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August/September 2014
Volume 45
Number 4
International Research Network on Organizing
by Projects (IRNOP)
7
The Effect of Optimism Bias on the Decision to Terminate
Failing Projects
Werner G. Meyer
21
Managing Structural and Dynamic Complexity: A Tale
of Two Projects
Tim Brady and Andrew Davies
39
Ethics, Trust, and Governance in Temporary Organizations
Ralf Müller, Rodney Turner, Erling S. Andersen,
Jingting Shao, and Øyvind Kvalnes
55
Value Management for Exploration Projects
Rémi Maniak, Christophe Midler, Sylvain Lenfle,
and Marie Le Pellec-Dairon
67
Risk Management in Project Portfolios Is More Than
Managing Project Risks: A Contingency Perspective
on Risk Management
Juliane Teller, Alexander Kock, and
Hans Georg Gemünden
81
Developing a Framework for Embedding Useful Project
Management Improvement Initiatives in Organizations
Gabriela Fernandes, Stephen Ward, and
Madalena Araújo
Editor
Hans Georg Gemünden, Dr. rer. oec. habil.,
Chair for Technology and Innovation
Management, Technische Universität Berlin,
Berlin, Germany
■
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August/September 2014
Volume 45, Number 4
Th e Pr o fe s s i o n a l Re s e a r ch Jo u r n a l o f t h e Pr o j e c t M a n a g e m e n t I n s t i tu t e
2
Guest Editorial
Jonas Söderlund, Department of Leadership and Organizational Behaviour, BI Norwegian
Business School, Oslo, Norway
Ralf Müller, Department of Leadership and Organizational Behaviour, BI Norwegian
Business School, Oslo, Norway
PAPERS
7
The Effect of Optimism Bias on the Decision to Terminate Failing Projects
Werner G. Meyer
21
Managing Structural and Dynamic Complexity: A Tale of Two Projects
Tim Brady and Andrew Davies
39
Ethics, Trust, and Governance in Temporary Organizations
Ralf Müller, Rodney Turner, Erling S. Andersen, Jingting Shao, and Øyvind Kvalnes
55
Value Management for Exploration Projects
Rémi Maniak, Christophe Midler, Sylvain Lenfle, and Marie Le Pellec-Dairon
67
Risk Management in Project Portfolios Is More Than Managing Project Risks: A Contingency
Perspective on Risk Management
Juliane Teller, Alexander Kock, and Hans Georg Gemünden
81
Developing a Framework for Embedding Useful Project Management Improvement Initiatives
in Organizations
Gabriela Fernandes, Stephen Ward, and Madalena Araújo
109
Calendar of Events
110
Project Management Journal Author Guidelines
The Book Review Section can be found online.
Cover to Cover—Book Reviews
Kenneth H. Rose, PMP
Guest Editorial
Jonas Söderlund, Department of Leadership and Organizational Behaviour, BI Norwegian
Business School, Oslo, Norway
Ralf Müller, Department of Leadership and Organizational Behaviour, BI Norwegian Business
School, Oslo, Norway
Project Management and Organization Theory: IRNOP Meets PMJ
®
This is the first Project Management Journal (PMJ) special issue with papers from the International Research
Network on Organizing by Projects (IRNOP) conference.
IRNOP has established itself as one of the leading and
most prominent meeting places for scholars in the realm
of project organizing. This loosely coupled network was
founded in 1993 and held its first conference in Sweden
in 1994. Since then, the conference has been organized
bi-annually and has travelled the world, with stops in
France, Canada, Australia, and several other countries
on its way to Norway, where the conference was held in
2013. Table 1 provides an overview of the conferences
organized since then. We were fortunate enough to host
this conference and are now fortunate enough to edit this
special issue with some of the papers presented at the
2013 conference.
This introduction will give you some thoughts and
ideas on where IRNOP is heading and how we wanted
to affect its trajectory. Our goal with the 2013 conference was to focus more on the methodological issues
and at the same time stick to the conventional focus on
project management research that draws on organization
theory. All past organizers of IRNOP, we believe, have
Year
Venue
1994
Lycksele, Sweden
1996
Paris, France
1998
Calgary, Canada
2000
Sydney, Australia
2002
Rotterdam, The Netherlands
2004
Åbo, Finland
2006
Xi’an, China
2007
Brighton, United Kingdom
2009
Berlin, Germany
2011
Montréal, Canada
2013
Oslo, Norway
Table 1: Overview of past IRNOP conferences.
Project Management Journal, Vol. 45, No. 4, 2–6
© 2014 by the Project Management Institute
Published online in Wiley Online Library (wileyonlinelibrary.com).
DOI: 10.1002/pmj.21442
2
had an intention to move IRNOP forward by adding their
personal flavor. From the very early days, the intention
was to improve the linkages between project management and organization theory; later, some of the topics
added have been more specific, including innovation and
business models. Over the years, IRNOP has accumulated
quite an impressive group of people who are currently
sharing the interest of making project management more
connected to organization theory, and on the other hand,
making organization theory more focused on projects and
temporary organizations.
Indeed, quite a few publications have emerged from
the series of IRNOP conferences. Perhaps one of the most
significant is the special issue that was published in 1995
by the Scandinavian Journal of Management. In this issue,
we have some of the most cited works in the area of project
management, including the articles by Lundin and Söderholm (1995) and Packendorff (1995) on projects as temporary organizations. In addition, in the same issue, Midler’s
(1995) influential paper on the projectification of the firm
appeared. Hence, already in the very beginning, publications from the IRNOP conference made powerful imprints
and, over the years, have received quite impressive citation
scores from a wide range of scholars, not only within the
project management community but also from scholars
in the fields of innovation and management. From the
subsequent conferences came a series of books (Lundin &
Midler, 1998; Lundin & Hartman, 2000) and a set of special
issues addressing topics such as renewal and learning.
Primarily, since the conference held in 2002, selected
papers from IRNOP have been published in special
issues in the International Journal of Project Management
(IJPM). For the 2013 conference in Oslo, we have two special issues—one that will be published by IJPM and this
issue of PMJ. There is a difference between the two. The
issue published by IJPM specifically addresses the methodological issues. The PMJ issue has a more conventional
touch—it publishes a few select papers from the conference that the track chairs believe would be interesting
for researchers and reflective practitioners in the domain
of project management. The idea was to provide a broad
view of what goes on in the area of project management;
hence, we have papers in this issue dealing with decision
making, portfolio management, ethics and governance,
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
complexity, risk, and improvements. In our opinion, these are
all ‘hot topics’ that currently attract a lot of attention among
scholars in project management, which might also spur
some interest from scholars in adjacent research domains.
Of course, the general idea with this special issue is not only
to show what currently goes on in the domain of project
management, but also to point out some directions for future
research. This is one of the main ideas in this introductory
paper. What goes on in the area of project management? What
are the paths ahead and research topics for the future?
As pointed out, we do not have a particular focus for this
special issue. Rather, the six selected papers demonstrate the
current breadth in the domain of project management and
deal with several different levels of analysis and a range of
different theoretical problems. It is quite interesting though to
see how the papers in a variety of ways respond to the calls for
rethinking project management research that was introduced
by Winter, Smith, Morris, and Cicmil (2006). In Winter et al.’s
paper, the general idea was to highlight a path ahead for project management research. In particular, the authors pointed
out that there was a greater need to address the complexity
of project management; to investigate the social processes
of projects; to explore the value creation properties and
processes of projects; and to look at projects from a broader,
more holistic viewpoint. The papers included here contribute
to this agenda in different ways. They strengthen the call for
more research into these specific domains and also demonstrate that project management research has moved ahead
to new territories and new calls for rethinking, including a
broader view on decision-making processes, a more dynamic
perspective on complexity, a greater interest into the value
created by innovation projects, and a more current take on
the improvements of the management of projects. These are
all topics that will be discussed by the papers presented in
this special issue. Following we summarize the main ideas
coming from these papers and the way we view them; then
follows our view on how they impact the way we should look
upon future research.
Optimism bias and decision making have always been
essential parts of project management research. One of the
most important contributions is probably the work by Staw
and Ross on escalating of commitment and why decision
makers stick to failing projects. This has been a popular
theme in research within the decision school of project management research (Söderlund, 2011). In recent years, this
and other studies have received renewed interest, which has
spurred the interest in decision making preceding projects.
Most notably, Bent Flyvbjerg has called attention to a series of
decision-making problems in the domain of projects. Nobel
Prize winner Daniel Kahneman has of course also influenced
a number of scholars in social science and, not surprisingly,
also scholars in the field of project management. One of his
main ideas with this stream of research is the delusions of
success and the optimism bias typically observed in a number
of decision-making situations preceding large-scale projects.
The first paper by Werner G. Meyer, “The Effect of Optimism Bias on the Decision to Terminate Failing Projects,”
on the effects of optimism bias and how this affects the decisions to terminate failing projects, draws on experimental
data involving 345 individuals. The paper makes a distinction
between two kinds of optimism bias: in-project optimism bias
and post-project optimism bias. The author demonstrates
that in-project and post-project optimism biases have effects
on the escalation of commitment of failing projects. The
study lends significant support for the two types of optimism
bias, indicating that decision makers were likely to escalate
commitment to a failing project. The main reason was that
they had the perception that the benefits from the project’s
product would exceed the benefits that were calculated in
the project’s business case. The study also shows that decision makers tend to be optimistic about the influence they
have over the outcomes of projects, in other words, what
the author refers to as in-project optimism. Decision makers
were also optimistic about the value that projects deliver. In
particular, they tended to be optimistic that projects deliver
better business benefits than what can be proven through the
business case. The latter is associated with what the author
refers to as ‘post-project optimism,’ which is an optimism
bias prevalent throughout the project. This bias increases as
the project approaches the end. The support for post-project
optimism bias indicates that decision makers believe that a
project will give better returns after the project is completed
than what was initially identified in the project’s business
case. Post-project optimism bias suggests that decision makers are either not well-informed about the project’s business
case, and what can realistically be achieved, or they choose
to ignore the facts of the business case in lieu of their own
assessment of the project benefits.
Tim Brady and Andrew Davies address the issue of
structural and dynamic complexity in projects in the second
paper, “Managing Structural and Dynamic Complexity: A
Tale of Two Projects.” The authors draw on in-depth findings
from two case studies of megaprojects in the United Kingdom: the Heathrow Terminal 5 project and the London 2012
Olympic Park project. The authors argue that prior research
has shown that complexity is a significant factor in a project’s
failure to achieve cost, time, and quality objectives. Based on
prior research, the paper initially makes a distinction between
structural and dynamic complexity. This distinction is then
used to compare the two projects. The paper reveals a number of differences in the approach to managing structural and
dynamic complexity. The paper also identifies several common factors that may help project managers achieve positive
outcomes for their complex projects.
The authors are particularly interested in the conditions under which megaprojects can achieve cost, time, and
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
3
Guest Editorial
quality objectives. They argue that the two selected projects
are examples of successful construction megaprojects. Both
projects involved the integration of different types of infrastructure, including a variety of buildings, transport systems,
energy and waste systems, and IT systems. The authors are
particularly interested in understanding why the projects
were able to achieve cost, time, and quality objectives. The
paper shows how complexity associated with the two projects
was addressed by creating distinctive organizational structures and processes. The analysis reveals a set of differences
with regard to the approaches taken by the people managing the two projects. In the Heathrow T5 project, the client
created a controlled and tightly integrated umbrella framework based on a consistent and standardized process and a
common code of behavior, which was used across all major
projects and sub-projects. The Olympic construction project
and its delivery partner adopted a tight–loose approach to
managing the project to establish consistent processes for
managing change across the entire project while adopting
different approaches to individual sub-projects and providing contractors with the autonomy required to developing
specific solutions to dealing with problems encountered in
each project.
The authors point out that dynamic complexity is often
overlooked in large-scale construction projects. The authors
stress that managing such complexity is a process that, to a
great extent, depends on finding the right balance between
control and interaction and of being able to “do the extraordinary.” Balancing requires the project organization to find a
suitable structure to fit the project context that can accommodate the needs for both interaction and control. Doing the
extraordinary, it seems, sometimes means developing new
and creative ways of maintaining progress in the face of major
obstacles that can arise during the course of a complex project. Brady and Davies show that a higher order of cooperation
among stakeholders, project champions, highly competent
individuals; and the ability to discover unique solutions
and seeing events as opportunities rather than threats are
all important factors in successfully managing complexity
in large infrastructure projects. The authors identify a set of
common patterns across the two cases with regard to strong
client leadership and capabilities, collaborative behaviors, the
ability to be adaptive and responsive, innovative approaches,
and the use of digital technologies.
The third paper, “Ethics, Trust, and Governance in
Temporary Organizations,” by Ralf Müller, Rodney Turner,
Erling S. Andersen, Jingting Shao, and Øyvind Kvalnes,
reports on findings from an investigation on the types and
severity of ethical issues project managers face in different
governance settings and how managers deal with these ethical issues. The study also looked at how the governance paradigm influences the trust among stakeholders in a project.
In that respect, the paper participates in the ongoing debate
4
about the importance of different governance structures
for the management and leadership of projects and adds
an ethics and trust dimension. Initially and based on the
literature on project governance, the authors make a distinction between four types of governance paradigms to which
organizations are expected to adhere. The study is based
on a global, web-based survey with 331 responses. One key
observation from this study is that the types of ethical issues
vary by governance paradigm, country, and project type; in
addition, the behavior of managers varies a great deal by
the governance structure, as does the managers’ willingness to resolve ethical issues and the trust among stakeholders. The study indicates that higher levels of trust are
typically observed in predominantly stakeholder-oriented
governance structures. In accordance with agency theory
and stewardship theory, the study showed a dominance of
transparency issues in projects governed from a shareholder
perspective and a dominance of optimization issues (the
ethically correct distribution of benefits and risk among
project participants) in stakeholder-dominated governance
paradigms.
In the fourth paper, “Value Management for Exploration
Projects,” Rémi Maniak, Christophe Midler, Sylvain Lenfle,
and Marie Le Pellec-Dairon investigate some of the innovation challenges associated with the management of projects.
The authors argue that a greater focus on innovation-based
competition has led to a paradox for project management.
On the one hand, the authors point out that firms have been
continuously streamlining their new product development
process and have integrated their project management into
a strongly standardized model of project management. This
standardized model puts much attention on the elimination of risk and the achievement of cost, quality, and lead
time optimization. In that respect, this model focuses on the
convergence of activities toward a predefined goal. On the
other hand, the authors note, firms cannot only rely on standardized projects to renew their products and capabilities.
In such settings, the authors claim, there is a need to launch
and implement breakthrough innovation projects—projects
that, in the literature, are typically referred to as “exploration
projects” (Lenfle, 2008). Such projects struggle with unforeseeable uncertainties in which both the goals and the means
are difficult to define at the outset of the project. According
to Maniak, Midler, Lenfle, and Le Pellec-Dairon, one of the
most interesting and pressing issues with such projects is that
they should not only deliver a new product, they should also,
and—in some cases this might be the primary outcome—
deliver a novel organizational capability. The authors argue
that it is well recognized that the project evaluation and value
management methodologies are likely to kill exploration
projects. By relying on in-depth longitudinal studies of three
exploration projects in the space and automotive industries
and the aftermath of these projects, the authors document
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
how value creation can be regarded and managed as a dual
process of potential value creation and value realization.
The inherited rational approach widely relies on the exante definition of a given set of performance (price and volume, lead time, and customer willingness to pay for a given
set of functionalities). These theories hardly take into account
the serendipity required to reevaluate during the project the
set of performance settled at the beginning. Thus the project
reaches the objectives or fails, but does not map how it could
build on the ongoing experience to redefine its value and its
ability to open new business avenues. Even if the capability
building approach now clearly identifies the importance of
the learning cycle occurring from one project to another, it is
right now far from being used in the concrete value management toolbox.
More and more organizations and scholars show an interest in developing their capability of managing project portfolios. In the last few years, this area of research has perhaps
been the most vivid one in the area of project management.
In the fifth paper, “Risk Management in Project Portfolios
Is More Than Managing Project Risks: A Contingency Perspective on Risk Management,” Juliane Teller, Alexander
Kock, and Hans Georg Gemünden seek to integrate the
emerging literature on project portfolio management with
the literature on risk management. As the authors state, many
studies have indicated a positive relationship between project
risk management and the success of R&D and IT projects.
However, the reality might be very different at the portfolio
level and it might be quite insufficient to only look at the individual project risks. As the authors argue, risk management
at the project level aims at reducing the likelihood of project
failure; however, to manage risk at the project portfolio level
requires a broader perspective. The authors present a study
of 177 project portfolios. The results suggest that formal risk
management at the project level and integration of risk information at the portfolio level are positively associated with the
overall success of the project portfolio. The authors also demonstrate that simultaneous risk management at both levels
increases the positive effect. In addition, risk management at
the project level is more important for R&D-dominated project portfolios, whereas the integration of risk information is
more important with high levels of turbulence and portfolio
dynamics.
In the sixth paper, “Developing a Framework for Embedding Useful Project Management Improvement Initiatives
in Organizations,” Gabriela Fernandes, Stephen Ward,
and Madalena Araújo introduce a framework to improve the
analysis of project management improvements. The general
idea is that the management of projects needs to be improved,
but practitioners have little understanding of what initiatives
are worth pursuing. Hence, the authors argue, there is a need
for a more elaborate framework to guide scholars and practitioners to better target improvement initiatives. Fernandes,
Ward, and Madalena Araújo develop such a framework to
guide the analysis of the most worthwhile improvement
efforts. The framework is based on a literature review and a
large-scale interview study involving project management
practitioners worldwide. The resulting final framework highlights 15 key project management improvement initiatives
and 26 embedding factors grouped by the factor analyses into
three improvement themes and six embedding themes. The
paper addresses two primary questions: (1) What improvements are the most useful? And (2) What factors can facilitate
how improvements are embedded into project management
practice?
Future Research
The six papers in this special issue address a wide range of
topics—topics that are important to managers as well as
scholars in the field. We would like to point out a few areas for
future research, which we believe emanate from these papers;
of course, there is much more to be said about the subject,
and indeed more details are found in the various papers
included in this issue.
First, we believe there is a need to better link governance
issues with issues linked to the management of projects: What
governance paradigms exist and how these various paradigms
affect such things as decision making in the early and later
stages of a project. We also think that there is a need to better
understand the impact of corporate governance on project
governance and from there what actually affects the ethical
behavior and various unethical behaviors in a project context.
Second, we believe there is a general need to investigate
the potential difficulties and clashes between the project level
and the portfolio level. Risk management is one example.
Innovation is another example. What activities might work at
the project level and what activities might work at the portfolio level? What activities might produce effective outcomes at
the project level but may lead to deteriorating results at the
portfolio level?
Third, how do organizations build project capabilities?
There seem to be two specific areas of importance in that
respect: One area relates to the role of innovation projects in
developing project capabilities in building improved performance in projects. The second area relates to the improvement initiatives in project operations and what specific
improvements that have the best effects on project capabilities. These and many more questions are up for discussion
and need answering. There is a lot to research out there. We
look forward to the next IRNOP conference in London to hear
some of these answers.
Acknowledgments
The authors are grateful for help and support from the
Editor-in-Chief of Project Management Journal , Hans Georg
Gemünden, who handled the editorial responsibilities for the
®
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
5
Guest Editorial
paper by Müller et al., who is co-editor of this special issue
and whose paper had to be handled by an editorial board
member other than himself. The authors also acknowledge
the help and support from a large number of reviewers who
reviewed the papers that were considered for publication.
We also acknowledge the financial support from the Project
Management Institute, the International Project Management
Association, the Norwegian Center of Project Management,
and BI Norwegian Business School.
References
Lenfle, S. (2008). Exploration and project management.
International Journal of Project Management, 26(5), 469–478.
Lundin, R. A., & Hartman, F. (Eds.). (2000). Projects as
business constituents and guiding motives. Boston, MA: Kluwer
Academic Press.
Lundin, R. A., & Midler, C. (Eds.). (1998). Projects as arenas for
renewal and learning processes. Boston, MA: Kluwer Academic
Publishers.
Lundin, R. A., & Söderholm, A. (1995). A theory of the
temporary organization. Scandinavian Journal of Management,
11(4), 437–455.
Midler, C. (1995). Projectification of the firm: The Renault case.
Scandinavian Journal of Management, 11(4), 363–376.
Packendorff, J. (1995). Inquiring into the temporary organization: New directions for project management research.
Scandinavian Journal of Management, 11(4), 319–334.
Söderlund, J. (2011). Pluralism in project management:
Research at the crossroads of specialization and
fragmentation. International Journal of Management Reviews,
13, 153–176.
Winter, M., Smith, C., Morris, P., & Cicmil, S. (2006).
Directions for future research in project management:
The main findings of a UK government-funded research
network. International Journal of Project Management, 24,
638–649.
6
Jonas Söderlund is Professor at BI Norwegian Business
School and a founding member of KITE at Linköping University.
Dr. Söderlund has researched and published widely on the management and organization of projects and project-based firms, time
and knowledge integration in complex projects, and the evolution
of project competence. He has written about the fundamental
questions of project management research, the schools of project
management research, human resource management in projectbased firms, the P-form corporation, the pressing challenges for
business schools, and teaching project management in business schools. His work has appeared in Advances in Strategic
Management, International Journal of Management Reviews,
Organization Studies, Human Resource Management, International
Journal of Human Resource Management, R&D Management,
International Journal of Innovation Management and International
Business Review. His most recent books are the Oxford Handbook
of Project Management (Oxford University Press), Human
Resource Management in Project-based Organizations: The HR
Quadriad Framework (Palgrave), and Knowledge Integration and
Innovation (Oxford University Press). He can be contacted at
[email protected]
Ralf Müller is Professor of Project Management and former
Associate Dean at BI Norwegian Business School. He is the (co-)
author of more than 150 academic publications, including the
first book on methods for project management research: Novel
Approaches to Project Management Research: Translational and
Transformational (published in 2013 by CBS Press), which he coedited with Nathalie Drouin and Shankar Sankaran. In 2012 he was
awarded the IPMA Research Award, together with Monique Aubry
and Brian Hobbs. Before joining academia, he spent 30 years in
the industry consulting with large enterprises and governments
in more than 50 different countries for their project management
and governance and also held related line management positions,
such as the Worldwide Director of Project Management at NCR
Corporation’s Teradata Business Unit. He can be contacted at ralf.
[email protected]
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
PAPERS
The Effect of Optimism Bias on the
Decision to Terminate Failing Projects
Werner G. Meyer, SKEMA Business School, France
ABSTRACT ■
INTRODUCTION ■
This research presents the findings from an
experiment that investigated to what extent
decision makers suffer from optimism bias
when escalating a commitment to failing
projects; 345 individuals, involved in project
decision making, participated in the experiment. A new form of optimism bias, namely
post-project optimism bias, is defined. Postproject optimism bias is an overly optimistic
belief that a project will deliver better business benefits than what was planned or that
can be proven. It is further confirmed that
both post-project and in-project optimism
biases have significant effects on the escalation of commitment to failing projects.
A
KEYWORDS: escalation of commitment;
decision making; optimism bias; portfolio
management
person who makes a physical or psychological investment usually
attaches some value to that investment. Examples of such investments include financial investments, waiting in queues, romantic
relationships, self-identity, and projects (Brockner et al., 1986).
When it appears to the person that the investment is not going to give the
expected returns, there are three possible courses of action: withdraw from
the investment (terminate), continue with the investment as originally
planned (persistence), or invest more than what was originally intended
(escalation). The terms “escalation” and “commitment” are often used to
indicate either persistence or increased investment (Staw, 1997).
The behavior to persist with a failing course of action has been studied
by a number of scholars under different themes: “escalation of commitment”
(Staw, 1976), the “too-much-invested-to-quit” effect (Teger, 1980), “psychology of entrapment” (Brockner & Rubin, 1985), and “the sunk cost effect”
(Arkes & Blumer, 1985).
Escalation of commitment (The term “escalation of commitment” is commonly used in the existing literature and is typically abbreviated EoC.) situations have three distinct attributes (Staw & Ross, 1987):
• Some unforeseen loss or cost has resulted from the original situation;
• The failed situation arose over a period of time and is not a one-shot decision
problem; and
• Simple withdrawal from the situation is not an obvious solution to the problem.
Project Management Journal, Vol. 45, No. 4, 7–20
© 2014 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21435
It is widely recognized that Staw did the pioneering work on escalation of
commitment, and many other authors have based their work on his research
(Rice, 2010).
Existing research has clarified many of the unresolved issues of escalation
of commitment, but much uncertainty still exists about the specific reasons or
determinants that lead to it. There is presently no generally accepted model
of escalation of commitment and no consensus about the determinants or the
exact ways in which they affect a decision maker (Rice, 2010).
Optimism bias is an area that is not well-researched in the context of
escalation of commitment and projects, and past research in this area was
primarily done by psychologists who used so-called “projects” in decisionmaking experiments (Conlon & Garland, 1993; Jensen, Conlon, Humphrey,
& Moon, 2011). These experimental projects were very simple and had very
little resemblance to actual projects. The participants in the experiments
were, in most cases, undergraduate students who had no project management
experience. The main focus of prior research was on understanding human
decision-making behavior as opposed to project management decisionmaking behavior (Moon, 2001; Tversky & Kahneman, 1981).
In this research, a new form of project optimism bias is introduced (i.e.,
post-project optimism bias); prior research focused on in-project optimism
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
7
PAPERS
The Effect of Optimism Bias on the Decision to Terminate Failing Projects
bias, which focused on bias during the
estimation process (Flyvbjerg, 2008)
and during project execution (Tyebjee,
1987).
The research question stemming
from this research is whether decision
makers, who are faced with a project
that is in trouble, will escalate their
commitment to the project because
they feel that the benefits from the project’s product will exceed the benefit that
was calculated in the project’s business
case.
The first aim of this research is to
take a project management view of the
problem of escalation of commitment
and optimism bias and to test the decision-making behavior of individuals
who have an understanding of project management and who are involved
in the decision-making process when
portfolios of projects are evaluated.
The second aim is to determine
whether decision makers will discard
estimations of the business benefit of a
project, made in the project’s business
case, in favor of their own, overly optimistic, re-estimation of business benefits when the project is in trouble.
Background
In the study of escalation of commitment, one inevitably touches on other
areas of decision making. Economists
differentiate between decisions made
under risk and decisions made under
uncertainty (Fox & Poldrack, 2009;
Knight, 1921). When making a decision
under risk, decision makers know with
certainty what the probability distribution of possible outcomes is (e.g., when
throwing dice). When making a decision under uncertainty, decision makers do not know with certainty what the
probabilities of the outcomes are (e.g.,
investing money in the stock market),
and must therefore consider other factors to motivate their decisions. Decision makers who select projects deal
with both these types of decisions; in
some cases the probabilities are known,
but in other cases the decision maker
has to deal with much ambiguity. Both
8
of these situations can lead to escalation
of commitment (Staw, 1997).
Projects that are late and/or overbudget are not by default candidates for
termination (Karevold & Teigen, 2010;
Staw, 1997; Unger, Kock, Gemünden,
& Jonas, 2011). Organizations would
usually support projects where the
return exceeds the investment (Project
Management Institute, 2013). It should
further be noted that investments and
returns are not always measured in
monetary terms, and that factors such
as market growth, competitiveness, and
top management interests may be the
units of measurement (Lee & Om, 1996).
In this research, financial measures are
used because they are commonly used
and understood across most industries.
There is usually a difference between
the point where the actual investment
in a project exceeds the planned or
budgeted investment, and the point
where the actual investment exceeds
the anticipated benefit. Stopping a
project when the actual investment
exceeds the planned investment would
not make sense since the project could
still yield a handsome return on investment (Karlsson, Gärling, & Bonini, 2005;
Northcraft & Wolf, 1984). There are many
financial measurements and methods
available to determine the return on
investment of a project (Jonas, 2010),
and the difference between the investment and expected return can easily be
calculated in financial terms.
There is also a difference between the
point where the project starts to exceed
its planned investment and the point
where a decision maker will actually
decide to stop the project. This difference is a major dilemma for decision
makers, because waiting for a project’s
investment to erode all the predicted
business benefits before deciding to
stop the project is not an optimal decision. A decision maker would prefer to
terminate the project once it becomes
clear that the business benefit, or some
threshold toward that benefit, will be
eroded, hence improving the project
termination quality (Unger et al., 2011).
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
The decision maker must therefore rely
on a forecast of the future benefit deterioration when considering stopping the
project. Any forecast has an element of
uncertainty, and the behavior of a decision maker is significantly influenced by
project, psychological, social, organizational, and contextual factors (Simon
et al., 1987; Staw, 1997).
For projects that are pursued for
financial benefit, it is obvious that a
project with a negative return on investment will not yield financial benefits,
and should be stopped. In fact, a decision maker would ideally want to stop
a project before the return on investment is completely eroded, because any
unused investment funds can be used
for other projects that may turn out to
be better investments.
There are many well-documented
examples of continued investment in
failed projects, long after it became clear
that the project would not have any
benefits, for example: World’s Fair Expo
86 (Ross & Staw, 1986), the Shoreham
nuclear power plant (Ross & Staw,
1993), the Chicago Deep Tunnel Project (Staw & Ross, 1987), Ravensthorpe
Nickel Mine (BHP Billiton, 2009),
and The National Programme for IT
(TaxPayers’ Alliance, 2009). Flyvbjerg,
Bruzelius, and Rothengatter (2009) document project failures on a number of
large transportation projects.
Literature Review
Existing literature suggests that decision makers will escalate the commitment of resources to a failing course
of action (i.e., a failing project) for a
variety of reasons. These reasons, or
determinants, are often categorized into
project, psychological, social, organizational, and contextual determinants
(Staw, 1997). Within these categories
a number of determinants have been
studied in much detail (Sleesman, Conlon, McNamara, & Miles, 2012): selfjustification (Brockner, 1992; Staw,
1976; Staw & Fox, 1977), sunk cost effect
(Arkes & Blumer, 1985; Coleman, 2010;
Garland, 1990; Northcraft & Wolf, 1984),
Project Determinants
Author
1. Temporary versus permanent losses
Staw (1997)
2. Efficacy of further investment actions
Staw (1997)
3. Size of the project’s goal and eventual payoff Staw (1997)
4. Availability of feasible alternatives
Staw (1997)
5. Long-term investments
Staw & Ross (1987)
6. Salvage value and closure cost
Staw & Ross (1987)
7. Economic merits
Staw (1981)
8. Future investment required to achieve payoff Staw (1997)
9. Sequencing of costs and rewards
Ross & Staw (1993)
Psychological Determinants
Author
10. Optimism and illusion of control
Bazerman & Samuelson (1983)
Lovallo & Kahneman (2003)
11. Reinforcement traps
Platt (1973)
12. Self-justification
Staw (1976)
13. Expectancy theory
Vroom (1964)
Bhattacharya (2010)
14. Reactance effect
Staw & Ross (1978)
15. Learned helplessness effect
Abramson & Seligman (1978)
16. Invulnerability effect
Staw & Ross (1978)
17. Self-inference
Salancik (1977)
18. Information processing
Staw & Ross (1987)
19. Framing
Kahneman & Tversky (1979)
20. Sunk cost effect
Arkes & Blumer (1985)
Cunha & Caldieraro (2009)
Coleman (2010)
21. Project completion
Conlon & Garland (1993)
Ting (2011)
Social Determinants
Author
22. Job insecurity and policy resistance
F. V. Fox & Staw (1979)
23. Norms for consistency
Staw (1981)
24. Saving face (external justification)
Brockner, Rubin, & Lang (1981)
25. External binding
Staw (1997)
26. Competition
Rubin, Brockner, Small-Weil, & Nathanson (1980)
27. Modeling
Brockner et al. (1984)
Organizational Determinants
Author
28. Economic and technical side bets
March (1978)
29. Political support
Staw & Ross (1987)
30. Administrative inertia
Staw & Ross (1987)
31. Institutionalization
Staw (1997)
32. Legal implications
Ross & Staw (1986)
33. Compliance projects
Northcraft & Wolf (1984)
Contextual Determinants
Author
34. Government intervention
Staw (1997)
Table 1: Escalation of commitment determinants.
project completion (Conlon & Garland,
1993; Garland & Conlon, 1998; Jensen
et al., 2011), and optimism bias (Fischhoff, Slovic, & Lichtenstein, 1977;
Lovallo & Kahneman, 2003; Sharot
et al., 2012; Weinstein, 1980). A number of other determinants have been
proposed, mostly by Staw (1997), but
some of these overlap with previously
proposed determinants and have not
received much coverage. A total of 34
escalation determinants have been
identified from the existing research.
Table 1 lists the identified determinants
and the associated researchers.
Projects that are overspent or behind
schedule do not get into that predicament overnight. These situations usually arise from a gradual progression
of small cost and time deviations that
accumulate to create the problem.
There are, of course, events that happen on projects that can cause sudden
erosion in the return on investment,
but these events are not commonplace.
Case studies of failed projects clearly
show that the studied projects suffered
from a number of small problems that
built up over time until the return on
investment was completely eroded,
and the project was actually consuming funds beyond what was earmarked
for the project (Keil, 1995; Ross & Staw,
1986, 1993).
Whether a project gets into trouble
over an extended period of time or overnight does not affect this discussion; the
fact remains that there will be a decision maker looking at the project and
contemplating whether to spend more
resources on the project or to stop it.
Various models were developed in
the past to explain escalation behavior. The most notable examples are the
two models by Staw (1997). Mähring
and Keil (2008) propose an escalation
process model from observations in
information technology projects. These
models explain the process that decision makers go through when dealing with an escalation situation. Past
research has also shown that escalation
behavior may change over the life of the
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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The Effect of Optimism Bias on the Decision to Terminate Failing Projects
project (Brockner, 1992). There is, however, not currently a model that explains
the change in behavior of a decision
maker over the life of the investment.
Such a model would be useful to understand at what point in the escalation
process a decision maker decides to
stop the project and what triggers this
decision. This study does not attempt to
propose such a model; rather, it makes
a contribution that will promote the
development of such a model.
Bazerman and Samuelson (1983)
suggest that an overly optimistic belief
in the successful outcome of a project
could lead to escalation of commitment.
Optimism bias refers to the tendency of people to believe that they
are less likely to experience negative
events and more likely to experience
positive events than other people. Optimism bias is a relatively new term for
this phenomenon, but it has been studied for many years as belief and desire
(Lund, 1925), unwarranted optimism
(Tversky & Kahneman, 1974), unwarranted certainty (Fischhoff et al., 1977),
unrealistic optimism (Weinstein, 1980),
and comparative optimism (Shepperd,
Carroll, Grace, & Terry, 2002).
One of the earliest studies shows
that the desire of decision makers for
a particular outcome is strongly correlated with their belief that the outcome
will be achieved (Lund, 1925).
Humans have a built-in bias to be
optimistic about future events. This bias
is difficult to control, and even when
decision makers are aware of this bias,
they are highly unlikely to control or
alter their behavior (Lovallo & Kahneman, 2003; Sharot et al., 2012). Optimism bias has been observed in nearly
every human endeavor that involves
the prediction of future events, and
psychologists argue that it is a major
mechanism for survival in humans
(Sharot et al., 2012). Sharot et al. (2012)
found that optimism is seated in the
inferior frontal gyrus (IFG) part of the
brain. Interfering with the physical
functioning of the IFG through transcranial magnetic stimulation decreases
10
optimism bias, suggesting that optimism
bias is a biological attribute of humans.
Optimism bias in the context of project management has been studied by a
number of scholars. These studies have
focused on the optimism of managers
that a project that is failing in terms of ontime delivery or within-budget completion can be recovered to deliver within
the original time and cost parameters.
Experiments with optimism during
the planning of a project show that
“engaging in planning activity causes
optimism in the planner about what
the plan can achieve” (Tyebjee, 1987,
p. 398). Project success is also affected
by optimism, since project failure may
not only be judged in terms of the technical deliverables and performance of
the project, but also by the ability of
the project to meet the unrealistically
optimistic performance expectations of
management (Tyebjee, 1987).
Bidders in a competitive situation
may suffer from the ‘Winner’s Curse,’
which results in overly optimistic cost
estimates. Jorgensen and Grimstad
(2005) show how overly optimistic bidders for a software project may end up
with very low or negative profits. This is
particularly true when a large number
of bidders are involved. Since software
deliverables are easily changeable after
winning a bid, the initial over optimism
may lead to low-quality deliverables
and schedule overruns.
Significant estimation inaccuracies
in transportation projects have been
studied by Flyvbjerg (2006), who argues
that the problem is not due to outdated
data of forecasting methods, but that
optimism bias plays a significant role.
Reference class forecasting (which uses
data from previous similar projects to
forecast project cost) is proposed as a
forecasting method to bypass optimism
bias by focusing on the final project cost
as opposed to the project’s specific attributes that make up its cost (Flyvbjerg,
2008). Not all cost and schedule overruns are, however, due to optimism bias
and strategic misrepresentation. There
are often other underlying pathogens
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
that lead to problems such as design
errors that could lead to project failure
(Love, Edwards, & Irani, 2012).
