Using the strategic relative alignment index for the selection of portfolio projects application to a public Venezuelan Power Corporation

Abstract

In this paper a new approach that uses the alignment of projects with corporate strategic objectives to prioritize project portfolio in an efficient and reliable way is presented. For this purpose, corporate strategic objectives will be used as prioritization criteria to obtain the Relative Alignment Index (RAI) of each project which indicates how close or far each project is from the strategic objectives of the company. The approach presented uses the Analytic Network Process. This technique allows considering the influences among all the elements within the network, that means, the strategic objectives, and specially the projects within a portfolio. The proposed RAI index helps to select the best strategically aligned projects for the organization. The proposed RAI index and its form of evaluation have not previously been considered in the project portfolio literature until now.

The research methodology for the development of RAI is based on a combination of a synthesis of the literature across the diverse fields of project management, project alignment, multicriteria decision methods and a parallel analysis of an industrial case study. The use of the proposed RAI index is demonstrated using a rigorous methodology with acceptable complexity which seeks to assist managers of the National Electricity Corporation of Venezuela, recently founded and composed by 13 merging old companies, both public and private, in their yearly resources' assignment on their projects portfolio. The aim being to determine a projects 'ranking based on their degree of alignment to corporate strategy and on the judgments of a group of experts, such as the management board. The new corporation assumed the challenge of setting strategic directions (Mission, Vision, Values, Strategic objectives, Plans, Programs, etc.) common to all merging companies. This approach with multi-stakeholders support allows managers to strategically allocate resources to each project in a consensual way.