The importance of Organizational Structures in Portfolio Management
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=== Structure of this article === | === Structure of this article === | ||
| − | + | In order to obtain a fundamental knowledge and set the scene, the article starts with a short description of how to manage portfolios, organizational structures and the relationship between portfolio management and organizational structures. | |
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| + | The following section describes the usability of organizational structures in portfolio management and the theories behind will be address and explained. | ||
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| + | Lastly, the challenges and limitations will be discussed. | ||
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=== Managing Portfolios === | === Managing Portfolios === | ||
Revision as of 21:02, 22 February 2019
Contents |
Abstract
The success of any organization – being a commercial company or non-profit organization – is highly dependent on the level of alignment the organization is able to execute on. The mission and vision statement of an organization expresses the end goal – our north star. In order to achieve these goals, a strategy – the game plan of how to get there – is formulated. In order to execute on this strategy, you need to design the organization that suits and enables the strategy. The success criteria’s of and the organizations ability to execute projects is closely linked to their ability to design and structure the organization. They must have a clear organizational structure in order for the organization to execute the strategy and thereby achieve the goals efficiently[1].
The purpose of this article is to address and stress the importance of organizational design (including organizational structures needed for a project organization within a classical line organization) in order for the organization to become successful in practice. The article addresses - step by step - the important concepts and the application of how to obtain an optimal organization design that is need to execute on the portfolio management part of the strategy. It provides the tools and accumulated experience in order to become a good and successful practitioner.
Background
Structure of this article
In order to obtain a fundamental knowledge and set the scene, the article starts with a short description of how to manage portfolios, organizational structures and the relationship between portfolio management and organizational structures.
The following section describes the usability of organizational structures in portfolio management and the theories behind will be address and explained.
Lastly, the challenges and limitations will be discussed.
Managing Portfolios
According to MoP: Management of Portfolios Portfolio management is: “Portfolio management is a coordinated collection of strategic processes and decisions that together enable the most effective balance of organizational change and BAU.” [2].
Organizational structures
An organizational structure is a formal visualization of a system of tasks and the reporting relations, that coordinates and motivates the employees, so they efficiently can work together to achieve the goals of the organization. Having an organizational structure can help the organization improve efficiently by balancing the influencing factors such as external environment, strategy, technology and human resources[3]. There are several types of organizational structures, e.g. functional, matrix or divisional structures, which will be elaborated more on later in the article. It is a work of art to select and design a proper structure for an organization, which increase the efficiency and effectiveness of the organization. It is not easy and should not be taken for granted.
The success of any organization – being a commercial company or non-profit organization – is highly dependent on the level of alignment the organization is able to execute on. It is therefore important to focus on the structure of the organization and make a virtue out of designing the best possible structure that suits your organization and its goals the best. If the organizational structure is not in alignment with the strategy of the organization, it creates a friction which shows the inability to mobilize resources right, decision-making and information flow lacks and the execution of the strategy becomes ineffective[4].
Relationship between organizational structure and portfolio management
Application/Usability
Challenges and Limitations
References
- ↑ Kates, A. & Galbraith, J., Designing Your Organization: Using the Star Model to Solve Five Critical Design Challenges, 2007.
- ↑ Office Of Government Commerce, Management of Portfolios, TSO 2011.
- ↑ Jones, G. R. & George, J. M., Essentials of Contemporary Management, 5. edition., McGraw-Hill Education, New York 2015, Chapter 7.
- ↑ Kates, A. & Galbraith, J., Designing Your Organization: Using the Star Model to Solve Five Critical Design Challenges, 2007.