The effect of optimism bias has
become so prevalent in some sectors that
specific corrective measures have been
adopted. Following the Mott MacDonald (2002) report on large procurement
in the United Kingdom, HM Treasury
included optimism bias in their The
Green Book: Appraisal and Evaluation in
Central Government, Treasury Guidance
(HM Treasury, 2011) and Supplementary
Green Book Guidance: Optimism Bias
(HM Treasury, 2002). These guidance
books specifically address optimism
bias about four project parameters:
capital costs, works duration, operating
costs, and under delivery of benefits
(HM Treasury, 2011, p. 85) and propose
actions that should be taken to reduce
unwarranted optimism.
Organizational dynamics may also
lead to optimism bias during the planning and control of construction activities. Son and Rojas (2010) developed a
system dynamics model, which suggests
that introducing an explicit method for
analyzing and incorporating the effect
of organizational dynamics in projects
leads to more realistic planning and
control practices.
Existing literature does not make
a specific link between optimism bias
about the future benefits of a project’s
deliverable (or product) and escalation
of commitment. Karlsson, Gärling, and
Bonini (2005) do, however, note that
decision makers may escalate commitment even if they know that the future
investment will not have proven economic benefits. They suggest that this
behavior may be linked to the sunk cost
effect, marginal decision making, and
rate-or-return hypothesis, but note that
these effects do not describe the behavior of decision makers satisfactorily and
that there are probably other reasons
that contribute to this behavior.
Hypotheses
Optimism bias literature suggests that
decision makers will be overly optimistic
about the future benefits of a project.
This optimism can play out in a number
of ways.
Optimism can exist about the decision maker’s own ability to influence
the delivery of a project within the
originally estimated cost and time
(Bazerman & Samuelson, 1983; Juliusson, 2006; Tyebjee, 1987). This would
be translated into a decision maker
believing that a situation in which the
estimated cost to complete the project is greater than the estimate at the
start of the project and can be turned
around to deliver the project within its
original budget. In this paper, this type
of behavior is referred to as in-project
optimism bias.
Based on this predicted behavior,
the first hypothesis is defined, which
addresses in-project optimism:
H1: Decision makers believe that it is
possible to reduce the predicted cost
or time overrun of a project through
their own managerial efforts.
A number of case studies, discussed
below, suggest that optimism can also
exist about the business benefits of the
project. This type of optimism can take
three forms. The first form is optimism
that the direct benefits from the project
will be higher than originally estimated
(i.e., the decision maker’s perception of
the return on investment is greater than
the return on investment calculated in
the business case).
Ascher (1993) reports on a sample
of 1,200 World Bank projects, which
had an average estimated return of
22%. In most cases, the project owners were confident that they would get
better returns; however, the recalculated return post-construction was on
average 15% and in some cases less than
12%. Over-optimism about the project
returns is cited as a major contributor
for the motivation of these projects. In
these situations decision makers may
feel that the assumptions in the project’s original business case were too
conservative and that the actual benefits would be better.
The second form is optimism about
unplanned benefits from performing the project. Decision makers may
feel that there could be other spin-offs
from doing the project and that these
spin-offs would be significant enough
to justify the continuation of the project even if the return on investment
does not show this (Ross & Staw, 1986).
This behavior would strongly suggest
that the decision maker’s calculation
of the estimated return on investment
is greater than the calculated return
on investment; hence, decision makers
prefer their assessment of the value of
the project over that of the calculated
value. This behavior is suggested in a
number of case studies of actual projects that failed (Ross & Staw, 1986; Staw
& Hoang, 1995; Staw, Koput, & Barsade,
1997).
The third aspect of optimism is the
underestimation of the losses that the
project would suffer as a result of the
actual investment in the project being
more than the planned investment.
This would lead the decision maker
to overestimate the positive difference
between the investment and the benefit obtained from the investment. The
decision maker may therefore be under
the impression that, even if the project
overruns, it will still yield acceptable
benefits (Ascher, 1993).
In this paper, the optimism about
the returns of a project is defined as
post-project optimism bias. Based on
this predicted behavior, the second
hypothesis is defined, which addresses
post-project optimism:
H2: Decision makers believe that the
estimated business benefit from the
project will exceed the calculated
business benefit.
Research Methodology
Experiment Design
An experiment was used to test support
for the defined hypotheses. This experiment is similar in design to previous
experiments that tested for escalation
of commitment where a low project
completion and low cost scenario are
compared with a high completion and
high cost scenario (Arkes & Blumer,
1985; Conlon & Garland, 1993; Garland
& Conlon, 1998; Jensen et al., 2011;
Moon et al., 2003; Tan & Yates, 1995;
Tversky & Kahneman, 1981). The design
of the experiment used in this research,
therefore, allows for comparison with
previous research in this area.
Past experiments used by psychologists were primarily designed to observe
decision-making behavior. These experiments often lacked detailed project information and focused on the variation of
the decisions within the group. An example of such an experiment is presented by
Arkes and Blumer (1985, p. 129):
As the president of an airline company, you have invested 10 million
dollars of the company’s money into
a research project. The purpose was
to build a plane that would not be
detected by conventional radar, in
other words, a radar-blank plane.
When the project is 90% completed,
another firm begins marketing a plane
that cannot be detected by radar. Also,
it is apparent that their plane is much
faster and far more economical than
the plane your company is building.
The question is: should you invest the
last 10% of the research funds to finish
your radar-blank plane?
These types of experiments have
obvious limitations and respondents
may have questions about salvage value,
reusability of equipment, alternative
projects, potential other markets, and
so forth. The majority of past experiments in this area used undergraduate
students as participants in the experiments.
In the design of the experiment
for the present research, specific
information was incorporated about the
return on investment for the organization and the salvage value, in order to
focus the attention of the respondent
on deciding whether it is feasible to
continue with the project. Respondents
who have been in involved in project
selection were targeted in this research.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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The Effect of Optimism Bias on the Decision to Terminate Failing Projects
Independent Variables
A five-group, post-test-only, randomized experiment jointly varied invested
amount and project progress. This experiment uses five intervals of 20%, 40%, 60%,
80%, and 110% (coded as S20 to S110) of
the project budget spent, respectively.
Participants had to indicate whether
or not they would continue with a project given the scenario below. The values
shown in square brackets were changed
per scenario according to the values in
Table 2.
You are a manager in your organization and a member of a committee
responsible for recommending and
selecting projects. Your company
is conducting a project, which you
recommended with a planned cost
of US$25 million (M) and a planned
duration of 15 months. Before the
project was started, the estimated
return on investment (ROI) was 30%.
The project is now at the end of
month [2] and the project manager
has reported that the project is likely
to take four months longer (i.e., 19
months) to complete. The actual cost
to date for the project is [US$5M], and
the project manager estimates that the
project will cost US$8.5M more than
originally planned (i.e., US$33.5M).
At a project review meeting a decision
must be made whether to continue
with this project or not. If the project is
stopped now, approximately [US$2.5M]
of the investment can be salvaged in the
form of equipment and material. The
remainder is a sunk cost attributed to
labor and consulting fees. If you stop
the project, the unused money and salvaged equipment and material will be
redirected toward other new or existing
projects in the company.
Dependent Variables
After reading the scenario, the participants had to indicate whether they
would continue with the project or not.
Two of the dependent variables are
cofounded. The sunk cost of the project
Scenario
Parameter
Planned
investment1
Planned return2
Gross
profit3
ROI4
S20
S40
S60
S80
S110
$25.0M
$25.0M
$25.0M
$25.0M
$25.0M
$32.5M
$32.5M
$32.5M
$32.5M
$32.5M
$7.5M
$7.5M
$7.5M
$7.5M
$7.5M
30%
30%
30%
30%
30%
Actual duration5
2 months
5 months
7 months
10 months
15 months
Invested to date6
$5.0M
$10.0M
$15.0M
$20.0M
$28.0M
Salvage value if terminated7
$2.5M
$5.0M
$7.5M
$10.0M
$14.0M
$2.5M
$5.0M
$7.5M
$10.0M
$14.0M
$22.5M
$20.0M
$17.5M
$15.0M
$11.5M
$33.5M
$33.5M
$33.5M
$33.5M
$33.5M
$8.5M
$8.5M
$8.5M
$8.5M
$8.5M
Planned
Sunk cost if
terminated8
Redeemed funds if
terminated9
Revised total investment required10
Additional investment
required11
project12
$28.5M
$23.5M
$18.5M
$13.5M
$6.0M
Revised gross profit13
–$1.0M
–$1.0M
–$1.0M
–$1.0M
–$1.0M
Revised ROI with revised investment14
–3.0%
–3.0%
–3.0%
–3.0%
–3.0%
Required investment to complete
1The
estimated investment amount at the project start.
2The expected return from the project at the project start.
3The difference between the planned investment and the planned return.
4The return on investment (ROI) from the project at the project start.
5The actual duration of the project at the time the scenario is presented to the respondent.
6The funds invested in the project at the time the scenario is presented to the respondent.
7The amount that can be salvaged for re-use on other projects if the respondent decides to stop the project.
8The amount that cannot be salvaged if the respondent decides to stop the project.
9The total redeemed funds if the respondent decides to stop the project. This is the sum of the salvaged funds and the unused funds.
10The revised total estimated investment required to perform the project at the time the scenario is presented to the respondent.
11The additional investment required over and above the originally planned investment.
12The investment required to complete the project at the time the scenario is presented to the respondent. This is the revised investment minus the
investment to date.
13The difference between the revised planned investment and the expected return from the investment.
14The ROI as a percentage of the revised planned investment and the expected return from the investment.
Table 2: Scenario details.
12
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
increases with the time progress of the
project and one could reason that participants would find it difficult not to
relate the one to the other. The effects
of sunk cost and project completion covariation are investigated in detail by
Conlon and Garland (1993).
After making a choice for the continuation or termination of the project, participants were asked to motivate
their decision. Participants were presented with the following statement:
In support of your decision, to what
extent do you agree with the following
statements?
Support for ten different motivation questions was tested. Only the four
questions applicable to the present
study and are discussed in this paper.
The motivation statements are
shown in italics in Table 3. For each
statement the participant had to choose
his or her response from a seven-point
Likert scale (Weijters, Cabooter, &
Schillewaert, 2010), ranging from −3,
strongly disagree to +3, strongly agree.
Each motivation statement tested for
the determinants is shown in the second column of Table 3.
After completing the motivation
statements, participants had to answer
a number of demographic questions.
Setting and Sampling Strategy
The experiment was presented as a webbased and a paper-based survey. The
web-based option removed one of the
main limitations of the study, which is
confidentiality. The details of the respondents were in no way captured unless
the respondents provided their name and
email address to receive a copy of the
experiment results.
Some of the participants were delegates who attended post-graduate
project management training courses.
The setting was dictated by the fact that
participants attended a training course,
which given the nature of the experiment,
was unlikely to have had an influence on
the answers from the participants.
The data collection methods made
it difficult to target only project decision
makers. The fact that the hyperlink to
the web-based survey could be distributed freely meant that any person could
participate in the experiment. As far as
the paper-based survey is concerned,
it would have been difficult to get only
a portion of a classroom of students
to complete the survey. The sampling
strategy for the web-based survey was
random, and that of the post-graduate
students clustered. Participants who
were not involved in project decision
making were eliminated through a mandatory question about their involvement
in project selection in their organization.
of projects. Only these responses were
used in the quantitative analysis to test
the hypotheses.
Of the 345 selected respondents, 42%
were post-graduate students in part-time
project management courses at two South
African universities, and the remaining
58% had completed the survey online.
Most of the students from the University of Pretoria (UP) and Tswane University of Technology (TUT) in South Africa
were working full-time and had exposure to projects and project management
on a regular basis. The students came
from a diverse background of industries
and projects, and 58% indicated that they
were part of the project selection process
in the organizations where they work.
The selected respondents were from
38 countries and 23 different industries;
87% of the participants had bachelor’s
degrees or higher; 59% indicated that
they worked in organizations with more
than 1,000 employees; 59% indicated
that the average project duration is 6 to
24 months; and 79% reported that the
value of projects in their organizations
is below US$100 million.
Participants
The target population for this experiment
was individuals who were in some way
involved in the selection of projects. The
targeted individuals must have been in a
position where they were either decision
makers in the portfolio selection process
or part of the decision-making process.
Four hundred ninety-six respondents participated in the experiment;
345 respondents indicated that they
were directly involved in the selection,
the motivation of projects for selection, or both motivation and selection
Process
The experiment was conducted over
eight weeks between March and April
2013. Invitations to participate were
sent to a list of personal contacts over
a period of five weeks. The online survey was enabled after the first participant was invited and was disabled eight
weeks later. After this survey period,
the results were downloaded from the
SurveyMonkey website and analyzed.
The paper-based surveys at UP and
TUT were manually administered by
Motivation Statement
Tested Determinants
MS1
We usually get better than expected returns from projects over their useful life because of changes in
market conditions and will eventually recover the investment.
Post-project optimism bias
MS2
Even though the project is going to cost more, it is unlikely that we will lose the benefits; we will just
make a bit less.
Post-project optimism bias
MS3
Even though the project is overrunning now, we usually manage to recover lost time and cost overruns.
In-project optimism bias
MS4
A different decision could limit my future career opportunities or promotions in the organization.
Saving face
Table 3: Determinants associated with the motivation statements.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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The Effect of Optimism Bias on the Decision to Terminate Failing Projects
the researcher after a class break. The
surveys did not form part of any class
activity and were not specifically administered with any part of the curriculum
in mind. The participants were briefed
about the experiment, and each participant was presented with a printed
copy of the experiment. The participant
had to answer all the questions on the
printed document. After completing the
experiment the participants handed the
document back to the researcher.
The five scenarios were randomly
selected in the online survey. In the
paper-based survey the five scenarios
were randomized through handing out
equal numbers of each scenario to the
group of respondents. All the participants remained anonymous unless they
provided their contact details to receive
a copy of the survey results.
Results
Continue or Stop Decision
The responses of 345 respondents
who were directly involved in project
selection or the motivation of projects
for selection were analyzed; 211 (61%)
chose to continue with the project, and
134 (39%) chose to stop the project.
Respondents were 58% likely to
continue with the project in S20. A
slight decline in project continuation is
shown for S40 (51%). From the S60 point
onward the escalation behavior continues to increase with S60 and S80 at 65%
and S110 at 69% (see Figure 1).
Chi-Square Test
A Chi-square test for association shows
that there is not a statistically significant association between the choice to
continue or stop and the stage of project
completion, χ2(4) = 6.155, p = .188.
Correlation
The data indicate that respondents have
a higher tendency to continue with the
project in the second half of the project
(60% scenario and larger). This supports previous research by Staw (1997),
Brockner (1992), Teger (1980), and Garland and Conlon (1998) and illustrates
the classical behavior of escalation of
commitment, which posits that the further a project continues the more likely
the decision makers are to commit more
resources. The full results are shown in
Table 4 and Figure 1.
The decision to continue with the
project as the project approaches completion is positively correlated but is not
statistically significant, r = .800, p = .104.
Motivational Statements
Table 5 shows the means and standard
deviations for each motivational statement per scenario.
Tests of Hypotheses
Statistical significance for both hypotheses is tested with t-tests to determine:
ments of the decision maker’s own
managerial efforts to change the course
of the project (H1).
• Whether there is a difference between
the observed and expected assessments
of the post-project business benefits (H2).
The tests are done across all the
project scenarios, and the test value is
set at 0.0, since a value of ≤0.0 would
indicate that there is no support for
the tested motivation statement, which
means H0 cannot be rejected.
Three checks are done to validate
whether the results of a t-test will be
acceptable. The observations are independent, because each case in the data
set represents a single respondent (i.e.,
the data do not show repeated measurements of the same respondents). Inspection of a boxplot for values greater than
1.5 box-lengths from the edge of the box
showed that there are no outliers. The
support for the motivating statements
by respondents was normally distributed as assessed by visual inspection of
the Normal Q-Q Plot.
Statistical significance is tested at
the 99% confidence level (α = .01), with
N = 211 (respondents who chose to
continue with the project). The critical
test value for t ratio is 2.60 at 99% confidence (Larsen & Marx, 2012, p. 701).
Hypothesis 1
• Whether there is a difference between
the observed and expected assess-
The project case given to the respondents clearly shows that the project is in
Scenario
S20
Stop the project
Continue with the project and
approve the additional US$8.5M
Total
Count
S60
S80
S110
Total
134
29
39
23
23
20
% within Scenario
42.0
48.8
34.8
35.4
30.8
38.8
% of Total
8.4
11.3
6.7
6.7
5.8
38.8
40
41
43
42
45
% within Scenario
Count
58.0
51.3
65.2
64.6
69.2
61.2
% of Total
11.6
11.9
12.5
12.2
13.0
61.2
211
Count
69
80
66
65
65
% within Scenario
100.0
100.0
100.0
100.0
100.0
100.0
% of Total
20.0
23.2
19.1
18.8
18.8
100.0
Table 4: All groups: Continue the project per scenario.
14
S40
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
345
Results
Decision to Continue Investing: All Groups
100%
90%
% Respondents
80%
70%
60%
50%
40%
30%
20%
10%
0%
S20
S40
S60
S80
S110
Scenario
Figure 1: Decision to continue the project per scenario.
trouble. Further analysis of the scenario
shows that the planned investment will
exceed the budgeted investment and that
the financial benefit will be completely
eroded. MS3 tests directly whether the
decision maker believes that lost time
and money can be recovered as a reason
to continue with the project.
The results show that decision makers who chose to continue with the
project support the statement in motivation statement MS3 (M = .93, SD
= 1.53). Motivational statement MS3
states: Even though the project is overrunning now, we usually manage to
recover lost time and cost overruns.
H0 for H1 states: Decision makers
believe that their own managerial efforts
will not affect the time and cost overruns
on a project.
MS3 is positively supported in S20 to
S110 (t(211) = 10.691, p < .001) for project continuation and therefore supports
H1. The choice of a decision maker to
continue with the failing project and
the associated support for MS3 supports
the notion that decision makers would,
in the light of a failing project, continue
with the project while citing the possibility of recovering the project to meet
the planned schedule and budget as a
reason for doing so.
When a decision maker chooses to
abandon the project, the support for
MS3 is significantly negative in S20 to
S110 (t(134) = −9.250, p < .001).
H0 is therefore rejected for H1, and
the alternative hypothesis is accepted.
Hypothesis 2
Motivational statements, MS1 and MS2,
test for support of optimism bias about
the benefit that will be gained from the
project. Support for these statements,
when a decision maker continues with
the project, indicates that the decision
maker is optimistic about the outcome of
Mean
Motivational Statement
MS1
Decision
Stop
Continue
MS2
Stop
Continue
MS3
Stop
Continue
MS4
Stop
Continue
Standard Deviation
Scenario
S20
S40
S60
S80
S110
All
M
–1.17
–1.08
–.91
–1.35
–1.05
–1.11
SD
1.44
1.44
1.38
1.11
1.32
1.35
M
1.20
.88
1.26
1.07
1.29
1.14
SD
1.30
1.73
1.54
1.74
1.42
1.55
M
–1.00
–0.72
–.70
–1.61
–1.30
–1.01
SD
1.54
1.61
1.64
1.16
1.42
1.52
M
1.80
1.46
1.23
1.83
1.40
1.54
SD
.85
1.53
1.43
1.27
1.30
1.31
M
–1.03
–1.00
–1.48
–1.74
–1.10
–1.23
SD
1.88
1.64
1.27
1.29
1.29
1.54
M
1.15
.88
.77
1.05
.82
0.93
SD
1.33
1.36
1.82
1.58
1.51
1.53
M
–.83
–1.00
–1.13
–.57
–.45
–.83
SD
1.65
1.56
1.89
1.56
1.70
1.65
M
–.63
–1.07
–.28
–.52
–.31
–.55
SD
1.55
1.82
1.80
1.81
1.86
1.78
Table 5: Mean and standard deviation per scenario.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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The Effect of Optimism Bias on the Decision to Terminate Failing Projects
the project in support of the continuation
decision. In order to show that the bias
is related to the decision to continue the
project, there must be negative support for
the statement when the decision maker
chose not to continue with the project.
The motivation statement MS1 states:
We usually get better than expected
returns from projects over their useful
life because of changes in market conditions and will eventually recover the
investment.
MS2 states: Even though the project
is going to cost more, it is unlikely that
we will lose the benefits; we will just
make a bit less.
The results show that decision makers who chose to continue with the
project support motivation statements
MS1 (M = 1.14, SD = 1.55) and MS2 (M
= 1.54, SD = 1.31). To test the statistical significance of the support for this
motivation statement, the following test
is performed:
H0 for H2 states: Decision makers
believe that the estimated business benefits from the project remain unchanged
over the life of a project.
The expected assessment for MS1
and MS2 is that a decision maker will
show neutral or negative support for the
motivation statements.
Results
The project description given to respondents makes no mention of additional
benefits or spin-offs from the project. The financial data in the scenario
description are presented as data from
the business case, and it is clear that
the project is in trouble. The decision
maker would, with a simple calculation,
be able to calculate that the project has
a negative return. A decision maker who
chose to continue with the project therefore indicates that the decision maker
believes that the project will have benefits that are not in the business case.
The t-test results for the motivational statements are as follows:
MS1 is positively supported in S20
to S110 (t(211) = 10.691, p < .001) for
project continuation. This result supports
16
the notion that decision makers feel that
the project will provide greater business
benefits after project completion. There
is no information available to support
this idea; this support must therefore be
subconsciously constructed by the decision maker.
When a decision maker chooses to
abandon the project the support for
MS1 is significantly negative in S20 to
S110 (t(134) = −9.556, p < .001).
MS2 is positively supported in S20
to S110 (t(211) = 17.079, p < .001) for
project continuation. These results support the notion that decision makers
feel that not all the benefits from the
project will be lost. This assertion is
clearly incorrect, as a simple calculation
with the data available in the project
description shows that the project will
in fact lose money. The decision makers must therefore be overly optimistic
about the performance of the project.
When a decision maker chooses to
abandon the project the support for
MS2 is significantly negative in S20 to
S110 (t(134) = −7.746, p < .001).
The test results are consistent with
the hypothesis that decision makers
who chose not to terminate a project
assess that their perception of the business benefit will exceed the calculated
project business benefit. H0 is therefore rejected for H2, and the alternative
hypothesis is accepted.
For both H1 and H2 it could be
argued that decision makers continued
with the project because of fear of retribution from the company. Support
for fear of not being promoted or losing one’s job was tested with MS4 (M
= −.55, SD = 1.78). A t-test was performed to compare the mean value of
respondents who chose to continue,
and those who chose to stop the project.
The results of the t-test show that limiting career opportunities or promotions
did not play a role (t(211) = 4.522, p < .001)
in the decision to continue the project.
Discussion
This study investigated the effect of optimism bias on the decision to escalate
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
commitment to a failing project. The
results confirm the findings of a number
of existing studies but also provide new
insights into two forms of optimism bias
(i.e., in-project optimism bias and post
project optimism bias).
This study found that in-project
optimism bias is a significant contributor to decision makers’ motivation to
continue with a failing project. One
would have expected that it would have
been more prevalent in the early stages
of a project since a lot of time remains
to implement corrective actions. The
results show that, even though the highest support is for projects that are in
their early stages, the support remains
high throughout the remainder of the
project, even after the project has overspent its budget. The results also show
that, once a decision is made to stop the
project, support for in-project optimism
falls away.
These results support the findings
of Tyebjee (1987) and Flyvbjerg (2008)
that optimism arises during the planning of a project and specifically in the
estimation activities. These activities
are usually based on the past experiences of the project planner and those
involved in the development of the project plan. These processes reflect on
the capabilities of the individual doing
the estimate and are therefore susceptible to over optimism. In this regard,
Flyvbjerg (2008) offers reference-based
forecasting as a solution to curbing this
problem.
The second form of optimism, postproject optimism bias, is prevalent
throughout the project and increases
as the project approaches the end. The
support for post-project optimism bias
indicates that decision makers believe
that a project will give better returns after
the project is completed than what was
initially identified in the project’s business case. This viewpoint becomes more
pronounced as the project progresses.
Very little past research has been
done to investigate post-project optimism bias as a reason for escalation of
commitment. Karlsson, Juliusson, and
Gärling (2005) mention that decision
makers may escalate commitment even
if they know that the future investment
will not have proven economic benefits,
but they link this to the sunk cost effect
and not optimism bias.
Post-project optimism bias suggests
that decision makers are either not
well-informed about the project’s business case and what can realistically be
achieved, or they choose to ignore the
facts of the business case in lieu of their
own assessment of the project benefits.
The present study strongly suggests the
latter situation.
The challenge faced by organizations is to find managerial and systemic
solutions to deal with both forms of
optimism bias. This is complicated by
the fact that humans are hard-wired to
being optimistic (Sharot et al., 2012)
and have a tendency to rely on their
own assessment of a project in spite of
conflicting empirical evidence.
Conclusion
In this research, an experiment was conducted to test the impact of in-project
and post-project optimism bias on the
decision to continue with a failing project. The experiment tested the behavior
of decision makers over five different
scenarios of a project at different stages
of completion; 496 respondents participated in the experiment. The responses
of 345 respondents who indicated that
they are involved in project selection
were statistically analyzed to test two
hypotheses.
Significant support was shown for
both types of optimism bias. These
results suggest that the decision makers
are very likely to escalate commitment
to a failing project because they have
a perception that the benefits from the
project’s product will exceed the benefits that were calculated in the project’s
business case.
This research adds to our understanding of the behavior of decision
makers in a number of ways.
Decision makers will very often be
overly optimistic about the influence
they have over the outcomes of projects
(in-project optimism). They will also be
optimistic that projects will deliver better business benefits than what can be
proven through the traditional methods
of business case development (postproject optimism). Senior managers
should therefore be aware that decision
makers who escalate commitment often
act from a position of optimism when
assessing projects. There is no correlation between the level of completion
and the decision to continue investing
in the project.
Managerial Implications
This research has implications for senior
managers in organizations that invest
in projects. In-project and post project
optimism bias have a significant effect
on the decision to continue with a failing project and indicates that managers will have an unrealistically positive
view of failing projects. This optimism
is reflected in the tendency of managers
to believe that they can salvage failing projects and that a troubled project
will yield better than planned business
benefits.
Organizations should avoid expensive escalating situations by introducing suitable management interventions.
This requires understanding of the
behavior of decision makers. The challenge faced by managers is that optimism bias is a biological attribute in
humans and finding managerial interventions to counter that optimism may
be difficult (Sharot et al., 2012).
Flyvbjerg (2008) recommends reference class forecasting as a specific
way to deal with in-project optimism
bias. This method essentially removes
the project planner’s reliance on his or
her own experience when performing
estimates.
A number of general de-escalation
strategies have been proposed in the
existing literature. Staw and Ross (1987)
propose that the decision makers on
projects should be changed from timeto-time to break escalation behavior. To
achieve a similar de-escalation effect
they also propose that the responsibility
for project decisions should be changed
over the life of the project. Keil (1995)
proposes early and frequent project risk
assessments and project audits as deescalation methods. Even though these
strategies are not specific to optimism
bias, they may force decision makers to
revisit the initial project business case
as a basis for decision making.
Theoretical Implications
The results further support the notion
that decision makers are concurrently
influenced by both in-project and postproject optimism bias when assessing
the merits of escalating commitment.
The results confirm in-project optimism bias and further show that this
form of bias prevails throughout the life
of a project.
The post-project optimism bias
results of this research suggest that
decision makers change their assessment of the business drivers that make
up the post-project benefits of a project.
The results further suggest that there
is a difference between the calculated
benefits from a project, and the benefits perceived by decision makers at
any point during project implementation. This would further indicate that
a descriptive and predictive model for
escalation could exist, which describes
the optimism bias determinant. This
model would be based on the cumulative (and optimistic) build-up of valueadding business drivers that contribute
to the value of the project.
Limitations
The results from this research do not
show whether decision makers will
eventually terminate a project or at what
point that will take place. The results, in
fact, indicate that optimism increases
as the project gets deeper into trouble.
The study only considered the effect
of financial aspects on the decision makers. The effect of optimism bias on nonmonetary benefits, sustainable business
growth, employee well-being, company
image, and so forth was not tested.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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The Effect of Optimism Bias on the Decision to Terminate Failing Projects
Decision making by committees was
not investigated. The experiment was
aimed at individual decision makers
who could be part of a project selection
committee.
A control group was not set up to test
the level of support for the given statements, for a project that is not in trouble.
This research tests for the relative change
in behavior between the five scenarios.
Each respondent was presented
with one of the five scenarios. The
scenarios are lengthy and presenting
a single respondent with more than
one scenario may have created bias,
because the respondent would have
compared his or her responses to one
scenario to the responses he or she gave
for the preceding scenarios.
Future Research
Future research to determine which
decision makers are influenced by nonmonetary determinants will be useful.
The fact that money is often a major
consideration for managers may cause
decision makers to behave differently
when faced with situations in which socalled “soft issues” are at stake.
Research to determine whether,
and at what point, decision makers will
eventually terminate a failing project
would be of interest, since the data from
this research show that decision makers
increase their escalation, even after the
project’s budget has been eroded.
The selection of projects in organizations is often done by groups of decision makers (Ghasemzadeh, Archer, &
Iyogun, 1999). It has been suggested
the groups tend to escalate more than
individuals (Whyte, 1993) and further
research on in-project and post-project
optimism bias in a group setting would
be of interest.
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Werner G. Meyer is a project management
consultant specializing in maturity assessments and project office implementations
and holds MSc and PhD degrees in project
management from SKEMA Business School
in France. His research interest is decision
making under risk and uncertainty, and
specifically, the decision-making processes
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software simulations to study the decisionmaking behavior of portfolio managers. He
can be contacted at [email protected]
PAPERS
Managing Structural and Dynamic
Complexity: A Tale of Two Projects
Tim Brady, Centre for Research in Innovation Management, Brighton Business School,
University of Brighton, Brighton, United Kingdom
Andrew Davies, School of Construction and Project Management, the Bartlett Faculty
of the Built Environment, University College London, London, United Kingdom
ABSTRACT ■
Previous research suggests complexity may
be a significant factor in a project’s failure to
achieve cost, time, and quality objectives.
In this paper, we examine the project complexity literature to develop a simple framework consisting of structural and dynamic
complexity. We use this to compare the
complexity of two successful construction
megaprojects—Heathrow Terminal 5 and
the London 2012 Olympic Park—to consider
how the complexity in the two projects was
managed. Our analysis reveals differences
in the approach to managing structural and
dynamic complexity, but identifies common
factors that may help project managers
achieve positive outcomes for their complex
projects.
KEYWORDS: complexity; uncertainty;
systems integration; management;
infrastructure
Project Management Journal, Vol. 45, No. 4, 21–38
© 2014 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21434
INTRODUCTION ■
C
omplexity plays a vital role in determining whether large engineering projects succeed or fail (Morris & Hough, 1987; Miller & Lessard,
2001; Flyvbjerg, Bruzelius, & Rothengatter, 2003; Williams, 1999,
2005; Meier, 2008). Megaprojects—defined by Flyvbjerg et al. (2003),
as large infrastructure investments of around US$1 billion (£500 million) or
more—are among the most complex category of project. Cost overruns of 50%
are typical and overruns of 100% are not unusual. The reconstruction of the
£798 million (approximately US$1.3 billion) Wembley Stadium project, for
example, was 80% over budget and delivered four years later than originally
planned.
But not all megaprojects fail, and this paper examines conditions under
which they can achieve cost, time, quality, and other strategic objectives. We
compare two successful UK construction megaprojects: Heathrow Terminal
5 and the London 2012 Olympic Park. Both projects were large and complex
and subject to high levels of uncertainty. We consider how the complexity
associated with the two projects was addressed by creating distinctive organizational structures and processes. Our analysis reveals differences in the
approaches taken by those responsible for managing the projects. In the T5
project, the client (BAA, formerly British Airports Authority) created a tightly
controlled umbrella framework based on a consistent and standardized
process and a common code of behavior, which was used across all major
projects and sub-projects. In contrast, the Olympic Delivery Authority (ODA)
and its delivery partner adopted a “tight–loose” approach to managing the
Olympics construction program to establish consistent processes for managing change across the entire program while adopting different approaches to
individual projects and providing contractors with the autonomy required to
develop specific solutions to deal with problems encountered in each project.
The paper is divided into six sections. In the second section, we review the
literature on project complexity and its management, including a discussion
of early examples of complex projects—the U.S. weapons system projects in
the 1950s and 1960s. We examine a number of frameworks informed by contingency theory developed to categorize complexity in projects. We synthesize
this literature on project complexity in a simple framework, which divides
complexity into two main categories—structural and dynamic complexity—
and considers the implications for project management. In the third section,
we describe our research method—the case-study comparison—and how we
derived the data for analysis, before presenting the two cases in the fourth
section. In the fifth section, we compare the two case studies and discuss their
similarities and differences in terms of structural and dynamic complexity;
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Managing Structural and Dynamic Complexity: A Tale of Two Projects
finally, the sixth section concludes by
considering how our findings can be
generalized and tailored to other complex project settings.
Understanding Project
Complexity
The inability to manage complexity has
been recognized as a major factor in
project failure for a number of years
(Williams, 1999). However, complexity
remains ambiguous and ill-defined in
much of the project management literature (Geraldi, 2008) and there has
been insufficient attention paid to early
studies of systems analysis, contingency
theory, and complex projects.
Early Research on Managing Complex
Projects
While the problem of managing complex projects is now receiving growing
attention, it is worth revisiting some
pioneering and insightful, yet often
neglected, studies of weapons and
defense systems projects in the 1950s
and 1960s. Informed by systems theory,
these studies argued that these projects are complex systems consisting
of interacting components arranged
in a hierarchical and decomposable
structure (Boulding, 1956; Ashby, 1956;
Simon, 1962; Von Bertalanffy, 1968).
Hirschman (1967) was one of the first
scholars to think of projects as systems,
realizing that the main challenge of
delivering a complex project consisting of many interconnected component
parts was not the size of the system
itself, but the difficulty in establishing
a set of methods or a process to coordinate and fit the parts together into a
coherent whole. Subsequent research
distinguished between tight and loosely
coupled interactions among component parts of a complex system (Perrow,
1984; Weick, 1976). A loosely coupled
system is nearly decomposable because
the behavior of each component is
less dependent on other components,
whereas a component in a tightly coupled system directly affects what happens in other components.
22
August/September 2014
Recent research makes scant reference to systems theory and the early
studies of weapons system development. However, a special issue of The
International Journal of Managing
Projects in Business on classics in project management included papers that
revisited a number of classic studies
and provide valuable insights into the
management of complex projects. Engwall’s (2012) paper on Sapolsky’s (1972)
classic about the Polaris missile project points out that, although Polaris is
strongly associated with the Program
Evaluation Review Technique (PERT)
and its consequent contribution to
project success, this tool was used to
gain political support and contributed
little to the technical progress of the
project (Engwall, 2012, p. 603). Sapolsky also emphasizes that time rather
than money was the main issue for the
project. There was no original budget
or detailed, formal technical performance targets against which the end
result could be measured. Söderlund’s
(2012) analysis of Sayles and Chandler’s (1971) in-depth study on project
organizing in NASA also emphasizes
the role of time. Brady, Davies, and
Nightingale (2012) review Klein and
Meckling’s (1958) contribution, which
deals with decision making under
conditions of uncertainty in weapons
systems projects. The development
of these complex projects was highly
uncertain and the eventual performance, cost, time, availability, marketability, and even utility of the various
alternatives being considered were
unclear. Under such conditions, decisions about the final design should be
delayed until later stages in the development project when there is more
information and learning available to
make informed decisions about how
to respond to changing conditions and
unanticipated circumstances.
In another important recent historical study published elsewhere, Lenfle
and Loch (2010) revealed that early
military projects, such as the Manhattan Project and the Atlas and Polaris
■ Project Management Journal ■ DOI: 10.1002/pmj
ballistic missile projects, applied a
combination of trial and error and parallel trials, which are in sharp contrast to
the control-oriented phased approach
that characterizes much of modern
project management. Early contributions to the management of complex
development projects also emphasize
the critical importance of systems integration (Sapolsky, 1972; Sayles & Chandler, 1971). A key role is that of the
systems integrator who not only has to
coordinate and control the network of
suppliers and sub-contractors involved
in the design and production of components and subsystems, but also has
to deal with the often conflicting interests of external stakeholders. The systems integrator relies on a mix of formal
contractual agreements, shared goals,
planning, and persuasion to encourage
close cooperation between the multiple
organizations involved and to address
the interdependencies between them
to achieve the system-wide goals that
the project aims for (Sayles & Chandler,
1971).
