From models to practice: decision making at portfolio meetings

Abstract

Purpose The purpose of this paper is to examine the behavior of decision makers in portfolio management meetings on innovation projects and to study decision‐making behavior at these meetings. Design/methodology/approach The paper is based on the case‐study approach; a theoretical framework is derived from sociology to direct the analysis of a portfolio management meeting. Four factors explain the behavior of decision making: the portfolio models as defined by organizational rules; issues related to the organizational context; a tendency to behave as others expect and to make appropriate decisions; and organizational learning processes. Findings The paper finds that the set of rules for conducting portfolio meetings was only partially followed. The identity of decision makers was not as calculating actors, but was shaped and influenced by four things: the formal system and rules, observations of others, the organizational context, and organizational learning. Systems other than the portfolio management systems compete for the decision makers' attention, as multiple criteria are manifest. Signals from top management influenced the decision makers' interpretations of the organizational context and framed the decision making. As learning showed decision makers what behavior was acceptable, this behavior seems to be further enforced. Decision making thus becomes more a matter of making appropriate decisions than of optimal or rational decision making. Research limitations/implications The study is limited to a single case study in one organization. Replications among other samples are needed to validate current findings. Originality/value This paper presents a framework for understanding how portfolio decision making is shaped and molded through appropriate decision making rather than by following the normative calculative approach. In practice, the decision maker must deal with multiple factors and criteria that make it difficult to carry out a traditional rational decision‐making process. Still, the functions of decision making meetings can extend beyond decision‐making. They may also serve as social occasions and as occasions for interpreting possible actions and sharing that information, making it possible to make appropriate decisions. Decisions are thus a construct rather than a calculative outcome.

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