Tuesday, March 26, 2013

Top Down Management approach





Top Down Management approach
Introduction:
Portfolio management can best be described as the science that best describes the process of management through centralized system of methods and technologies as used by project mangers in the process of dada collection analysis in order to effectively manage aspects of a project. It s main function is to ensure that resources are optimally mixed in relation to the delivery quotient they are expected to produce (Bahel, 2009). This way, they can be better allocated in order to ensure that the goals of an organization as regards finances and operations are honored .In the area of resource planning and management, there have been numerous arguments arising on which approach is better to use and implement between the top down approach and the bottom up approach (Chiu & Russell, 2011). The top down approach revolves around that use of a rough order in magnitudes involving little explanations on how to estimate the needs of the resources.
It usually requires early preparation and interrogation into the project planning cycle by use of techniques that are easy to implement. In terms of visibility, it is more than what is usually provided for in the bottom up approach and in this case therefore, it is able to support the desired qualities required in making the portfolio successful in regards to producing high returns on what was initially invested especially in the area of research and development and also in the other useful areas of resource planning and maximization (Gomez-Mejia et al, 2008). In order to ensure that the company is properly aligned in the aspect of being able to balance the efforts used and the outcomes attained it is essential that an organization chooses to implement the elements of atop down management approach in the project portfolio management. In this case therefore choose to use the top down management approach basing on the fact that it is better in returns and applicability in relation to this bottom up approach.
Analysis
It is not surprising to note that in the period of the ninetieth century, project management would always fail and were not successfully implemented. However after many studies and researches were conducted and done, there was an improvement in the area of project managements. However, the improvements have not been substantial since there are still a number of very important issues that have not been properly addressed. The failure still lies between the implementation of strategies and how they are executed. This is due to the approaches they are using to mange there portfolios. Despite the fact that project which are mainly it base require vital aspects in project management, there has been a lax which has been attributed to be as a result of implementing the bottom up approach method of portfolio management (Pojasek, 2005). The results have so far been very disappointing. For instance, it is noted that due to use of the bottom up approach, a majority of the companies fail to implement their strategy. Kaplan and Norton, who are statistical conducting companies, have noted that out of ten companies seeking to implement their strategy, only one is able to do so with the rest failing consecutively. IBM states that 40% of the investments made in the IT industry are wasted. In this case if the estimates used by IBM are correct this would therefore mean that out of the total investments done in the world over one trillion dollars are wasted annually (de Boer, 2008). The same investments have been rated by Graner to be at about 20% which is approximately equal to a sum total of $600 billion annually that is wasted in poor portfolio management.
In this case therefore, there must be a very big problem with the bottom up approach of portfolio management basing on the number of complaints that have rise n in the it industry following the use of the strategy. The approach may seem realistic and logical in how it is presented but in the real sense it causes business to operate in the fiction mode which is clearly not the appropriate way while making management decisions. This is why I am advocating for the use of the top down approach in portfolio management.
The approach is able to create a results chain model which is able to relate the relationship and discrepancies between the finances involved/invested and with what the business is able to produce in terms of the expected out comes. It is mainly appropriate for those types of companies that would desire to see a transformation in their business and not just in the aspects of profit realization or an increment in their revenues (Pursche, 1990). The approach is able to relay information regarding the benefits that will be accrued to the business through transformation, which are much higher than the benefits it would attain by using the mode of business it is currently using. The contrast between these two aspects is that they are that they area able to portray an amount of benefits that would be enjoyed by a firm. These benefits can also on the other hand be driven to the results chain in order to show the overall contribution of each aspect in regards to its capabilities. This is indeed very simple for use by management. It is actually the simplest compared to the other processes like the agile systems .It is therefore essential for us all to accept this simple technique to problem solving in regards to the complicated issues that it helps to address.
Through use of the top down approach companies are able to refer to the macroeconomic indicators in their environment for use the core force in implementation of their portfolio. This way, it is easier for the management of the companies to contrast and compare the investments they can do in different nations or regions (Babajanian, 2005). This way it is easy and very fast to make return on  investments by investing in areas that are money viable economically than just basing  on one’s investments through the tedious process of having to evaluate an ideal company before you can invest.