The insights in to these classic project management writings about complexity and how it can be managed
have somehow been missed in the later
mainstream project management literature. In the following successful megaproject case studies we shall see how
much of what they did bears a close
resemblance to the practice of those
early projects.
Research on Project Complexity
Building on systems theory, early contributions to contingency theory have
argued that organizations—including
projects and matrix structures—can be
treated as systems of interacting components operating in different environments (e.g., Lawrence & Lorsch, 1967;
Thompson, 1967). A number of scholars
have used contingency theory as a way of
defining project complexity. Building on
the core concepts in contingency theory,
Baccarini (1996), for example, proposed
two dimensions—‘differentiation’ and
‘interdependence’—to help distinguish
between organizational and technological
complexity. Differentiation refers to the
number of components (task, specialists, and sub-components, and so forth)
in a project, whereas interdependence
is about the degree of interrelatedness
among components.
Some authors have adopted the systems view to make distinctions between
different types of projects according to
their complexity (Hobday, 1998; Shenhar & Dvir, 1996, 2007; Shenhar, 2001;
Davies & Mackenzie, 2014) relating this
to the complexity of the product and/
or outcome of the project. According
to this view, projects can be distinguished by dimensions of system scope
and technological uncertainty. Shenhar
and Dvir (2007) identify three types of
projects:
• Assembly projects, which address the
assembly of a self-contained product or
a component that performs a defined
function in a larger system (e.g., computer console)
• System projects, which have as the outcome a single system with a common
goal (e.g., air traffic control) comprised
of a collection of assemblies, components, and subsystems
• Array projects, whose aim is to integrate a dispersed collection of systems,
often called a ‘system of systems,’ that
function together to achieve a common
goal (e.g., an airport).
Each of these different types of project demands organizational arrangements
and project processes commensurate with
the complexity of the outcome and for
these to become more elaborate and formal as the level of complexity increases.
Bosch-Rekveldt, Jongkind, Mooi,
Bakker, and Verbraeck (2011) suggest a
framework for characterizing the complexity of large engineering projects
consisting of three main pillars—technical, organizational, and environmental (TOE). The TOE framework contains
many elements related to structural
complexity and uncertainty. Technical complexity is related to the goals,
scope, and tasks in a project. Organizational complexity includes the size
of the project and softer aspects, such
as trust, availability of resources, and
the make-up of the project team. Environmental complexity includes stakeholder perspectives, locational aspects,
and market conditions. All three types
of complexity represent some of the
risks to the project. The TOE framework
integrates theoretical and practice perspectives and can be used at the frontend of projects and through the life
cycle to create a complexity footprint. A
project primarily associated with technical complexities might need a different type of project manager compared
with one associated with environmental complexities. Knowing the footprint
of a project can help managers make
informed decisions about how to manage the specifics of each project.
In a systematic review of the literature on project complexity, Geraldi,
Maylor, and Williams (2011) present
a contingency framework consisting
of five dimensions—structural, uncertainty, dynamics, pace, and socio-political complexity. The framework aims
to help individuals and organizations
make the right choices about how to
address the complexity of each project.
It brings together elements from previous contingency frameworks and offers
a more comprehensive analysis of project complexity. The dynamics and pace
dimensions add something new to the
analysis of complexity.
Dynamics refers to changes that
might occur in the projects—which
could be to specifications or goals or to
the external or internal political environment—and they are broadly defined
as a change in any of the other dimensions of complexity. In their doctoral
research, Hertogh and Westerveld (2010)
pointed out that the importance of
‘dynamic complexity’ is often neglected
in large infrastructure projects. Drawing on contingency, complexity management, and adaptive governance
theories, these authors introduced the
concept of ‘dynamic management’ as an
August/September 2014
answer to how complexity in large infrastructure projects should be successfully managed. Dynamic management
is a process that depends on finding
the right balance between control
and interaction and also on ‘doing the
extraordinary.’ Balancing requires the
project delivery organization to find a
suitable structure to fit the project context that can accommodate the needs
for both interaction and control. Doing
the extraordinary sometimes means
developing new and creative ways of
maintaining progress in the face of
major obstacles that can arise during
the course of these complex projects.
A higher order of cooperation among
stakeholders, project champions, highly
competent individuals; and the ability to discover unique solutions and
seeing events as opportunities rather
than threats are all important factors
in successfully managing complexity in
large infrastructure projects (Hertogh &
Westerveld, 2010, p. 347).
Pace is included in Shenhar and
Dvir’s (2007) diamond framework, whereas
Williams (2005) had also added this to the
structural and uncertainty dimensions of
his earlier models of project complexity.
This dimension deals with urgency and
time criticality of projects that require
specific structures and management
attention. It also emphasizes the need for
concurrent engineering, which in turn
implies tight interdependence between
elements in the system. Essentially, pace
refers to the rate at which the project
needs to be delivered. We will see how
this was an important feature in the two
megaprojects we analyze later in the
paper.
Building on both early and more
recent research (Sayles & Chandler,
1971; Sapolsky, 1972; Shenhar & Dvir,
2007), Davies and Mackenzie (2014)
argue that systems integration is the
core organizational capability required
to deal with the interdependency
among components, uncertainty, and
change found in complex projects. In
their study of the London 2012 Olympics construction program, Davies
■ Project Management Journal ■ DOI: 10.1002/pmj
23
PAPERS
Managing Structural and Dynamic Complexity: A Tale of Two Projects
Type of Complexity
Conceptual Contributions
Structural complexity
(arrangement of components
and subsystems into an overall
system architecture)
Dynamic complexity
(changing relationships among
components within a system
and between the system and
its environment over time)
Implications for Management
Systems hierarchy and interdependence among components
(Simon, 1962; Hobday, 1998; Shenhar & Dvir, 2007)
Decompose the project or program into more
manageable sub-components
Systems integration (Sapolsky, 1972; Sayles & Chandler, 1971;
Prencipe et al., 2003; Davies & Mackenzie, 2014)
Systems integrator manages technical and
organizational interfaces
Stakeholder relationships (Loch et al., 2006, p. 52; Dvir &
Shenhar, 2011; Hertogh & Westerveld, 2010), socio-political
complexity (Geraldi et al., 2011), and cultural differences (Scott
et al., 2011)
Collaborative arrangements— integrated
project teams, co-location; proactive stakeholder
communications, transparency, and engagement
strategies
Foreseen and unforeseen uncertainty (Klein & Meckling, 1958;
Loch et al., 2006; Hertogh & Westerveld, 2010; Edmonson,
2012)
Experiments, prototyping, trial and error learning
Complex coordination requirements and interdependencies
arising from the integration of multiple components (Sapolsky,
1972; Sayles & Chandler, 1971) and technological uncertainty
(Shenhar, 1993); teaming (Edmonson, 2012)
Flexibility, late design freeze, keeping options
open; concurrent engineering, parallel trials;
off-site testing before trying new products or
processes
Market uncertainty and novelty (Wheelwright & Clark, 1992;
Loch et al., 2006; Shenhar & Dvir, 2007; Edmondson, 2012)
Learning and feedback from user needs and
customer requirements; learning, experimentation
and collaboration multi-functional teams
Pacing and urgency (Gersick, 1994; Eisenhardt & Tabrizi, 1995;
Grabher, 2002; Shenhar & Dvir, 2007)
Scheduling and planned action to deal with
temporal milestones and rapid, mutual adaptation
in response to unplanned events
Table 1: Conceptualizing project complexity and its management.
and Mackenzie (2014) suggested that
organizations cope with complexity by
decomposing a project into different
levels of systems integration with clearly
defined interfaces between levels and
component systems. At a system of systems level (which they call “meta systems integration” to convey the idea of
standing above and looking across the
overall program and system of systems),
the client is responsible for establishing
a systems integrator—in-house or as
a joint-venture delivery partner—with
the capabilities of comprehending the
total system, managing external interfaces with multiple stakeholders, and
program managing the integration of
individual system projects. At the system integration level, each individual
system project can be managed as a
relatively self-contained activity with
defined interfaces along with other
parts of the overall program.
24
August/September 2014
Contributions from the literature on
project complexity and the implications
for its management are summarized
in Table 1. To simplify the analysis we
suggest that the types of complexity
discussed above fall into two main categories, structural and dynamic, each of
which combines elements and concepts
found in the literature.
Similar to Henderson and Clark’s
(1990) concept of architectural innovation, our formulation of structural
complexity refers to the arrangement of
components and subsystems into one
overall system architecture. The concept includes the characteristics of the
system being produced in the project,
the system producing it, and the wider
system that will be using the output
of the project. Thus, it covers not just
the size of the system in terms of numbers of components and their relations
but also the number of stakeholders
■ Project Management Journal ■ DOI: 10.1002/pmj
(internal and external) and the relations
between them (i.e., the organization
and governance of the project). Project
complexity can arise from the interdependence among component tasks
and stakeholder relationships (Loch, De
Meyer, & Pich, 2006, p. 52). In array
projects (system of systems), managers often cope with a high degree of
structural complexity by creating an
umbrella organization and program to
deal with financial, logistical, legal, and
political issues and to coordinate the
variety of system projects, contractors,
and stakeholders that make up the overall array (Shenhar & Dvir, 2007, p. 105).
Although the concept of structural
complexity helps managers understand
the progress of individual parts and
interfaces among them at one point
in time, it is difficult to predict with
any degree of certainty how component parts of a system and boundary
between the system and its environment will interact over time. Structural
complexity generates its own internal
sources of uncertainty. Uncertainties
range from a known or foreseeable
event whose impact on the project can
be anticipated in advance, to entirely
unforeseen events with unpredictable
consequences (Loch et al., 2006).
We suggest that the concept of
dynamic complexity addresses the
unpredictable situations and emergent events that occur over time,
which are associated with interactions
among components of a system and
between the system and its environment. Dynamic complexity is therefore associated with different types of
uncertainty influencing the progress
of a project—technological (Shenhar,
1993), market novelty (Loch et al., 2006;
Shenhar & Dvir, 2007), and pace (Gersick, 1994). Dealing with uncertainty
in an era of rapid change and unpredictability requires a different approach
than traditional project management
can offer, especially when organizations
are trying to accomplish something that
has not been done before and might not
be done again (Edmonson, 2012). Organizations bring together people from a
variety of disciplines both from within
(different divisions or departments) and
outside the organizations (e.g., external
specialists and stakeholders) in temporary groups to solve problems in real
time. Edmonson calls this ‘teaming.’ As
she points out, “situations that call for
teaming are … complex and uncertain,
full of unexpected events that require
rapid changes in course” (Edmonson,
2012, p. 75). Furthermore, teaming
involves getting work done at the same
time as learning how to do it better; in
other words, doing execution and learning in parallel (Edmonson, 2012).
A project can have a high degree of
structural complexity with a low level
of uncertainty or dynamic complexity. External sources of uncertainty are
associated with the fact that tasks performed in complex projects are affected
by the unpredictable actions of other
organizations and stakeholders in the
environment within which a system is
conceived and delivered (Geraldi, et al.,
2011; Scott, Levitt, & Orr, 2011). The risk
of social misalignments, cultural differences, or political conflicts makes a
complex project uncertain and particularly when they are “situated in urban
or semi-urban areas and tend to have
considerable social, environmental, and
distributive impacts (Scott et al., 2011,
p. 46).
We use these broad categories to
analyze and compare the approaches
taken to manage complexity in our two
case studies in the fourth and fifth sections, but first we briefly describe our
methodological approach.
Research Methods
We chose a comparative case study
approach to answer the research question posed in this paper: How can
complexity be successfully managed in
projects? We selected two large mega
infrastructure projects, which were
associated with the highest degree of
complexity—both were system of systems projects (Shenhar & Dvir, 2007).
The case studies of T5 and the London Olympics were based on extensive interviews with managers using an
engaged scholarship approach (Van de
Ven, 2007). The research was undertaken at different times to answer different research questions. The study of
T5 aimed to understand how learning
and innovation in a megaproject was
used to create a new approach for coping with uncertainty. The study of the
London Olympics, which built on the
findings of T5, focused on exploring
how an organizational structure and
process were created to cope with a high
degree of complexity. In this paper, we
compare and contrast the approaches
used by both projects to deal with complexity. This was possible because our
T5 research was an in-depth exploratory study, which addressed not just
the issue of uncertainty, but also how
the project was organized, coordinated,
and managed as a system of systems.
August/September 2014
Each study used similar methods
to gather information and analyze the
findings. Our qualitative studies were
based on a similar number of interviews (each typically between one and
two hours long) and official documents,
presentations, contracts, reports, and
the trade press. Both studies involved a
high level of collaboration with senior
managers (e.g., project directors, project managers, and senior executives)
working in different organizations (clients, contractors, and other stakeholders) involved in shaping and executing
the projects. We produced detailed case
studies of our findings, which were presented to our collaborators for careful
verification and validation.
In the case of the T5 project, the
study of the Heathrow T5 project took
place over a period of 20 months, from
June 2005 through January 2007. We
conducted 30 interviews (which ranged
from 90 minutes to four hours long)
with most of the senior managers on
the project, including past and present project directors and senior project
managers from BAA—the client—and
Laing O’Rourke (LOR)—one of the
main contractors, and also with LOR’s
CEO and the former project director of
British Airways (BAA’s customer). The
findings, which have been published in
several journals, focused on the innovative approach used to deliver T5,
but raised important questions about
what types of organizational structure
and process are required to coordinate
such complex projects (Davies, Gann,
& Douglas, 2009; Brady & Davies, 2010).
This encouraged one of the authors
to explore this issue more deeply in a
separate study of the London Olympics
(Davies & Mackenzie, 2014).
In the London Olympics project
interviews were conducted between
December 2010 and September 2011
during the final stage of construction
and handover to LOCOG (the London
Organising Committee of the Olympic and Paralympic Games), with 31
senior managers in the Olympic Delivery Authority (ODA); the ODA’s delivery
■ Project Management Journal ■ DOI: 10.1002/pmj
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partner, CLM; and the principal contractor organizations. These included
the chairman of the ODA, board directors, project sponsors, project directors,
and project managers. The first phase of
interviews focused on management of
the overall program with managers from
the ODA and CLM. The second phase
focused on specific projects within the
overall program—the Olympic Stadium,
the Velodrome, the temporary structures, the International Broadcast Centre (IBC)/Media Press Centre (MPC),
the Aquatics Centre, and the Athlete’s
Village. Interviews were conducted with
tier one contractors, as well as the ODA
and CLM, and addressed how the individual projects fit into the overall program while being tailored to meet the
individual circumstances they faced.
After completing the two studies,
the authors identified an opportunity
to undertake a comparative study of
the management of complexity by
going back to our original interviews
and exploring the differences and similarities between the two projects. We
wanted to find out more about: the
choices facing the client about how to
establish a systems integrator to coordinate the project (in-house versus
project delivery partner); what factors
led to the successful (and unsuccessful) implementation of the projects; and
how the two projects created processes
to manage at both the program and
project levels—an important question,
as studies of previous megaprojects had
shown that many failed to deliver their
objectives.
Case Studies
In this section we outline the main
characteristics of the two megaprojects
and the different approaches employed
to dealing with the complexity arising
from these characteristics.
The T5 Project
At the time of its execution, the T5
project was one of the largest construction projects in Europe and the
most complex and challenging project
26
August/September 2014
ever undertaken by Heathrow’s owner,
BAA. The scope of the project included
diverting two rivers, over 13 kilometers
(approximately 8 miles) of bored tunnels, the construction of two terminal
buildings, a new spur road linking T5 to
the M25, a new air traffic control tower,
extensions to the existing aboveground
and underground rail links, airfield
infrastructure (including taxiways and
aircraft stands), a new baggage handling
system, a 4,000 space multi-level car
park, and a 600-bed hotel. Construction
was carried out within a highly physically constrained environment on a site
bordered by two runways and the existing terminal buildings, while causing
minimum disruption to the operational
activities of one of the busiest airports
in the world.
Adding to these challenges, plans
for the expansion of Heathrow had been
subject to the longest planning inquiry
in UK history, which sat for 3 years
and 10 months before the government
approved the project in November 2001.
The inquiry laid down over 700 conditions, including restrictions on delivery
and working times and specifying that
there could be only one entrance/exit to
the site through which all the vehicles
and workers had to pass and be subjected to the high security measures
associated with an airport. The construction project involved more than
60,000 people over its life cycle. At its
peak, some 8,000 workers per day and
250 deliveries of materials per hour had
to pass in and out of the site. The project cost, £4.2 billion (over US$7 billion),
when set against BAA’s market capitalization of around £6.8 billion (over
US$11 billion) in January 2006, meant
that T5 was an extremely risky undertaking for BAA.
BAA’s Novel Approach to Managing T5
During the long process of preparing
for T5, BAA came to recognize that
existing construction industry practices and their project management
processes could not cope with the complexity, scale, and risk associated with
■ Project Management Journal ■ DOI: 10.1002/pmj
the project and that a radically new
approach was required to manage T5.
Between 2000 and 2002, BAA carried out
systematic case study research of every
major UK construction project over £1
billion (approximately US$1.5 billion)
undertaken over the past 10 years and
every international airport opened over
the previous 15 years. This benchmarking analysis found that no UK construction project had successfully delivered
on time, within budget, and to the quality standards originally determined in
the contract. It also found that few projects had good safety records and no
recently built airport had opened on
time. Based on this study, BAA concluded that without a radically different
approach, the T5 project would cost
over £1 billion more than was affordable, would be two years late, and result
in between 6 and 12 fatalities.
BAA’s study identified two key areas
that contributed to the poor performance of megaprojects: the lack of
collaboration among project partners
and the client’s reluctance to assume
responsibility for project risk. The study
found that transferring the risk on to the
contractor offered no real protection for
the client, because the client is always
ultimately accountable for cost, time,
quality, and safety. BAA developed a
new approach to project management
based on two core elements: integrated
project teams and BAA’s acceptance of
the risk. These elements were used to
create two documents used to underpin
the approach to manage T5:
• The T5 Handbook—a visionary piece
of work created by a small team within
BAA in 1996 that defined the way BAA
wanted to work on T5, based on BAA
carrying the risk, including positive
rewards for success and not penalizing
failure. The handbook contained simple instructions about lines of reporting
and who was accountable if problems
were encountered on the T5 project.
• The T5 Agreement—a novel type of
cost-plus incentive contract based
on the processes outlined in the T5
Handbook that created a new set of
behaviors, which allowed members of
projects to work under a set of collaborative rules for integrated project team
working and partnering.
Unlike other forms of cost-plus contracts in which risks are shared between
the client and the contractor, BAA
assumed full responsibility for all the
risk while taking out insurance against
the project risk. BAA’s management
approach for T5 was to identify possible
sources of risks and to bring together
the best capabilities and resources to
manage that risk. The T5 Agreement
was designed to encourage collaboration and the creation of innovative solutions to problems that would inevitably
arise on such a complex and uncertain
project and avoid the practice of seeking additional payments and/or entering into legal disputes over changes in
scope, which were found in the more
adversarial relationships that typified
construction practice in the United
Kingdom. The T5 Agreement was based
on cost-reimbursable contracts—the
supplier was paid all costs incurred plus
a profit margin. All costs including profit
margins were reported on a transparent, open-book basis. Integrated team
members were incentivized to improve
performance by offering bonuses for
beating target costs and completion
dates. To avoid the risk that targets were
set too high, BAA brought in independent consultants to carry out detailed
cost analyses. The T5 Agreement also
specified that targets related to quality
and safety should not be compromised
to meet time and cost targets.
Under the T5 Agreement, integrated
project teams were established for each
sub-project and this team included
people from BAA, from main suppliers, designers and, where appropriate,
principal sub-contractors. These teams
were expected to share the same offices
and to share information and resources.
Under the T5 Agreement, suppliers were
expected to bring their most talented
people to the project, which enabled
Service
provider
British Airways
Airport owner and
operator
BAA
T5 Agreement
Project manager/
systems integrator
First tier suppliers
Second tier suppliers
60 suppliers
Subcontractors
Figure 1: The T5 organization structure.
BAA to assemble project teams to make
the best use of the expertise in their
partner firms. As shown in Figure 1 the
T5 Agreement only covered BAA and its
tier 1 suppliers (around 80 of these were
involved), but the integrated project
teams were expected to adopt the same
principles to their relationships with
lower tier suppliers (some 500 second
tier, 2,000 third tier, and 15,000 fourth
tier) as was embodied in the T5 Agreement.
These two elements of BAA’s novel
approach to project management—the
client assumes all the risk and integrated project teams—were supported
by three complementary innovations:
• Digital models for project design and
execution;
• Pre-fabrication, pre-assembly, and
testing of components; and
• Just-in-time logistics.
The Single Model Environment aimed to provide a central data repository
for all digital data relating to the project.
This was to ensure that no inaccuracies in information occurred between
partners in the integrated teams who
needed to view it in the design, production, and construction phases of the
project. The T5 project made extensive
August/September 2014
use of pre-assembly techniques and
off-site pre-fabrication to manufacture,
assemble, and test components before
they were brought on site. Once particular sub-systems (e.g., sections of the
roof, the services ‘chimneys,’ and the
air traffic control tower) were tested
this way, they were then disassembled
and transported in the largest possible
sub-sections to the Heathrow site for
final assembly. This use of off-site fabrication was supported by a logistics
strategy based on just-in-time techniques used in volume manufacturing
so that materials were only brought on
site when the site was ready to receive
them. BAA established two consolidation sites away from the main site to
support pre-fabrication and just-intime delivery. The Colnbrook Logistics
Centre included a railhead for the delivery of bulk materials, such as concrete,
aggregates, and steel; a factory for prefabrication and assembly of rebar; and a
laydown area for storage. The Heathrow
South Logistics Centre included a facility for the automated manufacturing of
piling cages used in the civil engineering
phase of the construction program and
was later used to assemble materials and
components into work packages ready
for use on site for the system integration
and fit-out stages.
■ Project Management Journal ■ DOI: 10.1002/pmj
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Together, these five components—
client taking on the risk, integrated
team working, the single model environment, off-site pre-fabrication, preassembly and testing—created a project
management system that represented
a breakthrough in the management of
megaprojects.
How Did this Approach Help BAA
Manage Complexity?
BAA played multiple roles of client, systems integrator, and project manager
for the T5 project. As a serial procurer of
capital projects, BAA had a capital projects division within its permanent corporate organization, which dealt with
its smaller more routine and repetitive
projects. For the one-off T5 megaproject, they created a separate project
organization consisting of a leadership
team with approximately 10 key individuals and some 160 staff members
to work independently of the corporate group. The T5 organization was
headed by a managing director, who
sat on the main BAA executive board.
He was responsible for keeping the
board informed of project progress and
also for managing external stakeholders, including the regulator, the airlines
(principally, British Airways), and local
communities. Under the T5 managing
director sat the T5 project director, who
was responsible for the integration of
the projects and sub-projects into an
overall program of construction work
to be delivered within cost, time, quality, and safety constraints. BAA broke
down the overall T5 project into a number of components, major projects, and
sub-projects. There were four main
components—railways and tunnels,
buildings, airport infrastructure, and
systems (which went across the other
three areas and involved the integration
of all the IT and supporting systems)—
each of which was headed up by a
project manager from the BAA internal
organization. These managers were
responsible for the systems integration
activities related to both the technical
and the organizational interfaces. These
28
August/September 2014
were further broken down into 16 major
projects and 147 sub-projects.
These sub-projects were organized
as integrated project teams made up of
representatives from BAA and several
tier 1 contractors—architects, designers,
structural engineers, constructors, fabricators, specialist contractors, and so
forth. They were co-located, co-incentivized, and co-responsible for the outputs of their projects. Sub-projects were
not necessarily managed by managers
from BAA; rather, they were headed
up by whoever was deemed to be most
appropriate in terms of the knowledge
and skills needed for the sub-project.
Where there were inter-dependencies
between sub-project teams, these were
recognized and managed at a higher
level. The information asymmetries,
which typically exist in large complex
projects with multiple suppliers, were
addressed partly through the integrated
project team structure but also by the
use of the single model environment,
which meant that the same digital
information was available to all parties
across the whole T5 organization. This
breakdown of the project into smaller
chunks helped BAA manage structural
complexity, including the wider system of stakeholders. The T5 managing
director dealt with external stakeholder
management and also handled communication with the senior internal
stakeholders through his membership
of the executive board, while internal
stakeholders were managed through the
integrated teams and the terms of the T5
Agreement.
One of BAA’s main roles in the T5
project was to create an environment
within which members of integrated
project teams were able to create innovative solutions by working with the
client as a partner. The T5 Handbook
and the T5 Agreement created the processes required to deliver the T5 project
but it became clear during implementation that effective integrated team working depended on fostering new types
of behavior so that suppliers could
work together with the client to solve
■ Project Management Journal ■ DOI: 10.1002/pmj
problems and create innovative solutions. BAA made continuous efforts
to break with traditional practices by
reinforcing and rewarding team-based
behaviors and fostering a culture of
learning among suppliers. These behaviors were based on ‘soft’ skills, such
as trust and cooperation, which are
required to work ‘constructively’ on the
project, rather than the hard skills of traditional contracting based on the commercial estimation of risks and making
claims when problems arise. BAA put
in place a change program with specialist change consultants to promote
these new behaviors and introduced a
T5 newspaper, poster campaigns, and
other measures to continually re-invigorate and reinforce the learning culture
and to create a sense of identity for the
T5 project, which transcended individual firm allegiance.
Dynamic complexity was dealt with
by the use of the collaborative T5 contract, which included incentives to
innovate during the project to solve
predictable and unanticipated problems that might arise during project
execution. The just-in-time logistics
system, ‘Projectflow,’ enabled teams to
update daily what work had been completed so that only the materials needed
for the next day’s work could be lined
up for delivery. This was developed
to help address the challenge of limited lay-down space on site and the
single entrance to the site mandated
by the public enquiry. The creation of
the two consolidation sites a few kilometers away from the airport, where
pre-fabrication and storage of materials could take place, was another
major factor in meeting this challenge.
The issues of pace and urgency were
addressed via the collaborative nature
of the relationships within and across
the integrated project teams. The teams
were encouraged to reveal problems at
an early stage rather than concealing
them so that they could be addressed
quickly and brought to the attention of
the managers at a higher level if necessary. When issues arose in one team
they would work together to derive a
solution and re-schedule work while
they solved the problem so that it didn’t
cause significant hold-ups elsewhere in
the program, which would affect overall
progress on the project.
Technological uncertainty was dealt
with by earlier experimentation and
standardization of major components,
by off site testing to prove constructability, and by a policy of not adopting
untested technologies on site. Where
new technologies were introduced,
they were first tested and proven in
trial or operational environments (e.g.,
BAA’s other airports) before being taken
to T5. During the lead up to T5, BAA
had achieved radical improvements in
the delivery of its program of capital
projects to modernize and upgrade its
existing terminal buildings and airport
infrastructure. By adopting two key
innovations, BAA was able to improve
its project processes during the late
1990s:
• Continuous Improvement Project Process (CIPP), embodied in BAA’s project
management guide, which established
standardized processes for delivering
cost-effective and profitable projects
through the application of best practices.
• Framework agreements to select and
work with a smaller number of highly
capable first-tier suppliers on a longterm basis.
These innovations in project management and partnering were applied
to improve BAA’s existing on-going program of more routine and less complex
capital projects based on a typical £15
million (over US$25 million) project.
BAA’s project guide presented a set of
replicable project processes, which
were used across BAA’s projects, including developing standardized designs,
ranging from individual modules to
complete buildings. By exploiting the
learning curve advantages of ‘design
it once, build it multiple times,’ BAA
was able to achieve significant cost
reductions in project delivery. While
BAA’s CIPP improvement program
focused on reducing the costs of its
regular capital project activities, the
longer-term objective was to prepare for
T5. The framework agreements enabled
BAA to improve project performance,
implement best practices, and select the
most capable supplier for each project.
Suppliers remained in BAA’s family of
framework suppliers for up to 10 years
if they achieved yearly improvements
in project performance. In the build-up
to the T5 framework, suppliers worked
in integrated project teams on BAA’s
projects, which helped to prepare firsttier suppliers for T5. The agreements
enabled BAA to understand the capability of its suppliers and their ability to
work with BAA under this environment
of cooperation, trust, and open-book
accounting.
The London 2012 Olympics
Construction Project
The London Olympics construction program was a large-scale, complex system
of multiple interacting systems. The program had dual objectives—delivering the
venues and infrastructure for the games
and providing legacy benefits. The original budget for construction set in 2007
was £8.1 billion (over US$13 billion) and
included considerable contingency elements; it provided most of the venues
for London 2012 and consisted of over
70 individual projects with many interdependencies between them, including common services and site logistics.
The main Olympic park site included
the Olympic Park itself—waterways,
wetlands, green spaces/parklands, 30
bridges to span the rivers and railways,
and underpasses; the 80,000-seat Olympic Stadium; the 17,500-seat Aquatics Centre (consisting of a permanent
central structure with two temporary
seating wings plus a temporary 5,000seat Water-polo venue); the 6,000-seat
Velodrome and a temporary BMX bike
track with 6,000 temporary seats alongside; the 12,000-seat temporary Basketball Arena; the Handball Arena; the
August/September 2014
Eton Manor sporting hub (temporary
training pools for aquatics events); the
Olympic Village (residential apartments
for 17,000 athletes in eleven plots, each
with five to seven buildings around a
courtyard); the International Broadcast
Centre/Main Press Centre (IBC/MPC),
providing facilities for 20,000 broadcasters, photographers, and journalists
plus a multi-level car park and temporary elements; the energy center plus a
new wind turbine, primary substation,
new utility networks underground (gas,
water, electricity, telecommunications,
and sewage), main sewer, and a deep
sewer pumping station.
The construction program faced a
number of other challenges. There was
an immovable deadline for the program:
The opening ceremony for the Olympics
was to take place on 27 July 2012 and
could not be relaxed. The Olympics
involved multiple stakeholders, some
of which had conflicting objectives (see
Figure 2, which shows the stakeholder
map for the Olympics). There was a
huge public sector investment in the
Games and subsequently a large interest at the national level, but the Olympics profile goes way beyond the host
nation, and the eyes of the world were
on the program. International events
like the Olympics are always subject
to worries about security and London
had previously been subject to terrorist attacks. As a result, there were huge
reputational risks, not only for the organizations involved in the construction
program, but for the UK government
and the country as a whole. The overriding imperative for the Olympics was
that this was a program that could not
fail. It is against this background that
the specific management approach was
developed.
The Approach to Managing the London
2012 Olympics
London was awarded the 2012 Olympic
and Paralympic Games on 6 July 2006.
The promise of creating a lasting legacy for London was the key to winning
the bid and has shaped the approach
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London/Local
Government
Nations and
Regions Group
Individual
boroughs and
authorities
LSDC
Fire
CABE
DEFRA
Met Police
Auth
TGDC
A+UU
TfL
LDA
Mayor
LOCOG
IOA
Sport
England
OLD
D of Health
DfES
Parliament
Env Agency
DTI
NAO
Env Agency
DCLG
HMT
D for Transport
World
Wildlife
Fund
London Citizens
Natural
England
DCMS
LVSC
Trades Unions
ODA/CLM
DEFRA
LSDC
BOA
UK Sport
Sport
English Heritage
Home Office
5 boroughs
Ambulance
English Nature
Office for Govt Commerce
London
Assembly
ALG
International
Feds
National
Government
Devolved
administrations
CABE
TfL
Health
and Safety Exec
DTI
Construction
Industry
Delivery
Contractors
LDA
Weymouth
Trade Unions (on site)
Broxbourne
Learning and
Skills Council
Office for Govt
Commerce
5 boroughs
A+UU
London Citizens
ELBA
London 2012 Forum
Local Strategic
Partnerships
Skills
Forecasting Unit
London Business
Board
Stakeholders
Local
interest
Clients
Partners
Consultees
Audiences
Figure 2: The ODA stakeholder map (source: http://learninglegacy.independent.gov.uk).
to the design and construction of the
Olympic infrastructure and venues. The
London 2012 Delivery Team consisted
of the London Organising Committee
of the Olympic and Paralympic Games
(LOCOG) and the Olympic Delivery
Authority (ODA). LOCOG was a private
company responsible for the planning,
funding, preparation, and staging of the
London 2012 games with a £2 billion
(over US$3 billion) budget, which was
mostly raised from the private sector,
income from IOC, revenue from ticket
sales, merchandise, and a domestic
sponsorship program. The ODA was
set up in 2006 as a temporary client
and public sector body responsible for
design, development, and construction
of the new venues and infrastructure for
London 2012 and their use afterward.
CLM was a temporary joint venture
between CH2MHill, Laing O’Rourke,
and Mace, which was formed to act as
the ODA’s delivery partner. The ODA
was responsible for handing over the
30
August/September 2014
Olympic venues to LOCOG and had a
£9.8 billion (over US$16.5 billion) budget funded by the Department for Culture, Media, and Sport (DCMS), the
Greater London Authority (GLA) and
the Olympic Lottery Distributor.
The ODA’s remit was ‘to deliver
venues, facilities, infrastructure, and
transport on time for the London 2012
Olympic and Paralympic Games that
are fit for purpose and in a way that
maximizes the delivery of a sustainable legacy within the available budget.’ So time, quality, and cost were
the prime focus of the delivery but
there were other ‘objectives’ related to
broader social and economic impacts:
health, safety and security; design and
accessibility; equality and inclusion;
legacy; emp loyment and skills; and
sustainability.
At the outset, the ODA faced the
challenge of delivering a large-scale
and complex system of systems project
in a major city. It had to find a way
■ Project Management Journal ■ DOI: 10.1002/pmj
of designing and building the Olympic
Park by a fixed date, across a constrained
site involving multiple systems, which
became increasingly interconnected as
more venues were constructed. It had
to establish a structure to manage and
coordinate numerous organizations
involved in multiple, often interconnected projects, and develop a process to perform interdependent tasks
(design, construction, integration, fit
out, and handover) and build individual
systems with interfaces (common utility
services, site logistics, and transport) to
other parts of the system of systems. At
the same time, the ODA had to engage
with many external stakeholders, such
as government, local authorities, railway authorities, and local community
groups involved in shaping the program
and defining its outcomes.
The organizational structure established by the ODA mirrored the structural complexity of the program. The
program was broken down into more
ODA
System of Systems
(Array)
Program
CLM
Projects
Systems
Principal Contractors
Sub-contractors
Components
and Subsystems
Figure 3: London 2012 Olympics: System of systems project.
than 70 individual projects in six different directorates: infrastructure, venues,
security, logistics, village, and transport. Designed to manage the overall
system, each individual system and the
interconnections between them, the
structure was based on three main organizational levels of systems integration
arranged in a hierarchical relationship
(as shown in Figure 3). The task of overall systems integration was undertaken
jointly by the ODA and CLM. Performing the role of client, the ODA established the goals of the program, worked
closely with the delivery partner, CLM,
to plan the program, and monitored
progress against those goals. The ODA
concentrated on dealing “upward and
outward” by establishing a single interface between the overall program and
the, often conflicting, interests of some
750 stakeholders. CLM was appointed
as delivery partner and systems integrator for the overall program. CLM
was responsible for keeping the ODA
fully informed about the progress of
construction by managing “downward”
across the overall program and acting as
project manager with principal contractors on each major construction project. The delivery partner managed the
interfaces and dependencies between
the various systems projects. Principal
contractors were contracted to integrate
and deliver individual systems projects
including venues and infrastructure
within the Olympic Park, against time,
cost, quality, and other strategic objectives. Each principal contractor was
responsible for managing his or her own
chain of subcontractors. For example,
Carillion’s IBC/MPC project involved 50
tier 1 and 50 tier 2 suppliers.
The ODA had a clear preference for
NEC contracts with their tier 1 contractors: NEC3 C was a target price plus
pain/gain contract, whereas NEC3 A
was a fixed-price contract. The contract between ODA and CLM was carefully structured in two regards. First,
CLM bid on periodic ‘work packages,’
which were typically let for a 12- to
18-month period. The ODA would specify the overall, top-down requirements
for the period, leaving CLM to work
through the details and come back with
a bottom-up proposal, which was then
subject to examination and negotiation.
This approach ensured that CLM had
high ownership of the resulting work
packages, which reflected bottom-up
knowledge. Second, the contract also
involved important incentives. CLM’s
profit margin was linked to multiple key
performance indicators (KPIs) with as
much as 90% of their overall margin at
risk if they failed to achieve them. This
provided CLM with a huge incentive
to meet various milestones and targets
and served to align objectives between
August/September 2014
CLM and the ODA. The KPI approach
also provided flexibility so that incentives could be aligned between CLM
and tier 1 suppliers; an example of this
was the Athletes Village, where relationships between CLM and Lend Lease
improved once it was clear that success
would benefit both.
