.03 -0.05 -0.04 -0.04 -0.03
Maturity of Single Project Management 0.17**
0.14* 0.14
* 0.14
* 0.14
* 0.16
**
Formalization of Portfolio Management 0.11**
0.10**
0.10**
0.10**
0.09**
0.11**
External Turbulence 0.07 0.07 0.06 0.08 0.08 0.10*
Accountability for Benefits Realization 0.02 -0.03 -0.02 -0.04 -0.04 -0.05
Incentives for Portfolio Success 0.05 0.03 0.04 0.02 0.03 0.04
H1: Business Case Control (BCC) 0.12* 0.13
* 0.15
** 0.12
* 0.12
*
H2: BCC x Accountability 0.06*
H3: BCC x Incentives 0.11**
H4: BCC x Number of Projects 0.11**
H5: BCC x Turbulence 0.12**
Constant 4.58**
4.58**
4.52**
4.54**
4.56**
4.58**
R2 0.18 0.21 0.23 0.25 0.25 0.25
R2 (adjusted) 0.14 0.17 0.19 0.21 0.21 0.21
Delta R2
0.03
* 0.02
* 0.04
** 0.04
** 0.04
**
F 5.56**
5.64**
5.74**
6.45**
6.26**
6.23**
Hierarchical OLS regression; n=183; mean-centered variables; unstandardized regression coefficients are
reported; † p<0.10; * p<0.05; ** p<0.01 (two-sided). BCC=Business Case Control