Through this mode of management it is possible for companies to effectively carry out their investments through the formulation of an overview of the general economy. In this case therefore, it is possible to decide on whether t invest in a large number of stocks or to do an analysis of an individual company/industry in regard to the benefits they are going to be entitled to as regard to the information they have attained of the economic market. This way they are able to choose the best way forward( Kim et al 2006). This approach is most especially important to large investment companies who are seeking great profits in the industry.
In the case of the top down approach it is easier for companies to eliminate wastes before they can constitute the portfolio of the company. This is due to the fact that they are thoroughly evaluated and gone through before any decisions can be made. No decision is made without market analysis and testing. It is also important to note that this approach allows for the resources of the company to be geared towards the right venture in regards to investment (Deo,1992). After keen analysis of the economic conditions and the market climate in a certain line of investments, the company is able to come up with an appropriate decision that will prohibit aimless and loss full investments.
The top down approach enables companies to be better aided in matters regarding transparency while making decisions related to the company. This is due to the fact that through selecting new projects and in making new priority requests for the projects the companies are able to include their stakeholders in making such decisions, these way they are able to make the processes more open in the case of the decisions that may permanently affect the performance/stature of the organization. Through the creation of standardized and open processes in decisions involving the company, the management is relaying a message to the share holders that they are indeed partners in the company and as such a very important aspect of the company. This way they are motivated to increase their investments and other processes that are positive contributors to the development of the company.
In the aspect of helping to reduce the overall costs to be spent on the process, top down portfolio management is ideal in projects (Lockett et al, 2008).This is because through this, one is able to determine where the costs are coming from and why they are recurrent. In this case therefore, more light is shed on the projects that the management would like to undertake. In the long run, the process leads to the implementation of constant evaluations and analysis hat help to ensure that the decisions that have been undertaken are well implemented and deserving. This way, the projects or processes that are no longer viable are eliminated even before they make up the portfolio and thus a lot of money is saved in relation to the costs that they would have entailed.
Since the top down approach necessitates that a lot of market research is conducted, it helps to eliminate and reduce the level of risks involved in a project (Rosenberg et al, 2008). This element is indeed very important and vital in the aspect of project management. In this case the studied risks are assessed and a measurement criterion through which they will be weighed is determined. This way, they are evaluated and assessed in regards to the threshold that have been set by the organization. Additionally through this process the organization is enabled to take up ventures that they may be able to handle in term of risk management and thus the negative effects are consequently reduced. This therefore enables the organization to asses the risk in regards to whether it can be able to counter it when it occurs and the cost implications that are attached to it (Smith, 2008).
The top down approach especially in the information technology industry helps to create a better platform through which the portfolio created can be viewed. It enhances the ability of the organization through creating agility and giving it the ability to be well equipped in regards to responding to change and also with a clear overview of the overall implications of the portfolio to the functioning of the organization.
In the case of power steering Company, the top down portfolio has helped to sustain the business in four major perspectives categorized into optimization of demand, proper governance, execution and adequate analysis of the market place (Juneja et al, 2011). It is stated that the approach is more better and mature in the essence that it enables the processes in project portfolio management to be treated in equality therefore, helping to place a significant value on the demand level and in the governance of the company other than basing on the low areas that do not usually require a lot of attention from the management as will be done through the use of the bottom up strategy (Jacobsen, 1998). In this same aspect therefore, it is attributed that due to the top down approach, the company has been able to assert a level of discipline through all the areas and levels of capability than basing on the benefits that may accrue due to an increment thus allowing them to ably advance form the basic to the higher levels. (Nor et al, 2010) In this case therefore they have been able to attain the increment if value through greatly improving their processes.
Conclusion:
Basing on the above fact therefore, it is only right to state that top down approach is better than the bottom up approach as reviewed above. It may seem quite tedious and long to carry out the top down approach especially in the implementation phase of the project but the benefits in the long run are much more than the implantation costs in the short run.







References
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