The ODA and CLM set up five key
processes to manage the overall program: up-front planning, project and
program monitoring, problem resolution, change management, and integration management (Mackenzie & Davies,
2011). On their own, none of these five
processes was particularly innovative,
but collectively they enabled the delivery team to maintain the progress of
the project. The up-front planning led
to the development of a baseline in
2007, which defined scope, specifications, and budgets across the whole
program. These initial estimates were
written up in what was known as the
‘yellow book’ and used to monitor progress and change as the project unfolded.
It was subsequently updated in line with
changes in 2009 and became known as
the ‘blue book.’
The monitoring process involved a
hierarchy of reviews at both the individual project level and program level.
Every project had to report progress
on a monthly basis to CLM, who aggregated this information to provide a view
at the program level. The ODA and CLM
also carried a monthly trend review
to enable senior managers to identify
trends at higher levels in the organization, which might not be so apparent at
lower levels. In addition to these review
processes, there were audit processes.
Both CLM and the ODA had audit functions for the project and program level
operations, and the overall program was
subject to periodic higher level government audits. This monitoring process involved both upward reporting
and downward assurance activities, as
shown in Figure 4.
When the monitoring process highlighted problems, this would set in
motion the problem resolution process,
■ Project Management Journal ■ DOI: 10.1002/pmj
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Managing Structural and Dynamic Complexity: A Tale of Two Projects
Reporting
Assurance
Parliament
Ministerial briefings
Program report
Monthly program report
Project status reports
Performance report
Performance data
Department for
Culture, Media
and Sport/Funders
ODA
Delivery Partner
Project management team
Contractor
National Audit Office
value for money review
Program support and
assurance team
Program assurance
office
Performance
assurance
Project management/
Sponsor client reviews
Contractor quality
assurance processes
Sub-contractor
Figure 4: The relationship between reporting and assurance (source: http://leaninglegacy.independent.gog.uk/).
whereby CLM would work with the
relevant tier 1 contractor to identify,
explore, and evaluate different options
(referred to as ‘optioneering’) in an
attempt to co-develop a ‘best solution’
to the problem.
How Did this Approach Help the ODA
Manage Complexity?
The breakdown of the overall program into individual projects helped
deal with the structural complexity.
Although some projects corresponded
to individual venues, others such as
logistics and security provided program-wide services. Managing the
numerous stakeholders involved in the
program called for a strong governance
structure involving multiple layers of
assurance and reporting (see Figure 4),
both internally and externally. The separation of the roles of the ODA and the
delivery partner, CLM, enabled CLM to
focus on the execution of the program,
while the ODA could provide oversight
and assurance to satisfy the external
stakeholders.
Some aspects were tightly controlled, including the five key management processes; the principles and
targets related to health and safety and
32
August/September 2014
the other five priority themes; and the
behaviors required to underpin the
program culture (Mackenzie & Davies,
2011). Other aspects were loosely managed to enable flexibility such as how
contractors would implement the principles and targets for health and safety
and the other priority themes. Contracts were tailored to the complexity of
each system. For example, the Olympic
Stadium appointed a principal contractor under a design and build NEC3 C
(target price with pain/gain), whereas
a design-led procurement was used for
the Velodrome (given the desire for a
‘signature’ building).
The tight–loose approach enabled
the ODA to achieve a highly consistent approach across the whole program
while facilitating flexibility to enable
dynamic complexity to be managed
(Mackenzie & Davies, 2011). The suite of
contracts, tailored to the requirements
of each system, provided a way of dealing with dynamic complexity. The most
important aspect of these contracts was
the requirement to provide transparency of progress, to surface problems or
issues at the earliest point, and to work
in collaboration with CLM and others
to find solutions to problems. Although
■ Project Management Journal ■ DOI: 10.1002/pmj
an ‘open and collaborative’ approach
can be promoted by an NEC contract,
there is little doubt that working under
a contract that enshrines these behaviors, makes life easier. This loosely managed approach is exemplified by the
response to the economic downturn
in 2008, when public funding from the
contingency was used to pay for the
Athletes Village.
The ODA established a flexible
approach for dealing with unanticipated changes associated with dynamic
complexity. The change management process was based on the early
identification of the need for change,
a rigorous change approval process
(including escalation to the appropriate
level, depending on the magnitude of
the change), combined with full documentation of the changes, their impact,
and the supporting rationale. All significant changes needed approval of the
ODA-chaired ‘change board’ and the
whole process was designed to resolve
contentious issues before they became
confrontational. The integration management process dealt with interdependencies between the various projects
and sought to identify the impact of
slippages or changes in one project on
Heathrow Terminal 5
London Olympics
Project Characteristics
Type of project
System of systems
System of systems
Type of client
Private sector serial procurer of construction projects
Temporary organization for one-off procurement
Level of risk
T5 seen as critical for BAA’s future competitiveness
Very high—UK’s international reputation at stake
Size of budget
£4.3 billion
£8.1 billion
Stakeholder profile
Limited to a few key players
Large number of interested stakeholders
Characteristics of the site
Working airport—physically constrained, high security,
limited lay-down space
Brown-field site—physically constrained, high
security
Time constraints
BAA imposed an end date for the project
Immovable deadline for the opening of the Olympics
Management Approach
System of systems integration— BAA—the client
program level
Shared between ODA and CLM
System integration—project
level
Integrated project team—BAA and first tier suppliers as
partners
Principal contractor working in integrated project
team with CLM and ODA providing oversight
Overall approach
One size fits all
Tight–loose
Contract form
Single contract—the T5 agreement
Multiple contract types across the projects
Organization
Broken down into 4 main areas, 16 major projects, and
147 sub-projects
Broken down into 70 projects in 6 directorates: infrastructure, venues, security, logistics, village; transport
Governance
Limited number of layers—T5 Director on BAA main board Multiple layers of assurance and reporting
Approach to uncertainty
Integrated project teams expected to come up with
innovative solutions to emergent problems
Integrated project teams expected to come up with
innovative solutions to emergent problems
Approach to technology
New technology tested offsite prior to introduction
New technology only introduced if agreed by Change
Control Board
Approach to creating a
collaborative culture
External consultants used to implement a behavioral
change program supported by poster campaigns, T5
newspaper, etc.
ODA implemented a learning and development
program to support a collaborative culture
Table 2: Comparing the approaches to the management of complexity.
other projects and the program as a
whole. Integration committees were
established and operated in both the
design and construction phases of the
project.
All projects were required to follow
a standard approach for risk management, cost management, and change
control and this enabled the delivery
team to preserve control over aggregate costs and schedule and to achieve
program-level objectives. The adoption
of a highly proactive communications
and stakeholder management strategy
involving various levels of community
and political engagement (e.g., there
were daily site public visits to make
transparent the progress being made)
also addressed the wider socio-political
challenges associated with structural
and dynamic complexity. The ODA
implemented a learning and development program, which included team
building, skills development, mentoring, and health and well-being activities
to create and support a collaborative
culture. The program culture was characterized by three important features: a
fundamental belief that ‘failure was not
an option’; a commitment to revealing
problems as early as possible and collectively striving to develop solutions to
these problems; and a tight adherence
to health and safety practices.
Discussion
Both projects were large and structurally complex and subject to dynamically changing conditions. High levels
of uncertainty were experienced in both
August/September 2014
projects, and time was an important
factor. However, despite these similarities, there were differences in the
approaches taken by those responsible
for the management of these projects.
Table 2 summarizes the main characteristics of the two projects and the
management approaches taken to
dealing with structural and dynamic
complexity.
We see that both projects were system of systems projects involving the
integration of different types of infrastructure, including a variety of buildings, transport systems, energy and
waste systems, and IT systems. BAA was
a private client with a permanent organization set up to deal with an on-going
portfolio of both routine capital projects
and one-off megaprojects, whereas the
■ Project Management Journal ■ DOI: 10.1002/pmj
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ODA was a public sector client set up
as a temporary organization to deliver
a one-off megaproject. Both projects
had a variety of internal and external
stakeholders. In the case of T5, this was
limited to a few key players once the
public inquiry was over, whereas for
the Olympics, the number of interested
stakeholders remained large throughout the life cycle. Both sites were physically constrained and subject to high
levels of security and located in densely
populated urban areas with highly congested road links. However, T5 had the
added complication that it had to be
built within the boundaries of one of
the busiest operating airports in the
world, whereas the Olympics site was a
brownfield site.
Both projects had very large budgets—the Olympics budget at £8.1 billion was almost double that for T5’s
£4.3 billion budget, although the final
cost (£6.8 billion) was much lower. Both
projects faced a high level of risk. For
BAA this was largely related to commercial risk, because failure to deliver
T5 on time and within budget could
severely affect their competitive performance and long-term survival. The
risk for the ODA and the organizations
involved in delivering the Olympic construction program was largely reputational, because the Olympics had such
a high profile that the adverse publicity
that failure would generate would be
extremely harmful to all concerned. The
urgency of the two projects differed.
The Olympics project had a time-critical immovable end date, which was very
much set in stone. The official opening
ceremony was due to take place on 27
July 2012 and this could not be changed.
For T5, BAA imposed an official opening
date at the end of March 2008, which
could have been relaxed.
Both projects were system of systems projects and both were broken
down into a smaller number of projects
and sub-projects to help deal with systems hierarchy and the interdependence
between components (Simon, 1962;
Hobday, 1998; Shenhar & Dvir, 2007).
34
August/September 2014
Systems integration (Sapolsky, 1972; Sayles & Chandler, 1971; Prencipe, Davies,
& Hobday, 2003; Davies & Mackenzie,
2014) was a major factor in the management of structural and dynamic complexity in the T5 and the Olympics. On
T5, BAA played dual roles of client and
systems integrator at both the program
and project levels. In the long period
between the first design for T5 and
when the public inquiry gave approval
to its plans, BAA built up a large internal program management capability
by recruiting a senior team of talented
people, which was supplemented by
employing leading external specialist consultants to help prepare for T5.
The people on this team were selected
because they had a deep knowledge
and experience of business practices in
other industries and/or a track record
of successfully completing megaprojects. BAA was also involved in systems
integration at the project level, as BAA
managers were part of each integrated
project team. On the Olympics, the ODA
focused more on dealing with the plethora of external stakeholders (Loch et al.,
2006; Dvir & Shenhar, 2011; Hertogh &
Westerveld, 2010), such as LOCOG, various sports associations, many statutory
bodies, and local and central government, leaving its delivery partner, CLM,
to deal with the program management
and work with tier 1 contractors to deal
with project level management. The
role of the ODA was to be a relatively
‘thin’ but ‘intelligent’ client operating
in the middle ground between LOCOG
and the construction industry, while
leaving the bulk of the systems integration activities to their delivery partner.
The partners in CLM were selected precisely because they brought appropriate capabilities to the team: CH2MHill,
a U.S. contractor had previous experience of working on Olympics programs;
Laing O’Rourke and Mace had both
worked as tier 1 suppliers on the T5
project. Despite this role separation, it
is clear that the ODA and CLM worked
very closely together playing in brokering between stakeholders and the
■ Project Management Journal ■ DOI: 10.1002/pmj
contractors when it came to changes in
requirements, unanticipated problems,
and emergent opportunities.
Both BAA and the ODA created organizational structures that mirrored the
structural complexity of each project. In
the T5 project, a single novel contractual
arrangement was mandated by the client,
BAA, and laid out in the T5 Agreement
and agreed on by all tier 1 suppliers.
In contrast, the ODA used a variety of
different contractual arrangements,
depending on the nature of the artefact
being built. The T5 Agreement established a consistent and standardized
process and a common code of behavior that were applied uniformly on all
sub-projects but also required problems
to be solved through collaboration and
cooperation within the team. The ODA
and its delivery partner, CLM, adopted
a tight–loose approach to managing the
Olympics construction program, which
tried to strike a balance between consistent processes for managing change
across the entire program, while allowing
contractors to adopt specific solutions to
problem solving in individual projects.
Both approaches thus embodied a balance between control and interaction
(Hertogh & Westerveld, 2010).
The two projects had different
approaches to managing the risk associated with dynamic complexity. On
T5, BAA refused to transfer risk to its
supply chain—the phrase, “BAA owns
all of the risk, all of the time,” was used
to describe their approach. They took
out a novel insurance policy to cover
themselves and the supply chain.
Taking risk away from the supply chain
and using pooled benefits to encourage
the exploitation of opportunities was
a departure from conventional practice and shifted the focus from damage
limitation, to a search for the best way to
get the required benefits delivered. The
Olympics budget included a large contingency to cover risk. The governance
for the Olympics included multiple layers of assurance and reporting, whereas
T5 had a limited number of layers. This
reflected their different contexts. T5 was
an internally funded project for BAA,
a private sector organization, whereas
the Olympics games were a publically
funded project being delivered by the
ODA. Both projects included strong
economic incentives to deliver on time
with extra rewards for delivering performance levels on cost and time, which
exceeded expectations. This encouraged close cooperation between the
suppliers and the client.
The two projects had similar organizational approaches—integrated project teams—for dealing with uncertainty
and emergent problems. The approach
is an example of teaming (Edmonson,
2012) to support and encourage collaborative working and innovation. In both
instances, a highly competent group of
experts from both within and outside
the client organization was put together
in integrated teams to enable the client
to accomplish something that had not
been done before.
Both projects placed a strong
emphasis on the control of new technology with T5, insisting that all new
technologies, whether in products
or processes, had to be tested offsite
prior to its introduction in the project,
whereas in the Olympics program new
technology could only be introduced if
agreed on by the Change Control Board,
which was part of the governance structure. The long period between the first
design of T5 and the beginning of the
project enabled BAA to carry out extensive trials and experimentation with
technology and project management
approaches to try to increase predictability and reduce uncertainty (Klein
& Meckling, 1958; Loch et al., 2006;
Hertogh & Westerveld, 2010).
Although the T5 construction project was successfully completed on time
and within budget, the official opening
was a public relations disaster due to a
myriad of small problems that arose on
the day and led to the cancellation of
many flights and the loss of thousands
of suitcases, resulting in frustrated passengers. BAA admitted afterward that
perhaps they had failed to work closely
enough with their airline customer
British Airways in the handover of T5
post construction and that they might
have carried out the move to T5 in more
incremental steps (Brady & Davies,
2010). Their self-imposed deadline for
the opening could have been relaxed.
Having seen the problems of the T5
opening, the ODA and CLM made
sure they left plenty of time in the
schedule to move smoothly toward the
operational phase of the project. The
Olympic venues were completed successfully a year ahead of the opening
ceremony.
It is important to recognize some
important enabling factors, in addition
to the ability to manage complexity,
which contributed to the success of T5
and the Olympics. In the case of T5,
the leadership of Sir John Egan—BAA’s
CEO during most of the 1990s—was
a significant factor. Egan recognized
that by learning from the experiences
of other industries and applying these
ideas, practices, and technologies BAA
could improve its own project processes. He oversaw the development
of a very strong internal capability in
the management of projects and programs in the build-up for T5, which
had twin goals: for BAA to become the
best client to the construction industry
and to develop an approach that would
enable them to successfully complete
T5. In the case of the Olympics Construction Programme, the leadership
of John Armitt was also seen as crucial.
He oversaw the decision to employ an
experienced and well-resourced delivery partner, the implementation of supportive contractual arrangements, and
a program-wide culture of collaboration and a ‘can-do attitude.’ In addition,
it has to be noted that both projects
had very generous budgets, which were
ample enough to achieve the aims of the
projects. The procurement processes
reflected this realism and rejected the
previous practice of lowest bid tendering. In this respect, there was little evidence of the optimism bias that afflicts
many megaprojects. It is interesting to
August/September 2014
note that there was very little in these
approaches that had not already been
done before. There was no ‘magic ingredient’ as such. All the elements that
went into the T5 approach—the client owning the risk, integrated team
working, the single model environment,
pre-fabrication, and just-in-time delivery—had been carried out elsewhere
previously, most notably in the offshore
oil and gas industry. Similarly many of
the elements in the Olympics approach
can be found in most project management guidelines; the difference was that
in a project that could not afford to fail,
here they were applied rigorously and
consistently.
Conclusions
In this paper we have tried to answer
the question: How can complexity be successfully managed in projects? Having reviewed the literature
on complexity and its management in
projects, we developed a simple framework consisting of two main types of
complexity—structural and dynamic
complexity—and how these might be
managed in practice to analyze two successful megaprojects. The projects were
chosen because they were associated
with a very high degree of complexity
and were successfully delivered on time
and within budget. The two cases studies show how the clients, BAA and the
ODA, adopted structures and processes
to successfully manage the mix of complexity and uncertainty that surrounded
the projects. Despite some differences
in the approaches taken to dealing with
complexity, there are some common
features that might usefully be transferred to improve the performance of
other megaprojects.
Both cases exhibited:
• Strong client leadership and capabilities. As a repeat client, BAA, had built
up a large internal capability and led
the innovative approach and participated in the integrated teams, whereas
the ODA, as a one-off client, appointed
a delivery partner with strong capability
■ Project Management Journal ■ DOI: 10.1002/pmj
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•
•
•
•
•
to manage the complex system integration activities required while focusing
on the management of external stakeholders
Collaborative behaviors. The contracts
deployed in the two projects supported
collaboration, rewarded performance,
and included incentives for exposing
and managing risk; an integrated team
approach including the client, the system integrator, and first tier contractors
was adopted; education and training,
and other support activities were utilized to encourage and support a collaborative culture
The ability to be adaptive and responsive. This was exemplified by the T5
Agreement and the ODA problem-resolution process and the use of flexible
design
Innovative approaches. For example,
the use of modular design, pre-fabrication, off-site testing, project-flow
software in T5, and the ODA review
process
The use of digital technologies. The single model environment and the use of
simulation in T5, the use of simulation,
and the use of common digital tools in
the Olympics
An outcome-driven approach. T5 was
driven by outcomes in the early phases,
and BAA recognized the challenges of
transitioning to the operational phase
but had poor collaboration with their
customer, BA, and provided inadequate training for this phase, whereas
the Olympics learned from this failure
and made sure they allowed adequate
time for testing and modifying things
before the move to operations.
It appears that the Crossrail project
is being managed in much the same
way, and the recent reforms to the public private partnership project process
(HM Treasury, 2012) also include new
approaches to risk and transparency,
along with recognition of the needs for
flexibility and more efficient delivery.
This suggests that there has been some
cumulative learning in the United Kingdom about how to manage complex
36
August/September 2014
projects that should prove useful as they
embark on a new series of high-profile
megaprojects, including Crossrail 2,
High Speed 2, and the proposed nuclear
power station construction.
We aim to contribute to the literature by suggesting that structural and
dynamic complexity concepts are useful
for exploring how to manage projects.
We found that the approaches taken to
manage complexity in these recent successful megaprojects resemble the practices adopted in the Polaris and other
early weapon systems development
projects, in which time was crucial and
levels of uncertainty were high. We also
note similarities to some concepts in
more recent research, such as the use of
‘teaming’ in situations of high complexity and uncertainty (Edmonson, 2012)
and the concept of ‘dynamic management’ in large infrastructure projects,
which requires a balance of control
and interaction and the existence of
some additional x factors (Hertogh &
Westerveld, 2010). Although our case
studies were limited to megaprojects,
we believe that the simple model we
adopted based on the concepts of structural and dynamic capability might be
usefully applied to all projects. A proper
evaluation of the different complexities
in projects throughout the life cycle
might result in delivery teams adopting
structures and approaches to the management of their projects, which more
effectively align with the complexities
and give a better chance of successful
completion.
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Tim Brady is Professor of Innovation in
the Centre for Research in Innovation
Management at Brighton Business
School, University of Brighton and Visiting
Professor in the Department of Industrial
Engineering Management at the University
of Oulu in Finland. His current research
interests include the development of new
business models for infrastructure, the
management of complex projects and
■ Project Management Journal ■ DOI: 10.1002/pmj
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PAPERS
Managing Structural and Dynamic Complexity: A Tale of Two Projects
programs, and learning and capability
development in project-based business.
He was a member of the EPSRC-funded
Rethinking Project Management network, and Deputy Director of the ESRCfunded Complex Product Systems (CoPS)
Innovation Centre. He has published in
management journals, including Sloan
Management Review, Organization
Studies, Industrial and Corporate Change,
Research Policy, R&D Management, and
Industrial Marketing Management and
in project management journals including the International Journal of Project
Management and The International Journal
38
August/September 2014
of Managing Projects in Business. He can
be contacted at [email protected]
Andrew Davies is Professor of the
Management of Projects in the School of
Construction and Project Management,
the Bartlett Faculty of the Built
Environment, University College London.
He is author of “The Business of Projects:
Managing Innovation in Complex Products
and Systems,” Cambridge University
Press (2005), co-authored with Michael
Hobday, and “The Business of Systems
Integration,” Oxford University Press
(2003, 2005), co-edited with Andrea
■ Project Management Journal ■ DOI: 10.1002/pmj
Prencipe and Michael Hobday. Professor
Davies has published in a range of
leading management journals, including California Management Review, MIT
Sloan Management Review, Research
Policy, Organization Studies, Industrial
Marketing Management and Industrial and
Corporate Change. He is on the Editorial
Board of Project Management Journal®
and an Associate Editor of Journal of
Management, Industrial and Corporate
Change, IEEE Transactions of Engineering
Management, and Engineering Project
Organization Journal. He can be contacted
at [email protected]
PAPERS
Ethics, Trust, and Governance
in Temporary Organizations
Ralf Müller, Department of Leadership and Organizational Behaviour, BI Norwegian Business
School, Oslo, Norway
Rodney Turner, Universite Lille Nord de France, LSMRC, Skema Business School, Euralille,
France; Faculty of Design Architecture and Building, University of Technology Sydney, Australia;
Kingston Business School, Kingston University, Kingston-Hill, Kingston-upon-Thames, Surrey,
United Kingdom
Erling S. Andersen, Department of Leadership and Organizational Behaviour, BI Norwegian
Business School, Oslo, Norway
Jingting Shao, Institute of Industrial Economics, Chinese Academy of Social Sciences
Øyvind Kvalnes, Department of Leadership and Organizational Behaviour, BI Norwegian
Business School,Oslo, Norway
ABSTRACT ■
INTRODUCTION ■
We investigate the influence of governance
structures of temporary organizations on
the ethical issues faced by its managers,
how they respond to these issues, and how
that influences trust among stakeholders. A
global, web-based survey confirmed earlier
research that project managers encounter
transparency, optimization, and relationship
issues, and identified four additional ethical
issue types. Managers’ behavior in responding to ethical issues varies by governance
structure, their willingness to resolve ethical
issues themselves, and the trust between
stakeholders. Higher levels of trust are found
in stakeholder-oriented governance, which
can reduce transaction costs. Implications for
practitioners and academics are discussed.
n this paper we investigate the types of ethical issues and trust implications that can be expected within four different approaches to the governance of projects; for this, we categorize the types of ethical issues and
trust implications by governance paradigm. The study takes the work by
Schaubroeck et al. (2012) (which is built on the model by Schein, 1985, 2010)
as its point of departure. Their work shows that ethical leadership by upper
management impacts both directly by influencing the managers at the next
level within the organizational hierarchy, and indirectly, by influencing the
overall organizational culture, which pervades all layers in the hierarchy. This
study extends these findings into the realm of temporary organizations by
assessing the impact of governance structures on the types of ethical issues
managers of temporary organizations face and the behaviors they adopt to
respond to them. Furthermore, we identify those governance structures,
which support the building of trust between these managers, their teams, and
other stakeholders.
This paper reports the results of the second stage of a multi-stage study.
In the first stage (Müller et al., 2013), we conducted a qualitative analysis
based on nine case studies and found that managers of temporary organizations, such as projects, face different types of ethical issues, and showed that
the way they respond to them can be influenced by the governance structure
of the parent organization. Moreover, we proposed that the trust that builds
between the manager and the governance structure can influence the trust
the project team and other stakeholders have in those two actors. In this, the
second stage, we conducted a quantitative analysis of results obtained from
a web-based survey to validate and extend the propositions from the prior
study. We also collected data on ethical issues and the role of trust in different governance structures, so the results reported here are both confirmatory
and exploratory.
Ethics has developed into an important topic for organizations and their
governance. Irrespective of the many influences on ethics in organizations,
such as culture and leadership we focus on its role in the governance of
projects. Within the present study we view ethics in the sense of Buchholz
KEYWORDS: project governance;
governance of projects; trust; ethics; ethical
issues
Project Management Journal, Vol. 45, No. 4, 39–54
© 2014 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21432
I
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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PAPERS
Ethics, Trust, and Governance in Temporary Organizations
and Rosenthal (1996) as a person’s situation-dependent application of moral
standards, which stem from the traditions or beliefs that have grown in
societies concerning right and wrong
conduct.
In the first stage of our first study
(Müller et al., 2013) we identified three
generic types of ethical issues encountered by project management practitioners: transparency issues, relationship
issues, and optimization issues. We do
not claim that this list is exhaustive;
other categories, including politics or
illegal actions, can be posited. In this
stage of the study, we quantitatively
test the conclusions from the qualitative
study and further investigate whether
additional ethical issues faced by project managers can be identified. This
leads to our first research question:
RQ1: What are the ethical issues that
managers of temporary organizations
are experiencing in their work?
Governance is executed through the
governance structure, which includes
the organization’s value system, formal
procedures, processes, policies, roles,
responsibilities, and authorities, which
regulate governance mechanisms such
as trust and control. It is the materialized or “lived” form of governance and
exists at every level of a hierarchy, or
the nodes in a network, by setting the
goals, providing the means to achieving
these goals, and controlling progress
for the next lower level in the hierarchy or an adjacent node in a network
(Müller, 2009; Turner, 2009). Corporate governance encompasses all work
in an organization, including work in
line and temporary organizations, and
interfaces, overlaps with, and sets the
boundaries for lower level governance,
such as projects, programs, and portfolios (Association of Project Management, 2004; Müller, 2009). From the
work of Schaubroeck et al. (2012) it
can be assumed the way projects are
governed by their respective institutions, such as steering committees,
program and portfolio management,
40
project management offices (PMOs)
and so forth impacts ethical decision
making in projects. Decisions on ethical
issues should therefore be understood
within the context of the governance of
projects, and are influenced in turn by
corporate governance (Müller, 2009). So
governance sets the context, and trust is
one mechanism to execute governance
in temporary organizations; within this
context ethical decisions are taken by
project managers.
Thus different governance structures try to control the ways project
managers respond to ethical issues in
different ways, resulting in different
profiles of trust between the project
manager and governance structure. We
wish to further expand on this model
and obtain quantitative support for it,
which leads to our second research
question:
RQ2: In what way do different governance structures influence the
behavior of project managers when
responding to ethical issues?
Schaubroeck et al. (2012) showed
that higher management levels influence the ethical behavior of lower level
managers as well as the overall ethical culture in an organization. Building
on that, we assume the way the project manager and governance structure
behave toward each other will influence
the perception of the project team and
other stakeholders. Thus the influence
the governance structure has on the
behavior of the project manager, and
the trust between those two actors, may
have an impact on the trust that the
project team and other stakeholders
have in the project manager. This leads
to our third research question:
RQ3: To what extent do governance
structures influence the level of
trust within the project team and
between the project team and other
stakeholders?
The unit of analysis for RQ1 and RQ2
are the project manager and for RQ3,
the community of project stakeholders.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
The topic is of interest for several
reasons. First, an understanding of the
nature of the ethical issues faced by
project managers allows them to be
addressed more effectively. Second, an
understanding of the impact of governance on project managers’ ethical
decisions and the trust it engenders,
enables organizations to adjust governance structures to potential ethical
issues and to prepare for possible issues
in given governance structures.
Literature Review
The literature for this study falls naturally into these three categories: ethics, governance, and trust. An in-depth
literature review on these items can be
found in our previous paper (Müller
et al., 2013). Due to space limitations
we provide here only the definitions and
additional literature, which are relevant
for the present study over and above
what was reviewed before.
Ethics in Projects
Our qualitative study on the nature of
ethical issues and the related ethical
dilemmas for project managers revealed
the three categories of transparency,
optimization, and relationship issues,
as presented in the introduction. That
study was based on nine case studies and 28 interviews; thus, the results
are only generalizable to a theory, not
to a population (Yin, 2009). However,
they are supported by research findings in general management. Examples
include transparency as one of the classic and most important ethical issues
in governance (Child, 2002). Transparency is needed to stimulate ethical
awareness through information sharing,
which ultimately ensures accountability
for the performance of individuals and
their organizations (Kim, Halligan, Cho,
Oh, & Eikenberry, 2005). Optimization
issues are at the core of Kohlberg’s
popular six-stage model of increasingly
higher levels of moral sophistication
(Kohlberg, 1969), where self-interest
(as ethical optimization) constitutes
the lowest level and justice, rights, and
social responsibility the highest level.
Relationship issues arising from the
dilemma of either sacrificing personal
relationships for the sake of the organization or vice versa are yet another classic theme in business ethics, as shown
by Barnett and Karson (1989).
In the present study we wish to
expand on our findings in two ways.
First, we aim to confirm them quantitatively and so make them generalizable
to the project manager population. We
therefore propose:
P1: The three categories of ethical
issues (transparency, optimization,
and relationship issues) are experienced by the wider population of project managers.
Second, we are aware of the limitations of our qualitative study and expect
other ethical issues to be found, such as
some of those identified in general management research (such as in Cooper
et al., 2000), or some of those that are
conceptualized as particular for project settings, as indicated by Helgadóttir
(2008) or Godbold (2007). However, we
do not expect that all types of ethical
issues identified in general management and conceptualized for project
management to be empirically found in
the management of projects.
P2: Project managers experience additional ethical issues.
These two propositions address
research question RQ1.
Project Governance
The term governance is applied in many
different areas, including politics, sociology, medicine, philosophy, information technology, management, and
project management. Although there
are differences between these perspectives, there are also commonalities,
which include Stoker’s (1998, p. 155)
finding that “governance is ultimately
concerned with creating the conditions
for ordered rule and collective action,”
which is accomplished through a
“framework for ethical decision making
and managerial actions based on transparency, accountability, and defined
roles.” The way this is accomplished differs widely among organizations.
Following Morris (1997), we differentiate between the governance of
projects and project governance. Project governance is the governance of an
individual project and applies from the
issue of the charter to project close-out,
whereas the governance of projects is
the governance of a portfolio of projects—whether in a program, portfolio,
project-oriented organization, or a
network of projects—and applies from
initial concept to early operation of
the project’s deliverable (Morris, 1997;
Turner, 2009; Turner, Huemann, Anbari,
& Bredillet, 2010; Gareis, Huemann, &
Martinuzzi, 2013). The Association for
Project Management (2004) uses the
term “governance of project management” to refer specifically to the interest
the board of directors takes in projects, programs, and portfolios within
the project-oriented organization. We
use Pinto’s (2013) definition of project
governance:
The use of systems, structures of
authority and processes to allocate
resources and coordinate or control
activity in a project.
The governance of projects is the
application of that to the portfolio of
projects and the wider area of responsibility, from concept to early operation,
rather than from charter to close-out.
In this paper we address the governance of projects and use Müller’s
(2009) model to categorize governance
structures. This is based on the governance theories of Clarke (2004), who
suggests firms can adopt a stakeholder
or shareholder orientation, and the theory of control in organizations developed by Brown and Eisenhardt (1997)
and Ouchi (1980), who suggest organizations can control their employees
through their behavior (process compliance) or outputs (goal achievement).
This leads to four governance paradigms:
1. The Conformist emphasizes compliance with existing procedures to keep
costs low.
2. The Agile Pragmatist maximizes technical usability, often through a timephased approach to release functionality of a product over a period of
time.
3. The Flexible Economist controls project outcomes and requires economic
delivery.
4. The Versatile Artist maximizes benefits by balancing a diverse set of
requirements arising from different
stakeholders and their diverging needs.
The governance of projects comprises a procedural and human dimension (Clegg Pitsis, Rura-Polley, &
Marosszeky, 2002; Clegg, 1994). The
procedural dimension allows for stability through structured planning and
control using governance frameworks,
enabled through clearly defined processes, roles, and responsibilities. This
is supported at the organizational level
through flat organization structures and
standardized reporting, which allow
for short communication links among
actors. The human dimension includes
people’s willingness to accept responsibility and collaborate for the good of the
organization or the society as a whole;
thus, this dimension allows for flexible
responses to changing circumstances
(Müller, Pemsel, & Shao, 2014).
The existence of the human dimension does not allow governance to
become a law-like straightjacket, which
can prescribe every reaction to every
ethical issue in projects; otherwise collaboration and flexible responses would
be impossible. Therefore governance
provides a contextual framework, which
shapes, but does not necessarily determine the actions of project managers
(Clegg et al., 2002; Clegg, 1994). We
propose:
P3: The behaviors adopted by project
managers to respond to ethical issues
differ by the type of governance structure, such as the governance paradigm.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Ethics, Trust, and Governance in Temporary Organizations
This proposition addresses research
question RQ2.
ture differs by the type of governance
structure, such as the governance
paradigm.
Trust in Projects
Trust, like ethics and governance, is conceptually approached from many different
directions. For example, the economical perspective aims for identification of
situations under which it is rational to
trust (Banerjee, Bowie, & Pavone, 2006);
in comparison, a sociological perspective of trust “argues that trust arises
from sociologically embedded norms
that govern the relationship” (Banerjee
et al., 2006). Within the present study
we adapt the conceptualization of trust
by Mayer, Davis, and Schoorman (1995),
who see trust as a function of trustworthiness, whose dimensions are ability (the
skills, competencies, and characteristics
that allow a person to influence within
a specific area), benevolence (the extent
to which the person being trusted wants
to do good to the person who trusts him
or her), and integrity (the trustee’s [person being trusted]) adherence to a set
of principles as judged by the trustor
(person trusting). To that end, we adopt
a cognitive-based view of trust, which
focuses on reliability and dependence on
other actors (McAllister, 1995).
Research on trust building through
governance in projects has been scarce.
Most of the studies identify the roles of
different types of trust in projects (Hartman, 2000) or roles of trust in organizational relationships (Pinto, Slevin, &
English, 2009). Clases, Bachmann, and
Wehner (2003) showed that too much
control leads to erosion of trust, which
was explained by Kadefors (2004), who
found that it signals to employees that
they are not trusted and that opportunistic behavior is expected. We build on
these findings and propose that:
P4: The level of trust between the project manager and governance structure influences the behaviors adopted
by project managers to respond to
ethical issues.
P5: The level of trust between the project manager and governance struc-
42
P6: The level of trust in projects (especially between project manager, project team, and external stakeholders) is
influenced by the level of systems trust
between the project manager and
governance structure and so differs by
the type of governance structure, such
as the governance paradigm.
These propositions address research
question RQ3.
Methodology
We build on our qualitative study
(Müller et al., 2013) by validating their
results and exploring the understanding
of ethics and trust in different paradigms
of the governance of projects. We follow
Morgan (2007) in designing a study that
uses an abductive approach by going
back and forth between induction and
deduction in converting observations
to theories, and then testing them. That
implies intersubjectivity in the relationship between researcher and research
process by alternating between objectivity and subjectivity (neither exists in
a pure form) to overcome incommensurability of inductive and deductive
approaches. Finally it implies transferability of the research results, which
are neither generally applicable, nor
particular for one case, but assume
that parts of the research results can
be transferred to other circumstances
(Morgan, 2007).
A worldwide, web-based questionnaire was used to collect data.
Respondents were asked to answer
the questions in relation to their last
project. The questionnaire consisted of
four parts, one for questions on each
research question and one for demographic data.
• Questions on RQ1 included the types of
ethical issues and their severity, questions on the authority of the project
manager to decide on and implement
actions in response to ethical issues,
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
the help sought by others, and the
measures taken by organizations to
prepare project managers for dealing
with ethical issues.
• Questions on RQ2 included a tenquestion construct to assess the governance of projects paradigm. This
was operationalized through a modification of the construct developed by
Miles, Covin, and Heely (2000), based
on the work of Khandwalla (1977),
and was used successfully in previous studies in project management
(Müller & Lecoeuvre, 2014). Items
were assessed using five-point semantic differential Likert scales. The construct consisted of two dimensions,
corporate governance orientation and
organizational approaches to control.
With the study’s aim of creating a categorization system, the intent is to
identify the overall direction of the
organization governing the project,
accepting that there might be different
approaches in other parts of the organization. The dominance of a shareholder orientation is indicative of an
underlying value of maximizing shareholder wealth relative to the requirements of other stakeholders; whereas
the dominance of stakeholder orientation indicates a wider spectrum of
stakeholders to serve, of which shareholders is one (Clarke, 2004; Davis,
Schoorman, & Donaldson, 1997). In
line with Miles et al. (2000), we measured the dominance of shareholder
or stakeholder orientation along the
dimensions of: decision making being
in the best interest of shareholders
or stakeholders; remuneration as
being based on shareholder return
on investment or community incentives; legitimacy of actions being based
on profitability of the results or by
achievement of wider social interests;
financial objectives being prioritized
over or under stakeholder satisfaction; and the organization’s long-term
objective being to maximize value for
the owners of the organization or for
society. The dimension for organizational control was used to identify
merely a behavior or outcome orientation in the control structure of the
organization. Similarly, the aim was
to identify the overall trend, to categorize into a behavior controlled
(process compliance) or outcome controlled (meeting expected results) governance approach. Following Miles
et al. (2000), the following items were
addressed: rule-orientation, being the
organization’s priority for following the
rules or creating expected outcomes,
level of control being the preference
for more formal and tight or more
informal and loose control, adherence
to job descriptions, being the need for
individuals to comply with their job
description or decide on their own
appropriate on-job behavior, the role
of support institutions (such as PMOs)
being process or results oriented, and
compliance expectations by the organization, such as prioritizing methodology compliance over an individual’s
own experience.
• Questions on RQ3 included those
on the most important stakeholders
in the project, and those on project
managers’ trust in their team and
teams’ trust in their project managers, as well as the perceived trust
of the project managers by stakeholders, and perceived trust of the
project teams by stakeholders. The
question items from Chen, Chen, and
Xin (2004) were used, applying fivepoint Likert scales (1 = low, 5 = high
trust). For each of the three groups
(project manager, project team, and
stakeholders), the following items
were assessed: trust in the project,
confidence in integrity, confidence in
right decision making, consistency of
actions with words, and guidance by
correct principles.
• Demographic data included the role of
the respondent, the project type, project size, and country of execution.
Data Gathering
The questionnaire was piloted in
March 2012, and a few minor changes
were made. The answers of the pilot
respondents were not included in the
final sample.
Snowball sampling was used by
sending an invitation and weblink to
presidents of professional organizations
for project management and their
special interest groups (SIGs), including the Project Management Institute
(PMI), International Project Management Association (IPMA), Association
for Project Management (APM), and
others. Furthermore, we contacted our
own network of project management
practitioners. Data collection was done
for a period of five weeks in April and
May 2012.
The number of responses totaled
337, six of which were not answered
at all, leading to 331 usable responses.
Snowball sampling does not allow calculating a traditional response rate;
however, the number of responses
approached the minimum sample size
for generalization for infinite population sizes (384 responses at a confidence level of 95% at margin of error
±5%) (Polaris, 2010).
Data Analysis
Analysis was done by using:
1. Unrotated Factor Analysis to test for the
internal consistency of measurement
constructs, such as those for project
governance paradigms and trust
2. Descriptive analyses were used to
extract patterns, preferences, and
average behaviors from the data
3. Chi-square tests were used to identify
significant differences between the
patterns found in the four project
governance paradigms, and
4. Correlation analyses were done to
identify the relationships between governance and trust.
Validity was ensured through the
use of tested measurement constructs
where possible, like those used for the
governance paradigms and the measure of trust, where item-to-item and
item-to-total correlations were used
(and respective thresholds of 0.3 and 0.5
being met) as quantitative validity tests,
in addition to the more qualitative test
for face validity during piloting. Other
questionnaire items were assessed for
their construct validity through assessments of fellow researchers (professors
in project management from other universities). Piloting was done through
members of the sponsoring organization (Norwegian Centre for Project
Management). Reliability was tested
using Cronbach Alpha with a threshold value of 0.7 (Hair, Black, Babin, &
Tatham, 2006).
The majority of respondents (70%)
were in a project management role. We
used ANOVA to test for differences in
answers by role, but found no significant differences; therefore we kept the
sample in its entirety for the further
analysis. We collectively refer to the
sample as “project managers” in this
paper. (See Table 1)
Analysis
The data satisfied the underlying
assumptions of the analysis techniques, such as those for normality with
skewness and kurtosis being within the
range of ±2.
Governance Paradigm
Unrotated factor analysis was done to
test the validity of the measurement
construct for the four governance paradigms. This tested for:
• Convergent validity within each of the
measurement dimensions (shareholderstakeholder orientation and behavioroutcome control). This most popular
method for internal consistency analysis
(Clark & Watson, 1995) tests that the
major portion of variance in the data
collected for a measurement dimension
“should be reflected as a general factor, a factor on which most of the items
positively load” (Snyder & Gangestad,
1986, p. 127). All items of each of the
two dimensions loaded clearly on their
respective dimension with loadings
higher than 0.40 (Table 2), thus they are
“good indicators of the construct” (Clark
& Watson, 1995, p. 317).
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Ethics, Trust, and Governance in Temporary Organizations
Respondents Roles
Valid
Frequency
Percent
Geographical Distribution
Project manager
231
69.8
Project team member
40
12.1
Europe w/o Scandinavia
52
15.7
Consultant
9
2.7
Scandinavia
47
14.2
Line manager
9
2.7
Middle and South America
25
7.6
PMO member
8
2.4
Middle East
20
6
Program manager
8
2.4
Asia
19
5.7
Valid
North America
57
17.2
5
1.5
Africa
9
2.7
Portfolio manager
4
1.2
Australia
8
2.4
Steering group member
4
1.2
Total
237
71.6
Trainer
3
0.9
Missing
Other
1
0.3
Total
Total
322
97.3
System
9
Total
331
System
Project Type
94
28.4
331
100
2.7
100
Project Size
Frequency
Percent
<€1 million
79
23.9
19
Valid
Missing
Percent
Manager of project managers
Missing
Valid
Frequency
Frequency
Percent
€1 – 4.9 million
63
IT & Telecommunication
103
31.1
€5 – 9.9 million
26
7.9
Orgl. Change & Business
75
22.7
€10 – 50 million
35
10.6
Engineering & Construction
54
16.3
>€50 million
32
Total
232
70.1
Total
235
71
System
99
29.9
System
96
29
331
100
Total
331
Missing
100
Total
9.7
Table 1: Sample demographics.
• Discriminant validity across the two
construct-dimensions to test their
orthogonal relationship showed a significant two-factor model (p = 0.000,
KMO.783, Eigenvalue = 1). The factor on Orientation explains 30.0% of
the variance at a reliability measure
(Cronbach Alpha) of 0.82, and the factor on Control explains a 26.0% variance at a Cronbach Alpha of 0.77, thus
in total 56% of the variance, at acceptable reliability levels (Hair et al., 2006).
• Haman’s unrotated factor analysis was
done to test for common methods bias.
As shown in Table 2, the clear loading
of each measurement dimension on
its respective factor did not indicate an
issue of that kind (Podsakoff & Organ,
1986).
This confirmed the eligibility of the
measurement construct for the governance paradigms.
44
Each dimension was measured on
a five-point scale. Orientation scores
below 3 were classified as shareholder
oriented and those at and above 3 as
stakeholder oriented. Similarly, scores
below 3 on the control dimension were
scored as behavior control and those at
or above 3 as outcome control.
Component
Measurement Dimensions
1
Orientation: long-term objectives
0.778
Orientation: shareholder versus stakeholder
0.755
Orientation: profit versus social interest
0.754
Orientation: remuneration
0.715
Orientation: financial objectives versus stakeholder satisfaction
0.653
2
Control: procedures
0.826
Control: control
0.789
Control: job conformance
0.726
Control: method compliance
0.595
Control: tactical PMO
0.450
Note. Extraction Method: Principal Component Analysis.
Table 2: Unrotated factor analysis of the governance paradigm construct.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
Research Question 1: Types of Ethical
Issues
Categories and Frequencies of Ethical
Issues
We asked the respondents to what extent
they identified the three ethical issues
identified in the qualitative study, by
asking them to rank them on a 5-point
Likert scale (ranging from 1 = never to 5
= always); 97% of the respondents (321)
replied to this question that they had
these issues in their last project. From a
frequency perspective this is significant.
It supports proposition P1. Transparency issues, with a mean of 2.75, were
the most highly recognized, with optimization issues a close second, with a
mean of 2.69. Relationship issues were
the lowest recognized, with a mean of
2.31. The differences were not significant (at 0.05).
We also asked the respondents to
identify other possible issues. Only 5%
of the respondents (16) replied to this,
but we were able to identify four more
ethical issues encountered by project
managers:
4. Power and politics issues: these emerge
from the use of power or politics in
order to enforce decisions or changes
in projects.
5. Illegal actions: these include fraud,
corruption, blackmailing, and bribery.
6. Role conflicts: these arise from differences in cultural, religious, legal, or
career values.
7. Underperforming governance structure: these issues arise from low or
non-involvement of governance institutions, when their role is crucial for
project progress.
Of these, power and politics issues
were encountered most frequently
(mean = 3.0), but were only mentioned
by 8 respondents (2.4%), which supports
proposition P2, but only marginally.
The seven categories derived from
the earlier and present study are inductively derived and they should not be
understood as being mutually exclusive, or strictly different. Just as in other
categorization systems (as opposed to
classification systems) it is possible that
perceptions of categories differ by perspectives or situations of individuals.
The appropriateness of the three
generic types of issues (transparency,
optimization, and relationship) as a
measurement construct to test for frequency of ethical issues in general was
tested through unrotated factor analysis. The three issue types loaded on one
unrotated factor (all loadings > 0.68),
which explained 59.3% of the variance
(p = 0.000, KMO = 0.622). Cronbach
Alpha of 0.86 showed reliability. This
confirms the eligibility of the three categories as a measure for the general frequency of generic ethical issues, further
confirming Proposition P1.
An important finding was that companies providing training in ethics have
a significantly lower frequency in the
occurrence of optimization issues than
other companies (ANOVA, p = 0.021;
Scheffe, p = 0.037). No significant differences in frequencies were found by
country, project type, project size, or the
use of codes of ethics by organizations.
Severity of Ethical Issues
Respondents were asked for their
most severe ethical issue. Across all
responses, transparency issues were
mentioned most often (20.6%), followed by optimization issues (18.4%).
The most often reported ethical issue
(mode) differs by governance paradigm. Behavior-controlled paradigms
(Conformist and Agile Pragmatist)
report transparency issues most often,
whereas outcome-controlled paradigms
(Flexible Economist and Versatile Artist) report optimization issues. ANOVA
analysis with post-hoc Scheffe test was
done to detect differences in the frequency of ethical issues by paradigm.
Results showed that the Versatile Artist paradigm has a significantly higher
frequency of issues than the Conformist
paradigm (ANOVA p = 0.008, Scheffe
p = 0.013).
Analysis per category of most
severe ethical issues showed that the
distribution differs across paradigms.
Transparency issues occur most often
under the Conformist paradigm (40%),
whereas 50% of all relationship issues
are reported within projects governed
by the Flexible Economist paradigm.
Optimization issues occur roughly to
a third in both the Flexible Economist
and Versatile Artist paradigms, whereas
power and politics issues occur most
often in the Flexible Economist paradigm (42.1%), and illegal actions and
role conflicts occur most often in the
Versatile Artist paradigm. Underperforming governance structures occur
most often (44.4%) in the Flexible Economist paradigm as the most severe ethical issue.
The distribution of most severe
ethical issues within each paradigm is
shown in Table 3. Half of all issues
(50%) within the Conformist paradigm
and slightly less (42.4%) in the Agile
Pragmatist paradigm are transparency
related, thus are in behavior-controlled
environments. The Flexible Economist
paradigm is dominated by a mix of
transparency and optimization issues,
and the Versatile Artist suffers mainly
from optimization issues.
Table 3 shows that behavior control
based paradigms are prone to transparency issues, whereas outcome control
based paradigms face more optimization issues. This is also reflected in the
correlations. The project governance
control dimension is positively and
significantly correlated with transparency issues (p = 0.016, r = 0.156). The
higher the behavior control, the more
transparency issues. Similarly is the
shareholder–stakeholder orientation
negatively correlated with relationship
issues (p = 0.035, r =—0.133). Thus, the
more shareholder oriented the governance structure is, the more relationship issues will appear.
Trust (as the degree to which the
governance system trusts the project
managers) was tested by asking project managers’ about their authority
to decide on ethical issues and implement their decision themselves. We
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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PAPERS
Ethics, Trust, and Governance in Temporary Organizations
Project Governance Paradigm
Most Severe Issue (type)
Conformist
Economist
Artist
Pragmatist
Transparency
% within Project Governance paradigm
50.0%
24.6%
11.4%
42.4%
Relationship
% within Project Governance paradigm
6.8%
12.3%
4.5%
6.1%
Optimization
% within Project Governance paradigm
18.2%
28.1%
38.6%
24.2%
Power and politics
% within Project Governance paradigm
6.8%
14.0%
11.4%
9.1%
Illegal action
% within Project Governance paradigm
11.4%
8.8%
20.5%
6.1%
Role conflict
% within Project Governance paradigm
4.5%
5.3%
9.1%
6.1%
Governance structure
% within Project Governance paradigm
2.3%
7.0%
4.5%
6.1%
% within Project Governance paradigm
100.0%
100.0%
100.0%
100.0%
Table 3: Distribution of most severe issues within each governance paradigm.
Governance Paradigm
Conformist
(shareholder orientation/behavior control)
Flexible Economist
(shareholder orientation/outcome control)
Versatile Artist
(stakeholder orientation/outcome control)
Agile Pragmatist
(stakeholder orientation/behavior control)
60%
50%
69%
86%
Supervisor (51%)
Steering Committee (33%)
Colleagues (31%)
Supervisor (49%)
Colleagues (41%)
Steering Committee (31%)
Steering Committee (38%)
Supervisor (35%)
Colleagues (24%)
Supervisor (41%)
Steering Committee (39%)
Colleagues (36%)
Frequency of those not
seeking help
Top three sources turned to
for help* (% mentioning**)
* = difference in patterns between Flexible Economist and other paradigms is significant at 0.05.
** = multiple mentioning possible.
Table 4: Seeking help with ethical issues.
found no correlation with the governance paradigm dimensions; so these
authorities are granted independent
of the governance paradigm. However,
we found that 70% of the governance
structures allow project managers to
decide and act on ethical issues themselves, and 80% of the project managers trust their governance structures
to be supportive in addressing ethical
issues. This indicates a mutual reinforcement of system trust and personal
trust.
Research Question 2: Behavioral
Implications of Different Governance
Structures
We asked respondents to indicate
whether they would seek help if they
could not address an ethical issue on
their own, and if so from whom: 69.8%
(231) indicated they would ask for help;
15.4% (51) said they would not; and
46
14.8% (49) did not answer the question.
The main reason given for not seeking
help was they did not want to make it
an issue, and 65.5% (269) said they often
solved the issue themselves. A small
number, 5.4% (18), said they could not
raise the issue because it was illegal.
Others delegated or escalated the issue,
3.4% (11). Table 4 shows the frequencies by governance paradigm, and the
actors from whom help is sought. The
frequency of seeking help differs by
governance paradigm. People on projects governed by a Versatile Artist paradigm seek help least often (66.7%) and
have the lowest number of people they
contact when they do (mean = 1.67).
Contrarily, 77.2% of respondents in a
Conformist paradigm ask for help and
contact an average 2.18 people; thus,
people in organizations with the most
control seek help most often from the
most people, and those in the firms with
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
the least control, seek help least often
from the fewest people.
Those who sought help were asked
to indicate from whom. Answers differed by governance paradigm, level of
authority, type of ethical issue, project
type, size of project, and geography.
This supports proposition P3.
Governance paradigms: Supervisors
are the preferred source for help in the
Conformist, Flexible Economist, and
Agile Pragmatist paradigms, and Steering Groups in the Versatile Artist paradigm. Chi-square tests showed that the
search pattern of the Flexible Economist
paradigm differs significantly (at p =
0.05) from the patterns in other paradigms.
Level of authority: We also looked for
difference by level of authority. Respondents who do not seek help have a significantly higher authority to decide on
their own on ethical issues (p < 0.05).
Governance Paradigm
Shareholder Orientation
All
Number
Conformist
Stakeholder Orientation
Flexible Economist
Versatile Artist
%
Number
%
Number
%
%
Number
%
Sponsor
145
60.7
36
64.3
53
68.6
33
52.4
22
56.4
End user
71
29.7
14
25.0
18
23.4
23
36.5
13
33.3
Suppler
Number
Agile Pragmatist
2
0.8
1
1.8
0
0.0
1
1.6
0
0.0
Other
21
8.8
5
8.9
6
7.8
6
9.5
4
10.3
Total
239
100.0
36
100.0
77
100.0
63
100.0
39
100.0
Table 5: Importance attached by project managers to different stakeholders.
Seeking help seems to compensate for
lack of authority. This explains the relative popularity of supervisors and steering committees for these questions.
Types of ethical issues: The source
of help sought differs slightly by type of
ethical issue. Supervisors are most often
referred to, except for power and politics and underperforming governance
structures, where the steering committee is most popular. In cases of illegal
actions, both the supervisor and rules
and regulations are equally popular. In
the case of role conflicts, supervisors
and colleagues are most often referred
to. Help is sought most often and from
the most people, for power and political
issues (91.3%) and least often for illegal
actions.
Project type: The source sought for
help differs also by project type. Supervisors are the main source of help in
all project types. Help is sought most
often in ITT projects and least often in
engineering and construction projects.
The most severe issues are transparency issues in ITT and organizational
change and business projects. Optimization issues are most often reported in
engineering and construction projects.
Size of projects: The source sought
for help differs also by size of project.
Supervisors are most popular for that.
In terms of project size, help is most
often sought for in the projects above
€50 million and least often in projects
between €10 and 50 million. Most contacts for help are sought in the largest projects and the least in projects
between €5 and 9 million. Optimization issues dominate the smallest (<€1
million) and the largest projects (>€50
million), whereas transparency issues
dominate the projects in between.
Geography: The source also differs
by region/continents. Supervisors are
preferred in almost all regions, except
Scandinavia and the Middle East,
where the Steering Committee is more
popular. Help is most often sought by
respondents in the Middle East and in
Middle and South America, and least
often in Australia. Transparency issues
dominate in Europe, North America
and Asia, and optimization issues in
the Middle East and Middle and South
America.
We explored the level of trust between
different actors on the project and
looked at how to build trust through the
governance structure. But first we asked
project managers who were the most
important stakeholders in their projects.
holders under different governance
paradigms. Under all four paradigms,
sponsors are ranked the highest and
end users the next highest. However, the
paradigms with a shareholder orientation rank sponsors more highly than
those with a stakeholder orientation,
and those with a stakeholder orientation rank end users more highly than
those with a shareholder orientation.
Significant differences were found using
the Chi-square test. Results show that
the pattern in importance ranking differ
significantly between the Conformist
and Agile Pragmatist paradigms (p =
0.026), Flexible Economist and Versatile
Artist paradigms (p = 0.004), Flexible
Economist and Agile Pragmatist paradigms (p = 0.000), and Versatile Artist
and Agile Pragmatist paradigm (p =
0.03). This is to be expected. The sponsor represents the shareholders and so
will have higher importance attached to
governance paradigms with shareholder
orientation, but end users will receive
greater significance in those paradigms
with a stakeholder orientation.
Importance of Stakeholders
Trust Between Different Actors on Projects
Table 5 shows the importance project
managers attach to different stake-
We asked different project actors, the
trustors, a series of questions to gauge
Research Question 3: Trust Between
Different Actors
Trustor
Trustee
Project manager
Project team
Project Manager
Project Team
Other Stakeholders
*
3.27 (0.901)
3.97 (0.552)
3.85 (0.680)
*
3.50 (0.569)
Table 6: Level of trust between different project actors, mean (standard deviation).
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
47
PAPERS
Ethics, Trust, and Governance in Temporary Organizations
Corporate Governance
Project
Project Managers Project Managers
Orientation
Governance
Authorized to
Authorized to
(shareholderControl Orientation Implement Measures Decide on Ethical
stakeholder)
(behavior-outcome)
on Ethical Issues
Issues
T1: Project managers
trust in project team
Pearson
Correlation
Sig. (2-tailed)
N
T2: Project managers
perceived trust by
project stakeholders
0.051
156
0.137
0.087
158
0.053
0.083
0.119
Sig. (2-tailed)
0.062
0.500
0.306
0.138
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
Pearson
Correlation
Sig. (2-tailed)
N
Project governance
control orientation
(behavioroutcome)
0.160
165
0.156
0.146
T3: Project teams trust Pearson
in project managers
Correlation
Corporate governance
orientation (shareholder-stakeholder)
0.011
165
–0.110
Pearson
Correlation
N
T4: Project teams perceived trust by project
stakeholders
0.197*
Pearson
Correlation
Sig. (2-tailed)
N
164
164
155
157
0.430*
0.332
0.286
0.368
0.022
0.091
0.148
0.054
28
27
0.203
0.301
28
27
0.008
0.969
27
1
254
0.023
0.313
27
28
0.148
0.453
28
0.023
0.110
0.057
0.728
0.090
0.379
240
241
1
0.728
240
0.202
0.019
240
0.770
227
244
0.016
0.810
230
* = significant at p < .05.
Table 7: Correlations of governance paradigms, trust, and authority.
the extent to which they trusted other
actors on the project, the trustees. First,
we gauged the level of trust between the
project manager and project team. We
asked each as a trustor to rate the other
as trustee (for details, see the methodology section).
Table 6 shows the mean scores
across the six questions. We then asked
each to say to what extent they perceived that they are trusted by other
stakeholders. Against a similar set of six
questions, we asked them to say to what
extent they thought other stakeholders
as trustors trusted them as trustees. The
results are shown in the last column
of Table 6. Project managers perceive
48
the trust of other stakeholders in the
project managers significantly higher
(at p = 0.05) than the trust these project
managers have in their teams. The trust
of the project team in the project manager is nominally lowest, but not significantly different from the perceived level
of trust that stakeholders have in the
project team.
Correlations Between the Governance
Paradigm, Trust, and Authority
We used Pearson correlations to assess
the trust between the parties against
the project governance paradigm
dimensions and the project managers’
authorities to decide on and implement
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
measures in response to ethical issues.
Table 7 shows the results.
Results show that:
1. The governance orientation, (shareholder to stakeholder), is positively
correlated (p = 0.011, r = 0.197) with
project managers trust in the project
team (T1). The higher the stakeholder
orientation, the higher the project
managers trust in the project team.
This explains (in R2) about 4% of the
project manager’s trust in his or her
team (T1).
2. Project managers’ authority to implement their own decisions on ethical
issues is positively correlated with
project managers’ trust in the project team. However, this result is at
the borderline of insignificance (p =
0.051) at a 5% threshold, but would
be acceptable at 10% threshold. The
correlation explains about 2.5% of the
project manager’s trust in his or her
team (T1).
3. The governance orientation (shareholder to stakeholder) is positively
correlated (p = 0.022, r = 0.430) with
project team’s trust in the project
manager (T3). The higher the stakeholder orientation, the higher the
teams trust in the project manager.
This explains about 19% of the trust
of team’s in their managers (T3).
4. Authority to decide on ethical issues is
positively correlated with team members’ trust in the project manager. Similar to the results on the authority to
implement, this result is at the borderline of insignificance (p = 0.054) at a 5%
threshold, but would be acceptable at a
10% threshold. It explains about 14% of
the trust of teams in their managers (T3).
Practical significance of these results
can be interpreted using Cohen’s (1988,
p. 413) classification of effect sizes in
the behavioral sciences. He classified
R2 measures above 0.02 as small, above
0.13 as medium, and above 0.26 as large.
Small effect sizes are of a magnitude
often found in relationships pursued
in the ‘soft’ behavioral science (Cohen,
1988, p. 79). Medium effect sizes are of a
magnitude that ‘would be perceptible to
the naked eye of a reasonably sensitive
observer’ (Cohen, 1988, p. 80), and large
effect sizes mark the ‘practical upper
limit of predictive effectiveness’ in the
behavioral science (Cohen, 1988, p. 81,
citing Ghiselli, 1964, p. 61).
Notwithstanding the borderline of
significance of two of the correlations,
we see small effect sizes in result (1)
and (2) above and medium effect sizes
in (3) and (4).
Conclusion
The aim of this study was to obtain quantitative verification for the qualitative
results obtained in the first stage of the
study (Müller et al., 2013) and to further
extend the propositions of that study.
The study addressed three research
questions and the results were as follows:
Research Question 1: Types of Ethical
Issues
system in the project manager and
found it was not dependent on the governance paradigm, and so that did not
support part of Proposition P5.
Research Question 2: Behavioral
Implications of Different Governance
Structures
Research Question 2 is:
Research Question 1 is:
RQ1: What are the ethical issues that
managers of temporary organizations
are experiencing in their work?
RQ2: In what way do different governance structures influence the
behavior of project managers when
responding to ethical issues?
with the following propositions:
with the following proposition:
P1: The three categories of ethical
issues (transparency, optimization,
and relationship issues) are experienced by the wider population of project managers.
P3: The behaviors adopted by project
managers to respond to ethical issues
differ by the type of governance structure, such as the governance paradigm.
P2: Project managers experience
additional ethical issues.
Proposition P1 was strongly supported, and Proposition P2 was weakly
supported. Project managers experience
the three ethical issues identified in the
previous study: transparency, optimization, and relationship issues, and in addition we identified four additional issues:
power and political issues, illegal actions,
role conflicts, and underperforming governance structure. The four additional
issues were not identified by many people, but they may change if they were
offered them as options. The most frequently encountered issues were transparency issues followed by optimization
issues. The frequency of issues differed
by governance paradigm. Organizations
using behavior control are more likely
to encounter transparency issues. When
people’s work is more tightly controlled,
they are more likely to compromise
reporting about their progress. Firms
with a shareholder orientation are more
likely to encounter relationship issues.
Where relationships within the organization are important, they can be more
frequently compromised.
We were also able to investigate
the amount of trust of the governance
Proposition P3 was supported. People from the Versatile Artist paradigm
sought help the least often and from
the fewest people, whereas people from
the Conformist paradigm sought help
the most often from the most people.
The paradigm with the highest level
of control has the people least willing
to address issues themselves and the
people with the weakest control are
the most willing to address issues by
themselves. This confirms the findings
of Schaubroeck et al. (2012) that the culture that senior managers engender in
an organization influences the behavior
of managers at all levels. Supervisors
were the preferred source of help in all
paradigms except the Versatile Artist,
where the Steering Committee was the
preferred source. Behaviors also differed by level of authority, type of ethical issue, project type, size of project,
and geography.
Research Question 3: Trust Between
Different Actors
Research Question 3 is:
RQ3: To what extent do governance
structures influence the level of trust
within the project team and between
the project team and other stakeholders?
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Ethics, Trust, and Governance in Temporary Organizations
with the following propositions:
P4: The level of trust between the project manager and governance structure influences the behaviors adopted
by project managers to respond to
ethical issues.
P5: The level of trust between the project manager and governance structure differs by the type of governance
structure, such as the governance
paradigm.
P6: The level of people trust in projects
(especially between project manager,
project team, and external stakeholders) is influenced by the level
of systems trust between the project
manager and governance structure
and so differs by the type of governance structure, such as the governance paradigm.
Data analyzed for Research Question 2 show that project managers’
behavior differs by the level of trust
granted by the governance structure.
Project managers with higher levels of
trust to decide on ethical issues and
implement their decisions asked significantly less people for help than their
less trusted colleagues. This supports
Proposition P4. Research Question 2
suggests the behaviors adopted by project managers differ by governance paradigm, but data gathered under Research
Question 1 suggested that there was
no difference in the level of systems
trusts between the governance structure
and project manager by governance
paradigm. Thus, Proposition P5 was
not supported by this. Proposition P6
was partially supported. The answer to
Research Question 3 is: In governance
paradigms with a shareholder orientation, project managers trust end users
more. End users provide the returns
for shareholders. In governance paradigms with a stakeholder orientation
project managers trust sponsors more.
Sponsors are the contact with other
stakeholders. The levels of trust vary by
governance paradigm. Project managers
have greater trust in the project team,
and the team in the project manager,
50
under paradigms with a stakeholder
orientation. Higher levels of stakeholder
orientation in the governance structure
are associated with higher levels of trust
between project managers and teams.
We also found that trust between the
project manager and project team is
correlated with the amount of authority granted to the project manager to
take decisions. This indicates that trust
is reflective, and that trust granted
by the system is reflected in the trust
between the actors, partially supporting
Proposition P4. To increase trust, the
governance structure should emphasize a stakeholder orientation and trust
the project manager to address ethical
issues appropriately.
Practical Implications
This research can help organizations to
understand the different types of ethical issues that project managers face
and design the governance structure
to help project managers dealing with
these issues. For example, by adjusting their governance paradigm toward
more stakeholder orientation, organizations are able to increase the level of
trust between project managers and the
governance structure. How this can be
done is described by Hernandez (2012).
Doing this may also enhance trust
between other project actors. A further
practical implication is the role of training in ethical issues, which significantly
reduces the amount of optimization
issues in projects, which is in line with
Trevino’s (1986) proposition that training in ethics increases moral judgment.
Knowing the types of issues to expect
in a governance paradigm (as outlined
above) points organizations toward
measures needed to prepare for or prevent these issues. A portfolio of possible measures is outlined in our earlier
paper (Müller et al., 2013).
Academic Implications
The findings on ethics support the work
of Schaubroeck et al. (2012) and take it
into the realm of project management
by showing the impact of (higher level)
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
governance structures on (lower level)
temporary organizations and their
types and measures for handling ethical
issues. The study also shows how different contexts lead to different actions
and behaviors of managers; thus, different results of their framings of ethical
issues, in the sense of Kelley and Elm’s
(2003, pp. 139–140) findings that “organizational setting and organizational
factors influence the way that managers
frame ethical issues, particularly since
framing involves embedding decisions
and problems in a context.”
Writers on corporate governance
emphasize the importance of transparency as a basic principle of good governance (e.g., Aras & Crowther, 2010).
The present study showed that transparency is also a major issue in projects.
This implies a future research question: Are the ethical issues in projects
predominantly influenced by corporate
governance or project governance? The
findings on transparency issues, here
mainly related to compromising the
reporting of real project performance,
are supported by Shalvi, Handgraaf, and
De Dreu (2011, p. S17) who, in reference
to Schweitzer and Hsee (2002), propose
that “uncertainty about the real-world
state of affairs increases the likelihood
that people will bend the rules in their
own favour.” The reasons for this behavior were not assessed in the present
study. However, traditional agency
theorists would relate this behavior to
the utility maximization intents of the
“homo economicus” (Jensen & Meckling, 1994), while recent research in psychology showed that decision makers
tend to prioritize the improvement of
outcomes for others in need (pro-social
behavior) over improving the outcomes
for themselves (egoistic behavior) in
an attempt to reach a positive moral
self-regard (Schaumberg & Wiltermuth,
2014). Taken together, project managers, when compromising the truth in
their reporting, may do so in the best
interests of the project and its team,
including themselves—an aspect that
requires further investigation.
The study’s findings on trust in
project settings complement several
studies in general management and
psychology. For example, the 70% to
80% reciprocity of personal and systems trust between managers and governance structures indicates that (1)
trust is used as a governance mechanism, potentially reducing transaction
costs (Duyer & Chu, 2003); (2) personal
trust and trust based on decontextualized rules are mutually supportive,
and not alternative options for building
relationships (Clases, et al., 2003); and
(3) medium levels of trust are preferable over extreme levels of high or low
trust, which can be harmful (Jeffries
& Reed, 2000; Langfred, 2004). Taken
together this indicates the important
role of trust between projects and their
context. Little research has been done
in this area and more is needed.
Moreover, the study showed that
different contexts, such as project
types, governance paradigms, ethical
issues, and so forth, make project managers turn to a variety of different roles
and sources for help, thus trusting different people, institutions, or policies
for good advice, contingent on the situation. This supports Kramer’s (2006)
model of people using intuitive social
auditing before they decide whom
to trust. Here situational sensemaking (situation specific interpretation)
precedes the decision on appropriate
action in a situation. The present study
showed how situational characteristics
lead project managers to trust different
roles in seeking their advice in different
circumstances.
Project managers with higher levels
of power in the form of decision-making
authority on ethical issues yield higher
levels of trust from their project teams.
Conversely, project managers trust
their teams more when they have the
power to implement measures against
ethical issues themselves. This finding contributes to the ongoing debate
and research agenda on the complex
relationship between power and trust
(Bachmann, 2006; Sydow, 2006) by sup-
porting the role of institutional-based
trust, “where power has a considerable
potential to foster the development of
trust between social actors” (Sydow,
2006, p. 393). This is indicative of the
crucial role governance institutions
play for trust building in organizations
through their granting of power to organizational actors. More research in this
area is also indicated.
The strengths of the study lie in its
combination of often separately investigated topics. The combined effect of
governance, trust, and ethics was, to
the best of our knowledge, not a subject of project management research
before. The use of existing measurement constructs and a relatively large
sample size of 331 answers to a global
survey also add to the strengths of the
study. Weaknesses of the study lie in
the low number of responses to the
newly identified ethical issue categories, 4 to 7 (see above), which requires
further investigation. Other weaknesses
include the relative small effect size and
borderline of significance of some of the
correlations.
Future studies should also investigate the next level of detail in both governance structures and ethical issues, as
well as the relationship between system
trust and people trust in governance.
This will help to develop theories of
how different governance structures
impact on the development of trust in
different ways. Furthermore, a process
study should be able to bring up some
complementary views on ethical issues,
such as those suggested by Langley,
Smallman, Tsoukas, and Van de Ven
(2013).
Project managers encounter ethical issues, and the governance structure
influences the types of issues encountered and the way they are responded to.
Acknowledgments
The researchers in this study thank the
Norwegian Centre for Project Management for their financial and in-kind
support, without which this study would
not have been possible.
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Ralf Müller is a Professor of Project
Management at BI Norwegian Business
School in Norway. His principal research
interests are in leadership and governance of
projects, programs, portfolios, and PMOs. He
is department editor at Project Management
Journal ®, the author or co-author of more
than 150 publications, and, among other
accolades, the receiver of the 2012 IPMA
Research Award, and Project Management
Journal ®’s 2009 Paper of the Year Award. He
holds an MBA from Heriot Watt University,
a DBA degree from Brunel University
in the United Kingdom, and is a Project
Management Professional (PMP)® credential
holder. Before joining academia, Professor
Müller spent 30 years in the industry consulting with large enterprises and governments
in more than different countries for their project management and governance and also
held related line management positions, such
as the worldwide director of project management at NCR Teradata. He can be contacted
at [email protected]
Rodney Turner is a Professor of Project
Management at Kingston Business School
and at SKEMA Business School, in Lille,
France, where he is Scientific Director
for the PhD in Project and Programme
Management. He is also Adjunct Professor
at the University of Technology Sydney
and was Visiting Professor at the Technical
University of Berlin for 2012–2013.
Rodney is the author or editor of sixteen
books and editor of The International
Journal of Project Management. His
research areas cover project management
in small to medium-sized enterprises, the
management of complex projects, the
governance of project management, including ethics and trust, project leadership
and human resource management in the
project-oriented firm.
Rodney is Vice President, Honorary
Fellow, and former chairman of the UK’s
Association for Project Management, and
Honorary Fellow and former President
and Chairman of the International Project
Management Association. He can be
contacted at [email protected] or
[email protected]
Erling S. Andersen is professor emeritus
of project management at BI Norwegian
Business School, Oslo, Norway. He has
been visiting professor to the University of
Tokyo, Japan and to Nanyang Technological
University, Singapore. He has been dean
for BI’s China and Vietnam activities. He
is honorary professor at the University of
Southern Denmark. Professor Andersen
has published several books and articles
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
53
PAPERS
Ethics, Trust, and Governance in Temporary Organizations
on information technology, systems
development, project management, and
management in general. His book, Goal
Directed Project Management has been
translated in nine languages and his
latest book, Project Management–An
Organizational Perspective has been
published by Prentice-Hall. He can be contacted at [email protected]
Jingting Shao is a post-doctoral
researcher at the Institute of Industrial
Economics at the Chinese Academy of
Social Sciences and the Vice President of
China’s Young Crew project manager organization within the International Association
of Project Management (IPMA). She holds
two doctoral degrees, one from SKEMA
Business School (Lille, France) in Strategy,
54
Programme and Project Management
and one from Northwestern Polytechnical
University (Xi’an, China) in Management
Science and Engineering. Her research
interests are in program management,
leadership, and project governance. In 2011
she was awarded the “IPMA Outstanding
Research Contribution of a Young
Researcher Award” and in 2012 the “China
Project Management Research Contribution
Award.” She has participated in several
international research projects sponsored
by the Project Management Institute
and the Norwegian Centre for Project
Management. She can be contacted at
[email protected]
Dr. Øyvind Kvalnes is an Associate
Professor at BI Norwegian Business
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
School, Department of Leadership and
Organizational Behaviour. He has a PhD
in philosophy from the University of
Oslo, on the topic of moral luck. For ten
years, he has worked as a philosophical
consultant for Nordic organizations mainly
organizing dilemma training sessions with
leaders and employees and he has facilitated processes in a range of projects,
focusing on ethics and communication
in project management. His research
interests are in business ethics, moral
psychology, communication climates,
and identity and values in organizations.
At BI he is responsible for a course
in applied business ethics, a compulsory course for all master’s of science
degree students. He can be contacted at
[email protected]
PAPERS
Value Management for Exploration
Projects
Rémi Maniak, Telecom ParisTech, Paris, France
Christophe Midler, CNRS & Ecole Polytechnique, Palaiseau, France
Sylvain Lenfle, University of Cergy-Pontoise, Ecole Polytechnique, Palaiseau, France
Marie Le Pellec-Dairon, Ecole Polytechnique, Palaiseau, France
ABSTRACT ■
INTRODUCTION ■
Whereas exploration projects stand as
important drivers in renewing the assets of
the firm and creating new business opportunities, it is well recognized that project
evaluation and value management methodologies are likely to kill them. This paper
provides elements to solving this paradox.
We rely on a longitudinal study of three
exploration projects and the projects conducted afterward in the automotive and
space industries. The analysis suggests that
the value creation process can be regarded
and managed as a dual process of potential
value creation and value realization. This
paper discusses the linkages with existing
practices and theories.
T
KEYWORDS: project management;
exploration projects; project evaluation;
innovation; capability building; multiproject management; real-option
Project Management Journal, Vol. 45, No. 4, 55–66
© 2014 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21436
he innovation-based competitive environment has been leading firms
to a paradox in project management. On the one hand, firms have been
continuously streamlining their new product development processes,
converging into a dominant model of project management (Kerzner,
2013; Project Management Institute, 2013). This model put increasing attention on risk elimination, cost, quality, and lead time optimization, focusing on
the convergence toward a predefined goal. On the other hand, because firms
cannot only rely on such projects to renew their products and competences,
a growing stream of literature has been focusing on more breakthrough innovation projects. This type of project is known as exploration projects (Lenfle,
2008); in other words, projects characterized by unforeseeable uncertainties
(Loch, DeMeyer, & Pich, 2006) for which neither the goals nor the means to
attaining them are clearly defined from the outset. Exploration projects are
therefore expected to stand as a second order dynamic capability (Danneels,
2002), allowing the company not only to develop more innovative products
(in terms of market segment, usage, technology basis, product architecture,
and business model) than it is used to launching, but also creating new
competences and routines that can trigger new business trajectories (Benner
& Tushman, 2003). Such projects stand at the crossroads of development
projects (which are focused on rapid and cheap product development) and
research projects (which are focused on knowledge creation).
The generally agreed on tools and management theories have proposed
several frameworks to better understanding and managing this value creation
process. The inherited rational approach relies widely on the ex-ante definition of a given set of performance measures (price and volume, lead time,
customer willingness to pay for a given set of functionalities). These theories
hardly take into account the serendipity required to reevaluate during the
project the set of performance measures settled on in the beginning. So, the
project reaches the objectives or fails, but does not map how it could build
on the ongoing experience to redefining its value and its ability to open
new business avenues. Even if the capability building approach now clearly
identifies the importance of the learning cycle occurring from one project
to another, now it is far from being used in the concrete value management
toolbox.
Given this theoretical and empirical issue, this paper aims at better understanding the way the value creation process could be better managed in the
context of breakthrough exploration projects. To do so, it relies on a multiple
case approach, studying the following in each case: what the initial expectation of the project was; how the company reoriented the project and/or the
second generation; what assets developed with the initial project and how
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Value Management for Exploration Projects
they paved the route for an effective and
successful multi-project path.
This paper is organized as follows.
The first section discusses the literature
on project evaluation; the second section presents the methodology; the third
section exposes the cases, which are in
turn analyzed in the fourth section. The
fifth section sums up the main theoretical and managerial implications.
Literature Review
A Theoretical and Empirical Problem
The project management literature
has been following the concrete project management concerns. Given the
increasing innovation-based competition (Brown & Eisenhardt, 1997), project management attention has shifted
from development projects (Clark &
Fujimoto, 1991) to exploration projects
(Lenfle, 2008). Project control concerns
have shifted from cost control and traditional value management—such as
earned value—to a deeper understanding of the strategic value generated
through the projects (Brady & Davies,
2004; Shenhar & Dvir, 2007).
In the early 1990s, the challenge was
to coordinate various organizational
units to deliver new products (Clark &
Fujimoto, 1991). This progressively led
to streamlining the design processes so
they could achieve a good quality-costlead time performance. Much of the
project management literature has been
focusing on how to bridge organizational units in a way that can maximize
these performance indicators; this has
progressively stabilized project management principles (e.g., heavyweight
project management, concurrent engineering), which are now very wellknown and are being applied (Project
Management Institute, 2013).
Recently, this theory building path
about project management has been
described as putting too much emphasis on control over flexibility (Lenfle &
Loch, 2010).
First, it is believed to have lost the
roots of project management, which
56
were initially focused on a design to
innovation management, more than on
a design to cost or design to quality
management. Second, it neglects the
knowledge creation process, which is
a key for long-term firm performance.
Indeed, projects play a critical role in
the competence building dynamic of
the firm (Brady & Davies, 2004; Maidique & Zirger, 1985). Within the projectbased organization this dynamic has led
to a better articulation between project
management and research departments
in order to nurture multi-project learning trajectories.
In this window of opportunity,
academics have identified exploration project as a good vehicle to feed
such a product–competence dynamic.
Whereas research projects aim at creating new knowledge that will be used
afterward, development projects aim
at using existing knowledge to create
new products; exploration projects target
these two objectives in parallel (Lenfle,
2008). Therefore, the management of
such exploration projects challenges the
dominant model of project management
(Kerzner, 2013), which defines a project
as the convergence toward a predefined
goal within budget, quality, and time
constraints. On the contrary, when firms
rely on projects to manage exploration,
neither the goals nor the means to attaining them are clearly defined from the
outset, since “little existing knowledge
applies and the goal is to gain knowledge about an unfamiliar landscape”
(McGrath, 2001, p. 120). The strategy,
therefore, generally evolves during the
project and new competences and/or
market opportunities frequently appear.
Consequently, recent research in the
project management field has identified specific management principles for
exploration projects (Lenfle, 2008; Loch
et al., 2006) and has emphasized the
crucial role of inter-project learning; in
other words, the carryover of knowledge
from the first exploratory project to its
successors (Brady & Davies, 2004).
One critical issue is the value management philosophy and methodologies
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
that are used before, during, and after
the project. The economic constraint
indeed has been spreading deeper and
deeper within project management and
more and more upfront in the design
process. Decades ago, the R&D budget
was unlikely to be questioned about
its profitability (Roussel, Saad, & Erickson, 1991). Now, every single R&D project—development project or research
project—has to provide elements to
evaluate the outcomes of the associated
investment. A large body of literature
has been focusing on this issue.
Three Approaches for Project
Evaluation and Value Management
We can group these theories into three
schools of thought: the rational approach,
the uncertainty reduction approach, and
the capability building approach.
The rational approach for project
evaluation and management has its
roots in the postwar development of
system analysis (Cleland & King, 1968;
Miles, 1972). It is dominant in most
textbooks on project management. This
rational approach considers the project
as the convergence toward a clearly, exante defined goal within the specified
constraints of cost, quality, and time.
The techniques of value management
(Miles, 1972) help optimize the definition of the goal. Afterward, during the
project, the corresponding methodologies help screen the progression of the
planned tasks and monitor the earned
value compared with the initial target.
The ex-ante evaluation methodologies
imported and adapted several tools
coming from the finance techniques
within the project management toolbox: return on investment (ROI), internal rate of return (IRR), and net present
value (NPV); these methods integrate
data about project cost control with
data about the customer value of the set
of functionalities delivered by the product, expected sales.
Although perfectly suited to traditional projects, this rational approach
presents important limitations in a
context of exploration. There is a wide
consensus on the fact that this is likely to
kill innovation (Christensen, Kaufman,
& Shih, 2008). Exploration projects
rarely survive the resource allocation
process in large organizations given this
set of criteria (Baldwin & Clark, 1994;
Bower, 1970; Dougherty & Hardy, 1996).
Relying on U.S. historical data, Baldwin
and Clark (1994) demonstrate that a
rational finance-based approach had
a systematic and pernicious effect on
investment decisions: it caused managers to favor short-term profitability over
the creation of capabilities and learning
capacity. Thus, as stated by Levinthal
and March (1993), exploration is perceived as “on average unfruitful,” which
is damaging in today’s competitive environment (Levinthal & March, 1993). The
ex-ante evaluation of a project is very
difficult when neither the costs nor the
revenues can be foreseen with some
reasonable probability.
The uncertainty reduction approach
is precisely rooted in the critique of the
rational approach. Increasing the number, frequency, and the objectivity of
screening criteria (for example, anticipated ROI, sales provisions) decreases
the project flexibility required to scout
and integrate new information during
the project. This stands therefore as a
factor of learning failure and tends to
decrease the product success (Sethi &
Iqbal, 2008). In this perspective, projects are seen as a process of information acquisition that progressively
leads to uncertainty reduction (Klein &
Meckling, 1958), thus one cannot define
the result of the project nor the path
to reaching it beforehand. In light of
this, the project manager should make
“deliberate effort to keep his program
flexible in the early stages of development so that he can take advantage
of what he has learned. (…) In order
to maintain flexibility he commits
resources to development only by stages,
reviewing the state of his knowledge
at each stage prior to commitments.”
(ibid., p. 357) We can recognize here
the theoretical foundations of the real
option approach, which emphasize the
fundamental value of project flexibility
when confronted with unforeseeable
uncertainties (Kester, 1984; Schwartz
& Trigeorgis, 2004; Trigeorgis, 1996).
This school of thought led to important
development both for the ex-ante evaluation of projects and their management
(Huchzermeier & Loch, 2001; Schwartz
& Trigeorgis, 2004). There is a long tradition of research putting the emphasis
on project flexibility and adaptability, in
which are rooted contemporary project
management processes, such as Discovery-Driven Planning (DDP) (McGrath &
MacMillan, 1995) or Novelty, Technology, Uncertainty, Complexity and Pace
(NTCP) (Shenhar & Dvir, 2007).
The capability building approach
focuses on the reuse potential of what
has been created by a specific project.
A project can therefore fail to reach
its initial objectives but, nevertheless,
produce an important concept and/or
capability, which will prove very useful
for future projects and/or the firm (Keil,
McGrath, & Tukiainen, 2009). This widens the rational and uncertainty reduction approach, encompassing the future
projects within the first project evaluation. “When the carryover of learning
from one product to another is recognized, it becomes clear that the full measure of a product’s impact can only be
determined by viewing it in the context
of both the products that preceded it
and those that followed” (Maidique &
Zirger, 1985). Several authors have confirmed such a multi-project learning
track (Brady & Davies, 2004; Le Masson,
Weil, & Hatchuel, 2010).
Taking into account this capability-building perspective in the evaluation and management of tools is far
from easy. Several attempts have been
made, including some qualitative variables in the portfolio screening metrics,
for example, “competence building”
or “brand impact” (Cooper, Edgett, &
Kleinschmidt, 1999). Advanced portfolio approaches proposed dividing
the general project portfolio into more
homogenous buckets and scoring them
through criteria that are coherent with
the firm’s strategy to ensure alignment
(Cooper et al., 1999; Terwiesch & Ulrich,
2009). The design theory approach
insists on the expansion value allowed
by the project, in other words, its ability to generate new concepts and or
new knowledge (Gillier, Hooge, & Piat,
2013). Applying the principal agent to
the project investment decision invites
not only considering the intrinsic performance of the project (kept by the
project manager), but also a wider organizational value represented by the
project’s owner and funder (Zwikael &
Smyrk, 2012).
Literature Discussion
Going back to the initial research question: “How to better frame and manage the value of exploration projects?”
the literature review provides important
guidelines and limitations.
The literature helps to frame the
temporal and analytical scopes required
to study the value creation mechanisms
in the context of exploration projects.
We need to look at the financial direct
outcomes of a single project and also
the resources and competences generated through the project. In terms of
window of evaluation, we need to adopt
a multi-project perspective, looking
at how the sequence of projects could
build on the assets created by the initial
project to generate tangible economic
advantages.
We so define the value brought by
a project as the set of economic advantages within the company that hosted the
project—advantages that result from the
project, in the sense that they would have
unlikely occurred without the project.
However, we surprisingly have few
elements about how the value is managed across series of projects relying
on the same concept and/or common
competences (what Le Masson et al.,
2010, refer to as “lineages”). Speaking
about the nature of the value created,
most of the literature relies on a “define
and run” paradigm, whereas other
bodies of literature indicate that the
definition of the strategic intent and
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Value Management for Exploration Projects
footprint of the project is one of the
main missions of an exploration project.
The flexibility in project management is
reputed to concern the how? The what?
But not the why? The three approaches
presented above all consider—explicitly
or implicitly—that the value management consists of framing ex ante a specific structure of value for the project,
and then realizing this value in the most
favorable way, given the events that
happen during the project. The rational approach (value management, NPV)
freezes the composition of the expected
cash flow, and orients the project to
make it happen. So, the performance
of the output is already set in the early
DNA of the project. Only recently, have
academics considered the projects as
potentially disruptive toward these
screening criteria (Petit, 2012). The real
option school of thought considers the
future probable scenarios in a “decision under uncertainty” paradigm. At
the beginning of the project, probable
scenarios are defined and evaluated,
and the course of the project can only
reveal which one happens, not create
new ones.
Now, speaking about the management of such value creation process,
the literature is still largely influenced
by a ‘project by project’ evaluation philosophy. One symptom of this is that
very little has been said about the ways
projects can generate (and maximize)
such impacts on resources and competences. A second symptom is that
if there is a wide consensus about the
fact that the evaluation should integrate
“qualitative” impacts, this impact can
be called value only if future projects
are able to turn these new knowledge
Industry
First Project
Space
industry
Space
oceanography
Automotive Renault
industry
Espace
Toyota Prius 1
and competences into new products.
When dealing with the control of project
dynamics, the dominant portfolio management methodology consists mainly
of eliminating the projects that have a
bad risk/NPV (or scoring) profile and
very little on building dynamically evaluated cumulative projects.
This critical review invites us to better frame the research issue. How do
firms modify their expectations about
the exploration projects they launch?
How do we describe this dynamic process? What can we learn to better manage the value creation process during a
project and/or a sequence of projects?
We now present the methodology
we used to investigate this issue.
Methodology
As described above, although value
management is not a new topic, the way
companies create value through exploration projects and exploit it on a multiproject scale is still an underexplored
issue. In order to gain insight, we chose
a qualitative longitudinal approach
(Eisenhardt, 1989) and relied on a process analysis (Van de Ven, 1992) to study
how several exploration projects actually developed the business.
Choice of Industries and Cases
We chose quite different industries but
ones that are facing an increasing pressure both to launch radically new products and master R&D productivity. The
intent was to see how these companies
faced the need to innovate on a multiproduct scale and the pressure for direct
ROI on each project at the same time.
The automotive industry appeared
to be a natural candidate. Carmakers
Data Sources
Action research in Centre National d’Etudes Spatiales (CNES) during 3 years; 25 interviews with project stakeholders
(project manager, engineers, heads of departments)
Database Global Insight. Internet. Archives. Five interviews at the carmaker (former development team members,
marketing manager)
Itazaki, 1999; Nonaka & Peltokorpi, 2006
Table 1: Data sources.
58
have to differentiate themselves within
a saturated market structured by a
dominant design. The low margin business model and current crisis demands
justification of the expected profitability of any R&D investment. In the
automotive industry, we chose to focus
on two cases of projects that dramatically changed the company’s product
line and corporate performance: the
Renault Espace and the Toyota Prius 1.
In order to enlarge the applicability of our results, we chose to supplement the automotive industry analysis
with a project (Topex/Poseidon) taken
from another industry (space industry).
We chose the space industry, because
we had ongoing research that focused
on project evaluation. Over decades,
this industry has benefited from public funding to launch high-investment
programs with low requirements to justify these investments (Apollo being the
paradigmatic case). Our research with
a space organization, as other research
projects (Kwak & Anbari, 2012), showed
that this situation has dramatically
changed. Now space programs increasingly face the requirement to justify the
investment and provide visibility about
the expected value created. Moreover,
their great variety—from pure scientific
research to operational environmental
management—complicates the evaluation process and criteria.
In each case, we relied on several
sources of data (see Table 1). This data
collection process allowed us to have
a correct triangulation of the interpretations (Yin, 1994) and be able to tell
about the innovation process taking
the point of view of the firm, which
launched the initial breakthrough.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
80,000
70,000
60,000
Renault - Espace
50,000
Ford - Galaxy
40,000
Fiat - Ulysse
30,000
Peugeot - 806–807
20,000
Citroen - Evasion - C8
VW - Sharan
10,000
2010
2009
2008
2007
2006
2005
2004
2003
2001
2002
1999
2000
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0
Figure 1: Volume of sales of MPV-D in Europe.
Framework
We frame the data collection with the
guidelines provided in the literature
(Van de Ven, 1992). We track the whole
lineage (Le Masson et al., 2010), which
encompasses the duality product/
assets on a multi-product scale. First,
we looked at the project direct outputs,
in addition to asset creation. More precisely, we investigated what the impacts
of the initial project were in terms of
competence building, brand image,
and so forth. Second, we tracked how
these assets were reused by the subsequent projects and how it supported
their performance. The following section presents the cases structured in
that way.
Case Studies
The Espace Project
In the early 1980s, Matra and Renault
worked on a car concept called “European van.” Renault built this vehicle
based on the success of the van in the
United States and tried to adapt the
concept to the European market. In
1984, Renault launched the Espace, a
very unusual car on the market at that
time, with a relatively low investment:
US$200 million1 (in 2013). The sales
1 Figures
are in US$ amounts from 2013.
curve was also very unusual. In the first
month, only nine clients bought one;
then, 2,600 units sold in the six first
months, especially to many taxi and
ambulance drivers, who appreciated the
roominess of the vehicles. The reputation of the model improved, and finally
more customers stepped in. Renault
eventually sold 500,000 units of this first
model, remaining durably above competitors, which finally launched similar
models (Figure 1).
The big impact of the Espace product
was the creation of a new market segment
in Europe (VAN-D today) and building a
strong reputation based on this concept.
The product strongly influenced the shift
of the brand positioning toward a “car for
living,” and the company kept this slogan
over more than 10 years. Another asset
was the competence in R&D. Based on
previous experiences, Renault “monospaces” remained steadily better in car
dynamic and comfort than their competitors, which can be identified as a
design competitive advantage (the car
is high, and designing a high car with
the dynamic behavior and comfort of
a sedan is key in this market). Another
asset was the interior modularity, which
had been an active field of experimentation since the 1980s Espace.
The company could have stopped
here, but decided to not only pursue
the Espace effort. In 1993, the launch
and commercial success of the city-car
Twingo was definitely made possible,
thanks to the legitimacy acquired on the
“monospaces” and “car for living” concepts. The legitimacy was important in
the eyes of the customer who could buy
a “small Espace for city,” and in the eyes
of the Renault decision makers who
progressively found it rational to launch
a concurrent product of the existing
products of the segment, assuming the
risk of cannibalization.
The company also deployed the
concept on the C-segment in 1997, with
the Scenic model, which was an overwhelming success, with more than two
million units sold in seven years. Competitors rapidly imitated this move (in
1998) but no one managed to reach
such volumes. Even the subsequent
models of the Scenic (II in 2003 and III
in 2010) still rose above competitors in
terms of volume (Figure 2).
The Prius 1 Project
In September 1993, Chairman Eiji
Toyoda asked his R&D teams to build
“a car for the 21st century,” with very
open specifications: “A small-size car
with a large cabin is the most important prerequisite for the 21st century
car. Fuel-efficiency would be necessary”;
“50% consumption compared with a
Corolla” (Itazaki, 1999, p. 3). It was
only in November 1994 that the hybrid
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400,000
350,000
Renault - Scenic
300,000
Fiat - Multipla
250,000
Opel - Zafira
200,000
Citroen - Xsara/C4
150,000
VW Touran
Ford - C Max- S Max
100,000
Toyota - Corolla verso
50,000
Peugeot - 3008 - 5008
2010
2009
2008
2007
2006
2005
2004
2003
2001
2002
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
0
Figure 2: Volume of sales of MPV-C in Europe.
40,000
35,000
30,000
25,000
USA
20,000
Japan
15,000
Europe
10,000
5,000
10/1997
3/1998
8/1998
1/1998
6/1999
11/1999
4/2000
9/2000
2/2001
7/2001
12/2001
5/2002
10/2002
3/2003
8/2003
1/2004
6/2004
11/2004
4/2005
9/2005
2/2006
7/2006
12/2006
5/2007
10/2007
3/2008
8/2008
1/2009
6/2009
11/2009
4/2010
9/2010
2/2011
7/2011
12/2011
0
Figure 3: Volumes of sales of the Prius model, worldwide.
arose, so it was an easy way to explain
its fuel economy. The so-called G21
project gave birth to the Prius 1. The
project targeted 1,000 and then 2,000
units per month. During the first year,
Toyota sold an average of 1,000 units
per month, primarily to public agencies, politicians, actors, and artists who
bought the car. Initially targeted for the
Japanese market, the worldwide considerable attention paid by the public,
the press, and the public agencies per60
suaded the company to expand worldwide. This implied developing, a couple
of months after the initial homeland
launch, a specific version of the Prius to
sell overseas in Europe and the United
States. Surprisingly, the product sold
very well in the United States (especially
in California), which contributed to the
improvement of the Toyota brand image
in North America.
Financially, the Prius 1 project was
a considerable failure. The product sold
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
only 100,000 units in the first six years,
with a loss of more than US$1 billion
dollars (estimation).
The Prius project, however, had
been considered from the beginning as
a transformation of the resources and
competences of the firm. Chairman
Eiji Toyoda said before the project:
“Should we continue building cars as
we have been doing? Can we really
survive in the 21st century with the type
of R&D that we are doing now? There
is no way that this situation will last
much longer” (Itazaki, 1999, p. 3). The
G21 project was a way to get away from
the complexification of R&D and from
the brand image of Toyota, which was
getting too old compared with Honda.
Thirteen years later, the R&D has benefited from a great update, not only on
powertrain, but also on all the noise
vibration and harshness competences.
The brand value was twice as high
in 2008 than in 2000, mainly because
of the Prius effect. And, most importantly, the company legitimated a new
concept of vehicle—the hybrid—on
which it could rely on distinctive competences and legitimacy to dominate
competitors for a decade.
The company took advantage of the
knowledge acquired by its R&D division
and of the customer knowledge to build
a brand new Prius that was not only an
incremental evolution of the first version, but a dramatic move forward in
term of exterior design, comfort, NVH,
and hybrid performance. The Prius 2
was marketed in 2003 and immediately became a considerable success.
In 2007, the Prius 3 was launched, and
other products, including the Camry
and Yaris, were also “hybridized” in the
late 2000s. Eventually, the first Prius
move triggered a story that provided
4 million units of hybrids in 15 years
(Figure 3). Toyota runs several years
ahead of the competition with this new
concept created just 15 years earlier.
By continuously investing to upgrade
the underlying assets (R&D capability,
brand, factories, and ecosystem), the
Toyota hybrid remains the most desired
hybrid vehicle, despite numerous competitors appearing on the market since
its introduction.
Topex/Poseidon and Space
Oceanography
Altimetry satellites analyze ocean circulation, ocean-atmosphere interface,
sea ice, wave height, and wind speed
across the world’s oceans. At first, Topex
and Poseidon were two distinct projects
on both sides of the Atlantic—the first
led by NASA, the second led by CNES.
Since neither of them had received a
budget sufficient enough to develop a
dedicated mission, discussions between
CNES and NASA began in 1983 and led
to a joint project. Thus, TOPEX/Poseidon became the first mission dedicated
to ocean altimetry. The satellite was
launched in 1992.
The first objective of the satellite
was a scientific and social one. Earth
observation satellites have been considered since the 1960s, to establish
a global view of the Earth’s surface,
as well as to better understand and
monitor the environment. It had been
especially identified that the study of
the ocean’s global dynamic and ocean
moves was an issue, because these
oceanographic data are an important
lever to improving climate change models. Spatial experts considered remote
sensing systems as a very suitable tool,
as they allowed global and homogeneous coverage throughout the world.
However, during the first stage of the
project, oceanographers were not used
to that technology and were not convinced of the validity of the data taken
from 700 miles away from Earth; thus,
the mission had not only to bring data
but also to confirm their reliability.
This objective was fully achieved: data
produced by Topex/Poseidon contributed substantially to understanding of
the ocean/atmosphere interaction and
ocean dynamic. In ten days, Topex/
Poseidon had collected more reliable,
precise, and exhaustive data than in
100 years of data collected from the
seafloor.
The second objective was the demonstration of a new altimeter, smaller
and more precise than other available
altimeters. Other satellites, such as the
Seasat and ERS 1, had already produced
altimetry data before, but they didn’t
have sufficient enough precision levels to provide usable data (precision
approximately 24 inches). This objective was also fully achieved, and the
sensor provided data with a precision
of 1 inch.
The third objective was to develop
new applications from space. The initial funding was provided due to the
promising nature of the data collected
for military activities, such as submarine
missile trajectory and concealment. The
goal was then to validate the value added
for this “niche market” and explore new
markets based on the same kinds of data.
The mission confirmed that data could
be used for these military issues, and the
increase in altimetry precision opened
new arenas for business development,
which materialized later.
One noticeable effect of the Topex/
Poseidon project was to structure
and network an increasing number of
actors, ranging from a space oceanography research laboratory, a subsidiary dedicated to operational services,
an institutional entity, and so forth.
This has progressively demonstrated
the relevance and added value to these
stakeholders and has attracted more
and more players to the game.
TOPEX/Poseidon has been followed
by the Jason program, among which
the satellites Jason-1 and Jason-2 are
currently in operation. These projects
could build on the previous TOPEX/
Poseidon success on several aspects:
• The altimeter technology developed
on the first TOPEX/Poseidon was
improved and reused on subsequent
oceanographic satellites.
• The reliability of the data and refinement of the precision allowed for
expansion into new scientific domains:
mesoscale ocean circulation, eddies,
and mean sea level knowledge, cyclone
modeling and prediction, and so forth.
• The market applications and the associated ecosystem also expanded, from
pure military/scientific issues to more
commercial ones: fisheries management, offshore activities, tourism, security, and so forth.
CNES acts now as a recognized
player in this field, and the number of
scientific and commercial applications
increases each year.
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Discussion
The analysis of the cases provides
insight into value management in the
context of exploration projects. First we
described the value dynamic observed
and described how it fits within the
existing literature. Then we detailed
how the notion of potential value can be
used as a consistent describer of such
a dynamic, and as a concrete lever of
exploration project management.
Value Management Theories
Versus Exploration Projects
First, the study confirms previous
research findings on the fact that the
rational approach is far from being
sufficient to anticipate and explain
the financial impacts of exploration
projects.
The cases first highlight that the
classical notion of value management
(Miles, 1972) stands as a poor describer
of the value creation process triggered
by exploration projects. Yes, the initial
project has functional attributes, and
the underlying development project
tries to identify some attributes that
can create customer appeal, thereby
minimizing the costs. Yes, the project
followed an earned value logic based on
the monitoring of task accomplishment;
however, the final value delivered to the
company goes far beyond this logic.
Indeed, exploration projects start
with broad hypothesis, because the
teams know very little about the market,
the customer preferences, the potential
partners, and what is or is not technically feasible. The market studies made
during the project help, but the main
lessons learned about the critical attributes and market orientations come
during the launch period of the product,
and the costs are optimized afterward
once the direction has been set.
What happened to the Espace,
Topex, and Prius only one year after
the launch is quite different from the
functional attributes that motivated the
launch of the project. Here is where we
find the consequences of exploration
62
projects, which define their strategic
intent during and after the project.
At first glance, one could describe
the value dynamic using the real option
logic. Even if, from what we know from
the cases, none of them used the real
option tools to help in decision making,
we can imagine that they could. In the
beginning of the project, the team could
have drawn scenarios, uncertainty variables; and define associated values and
probabilities of occurrence. But how
could they? Who would have imagined
that the United States could be the best
initial niche to launch the Prius? And
that the Espace product would eventually turn into a more global Monospace
concept that would constitute a critical
attribute of the whole Renault brand?
First, although the existing literature mainly considers that the main
uncertainties should be solved during
the project (i.e., before product launch)
(Ford & Sobek, 2005) following the flexible development logic, the cases show
that important information—namely
about market and uses—appear after
product launch. Second, the project
does not only provide information to
reduce uncertainty about predefined
variables, it actually provides new
variables.
These value frameworks not only
have a limited explanation capacity
regarding the cases presented here, but
relying on them during the projects
would have hampered the value creation process. For example, sticking to
the initial plan (or scenarios) would
have led to continuously trying to convince the initially imagined niche (e.g.,
the Japanese market for the Prius; the
military/scientific market over three
years for the Topex), whereas the success came from unplanned opportunities (United States for the Prius and
numerous diverse applications for the
Topex over 13 years).
The capability building framework
stands as a good describer. Each project
has been building critical capabilities
in terms of product concept creation
and capture, R&D competence, and
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
brand image; however, the underlying
value of these newly developed assets
is only revealed once they are activated
by additional projects. This invites us to
consider these capabilities as “potential
value.”
Potential Value Creation and Value
Realization
The ex-post analysis provides insights
into what this initial investment actually
paid for.
Because of the technical and market novelty implied by both projects;
it was necessary to build new and specific competences on unusual domains.
Table 2 proposes a synthesis of the different resources and competences built
through the initial project. For example,
the project can promote an original
product concept in the eyes of the customer, who becomes increasingly aware
of its existence and specific benefits; it
can also develop the brand notoriety,
which can make upcoming products
more desirable if they can build on the
same position path. The project can
obviously develop specific R&D design
capabilities: proprietary technologies,
patents, product, and/or process design
competences; it can also create original relationships (with private or public
actors) that the firm can use afterward.
We define these new assets as a
“potential value”; they serve as resources and competences that are built
through the project and can be used
later to create tangible economic advantages for the firm. Let us highlight the
close linkage between the potential
value creation and the nature of the
project. We’ve known for a long time
that mainstream projects only use existing competences, which can create core
rigidities (Leonard-Barton, 1992). Only
exploration projects are far enough from
the core business and competences to
really create potential value. The originality of the project compared with the
dominant design and the newness of
the knowledge space to be explored
can both be viewed as negative risks
in the traditional project evaluation
Niche
product for
families
Limited to
military
applications
Espace
Topex/
Poseidon
Twingo (more than 2 million units sold)
Scenic 1 (>1.9 million units)
Scenic 2 and 3 (>2 million units)
Other oceanographic satellites (Jason
1 to 3)
Increasing number of commercial applications: fisheries management, offshore
activities, tourism, security, and so forth
New relationships
with politicians (world
environment forums,
local authorities
through taxicab
fleets…)
-
Increasing number of
actors became parts
of the initiative, from
public institutions to
private organizations
Toyota Hybrid System;
R&D knowledge about:
power consumption;
noise and vibration;
materials; weight
The project fed the brand Interior modularity and
positioning; “cars for liv- space optimization
ing” became the slogan,
recognized by customers Van driving dynamics
Best in class in
altimeter technologies
Creation of a platform
for data processing and
service provisioning
Brand value +40%
between 2000 and 2008
Environment as a new
brand pillar, more valuable than the previous
quality based pillar
“Hybrid products” as a newly
understood product concept, a
generic market segment, footprinted by Toyota
“Monospace products” as a newly
understood product concept, a
generic market segment, foot
printed by Renault
Made concrete the previously
fuzzy environment concern
Oceanography project increased
knowledge on oceans dynamic
and contributed to climate change
concern
CNES reaffirms its position and capabilities on
a worldwide level
Data coming from its
satellites are reputed to
be as reliable
Prius 2 and 3 (>2 million units)
Usual models sales increased when they
proposed a hybrid version: Camry, Yaris,
and Highlander
Partnership
R&D/Production
Brand Promotion
Realization of the Potential Value
(Successful products relying on
these assets)
Concept Promotion
Potential Value Created Through the Project
(assets footprint inherited from the initial exploration project)
Table 2: Potential value created by each initial project, and then realized by other projects.
Target
limited to
Japan
Initial
Product
Target
Prius 1
Initial
Exploration
Project
perspective and as potential value axes
in an approach that takes into account
the dynamics of organizational learning
(Gillier, Hooge, & Piat, 2013).
If creating this potential value during and after the project appeared as
a critical factor, realizing this value on
a multi-project scale was the key step
in shifting from a promising attempt
to a great economic success. The most
profitable projects were the following
projects, which pragmatically built on
the acquired assets to converge to welltargeted products. The success of the
Scenic clearly relies on the concept and
brand footprint about “monospace”;
generations 2 and 3 of the Prius kept
capitalizing on both strong engineering
experience and a unique reputation on
the hybrid concept; the CNES projects
fully exploited the technical expertise
about altimeter and its newly acquired
worldwide reputation to widen the
applications and partners.
We so define the value realization as
(1) the continuous re-evaluation of the
opportunities and assets built through
an exploration project and (2) the project development initiatives that rely on
this pragmatic revision.
This leads to the consideration
of the value management process of
exploration projects as a dual potential
value creation/value realization process, spreading on a multi-project scale.
Figure 4 illustrates this management
pattern.
Conclusion and Further
Research
Exploration projects are both a necessity in the current competitive context
and at the same time very difficult to
justify using the classical frames and
methodologies. The notion of potential
value management questions the existing theories and practices.
Facing the limitations of traditional
project evaluation methodologies, companies have these choices: sticking to
them and killing projects that cannot
ex ante provide sufficient arguments to
guarantee their direct profitability or
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
63
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Value Management for Exploration Projects
Potential value (assets, resources, and competences)
Concept promotion
Brand
R&D capabilities
Partnership
…
Exploration project
€
Exploration /
Exploitation project
Exploitation project
€
€
Realized value (products and services)
Figure 4: The value management for exploration project, managing the value potential creation/value realization process.
bypassing them and relying on top-management’s “gut feelings.” In the space
between these two extreme and risky
choices, there is a great opportunity to
develop new decision tools and evaluation processes that will take into account
the specificity of exploration projects.
In integrating the value potential in the
decision-making process it can help
to have such a rationalized approach.
It invites complementing the classical
screening methodologies with a more
strategic continuous monitoring process.
What are the assets that are being developed through the project? What can we
do with them? To what extent does it
question the product planning strategy
and even the corporate strategy?
If the traditional evaluation patterns
integrate these issues in the beginning
as ‘go–no go’ criteria, this paper shows
how the evaluation process would benefit from complementing the ex-ante
initial evaluation with periodical expost revisions during the sequence of
projects in two ways. On the one hand,
reevaluation of the potential expansion
value on the bases of new opportunities, which appear from the first moves;
on the other hand, assessment of the
realization of this potential value, due
to events that occurred in the period.
64
Fruitful value management appears as
a subtle mix of continuity in learning
and agility in the expectations as implemented during the evolution of successive projects.
This calls for bridging the learningby-project logic with the real option
logic. In a value potential perspective,
the project continuously builds and
uses options, depending on the assets
built and considered along a sequence
of projects. The first way is to consider that critical uncertainties are to
be solved not only during the development project—as the flexible development indicates—but after the product
launch, on a multi-project scale. The
second is to assume that projects should
not only converge to predefined scenarios but also create new ones, and
at the same time wondering how they
can build ways to make them profitable
on a multi-project scale/scope. We see
that consistent value management for
an exploration project can exist only
by linking the three theoretical schools
of thought: rational, uncertainty, and
capability building.
Let’s finally come back to the paradox raised at the beginning of the paper.
Rational tools and methodologies for
project management have been created
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
to better innovate, whereas they are
reputed to increasingly kill innovation.
With an ever-increasing emphasis on
radical new products and capability
building importance, these tools and
methodologies have no choice but to
better take into account the value creation project on a multi-project scale.
The notions proposed in this paper—
potential value creation, value realization—help better frame this issue and
contribute to solving this paradox.
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Dr. Rémi Maniak is an associate professor at the Telecom ParisTech and assistant
professor at the École Polytechnique
Engineering Schools in Paris; he received
his PhD in Management Science from the
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66
in large firms, ranging across strategic, organizational, and business
model issues. He can be contacted at
[email protected]
Pr. Christophe Midler is a graduate
of École Polytechnique and received
his PhD in Management Science from
Sorbonne University. He is a professor of Innovation Management, director of the Polytechnique Management
Research Center, and manages the
Innovation Management Chair. He is
also Doctor Honoris Causa at Umea
University, Sweden. His research topics
are product development and project
and innovation management in relation to organizational learning theory.
He has explored these topics in various
industrial contexts, especially the automotive industry, but also in construction,
electronics, chemistry, pharmaceuticals,
and high-tech start-ups. He can be
contacted at christophe.midler@
polytechnique.edu
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
Dr. Sylvain Lenfle is lecturer at the
University of Cergy-Pontoise and researcher
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historical research. He can be contacted at
[email protected]
Dr. Marie Le Pellec-Dairon is an environmental and agricultural engineer,
who graduated from AgroParisTech in
Paris; she holds a master’s degree in
Environmental and Energy Economics
(Ecole Polytechnique, Paris), and received
her PhD in Management Science from
Ecole Polytechnique. Her main interests are
value assessment of innovative projects
and stakeholder coordination and her focus
is on environmental and sustainability strategies, specifically these topics in the space
industry, where she has been working
for three years in the French space agency,
CNES. She can be contacted at marie.
[email protected]
PAPERS
Risk Management in Project Portfolios
Is More Than Managing Project Risks:
A Contingency Perspective on Risk
Management
Juliane Teller, Berlin Institute of Technology, Germany
Alexander Kock, Technische Universität Darmstadt, Germany
Hans Georg Gemünden, Berlin Institute of Technology, Germany
ABSTRACT ■
INTRODUCTION ■
Project risk management aims at reducing
the likelihood of project failure. To manage
risk in project portfolios, research suggests
adopting a perspective that is wider than
the individual project risk. The results from
a hierarchical multiple regression analysis
on a sample of 177 project portfolios suggest that formal risk management at the
project level and integration of risk information at the portfolio level are positively
associated with overall project portfolio
success. Simultaneous risk management at
both levels increases this positive effect.
Furthermore, risk management at the project
level is more important for R&D-dominated
project portfolios, whereas the integration of
risk information is more important with high
levels of turbulence and portfolio dynamics.
growing number of organizations are using projects to implement
new products, processes, and other types of change. Because organizations tend to run several projects concurrently, project portfolio
management is a key competence to flexibly adjust to environmental
changes and maintain competitive advantages. Project portfolio management
refers to the set of managerial activities that are required to manage a collection of projects and programs needed to achieve strategic business objectives
(Blichfeldt & Eskerod, 2008; Project Management Institute, 2008b). Projects
are frequently dynamic by nature and exposed to risk.
The literature has widely acknowledged the positive effects of risk management by focusing primarily on the project level across various industries
(de Bakker, Boonstra, & Wortmann, 2011). Many studies have shown a positive
relationship between project risk management and the success of research
and development (R&D) projects (Mu, Peng, & MacLachlan, 2009; Salomo,
Weise, & Gemünden, 2007) and the success of information systems and software development projects (de Bakker et al., 2011; Barki, Rivard, & Talbot,
2001; Ropponen & Lyytinen, 1997). In the context of project portfolios, however, it is insufficient to consider only individual project risks (Olsson, 2008);
the literature also suggests incorporating identified risks into the project portfolio management process (Bannerman, 2008; Sanchez, Robert, & Pellerin,
2008). Integrating risks into the project portfolio management process allows
the portfolio manager to adapt the evaluation and selection of projects, the
allocation of resources, and the steering of projects in accordance with the
identified risks. Furthermore, integration facilitates an overview of and focus
on the relevant risks. A project portfolio management approach that neglects
risks may lead to an unbalanced portfolio and without risk consideration at
the portfolio level, an organization may not build sufficient reserves and may
be ill prepared for the future.
Previous studies suggest that the effectiveness of different management
approaches is contingent upon project and portfolio characteristics (Salomo
et al., 2007), in addition to the nature of the environment (Tatikonda &
Montoya-Weiss, 2001). The benefits of risk management, however, may not
justify the costs of its implementation for all project portfolios (Kutsch & Hall,
2009); therefore, this study adopts a contingency perspective (Donaldson,
2001) and addresses the impact of external turbulence on risk management.
Previous research has found that the degree of uncertainty calls for different
KEYWORDS: project portfolio management; portfolio risk management; project
risk management
Project Management Journal, Vol. 45, No. 4, 67–80
© 2014 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21431
A
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
67
PAPERS
A Contingency Perspective on Risk Management
risk management approaches (Floricel
& Ibanescu, 2008; Jun, Qiuzhen, & Qingguo, 2011); however, we also investigate the influence of different project
types on risk management. We focus
specifically on R&D-dominated project portfolios, because R&D projects
are associated with higher levels of
uncertainty than other types of projects
(Lenfle & Loch, 2010). Furthermore,
project portfolios may have varying levels of fluctuation: some are static in
nature, whereas others are subject to
constant change. High levels of fluctuation indicate that an organization starts
and ends new projects frequently; thus,
we examine the influence of portfolio
dynamics on risk management.
Research on risk management in the
context of project portfolios is scarce. To
our knowledge, no study has yet investigated how formal risk management at
the project level interacts with the integration of risk information at the portfolio level and how this interaction affects
project portfolio success. It remains
unclear as to whether or not risk management at the project level is related to
portfolio success and whether or not it
is sufficient for managing risks in project portfolio environments; the previous
research is limited to empirical examinations of the contingencies that influence risk management and the nature
of that influence (Barki et al., 2001).
To determine whether risk management
activities at the project level and at the
portfolio level depend on one another to
enhance effectiveness, we link risk management at the project level with risk
management activities at the portfolio
level. Overall, we attempt to answer the
following research questions: How does
project risk management contribute
to project portfolio success? How does
formal risk management at the project
level interact with the integration of risk
information at the portfolio level? What
contextual factors affect the relationship
between risk management and project
portfolio success?
This study contributes to the literature on risk management and project
68
portfolio management by providing
empirical evidence and suggesting the
following: (1) a formal project risk management process is positively related
to project portfolio success; (2) project
risk management is necessary but not
sufficient for the success of a project
portfolio; (3) a formal project risk management process is even more important for R&D-dominated portfolios; and
(4) the integration of risk information at
the portfolio level is more important for
rapidly changing portfolios that operate
in highly turbulent environments. We
thus verify the claim that project risk
management is related to project portfolio success and confirm the need to
adopt a contingency view in risk management research.
Literature Review
Project Risk Management and Project
Success
The Project Management Institute defines
project risk as “an uncertain event or
condition that, if it occurs, has a positive
or negative effect on a project’s objectives” (Project Management Institute,
2008a, p. 127). The Association for Project Management (APM) uses a similar
definition, defining risk as “an uncertain event or set of circumstances that,
should it occur, will have an effect on the
achievement of the project’s objectives”
(Association for Project Management,
2006, p. 156). Several authors support
the view that risk encompasses both
threat and opportunity; they emphasize that both opportunities and threats
should be considered in the processes
of risk identification and analysis (Ward
& Chapman, 2003).
Project risk management enables
an organization to limit the negative
impact of uncertain events and/or to
reduce the probability of these negative
events materializing, while simultaneously aiming to capture opportunities
(Petit, 2012). The project risk management process includes the following
activities: (1) identifying project risks,
(2) analyzing project risks, (3) defining and implementing risk response
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
actions, and (4) monitoring project risks
(Project Management Institute, 2008a).
The information gathered during this
process serves as a basis for decision
making and various tools and techniques have been developed to support
these activities. Brainstorming helps
identify risks; the probability impact
matrix is frequently used to assess risks
(Project Management Institute, 2008a),
and the decision tree can help with
choosing among risk response actions.
Risk response measures can include
avoiding risk, transferring risk, mitigating risk, and accepting risk (Project
Management Institute, 2008b).
Various studies have found a positive relationship between project risk
management and project success. Mu
et al. (2009) performed an empirical
study in China and found a positive
relationship between risk management
strategies and the performance of new
product development projects. Research
by Salomo et al. (2007) underlines the
positive effect of risk management on
new product development projects; in
their study, project risk planning and
goal stability throughout the development process demonstrate a significant
positive effect on the performance of
projects involving new product development. Nonetheless, Raz, Shenhar,
and Dvir (2002) suggest that risk management procedures are still not widely
implemented. When implemented, risk
management is positively associated
with project success. The findings of
Ropponen and Lyytinen (1997) support
the assertion that risk management is
connected to project success, particularly with respect to managing software
risk. These authors highlight the importance of frequent and continuous utilization of risk management practices,
experienced project managers, and an
appropriate project size. The interviews
of de Bakker et al. (2011) indicate that
risk management is deliberately used
to deliver messages to other stakeholders, with the aim of influencing their
behavior, perceptions, and awareness
of the situation and its attendant risks.
Their study enhances the understanding of risk management by investigating how it influences project success.
Although many studies suggest that
risk management is related to project success, other studies have shown
that risk management underperforms
in practice (Bannerman, 2008; Raz et
al., 2002). Perminova, Gustafsson, and
Wikström (2008) highlight the need for
further empirical research on standardized and modularized processes, which
are assumed to make expert knowledge readily accessible and to support
learning.
Risk Integration at the Portfolio Level
The literature suggests a broader scope
to managing risks (Artto, Kahkonen,
& Pitkanen, 2000; Bannerman, 2008;
Olsson, 2008, Teller, 2013). Specifically,
Bannerman (2008) and Sanchez et al.
(2008) propose the idea of integrating
processes to manage threats into project portfolio management. Research
on integrating risk management into
the project portfolio management process has been relatively scarce, and
currently most portfolio risk management approaches focus on evaluating
and balancing processes (Sanchez et al.,
2008). A substantial proportion of highly
risky projects may be dangerous for
an organization because of the potential failures of these projects, whereas
too many low-risk projects in a portfolio may lead to low returns (Archer
& Ghasemzadeh, 1999). The results
from de Reyck et al. (2005) indicate that
risks should be assessed at the portfolio
level to increase the positive impact
of project portfolio management. Only
a few frameworks and methodologies
have been developed that integrate
risk management into project portfolio management (Olsson, 2006; Project
Management Institute, 2008b; Sanchez
et al., 2008). Olsson (2006) developed a
methodology that integrates risk management into the portfolio management
process and provides the portfolio manager with an overview of the risks within
the project portfolio. Sanchez et al.
(2008) developed a theoretical framework that integrates risk management
concepts into project portfolio management and that takes into account
interdependencies regarding resources,
knowledge, and strategy. The Standard
for Portfolio Management – Second Edition (Project Management Institute,
2008b) addresses portfolio risk management and provides guidelines for
integrating risk management into project portfolio management. The Project
Management Institute (2008b) proposes
that the portfolio manager must add,
reprioritize, and terminate projects
based on risk information, project performance, and alignment with strategy.
Contingency View of Risk Management
Several empirical studies have identified the need to adapt management
tools and procedures to various project
characteristics, including risk profile,
project complexity, or environmental
factors, such as turbulence (McFarlan, 1981; Raz et al., 2002; Ropponen &
Lyytinen, 2000; Sommer, Loch, & Dong,
2009). In their empirical study in Israel,
Raz et al. (2002) found that risk management appears to be more applicable
to high-risk projects. McFarlan (1981)
identified three dimensions that influence project risk: project size, project
structure, and experience with technology. According to McFarlan (1981),
high-risk projects require more experienced managers, careful planning, close
monitoring, and stringent control. Barki
et al. (2001) developed and tested a
contingency model in a study of 75 software projects and found that high-risk
projects called for higher levels of communication among decision makers.
By contrast, in a study of 58 startups
in Shanghai, Sommer et al. (2009) found
that risk planning is sufficient when
uncertainty and complexity are low.
These authors suggest using trial-anderror learning and selectionism (i.e.,
running several approaches in parallel
until the best solution can be identified) when uncertainty is unforeseeable and project complexity is high.
Pich, Loch, and de Meyer (2002) support this suggestion and posit that risk
management is sufficient when information about the environment is available and adequate. Jun et al. (2011)
conducted a quantitative study of 93
projects and revealed that project planning and control are particularly important when uncertainty is low. In highly
turbulent environments with rapidly
changing circumstances, the literature
suggests going beyond traditional risk
management and adopting procedures
and methods to increase flexibility
and learning (de Meyer, Loch, & Pich,
2002; Perminova et al., 2008). Certain
authors emphasize the use of a wider
perspective that includes all sources
of uncertainty rather than narrowing management down to risks (Ward
& Chapman, 2003). Nonetheless, uncertainty management that focuses solely
on threats and events is too focused,
because it may lead to inattention with
respect to other important areas (Perminova et al., 2008; Petit, 2012).
These contradictory findings suggest that there is a need for further
research on adapting risk management
to the characteristics of specific projects, portfolios, and environments. Furthermore, few empirical studies seek
to understand how risks can be managed in project portfolios; therefore,
the present study includes the direct
effects of risk management on portfolio
success and adopts a contingency perspective. Contingency theory suggests
that the structural factors in organizations should suit the contextual factors
to increase performance (Donaldson,
2001). In specific environments, different approaches are more or less effective. Contingency theory has been widely
used in project management research
(Shenhar, 2001) and project portfolio
management research (Teller, Unger,
Kock, & Gemünden, 2012). A contingency perspective predicts the conditions under which the positive effects of
risk management will be stronger than
the negative effects and the conditions
under which the opposite is more likely.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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A Contingency Perspective on Risk Management
Because the degree of uncertainty calls
for different approaches to risk management (Floricel & Ibanescu, 2008; Jun et
al., 2011), we will investigate how external turbulence influences the impact of
risk management on portfolio success.
Furthermore, not all project portfolios
are identical. Project portfolios may consist of different types of projects and may
have varying levels of fluctuation. In
particular, R&D projects are associated
with higher levels of uncertainty than
other types of projects (Lenfle & Loch,
2010; Shenhar & Dvir, 1996); whereas
certain project portfolios are static in
nature, others change constantly, which
leads to a higher degree of uncertainty.
Therefore, this study incorporates the
level of R&D focus in project portfolios
and portfolio dynamics into the investigation.
Theoretical Framework
and Hypotheses
The framework of this study describes
how project risk management and the
integration of risk information into project portfolio management are linked to
project portfolio success (see Figure 1).
The underlying hypothesis is that the
simultaneous use of project risk management and risk integration into project portfolio management will have a
complementary effect that leads to a
greater benefit than the sum of both
individual effects. The following section
describes the dependent and independent variables, their relationships, and
the effects of certain moderators.
Project Portfolio Success
Project portfolio success is a wellestablished and widely used construct
in the literature (Jonas, Kock, & Gemünden, 2013; Meskendahl, 2010; Müller,
Martinsuo, & Blomquist, 2008; Teller,
et al., 2012). The dimensions of project portfolio success are based on the
objectives of project portfolio management: the maximization of portfolio
value, portfolio balance, and the alignment of projects with strategic goals
(Cooper, Edgett, & Kleinschmidt, 2001;
70
Elonen & Artto, 2003; Kendall & Rollins,
2003). We follow the approaches of Cooper et al. (2001), Jonas et al. (2013), Müller et al. (2008), and Teller et al. (2012)
and include the following dimensions
in project portfolio success: (1) average project success, (2) average product
success, (3) strategic fit, (4) portfolio
balance, (5) preparing for the future,
and (6) economic success.
Average project success encompasses
the criteria of the iron triangle of cost,
time, and quality, in addition to compliance with the fulfillment of the
defined specifications of all projects in
the portfolio (Martinsuo & Lehtonen,
2007; Shenhar, Dvir, Levy, & Maltz, 2001).
Average product success describes the
market success and commercial success
of all projects in the portfolio (Meskendahl, 2010; Shenhar et al., 2001). Strategic fit incorporates the extent to which
projects reflect the corporate business
strategy. Portfolio balancing describes
the equilibrium between high-risk and
low-risk projects, long-term and shortterm projects, and technologies and
markets (Killen, Hunt, & Kleinschmidt,
2008). Preparing for the future refers to
the ability to quickly react to changes in
the environment and seize opportunities
in the long term (Shenhar et al., 2001).
Economic success addresses the overall
market success and commercial success of an organization or business unit
(Meskendahl, 2010; Shenhar et al., 2001).
Formal Project Risk Management
A formal process encompasses a clear
process description and the consistent
use of clear rules in projects (Cooper
et al., 2001; Teller et al., 2012). Several
studies have shown that a formal risk
management process is positively
associated with performance (Kwak &
Stoddard, 2004; Ropponen & Lyytinen,
2000). According to Nidumolu (1996),
defining milestones and procedures is
associated with decreased risk and, consequently, better process and product
performance. With defined procedures
for managing project risk, the project
manager can assess potential threats
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
and opportunities, understand the feasible impact of potential events on project
objectives, and make realistic assumptions (de Bakker, Boonstra, & Wortmann,
2010; Ropponen & Lyytinen, 1997). Such
enhanced awareness and understanding
of risks, in turn, appear to be related to
fulfilling the projects’ cost, time, quality, and economic objectives (Raz et al.,
2002). Using identical procedures and
tools for managing project risks allows
for a common understanding of risk
management and knowledge exchange
between project managers. A consistently applied process makes the risk
level of individual projects transparent,
which lays the foundation for balancing the portfolio with regard to risks.
In turn, balancing the portfolio ensures
that the portfolio consists of neither
too many nor too few high-risk projects. However, formalization can also be
counterproductive for certain types of
projects. For example, Sethi and Iqbal
(2008) reveal that formal stage-and-gate
type processes can lower the flexibility of projects. The question is whether
this finding also applies to formal risk
management processes. Furthermore,
a formal risk management process can
lead to rigidity and may not help the
project manager identify unforeseeable
risks. Nevertheless, a well-defined process is believed to foster control and
predictability, which, in turn, can influence flexibility and the ability to quickly
react to changes in the environment
(Liu, Chen, Chan, & Lie, 2008). Empirical evidence about the effects of a formal project risk management process on
project portfolio success is scarce. Based
upon findings in the project context, we
suggest that formalization of project risk
management will have a positive effect
on project portfolio success.
Hypothesis 1. Formal project risk management is positively related to project
portfolio success.
The Integration of Risk Information
into Project Portfolio Management
It is widely acknowledged in the literature that risk management supports
the decision-making process (de Bakker
et al., 2011; Chapman & Ward, 2004;
Perminova et al., 2008; Sanchez, Robert,
Bourgault, & Pellerin, 2009). Risk management activities are frequently used
to convey messages among stakeholders
(de Bakker et al., 2011). According to
Sanchez et al. (2008), risk management
must be an integral part of project portfolio management. Risk information can
be integrated into various phases of the
project portfolio management process,
including portfolio structuring, resource
management, and portfolio steering
(Jonas et al., 2013). Portfolio structuring involves strategic portfolio planning,
including project evaluation, project
prioritization, and project selection
consistent with the business strategy
(Archer & Ghasemzadeh, 1999; Jonas
et al., 2013). During portfolio structuring, the portfolio manager can include
risk information to balance the portfolio
regarding risks and to prioritize projects
(Olsson, 2008). During strategic portfolio planning, this risk integration may
help select the right projects. Resource
management consists of the allocation
of scarce resources in an efficient and
effective manner across the project portfolio (Blichfeldt & Eskerod, 2008; Jonas
et al., 2013). When risks materialize,
the portfolio manager can easily shift
resources from one project to another, if
necessary, based on the overview of the
portfolio’s state of affairs. During portfolio steering, portfolio managers gather
information to monitor resource utilization and strategic alignment, to identify synergies between projects, and to
develop corrective actions if deviations
occur (Jonas et al., 2013). The underlying assumption is that portfolio managers, who integrate risk information into
portfolio steering, can better recognize
necessary changes and make adjustments accordingly (Teller & Kock, 2013).
Furthermore, integrating risk management practices with project portfolio
management practices and policies is
assumed to enhance strategic fit (Sanchez et al., 2008). Hence, the following
hypothesis is proposed:
Hypothesis 2. The integration of risk information into project portfolio management
is positively related to project portfolio
success.
Interaction Between Project Risk
Management and Its Integration
at the Portfolio Level
Previous research has emphasized the
importance of project risk management
and its integration into project portfolio management. The portfolio manager can only operate if information
on an individual project is available.
Well-defined procedures and clear rules
improve the availability of risk information and allow for a consistently applied
process; thus, the risk level of individual
projects becomes transparent and comparable. Without project risk management, the integration of risk information
at the portfolio level is elusive. In other
words, integrating risk information into
project portfolio management that is
not based on meaningful risk information from the project level will be ineffective in enhancing project portfolio
success. However, project risk management alone is only effective to a limited
extent because it lacks a portfolio-wide
view. Moreover, integrating risk information at the portfolio level increases
and reinforces project risk management. For example, risks that occur in
several projects at once can be identified and risk response actions can be
pooled. Based upon these arguments,
we propose that project risk management and its simultaneous integration
at the portfolio level result in a complementary effect that leads to increased
portfolio success.
Hypothesis 3. The simultaneous use of a
formal project risk management process
and the integration of risk information into
project portfolio management increase the
positive effect on project portfolio success
(positive interaction effect).
R&D Focus of Project Portfolios as a
Contingency Factor
Previous research has suggested the
need to distinguish among different
types of projects and corresponding
strategies to manage risks (Lenfle
& Loch, 2010; Loch, de Meyer, & Pich,
2006). Certain types of projects, such
as R&D projects, seem to be associated with a higher level of uncertainty
than other types of projects (Lenfle
& Loch, 2010; Shenhar & Dvir, 1996).
The results of empirical and conceptual studies suggest that risk management appears to be more applicable
to high-risk projects (Couillard, 1995;
Raz et al., 2002); therefore, a formal
risk management process may be more
important for project portfolios with
a focus on R&D projects. At the same
time, it is suggested that risk should be
managed in low-risk projects (Raz et al.,
2002); conversely, some studies suggest
adopting a lower level of formalization
in projects with a high level of uncertainty (Jun et al., 2011). We follow the
literature stream that proposes that risk
management becomes more prominent
when projects are highly risky (Couillard, 1995; Raz et al., 2002). At the same
time, management strategies that focus
on uncertainty management may also
become more prominent. Because risk
management is assumed to reduce failure rates and lower the occurrence of
risk, we suggest that the proposed positive effects of project risk management
and its integration at the portfolio level
are even more prominent for project
portfolios with a focus on high-risk R&D
projects.
Hypothesis 4a. The relationship between
formal project risk management and project portfolio success is stronger in portfolios with an R&D focus.
Hypothesis 4b. The relationship between
the integration of risk information into
project portfolio management and project
portfolio success is stronger in portfolios
with an R&D focus.
External Turbulence as a Contingency
Factor
Environmental uncertainties lead to
risk. The risk management process
may need to be modified, depending
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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A Contingency Perspective on Risk Management
on environmental turbulence (Teller,
2013). Raz et al. (2002) found that
projects with high technological uncertainty implement project risk management practices more frequently than
projects with low technological uncertainty, whereas the results of projects
with both low and high technological uncertainty are comparable. Prior
research has suggested that certain risk
management practices, such as welldefined procedures, may be related to
a decrease in uncertainty and risk (de
Bakker et al., 2011; Nidumolu, 1996).
High uncertainty seems to call for
experienced staff (McFarlan, 1981),
flat hierarchy, rapid decision-making
capabilities, a portfolio-wide view, and
structured processes (Floricel & Ibanescu, 2008) with a lower level of formalization (Jun et al., 2011). Empirical
evidence on the effects of formalization
in highly uncertain environments is
mixed. Some authors find that formalization can be counterproductive for
projects in highly uncertain environments (Jun et al., 2011; Salomo et al.,
2007). Other researchers find that the
continuous use of standardized procedures is a key element in managing
uncertainty (Perminova et al., 2008).
In their investigation of formality in
the context of project management,
Tatikonda and Montoya-Weiss (2001)
found that technological uncertainty
has no significant influence on the
positive impact of process formality on
project outcomes.
Project risk management practices
may increase the predictability of stakeholder behavior (de Bakker et al., 2011).
Formal rules simplify the detection of
threats and allow for fast answers to
potential issues. However, formal rules
may reduce the ability to cope with
uncertainty arising from unanticipated
technological problems due to a lack of
flexibility (Tatikonda & Montoya-Weiss,
2001). The greater the level of uncertainty, the more valuable flexibility is.
Some authors even argue that risk management is insufficient for managing
uncertainty (Perminova et al., 2008),
because no risk information is available when uncertainty is high. High
uncertainty makes learning from the
past difficult (Kutsch & Hall, 2009); we
argue, however, that the structure that
is gained by risk management practices
at the project level, and the portfolio
level assists in coping with unexpected
events arising from highly uncertain
environments. Based upon the abovedescribed arguments, we propose that
risk management is more important
when external turbulence is high. We
measure external turbulence as technological uncertainty, which represents the degree to which technology
changes.
Hypothesis 5a. The relationship between
formal project risk management and project portfolio success becomes stronger as
external turbulence increases.
Hypothesis 5b. The relationship between
the integration of risk information into
project portfolio management and project portfolio success becomes stronger as
external turbulence increases.
Portfolio Dynamics as a Contingency
Factor
Portfolio dynamics refers to the degree
to which portfolio structure changes
over the course of a year. Project portfolios with high fluctuation may contain
a higher number of smaller and shorter
projects. Changes in the portfolio structure may cause the emergence of new
risks or the omission of old risks. A
high fluctuation of projects can lead to
frequently changing risks, and a project portfolio with projects that change
frequently may entail higher levels of
uncertainty and complexity. A formal
risk management process that involves
clear rules is associated with less initial effort for each project and helps
project managers to identify new risks
quickly. Integrating risk information
into the portfolio management process
helps to quickly identify the dependencies between projects and their risks
and allows the portfolio manager to
consistently consider strategic aspects
R&D Focus of Project Portfolios
External Turbulence
Portfolio Dynamics
H4, H5, H6: +
Formal Project Risk
Management
H1: +
Project
H3: +
Integration of Risk
Information into Project
Portfolio Management
Success
H2: +
Figure 1: Conceptual framework.
72
Portfolio
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
(Olsson, 2008). Therefore, we argue that
the greater the portfolio dynamics are,
the more important risk management is.
Hypothesis 6a. The relationship between
formal project risk management and project portfolio success becomes stronger
with increasing portfolio dynamics.
Hypothesis 6b. The relationship between
the integration of risk information into
project portfolio management and project
portfolio success becomes stronger with
increasing portfolio dynamics.
Method
Data Collection
We base the testing of our hypotheses on a cross-industry sample of 177
medium-sized and large firms in Germany. The object of analysis of this
study is the project portfolio of a firm or
business unit. To investigate the effects
of risk management at the project and
portfolio levels, we restrict our study
to firms with project portfolios of at
least 20 projects managed concurrently.
In total, we contacted approximately
650 organizations via mail and provided
general information about the study
with a solicitation for registration. The
response rate was approximately 27%.
To achieve a high response rate, we
cooperated with project management
institutions. We surveyed our informants during a three-month period in
2011. There were no significant differences (alpha 5%) between early and late
responses. To reduce the risk of bias due
to common-method variance (Podsakoff, Mackenzie, Lee, & Podsakoff, 2003),
we adopted a dual-informant design,
which included two different levels of
management. In every participating
firm, two informants were identified: (1)
a project portfolio coordinator and (2) a
senior manager. Project portfolio coordinators were in charge of the operative
management of the project portfolio
and therefore well suited to assessing
the applied procedures and processes
for managing the project portfolio. Job
titles for project portfolio coordinators
were typically portfolio manager, head
of project management office, division
manager, or department manager. The
informants from senior management
exercised decision- making authority
over the organization’s project portfolio; their job titles were typically chief
executive officer, head of business units,
or head of R&D. The project portfolio
coordinator assessed risk management
at the project and portfolio levels, the
R&D focus of project portfolios, and
portfolio dynamics. The senior management informant assessed project portfolio success and external turbulence.
This study was followed by a conference during which the findings were
presented, discussed, and validated
with approximately 80 participants. The
sample incorporates firms from diverse
industries, including manufacturing
(27%), financial services (19%), information and communication technologies (19%), energy and infrastructure
(10%), pharmaceuticals and chemicals
(9%), and other industries (16%). Of
these firms or business units, 29% had
fewer than 500 employees, 26% had
between 500 and 2,000 employees, and
45% had more than 2,000 employees.
The average project portfolio consisted
of 124 projects.
Measures
We measured our variables based on
multi-item scales that we derived from
the literature on project portfolio management, risk management, and related
fields. To suit our context, we adapted
the wording of certain scales. A pretest with 20 scholars and practitioners
increased confidence in the validity of
the adapted scales. Informants assessed
each item on a seven-point Likert scale,
ranging from 1 (“strongly disagree”)
to 7 (“strongly agree”), and the variables were constructed by averaging
the respective items. The validity of the
item scales was verified by a principal
components factor analysis (PCFA), followed by a confirmatory factor analysis
(CFA) (Ahire & Devaraj, 2001). A PCFA
was used to test whether all items load
on a single factor. Cronbach’s alpha
denotes the scale reliability, and acceptable values are greater than 0.7. A CFA
was used to verify the measurement
model. The measurement model is
considered satisfactory if the comparative fit index (CFI) exceeds 0.90 and the
standardized root mean square residual
(SRMR) is below 0.08 (Hu & Bentler,
1998); terminology for all items can be
found in the Appendix.
Dependent Variable. Project portfolio
success is measured by the senior management informant as a second-order
construct based on the dimensions of
average project success (three items),
average product success (three items),
strategic fit (three items), portfolio balance (three items), preparing for the
future (three items), and economic success (four items). These dimensions and
items are based on studies by Cooper
et al. (2001), Jonas et al. (2013), Müller
et al. (2008), and Teller et al. (2012). A
CFA verified the validity of the secondorder construct with the six dimensions
as first-order factors. The model fit is
acceptable (χ2 = 276.61 (df = 129; p <
0.00), SRMR = 0.076, CFI = 0.902), and
the first-order factors had significant
factor loadings between 0.62 and 0.78.
Independent Variables. Formal project risk management is assessed using
four items that measure the degree to
which there are formal rules and procedures—such as standardized forms and
workflows—for risk management at the
project level. Items are based on Willauer’s research (2003). The integration of
risk management into project portfolio
management is captured using six items
that measure the degree to which risk
information is integrated at the portfolio level. Items are conceptually based
on work by Sanchez et al. (2008). The
model fit is acceptable (χ2 = 82.65 [df =
34; p < 0.00], SRMR = 0.053, CFI = 0.943).
Controls. The R&D focus of project portfolios is the percentage of R&D
projects in the project portfolio (from
0 to 1 = 100%). External turbulence is
captured using four items that measure the degree to which technology
changes (Sethi & Iqbal, 2008). Portfolio
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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A Contingency Perspective on Risk Management
Variables
Mean
Std.-Dev.
1
2
3
4
5
6
1
Project portfolio success
4.95
0.70
2
Firm size
7.20
2.14
–0.04
3
Mandatory projects
0.18
0.23
–0.11
–0.03
4
R&D focus
0.40
0.38
0.05
–0.04
–0.28**
5
External turbulence
4.42
1.32
0.22**
–0.08
–0.19*
0.01
6
Portfolio dynamics
3.62
1.40
0.04
–0.05
–0.05
–0.09
7
Formal project RM
5.13
1.52
0.17*
–0.07
0.04
–0.03
0.03
–0.03
8
Integration of RM into PPM
3.86
1.28
0.22**
0.01
0.14
0.10
0.04
0.07
7
0.18*
0.22**
Note. n = 177. RM, risk management; PPM, project portfolio management. 7-point Likert scale, ranging from 1 (“strongly disagree”) to 7 (“strongly agree”).
*p < 0.05. **p < 0.01 (two-sided t-test).
Table 1: Descriptive statistics and correlations.
(1)
Project Portfolio Success
(2)
(3)
(4)
(5)
Firm size (ln)
0.01
0.00
0.00
–0.01
Mandatory projects
–0.33
–0.32
–0.36
–0.32
R&D focus
–0.01
0.03
–0.03
0.01
External turbulence
0.10*
0.10*
0.10*
0.10*
Portfolio dynamics
0.00
0.00
0.00
0.00
Formal project RM
0.06†
0.07*
0.06
0.06†
Integration of RM into PPM
0.11*
0.12** 0.12** 0.12**
Formal Project RM x
0.06*
Integration of RM into PPM
Formal Project RM x R&D focus
0.19*
Integration of RM into PPM x R&D focus
0.01
Formal Project RM x External turbulence
–0.01
Integration of RM into PPM x
0.05†
External turbulence
Formal Project RM x Portfolio dynamics
Integration of RM into PPM x
Portfolio dynamics
Constant
4.95** 4.92** 4.95** 4.95**
R2
0.12
0.15
0.14
0.14
2
Delta R
0.03*
0.02†
0.02†
Adjusted R2
0.08
0.11
0.10
0.09
F
3.32** 3.72** 3.14** 2.94**
(6)
–0.01
0.00
–0.33
–0.35
–0.03
–0.02
0.11** 0.10*
0.00
0.01
0.06†
0.06†
0.11** 0.15**
0.05*
0.17†
0.00
–0.01
0.04
–0.02
–0.02
0.07*
0.06*
4.94**
0.15
0.03*
0.10
3.29**
4.92**
0.21
0.09**
0.14
3.04**
Note. Hierarchical Regression Models with Project Portfolio Success (Models 1–6) as dependent variables; unstandardized regression coefficients are reported; all variables are mean-centered. n = 177.
RM, risk management; PPM, project portfolio management.
†p < 0.10. *p < 0.05. **p < 0.01 (two-sided t-test).
Table 2: Regression results.
dynamics is measured using two items
that assessed the degree to which the
portfolio structure changes over the
course of a year. Moreover, we account
74
for portfolio characteristics that may
have an effect on risk management
practices or project portfolio success.
Firm size was captured by the natural
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
logarithm of the number of employees
in the firm or business unit. Larger firms
may have more mature risk management practices. Furthermore, we control for the regulation of the firm by
measuring the percentage of mandatory projects in the project portfolio
(from 0 to 1 = 100%). Mandatory projects
include projects that must be implemented due to external reasons, such
as regulatory guidelines. These types
of projects leave the portfolio manager
with less flexibility in selecting new
projects. Furthermore, the manager is
not allowed to terminate mandatory
projects. Because mandatory projects
must be implemented regardless of the
inherent risks, risk management may be
more important for project portfolios
with a high percentage of mandatory
projects. The descriptive statistics and
correlations of all variables are shown
in Table 1.
Results
We used hierarchical multiple regression analysis to determine the effects
of formal project risk management and
the integration of risk information into
project portfolio management on project portfolio success. Model 1 in Table 2
shows the direct effects of formal project risk management, the integration of
risk information into project portfolio
management, and the control variables
on project portfolio success. Models 2
through 6 test the interaction effects by
5.6
High R&D focus
Low R&D focus
5.4
Portfolio Success
5.4
Portfolio Success
5.6
High Integration into Project Portfolio Management
Low Integration into Project Portfolio Management
5.2
5
4.8
4.6
4.4
5.2
5
4.8
4.6
4.4
1
2
3
4
5
6
7
1
2
Formal Project Risk Management
5.6
4
5
6
7
6
7
High Portfolio Dynamics
Low Portfolio Dynamics
5.4
Portfolio Success
Portfolio Success
5.6
High External Turbulence
Low External Turbulence
5.4
3
Formal Project Risk Management
5.2
5
4.8
4.6
4.4
5.2
5
4.8
4.6
4.4
1
2
3
4
5
Integration of Risk Management into
Project Portfolio Management
6
7
1
2
3
4
5
Integration of Risk Management into
Project Portfolio Management
Figure 2: Simple slopes of interaction effects.
adding the multiplication terms into the
models and comparing the models with
Model 1. To test the interaction effects,
we used the procedures proposed by
Aiken, West, and Reno (1991). For this
purpose, we mean-centered the variables and included the product term in
the regression model. We can assume
an interaction effect if the interaction
term is significant and the inclusion
of the term significantly increases the
explained variance of the model. Table
2 shows the results.
Model 1 reveals that formal project risk management has a marginally
significant positive impact (b = 0.06, p
< 0.10) on project portfolio success, as
does the integration of risk information into project portfolio management
(b = 0.11, p < 0.05). In addition, the
moderator external turbulence shows
a significant direct positive impact on
project portfolio success (b = 0.10, p <
0.05). Consequently, hypotheses 1 and
2 are supported. Model 2 includes the
product term of both independent variables. Here, we find a positive interaction (b = 0.06, p < 0.05) that supports
hypothesis 3, which states that simultaneous use of a formal project risk
management process and the integration of risk information into project
portfolio management increases the
positive effect on project portfolio success. Model 3 tests the interaction effect
of an R&D focus of project portfolios.
Although there is a positive interaction
effect with formal project risk management (b = 0.19, p < 0.05), there is no
significant interaction with the integration of risk information into project
portfolio management. Consequently,
we find support for hypothesis 4a and
no support for hypothesis 4b. Model 4
reveals a significant positive interaction effect between external turbulence
and the integration of risk information
into project portfolio management (b =
0.05, p < 0.10), which supports hypothesis 5b; however, no support is found
for hypothesis 5a. Model 5 tests the
interaction effect of portfolio dynamics. We find a positive interaction with
the integration of risk information into
project portfolio management (b = 0.07,
p < 0.05); thus, hypothesis 6b is supported, which indicates that integrating
risk information into project portfolio
management becomes more important
with increasing portfolio dynamics.
Contrary to hypothesis 6a, there is no
significant interaction effect with formal project risk management. Model
6 includes all effects in one model.
Overall, the adjusted variance is 14%,
which is satisfactory, considering the
fact that we are using a dual informant
design with no common method variance. Figure 2 depicts simple slopes to
visualize the interaction effects for high
and low values of the interaction terms.
According to Aiken et al. (1991), a low
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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A Contingency Perspective on Risk Management
(high) value is the mean minus (plus)
one standard deviation.
Discussion and Conclusions
The objectives of this study were to link
formal risk management at the project level with the integration of risk
information at the portfolio level and to
investigate the impact of both of these
on project portfolio success. A contingency view was adopted to examine the
effects of R&D-dominated project portfolios, external turbulence, and portfolio dynamics on risk management. The
results of this study have theoretical and
managerial implications for managing
project portfolios.
Theoretical Implications
Our major finding is that the interaction
between risk management practices on
different management levels is highly relevant for project portfolio success. Our
study therefore answers the call to further
examine the link between single project management and project portfolio
management (Martinsuo & Lehtonen,
2007; Söderlund, 2004). Martinsuo
and Lehtonen (2007) show that single
project management efficiency affects
project portfolio management. The
results of the present study extend this
finding by providing evidence that project risk management is linked to project
portfolio success. On the one hand, a formal risk management process at the project level is necessary for achieving high
project success and is equally important
to achieving high project portfolio success. On the other hand, we find that
integrating risk information into project portfolio management is associated
with increased project portfolio success.
These findings support the claim that
identified risks should be integrated into
the project portfolio management process (Sanchez et al., 2008). More importantly, our findings suggest that joint risk
management at both management levels
increases the positive effect on project
portfolio success. When risk information is integrated at the portfolio level,
the positive impact of risk management
76
at the project level is strengthened and
vice versa. The results suggest that risk
management implemented solely at
one management level and not at the
other has a lower impact; therefore, we
strongly recommend implementing risk
management at both management levels
simultaneously. For formal project risk
management to develop to its full potential, it is necessary to ensure that risk
information is integrated at the portfolio
level. Integration at the portfolio level
only makes sense when risks are identified at the project level. Our findings
deliver quantitative evidence for Olsson’s
(2008) assertion that it is insufficient to
consider only project risks in the context
of project portfolios.
This study also contributes to a
deeper understanding of the extent to
which contingencies affect risk management. Our findings demonstrate that
formal risk management at the project
level is even more important for portfolio
success in R&D-dominated project portfolios, whereas the benefits of integrating
risk information at the portfolio level are
even greater for project portfolios that
are highly dynamic in nature and operate in environments with high external
turbulence. The results are consistent
with previous research, which confirm
the increased benefits of risk management for high-risk projects (Couillard,
1995; Raz et al., 2002). Furthermore, the
fluctuation of projects seems to play an
important role for portfolio management
practices. Our findings suggest that risk
integration at the portfolio level is more
prominent for dynamic project portfolios. Moreover, the greater the level
of technological uncertainty, the more
valuable the integration of risk information at the portfolio level becomes. The
increase indicates that risk management
practices for integrating risk information
at the portfolio level gain importance as
uncertainty increases. As a result, this
study supports the claim that firms must
tailor their risk management to their
environment (Ropponen & Lyytinen,
2000). In other words, there is no single
method of risk management that fits all
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
portfolios (Shenhar, 2001). Furthermore,
this study addresses the call to examine
the fit among the type of project, the style
of project management, and success
(Shenhar, 2001; Shenhar & Dvir, 1996).
We could not confirm all the hypothesized interaction effects, however; for
example, we could not find an interaction effect between formal project risk
management and portfolio dynamics
(as well as external turbulence). A formal risk management process at the
project level might therefore be important regardless of the environmental
or portfolio-inherent turbulence. Similarly, integrating risk information into
the portfolio management process
seems to be of equal relevance for R&Dand non-R&D–dominated portfolios.
Managerial Implications
For practitioners, our results highlight
the need to address risks at the portfolio
level in addition to addressing risks at the
project level. Research has found that risk
management approaches at the portfolio
level are, de facto, still in their infancy (de
Reyck et al., 2005). Our findings suggest
that a holistic view will positively influence portfolio success. Integrating risk
information at the portfolio level is an
important step for advancing portfolio
managers’ understanding of risks. Portfolio managers must adapt project prioritization and resource allocation based
on risk information. For example, risk
information may lead to the postponement or cancellation of projects. Finally,
portfolio managers must consider portfolio and environmental characteristics
when managing risks. Project portfolios
with a high percentage of R&D projects may benefit from a formal project
risk management process more so than
other types of project portfolios. Project
portfolios with low external turbulence
and portfolio dynamics may not profit
as much from integrating risk information at the portfolio level. As a result of
the costs of applying risk management,
a high degree of risk management may
not be beneficial for all types of project
portfolios. In certain cases, the costs of
implementing risk management may not
justify the benefits (Kutsch & Hall, 2009).
Limitations and Avenues for Future
Research
When interpreting our results, some
limitations must be considered. First, the
independent variables and the dependent
variable were measured during the same
time period. Consequently, there might be
a risk of halo or attribution bias. Although
we used different informants, the actual
relationship between the independent
variables and the dependent variable
might be lower. Moreover, the focus of
this study was on German firms and risks
might be handled differently in other cultural contexts. Further research might
build upon our findings and examine risk
management practices in other countries.
The independent variables addressed aspects of risk management
at a high level. Future research might
address risk management issues at more
of an operational level. For example,
we have shown that risk integration at
the portfolio level is important. Future
research might examine the effectiveness of different approaches to achieve
this integration. Moreover, the literature has emphasized other methods to
enhance flexibility and rapid decision
making when managing uncertainty,
such as reflective learning or simultaneously pursuing various candidate solutions (Perminova et al., 2008; Pich et al.,
2002). Future research might include
uncertainty management approaches
into the proposed model and investigate how these proposed methods interact with risk management approaches
at the project and portfolio levels and
how they influence portfolio success.
To increase success, contingencies
must be carefully considered. In this
respect, other portfolio or environmental characteristics might be relevant to
other dimensions of risk management.
For example, the degree of interdependencies within a project portfolio
may influence the risk level because
new risks emerge in addition to single
project risks due to interdependencies
between projects (Project Management Institute, 2008b). Consequently,
identifying portfolio risks may become
more important as interdependencies
between projects increase. Additional
contextual factors might be investigated
in future risk management and project
portfolio management research.
Finally, to enhance the understanding of risk management practices, further
research seems appropriate to investigate the interaction effect between risk
management at the project level and the
portfolio level for other dimensions of
risk management. For example, research
might address the process of weighing
threats and opportunities to obtain a balanced project portfolio (Shenhar, 2001)
and might also examine how this weighing interacts with risk management practices at the project level. For instance,
portfolio managers seeking to reduce a
portfolio’s risk can initiate projects with
offsetting effects for existing projects in
the portfolio in terms of exposure to
uncertainty. As with organizational portfolio diversification, the overall risk of
the portfolio could be lower than the
individual risks of its projects.
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Dr. Juliane Teller studied as a doctoral
researcher at the Chair for Technology
and Innovation Management at the Berlin
Institute of Technology. Her research
focuses on the management of risks in
a project portfolio environment, as well
as formalization in project management
and project portfolio management. Her
research has been published in refereed
journals, including International Journal of
Project Management and Journal of Project
Management. Juliane Teller works in the
medical technology industry and can be
contacted at [email protected]
Alexander Kock, Dr. rer. oec. habil., is a
Professor of Technology and Innovation
Management at Technische Universität
Darmstadt, Germany and holds a diploma
in business engineering and a doctorate in business administration from
Berlin Institute of Technology. Professor
Kock’s research interests cover project
portfolio management and organizational issues of innovation management
and his work has been published in
various journals, including Journal of
Product Innovation Management, IEEE
Transactions on Engineering Management,
and International Journal of Project
Management. He can be contacted at
[email protected]
Hans Georg Gemünden, Dr. rer. oec.
habil., is a Professor of Technology and
Innovation Management at the Berlin
Institute of Technology. He holds a
Diploma and a Doctorate in Business
Administration from the University
of the Saarland in Saarbrücken, and
a Habilitation degree and an honorary doctorate from the University of
Kiel. Professor Gemünden has received
several Awards of Excellence for his
research, which has been published
in refereed journals, including, among
others, Organization Science, Research
Policy, Journal of Product Innovation
Management, Creativity and Innovation
Management, International Journal of
Research in Marketing, IEEE Transactions
on Engineering Management, R&D
Management, International Journal of
Project Management, and Journal of
Project Management. He can be contacted
at [email protected]
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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A Contingency Perspective on Risk Management
Appendix: Item Wording and Measurement
Project Portfolio Success (second order construct; χ² = 276.61 (df = 129; p < 0.00), SRMR = 0.076, CFI = 0.902)
Average Project Success (3 items, alpha = 0.66, factor loading λ = 0.70)
Please evaluate the average success of completed projects:
Our projects are completed with a high degree of schedule adherence.
Our projects are completed with a high degree of budget adherence.
Our projects fulfill the defined specifications.
Average Product Success (3 items, alpha = 0.86, λ = 0.77)
Please evaluate the average success of completed projects:
Our project results reach the level of market goals planned in the project (e.g., market share).
Our project results reach the level of financial goals planned in the project (e.g., ROI).
Our project results reach the amortization periods planned in the project.
Strategic Fit (3 items, alpha = 0.80, λ = 0.78)
The project portfolio is rigorously oriented toward the future of the company.
The corporate strategy is optimally realized by our project portfolio.
The allocation of resources to the projects reflects our strategic thrust.
Portfolio Balance (3 items, alpha = 0.75, λ = 0.71)
There is a good balance in our project portfolio in terms of … new and old application areas. /… new and existing technologies. /… project risks.
Preparing for the Future (3 items, alpha = 0.82, λ = 0.66)
In our projects, we adequately develop new technologies/skills.
Our projects put us a step ahead of our competitors in terms of new products, technologies, and services.
The projects allow us to help shape the future of our industry.
Economic Success (4 items, alpha = 0.84, λ = 0.62)
How do you evaluate the success of your company/business area compared to your competitors in terms of … overall business success. / … market
share. /… sales growth. /… profitability.
Formal Project Risk Management (4 items, alpha = 0.91)
Please evaluate the following statements with regard to the project level:
Responsibilities in risk management are clearly defined.
The risk management process is explained in detail in a process description (e.g., manual).
We use standardized forms for risk management.
As a part of risk management there are extensive regulations regarding content, scope, and the external form of risk documents (workflows).
Integration of Risk Management Into Project Portfolio Management (6 items, alpha = 0.87)
Risk information is integrated in project prioritization.
Individual projects are postponed based on risk information.
We cancel projects in progress based on risk information.
We initiate new projects based on risk information.
Resources are redistributed among the projects based on risk information.
We check the portfolio assumptions made for validity based on risk information.
External Turbulence (4 items, alpha = 0.87)
The technology used in our industry sector is constantly changing.
There are frequent technological breakthroughs in our industry sector.
Technological changes open up large opportunities in our sector.
Technological developments in our sector tend to be minor (inverted).
Portfolio Dynamics (2 items, alpha = 0.83)
Our project portfolio changes greatly over the course of a year.
We often modify the project structure over the course of a year.
80
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
PAPERS
Developing a Framework for
Embedding Useful Project Management
Improvement Initiatives in Organizations
Gabriela Fernandes, Southampton Management School, University of Southampton, United
Kingdom
Stephen Ward, Southampton Management School, University of Southampton, United Kingdom
Madalena Araújo, Department of Production and Systems, School of Engineering, University
of Minho, Portugal
ABSTRACT ■
INTRODUCTION ■
This paper describes the quantitative analysis phase of an exploratory study to identify
useful project management improvement
initiatives and factors contributing to their
successful embedment in organizations. A
preliminary framework, based on a literature review and a series of interviews with
practitioners, was tested via a questionnaire,
which elicited 793 responses from project
management practitioners worldwide. The
paper focuses on factor analyses of the questionnaire responses, addressing issues of
construct validity and reliability. The resulting final framework highlights 15 key project management improvement initiatives
and 26 embedding factors grouped by the
factor analyses into three project management improvement initiative themes and six
embedding themes.
P
KEYWORDS: improving; embedding;
project management practice; mixed
research
Project Management Journal, Vol. 45, No. 4, 81–108
© 2014 by the Project Management Institute
Published online in Wiley Online Library
(wileyonlinelibrary.com). DOI: 10.1002/pmj.21441
roject management remains a highly problematical endeavor.
Mir and Pinnington (2014) argue that despite the advancement
in project management processes and tools, project success has
not significantly improved. The Standish Group International
(2009) shows that in the year 2008, only 32% of all the projects surveyed
succeeded (i.e., were delivered on time, on budget, with required features
and functions); 44% were challenged (late, over budget, and/or with less than
the required features and functions); and 24% of projects failed (cancelled
prior to completion or delivered and never used). These results highlight the
importance of improving project management practices. Geraldi, Rodney,
Maylor, Söderholm, Hobday, and Brady (2008) raised the question: How do we
better develop and apply the knowledge of project management in projects?
Cooke-Davies (2001) studied a similar research question: What can be done
to improve project management practices and thus project performance? As
argued by Shi (2011)—how to implement and improve project management
in the “right way” is still a relevant topic to study. Although the literature
on project management provides some advice on how to improve project
management practice, organizations need guidance on which key project
management improvement initiatives they should concentrate their efforts
(Thomas & Mullaly, 2008; Shi, 2011). For example, Shi (2011) presents an
approach called the Value Adding Path Map (VAPM), which can guide
an organization, step by step, in introducing and implementing project
management in a better way. Shi (2011) argues that it is the coordination
of the ‘hard’ and ‘soft’ project management system implementations that
creates the largest value to an organization with the least investment. The
‘hard’ project management system means the traditional ways of project
management implementation, including the project management processes,
training and knowledge management, and tools and techniques. The ‘soft’
project management system includes the general management system and the
project management culture, which means that the organization recognizes
that project management contributes to the success of the organization.
In this research, improving project management in organizations is
assumed to be made through project management improvement initiatives,
which include specific project management practices, such as work breakdown structures or earned value management, as well as development of
activities that would help to improve project management practices, including
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
the standardization of project management processes, tools, and techniques,
or the designation of formal titles and
roles for those in charge of projects,
and their adequate training. Therefore,
project management improvement initiatives are defined as not just specific
tools and techniques, but a set of behaviors, routines, and ways of working that
are directed at improving project management performance.
A related issue is how to facilitate the
embedment of these project management
improvement initiatives in a sustained
manner, for which there is limited understanding. Cranefield and Yoong (2009,
p. 259) argued that “the nature of the
knowledge embedding process is not well
understood at either the organizational
or the individual level. In the research
literature there is neither clarity about
how embedding occurs, nor a good understanding of how it can be facilitated.” The
limited number of articles published in
the literature on embedding project management improvement initiatives illustrates the limited attention given to the
embedment process. Langley, Smallman,
Tsoukas, and Van De Ven (2013) argue
that a process can be studied in a variety
ways: change may be modeled in motion
and, thus, viewed as change in the qualities of substantive things over time, or as
enacted through a matrix of interwoven
processes. Research focusing on how the
qualities of an entity (e.g., an individual,
group or organization) change over time
may be studied from the perspective of
a substantive metaphysics in which processes represent changes in things. Other
research that focuses on how process
themselves emerge, develop, grow, and
decline are compatible with a process
metaphysics in which the focus is how
processes (rather than things) unfold over
time. This is the perspective of the present research on how organizations can
facilitate the embedding process of project management improvement initiatives.
The research reported here considers the
process of embedding as comprising a
number of interwoven and interrelated
component processes.
82
To explore embedment, embedding
of project management improvement
initiatives is studied as an innovation
process, consequently borrowing the
component process concepts of diffusion, dissemination, implementation,
and routinization from other disciplines,
including information and technology
and healthcare services (Greenhalgh,
Robert, Macfarlane, Bate, & Kyriakidou
2004; Venkatesh & Bala, 2008). Diffusion is the passive spread of innovations, whereas dissemination involves
active and planned efforts to convince
target groups to adopt an innovation.
Implementation is active and planned
efforts to mainstream the innovation
within an organization. Routinization is
the institutionalization of an innovation
and its standard use within an organization (Greenhalgh et al., 2004), meaning
that the innovation is embedded in the
organization. Therefore, embedding is
studied as a process rather than an
event, whereas the project management
improvement initiatives embeddedness
into an organization is the result (i.e.,
adopted by all relevant individuals and
incorporated into “business as usual”).
In the innovation literature, the
term ‘adopting’ is commonly used
rather than the term ‘embedding,’ which
is used in this study. The use of the term
‘embedding’ is based on two reasons.
First, most of the research on diffusion
of innovation has focused on productbased innovations, for which the unit
of adoption is the individual (Rogers,
2003), whereas the unit of adoption
in this study is the organization. Second, individuals in the organization can
adopt a project management improvement initiative, but this does not mean
that it is embedded in the organization. An individual can adopt, but it
is only the routine use of the project
management improvement initiative
and the strong contextualization (customization) and integration with other
contextualized management practices
in the organization, and the sense
of ‘ownership’ facilitated by the staff
involvement at all levels, which results
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
in the project management improvement initiative embeddedness in the
organization (Greenhalgh et al., 2004).
Rogers (2003) defines adoption (in relation to the individual) as the decision
to make full use of the innovation as
the best course of action available, and
presents individuals’ adoption as having five stages: awareness, persuasion,
decision, implementation, and confirmation. However, empirical work in the
field of organization and management
clearly shows that successful individual
adoption is only one component of the
assimilation of complex innovations in
organizations (Greenhalgh et al., 2004).
There are numerous potential barriers
to achieving the successful embedment
of project management improvement
initiatives. For example, a study by Loo
(2002) based on a questionnaire survey of a random sample of 150 Canadian organizations, identified some
potential barriers for achieving project
management improvements: not having a ‘champion’ or an influencer of
project management principles in the
organization; inadequate investment in
training; some managers and staff not
prepared to change or not seeing a need
to change; and everyone being already
busy and improvements requiring allocating even more time and energy into
work. There is, however, a need for
better understanding of the embedding
process (Cranefield & Yoong, 2009) as
well as the identification of the key
project management improvement initiatives organizations should seek to
embed (Thomas & Mullaly, 2008; Shi,
2011) and integrating the understanding of each of these aspects in a conceptual framework.
Based on a review of the normative
literature, a first attempt to construct
a conceptual framework drew largely
from three main theoretical foundations: (1) the Value Adding Path Map
(VAPM) framework from Shi (2011);
(2) a conceptual model for the spread
and sustainability of innovation in service delivery and organization from
Greenhalgh et al. (2004); and (3) the
technology acceptance model3 (TAM3)
from Venkatesh and Bala (2008).
Research Conceptualization
A basic assumption of this research is
that improving project management
practice improves project and organizational performance, even if the actual
value resulting from investments in project management and particular project
management improvement initiatives
has been hard to define and measure
(Thomas & Mullaly, 2008). In order to
maximize the value of project management, two things should be addressed;
first, the identification of appropriate
project management improvement
initiatives, both strategic and tactical
(Winter & Szczepanek, 2008; Shi, 2011).
Second, implementation processes
should fit the organizational context
(Thomas & Mullaly, 2008; Cooke-Davies,
Crawford, & Lechler, 2009; Zhai, Xin,
& Cheng, 2009). As argued by Thomas
and Mullaly (2008, p. 3) “The value of
any organizational improvement must be
judged in the context and situation from
which it arises and how well the improvement itself fits within the context of the
organization, industry, and geography in
which it is embedded.”
This study is conceptualized into two
constructs: improving and embedding
project management, although the two
concepts are linked as indicated in Figure 1, because an organization engaged
in embedding a project management
improvement initiative is, consequently,
improving project management. However,
in this research, ‘improving’ is seen as the
identification and selection of potentially
useful project management improvement
initiatives, which must then be embedded into the organization to be effective.
Therefore, with respect to the improving
construct, the research work focused on
identifying the most useful project management improvement initiatives, particularly the key activities that would help
to improve project management practice,
such as the standardization of project
management processes, tools, and techniques. With respect to the embedding
construct, the research was particularly
focused on identifying factors contributing to the successful embedment of project management improvement initiatives;
the assumption is that if an organization
is aware of these factors and addresses
them during the stages of the embedding
process of such an initiative, then embedment is more likely to be achieved.
To facilitate and support the embedment of a project management improvement initiative in organizations, the
study conceptualizes these initiatives
as innovations. Only three studies
addressing project management as an
innovation have been found. Martinsuo, Hensman, Artto, Kujalo, and Jaafari
(2006) used institutional and innovation diffusion theories to explore the
adoption of project-based management
as an organizational innovation. Hobbs,
Aubry, and Thuillier (2008) explored
the introduction of project management
offices as an organizational innovation
using a combination of survey and qualitative studies. Chan and Thong (2009)
used diffusion of innovation theories
to develop a conceptual framework for
agile methodologies acceptance.
Organizations tend to focus their
attention on what to improve (i.e.,
the selection of project management
improvement initiatives) and pay less
attention to the process of embedding
these initiatives into the organization.
In particular, there is little evidence in
the project management literature of
the factors contributing to facilitating
the embedding process of project management improvement initiatives.
Organizational
Context
Key project management
improvement initiatives
What project management
improvement initiatives?
Key factors for embedding
Diffusion
Choices of project management
improvement initiatives
Dissemination
Implementation
Routinization
Progress toward embedding a
project management improvement initiative
Figure 1: Research conceptualization.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
The research described in this paper
aims to contribute to the development
of a framework to help organizations
to embed useful project management
improvement initiatives; specifically,
this paper seeks to answer two research
questions:
1. Which project management improvement initiatives are regarded as most
useful and therefore need to be embedded?
2. What factors can facilitate the embedding of these initiatives into project
management practice?
To address these questions, the
authors first searched in the management literature for compelling models
or frameworks that could be adapted
or related to the project management
context. Consideration of the problem
of embedding project management
improvement initiatives was addressed
by examining the literature on change
management; however, the theories
of change management seemed insufficiently focused to inform practical
guidance to project management practitioners in embedding these initiatives.
Research reported in the innovation diffusion literature seemed to offer potentially more useful insights.
The following sections outline key
findings from the literature.
In identifying the pertinent factors, it
was necessary to make some judgments
about how far to distinguish different
embedding factors and the range of
possible project management improvement initiatives. This ‘decomposition
problem’ arises in most areas of management analysis. For example, in the
analysis of sources of project uncertainty and risk, Chapman and Ward
(2011, p. 32) argue that “. . . even the
most decomposed structures which are
viable still involve low level composites.
Further decomposition to clarify a source
may be possible, but in practice the limits to decomposition will be defined by
what is useful. Further, the most effective
and efficient decomposition structure is
84
a matter of choice which is necessarily
dependent upon the process objectives.”
In this study, reasonably high abstraction level of factor descriptions was
adopted. For example, the key project
management improvement initiative,
‘standardization of project management
processes,’ was employed rather than
distinguishing between different kinds
of processes. The results presented here
are part of a broader research study on
improving and embedding project management with these objectives: (1) to
identify the most useful project management practices (reported in the article by
Fernandes, Ward, & Araújo, 2013a); (2) the
identification of the inter-relationships
between the key project management
improvement initiatives and key factors to
facilitate embedment of these initiatives;
and (3) to find if respondents from different organizational contexts in the study
identify different relevance levels of the
key project management improvement
initiatives and the key factors to facilitate
their embedment.
Useful Project Management
Improvement Initiatives
The literature review first sought to identify a number of key project management
improvement initiatives, beyond the
implementation of specific tools and techniques (e.g., work breakdown structure)
that have the greatest impact on project
performance. Thomas and Mullaly (2008)
identified from an international study
called “Researching the Value of Project
Management,” that the project management improvements that have the greatest
impact on project performance are: (1)
uniform or standardized project management procedures, processes, and systems;
(2) a structured and coordinated project
communication system; (3) project management training; (4) designated formal
titles and roles for those in charge of projects (project managers), including their
adequate training; and (5) project risk
assessment and management procedures.
Andersen and Vaagaasar (2009), based on
three case studies conducted in Norway,
identified two kinds of efforts to improve
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
project management: implementation of
project management methodologies and
the creation of internal project management schools (for training).
For many companies, improving project management practices is crucial to
survival in a fast-changing environment
(Ebert & Man, 2008). Project management
maturity models could be used to understand organizations’ current capability to
undertake project management and help
them to improve project management
practice in a structured way (Sowden,
Hinley, & Clarke, 2010). There are several
maturity models in the literature available
for organizations to use, for example, the
Organizational Project Management Maturity Model (OPM3 ) – Third Edition (Project Management Institute, 2013) or the
Portfolio, Programme, and Project Management Maturity Model (P3M3) from the
Office of Government Commerce (Sowden
et al., 2010), although no single model has
achieved general acceptance. As argued
by Thomas and Mullaly (2008) none of the
existent maturity models had the depth
and breadth of variables important to
include in the evaluation of all aspects of
project management. In addition, from a
practical perspective, each of the instruments underlying these models runs into
a large number of questions or items, most
of which have never been tested for either
their reliability or validity in scientific
terms (Thomas & Mullaly, 2008). Additionally, as argued by Shi (2011), maturity
models have a large number of indicators,
which make it hard for an organization to
implement and thus improve their project
management practices.
Shi (2011) put forward an approach
called the Value Adding Path Map
(VAPM) to direct an organization to
implement project management in
the most reasonable, logical, and economical way. The VAPM framework
was selected as the main theoretical
foundation for the improving construct,
which focuses on the identification of
the most useful project management
improvement initiatives. It was selected
for several reasons, taking into account
similitude of objectives, robustness,
®
empirical evidence obtained, and a
multitude of organizational contexts.
The VAPM was based on the research
findings of Thomas and Mullaly (2008)
entitled “Researching the Value of
Project Management,” a three-year
study, involving a multi-disciplinary
research team, with over 45 academics
and 65 organizations worldwide from
very different contexts. Additionally, Shi
(2011) interviewed 30 project management practitioners from a variety of
industrial sectors in the Chinese context
and applied the framework to a case
study, which shows that this approach
is simple and easy to use. Nevertheless,
Shi’s study presents an important limitation in that it makes a recommendation of the “best” path to implementing
project management. However, the idea
that project management practice varies from one organizational context1 to
another is widely accepted (Besner &
Hobbs, 2013; Cooke-Davies, et al., 2009;
Shi, 2011; Thomas & Mullaly, 2008);
therefore, a general indication of the
“best” path might be “presumptuous.”
A number of key project management improvement initiatives have been
identified in the literature (Table 1),
which might have the greatest impact
on improving project management
practice. Following the classification by
Shi (2011), these key initiatives were
grouped under the following themes:
1.
2.
3.
4.
Process, tools, and techniques
People and organizational learning
General management system
Project management culture
Embedding Project
Management Improvement
Initiatives
When addressing the literature review
on embedding project management
improvement initiatives, even the word
‘embed’ was scarcely used by project
1
The organizational context is mainly dependent on the
strategic context; economic/political/cultural context, and
organizational attributes (e.g., organizational structures;
project data; organizational culture, and people who actually
do the work in organizations) (Thomas & Mullaly, 2008).
management authors. The concept
of embedding was mainly discussed
in knowledge management literature
(Argote, McEvily, & Reagans, 2003).
Knowledge is considered embedded
when it is deeply transferred or integrated into people’s interpretive frameworks, routines, and work practices
(Cranefield & Yoong, 2009). However,
as argued by Argote et al. (2003), more
research is needed on how knowledge is embedded in an organization’s
memory.
As noted above, the research
reported on innovation diffusion literature offered potentially relevant
insights. The technology acceptance
model3 (TAM3) from Venkatesh and
Bala (2008), along with the conceptual
model for the spread and sustainability
of innovation in service delivery and
organization from Greenhalgh et al.
(2004), were selected as the main theoretical foundations for the embedding construct. These two works were
selected for numerous reasons, taking
into account the similitude of objectives, robustness, empirical evidence
obtained, multidisciplinary teams, and
a multitude of organizational contexts
(the Greenhalgh model), and also on
the relevance of the variables being
used—namely the perceived usefulness
and perceived ease of use (TAM3).
TAM is the most widely applied model
of user acceptance and usage. TAM suggests that two specific beliefs, perceived
ease of use and perceived usefulness,
determine one’s behavioral intention to
use a technology (Venkatesh, 2000). TAM3
is a development of TAM, which presents
a complete nomological network of the
determinants of individuals’ IT adoption and use (Venkatesh & Bala, 2008).
The TAM3 model offers a powerful and
parsimonious explanation for the individual acceptance and usage behavior.
Venkatesh and Bala (2008) tested TAM3
in longitudinal field studies conducted
at four different organizations using Partial Least Squares, a component-based
structural equation modeling technique
used to analyze the data.
The conceptual model from Greenhalgh et al. (2004) is the result of a systematic review of the literature that was
undertaken according to an explicit,
rigorous, and reproducible methodology of empirical research studies, using
the technique meta-narrative review,
in which all primary studies used were
evaluated for its validity, in order to
address the question posed by the UK
Department of Health: How can we
spread and sustain innovations in the
health service delivery and organization? Greenhalgh et al. (2004) tested
the explanatory power of the model on
four case examples of the spread and
sustainability of complex innovations
in the UK health service delivery and
organization. The model proved to be
a useful analytical tool for the four case
studies. Although, this study had been
used only by the healthcare sector (e.g.,
Carayon, 2010), the Greenhalgh et al.
(2004) paper has been cited in almost
2,000 publications.
The various influences that help
innovation spread through the organization can be thought of as lying on a
continuum between pure diffusion (in
which the communication of innovations is unplanned, informal, decentralized, and largely horizontal or mediated
by peers) and active dissemination (in
which the communication of innovation is planned, formal, often centralized, and likely to occur more through
vertical hierarchies) (Greenhalgh et al.,
2004). In this study, the diffusion and
dissemination of project management
improvement initiatives is seen as the
process of ‘communication and influence’ for the adoption decision of the
initiatives by the organization. The
characteristics of an innovation (project
management improvement initiative)
and the individual adopters have particular influence in this process (Rogers,
2003). Implementation is the efforts
made to introduce the use of a project
management improvement initiative in
the organization. As argued by Meyers,
Sivakumar, and Nakata (1999, p. 295),
implementation is “the early usage
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
Themes
Key Project Management Improvement Initiatives
Process,
tools, and
techniques
1. ‘Implement corporate standardized/customized project management processes.’ Several project management bodies of knowledge
and methodologies offer guidance on such matters (Andersen & Vaagaasar, 2009; Loo, 2002; Milosevic & Patanakul, 2005; Shi,
2011; Thomas & Mullaly, 2008).
2. ‘Implement corporate standardized/customized project management tools and techniques’ (Anantatmula, 2008; Milosevic &
Patanakul, 2005; Shi, 2011; Thomas & Mullaly, 2008).
People and
organizational
learning
3. ‘Manage project management competences,’ for example, by assessing project management competencies of people from different project management roles, and providing project management training (Andersen & Vaagaasar, 2009; Loo, 2002; Shi, 2011;
Thomas & Mullaly, 2008).
4. ‘Established project management career path for all project management roles’ in order to motivate people to improve in their
project management practice to climb the project management career path (Cooke-Davies et al., 2009; Shi, 2011).
5. ‘Develop a culture of learning’ in order to better enhance the project management knowledge created in the organization (Loo,
2002; Burnes, Cooper, & West, 2003; Atkinson, Crawford, & Ward, 2006; Sense, 2007; Shi, 2011).
General
management
system
6. ‘Integration of the project management system with the general management system,’ i.e., the alignment of project management
activities with the whole organization’s activities. For example, the strategic planning of the organization should be tightly coupled
with the project identification and prioritization (Meskendahl, 2010; Srivannaboon & Milosevic, 2006; Shi, 2011).
7. ‘Develop supported infrastructure,’ i.e., a project management office or a similar structure (Dai & Wells, 2004; Hobbs et al., 2008;
Pellegrinelli & Garagna, 2009; Shi, 2011).
8. ‘Develop a project sympathetic organizational structure to project management,’ for example, a projectized structure or a strong
matrix structure (Maylor, Brady, Cooke-Davies, & Hodgson, 2006; Martinsuo et al., 2006; Shi, 2011).
9. ‘Empowerment of project managers,’ i.e., the organization should ensure that project managers have sufficient authority when
managing projects and that project managers are highly respected in the organization (Maylor et al., 2006; Loo, 2002; Shi, 2011;
Thomas & Mullaly, 2008).
10. ‘Develop a project categorization system’ in order to tailor the project management processes, tools, and techniques to the different types of projects in the organization (Crawford & Pollack, 2004; Crawford, Turner, & Hobbs, 2006; Malach-Pines, Dvir, & Sadeh,
2009).
11. ‘Benchmarking to assess project management and continuous improvement’ through, for example, the use of a model from the
literature to assess the current capability of the organization to undertake project management to define what may be needed to
make the organization more capable in project management terms (Barber, 2004; Luu, Kim, & Huynh, 2008).
12. ‘Assessment of project management performance,’ i.e., the feedback to project management team members of the project management performance assessment, during the project’s life cycle (Qureshi, Warraich, & Hijazi, 2009).
Project
management
culture
13. ‘Develop awareness of the project management value’ to project and organization performance among all staff members (Thomas
& Mullaly, 2007; Thomas & Mullaly, 2008; Zhai et al., 2009).
14. ‘Develop a basic understanding of organizational project management practices among all project stakeholders’ (Shi, 2011;
Thomas & Mullaly, 2008).
15. ‘Establish project management practices as internal standards’ (Andersen & Vaagaasar, 2009; Eskerod & Riis 2009; Shi, 2011;
Thomas & Mullaly, 2008).
Table 1: Useful project management improvement initiatives.
activities that often follow the adoption decision.” The success of implementation and routinization of project
management improvement initiatives
is dependent on the organization’s context (e.g., Cooke-Davies et al., 2009).
Different organizations provide widely
differing contexts for innovations, and
some features of organizations (both
structural and “cultural”) have been
shown to influence the likelihood that
86
an innovation will be successfully
implemented (Nystrom, Ramamurthy,
& Wilson, 2002; Sharma & Rai, 2003),
as well as organizational external influences (Abrahamson & Fairchild, 1999;
Johnston & Linton, 2000).
Through literature review a number
of key factors (Table 2), which might
have the greatest impact on embedding project management improvement
initiatives were identified. Following
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
the classification of (Greenhalgh et al.,
2004), the key embedding factors were
grouped under six main themes:
1. Project Management Improvement
Initiative (Innovation) Attributes
2. Adopter and Adoption
3. Communication and Influence
4. Inner Context
5. Outer Context
6. Implementation
Theme
Project
Management
Improvement
Initiatives
Attributes
Key Embedding Factors
1. ‘Clear relative advantage’ (Greenhalgh et al., 2004; Rogers, 2003).
2. ‘Compatibility’ with the values, norms, and perceived needs of intended adopters (Greenhalgh et al., 2004; Rogers, 2003).
3. ‘Simple rather than complex to deploy’ (Greenhalgh et al., 2004; NHS Modernisation Agency, 2003; Rogers, 2003).
4. ‘Trialability.’ Project management improvements that can be experimented with by intended users on a limited basis will be
more easily embedded (Greenhalgh et al., 2004; Rogers, 2003).
5. ‘Observability’ visibility of benefits (Greenhalgh et al., 2004; Rogers, 2003).
6. ‘Re-invention’ — capable of adaptation, refinement, or modification (Greenhalgh et al., 2004; Rogers, 2003).
7. ‘Low uncertainty about outcomes’ (Greenhalgh et al., 2004; Szulanski, 1996, 2000).
8. ‘Proven track record’ (Szulanski, 1996, 2000).
Adopter and
Adoption
Process
9. ‘Adopter motivation.’ Adopters need to be convinced that project management activity will help them to meet their objectives
in a cost effective manner, both directly and indirectly through enhanced organizational performance (Greenhalgh et al., 2004;
Ward, 2004).
10. ‘Perceived usefulness.’ The Technology Acceptance Model (TAM3) posits that adopter acceptance is determined by only this key
factor or adopter’s belief and the next one (Venkatesh & Bala, 2008).
11. ‘Perceived ease of use’ (Venkatesh & Bala, 2008).
12. ‘Beliefs of similarity or difference from other adopters’ (Bresnen & Marshall, 2001).
13. ‘Gender and age differences,’ (Morris & Venkatesh, 2000; Venkatesh, Morris, Sykes, & Ackerman, 2004).
14. ‘Nature of adoption decision,’ which could be optional, collective, authoritative, or contingent (Greenhalgh et al., 2004; Roger,
2003).
Communication
and Influence
15. ‘Demonstrating the project management improvement initiative value.’ Effective communication of the value of the project management improvement initiative across structural boundaries within the organization prior to its implementation (Greenhalgh
et al., 2004; Venkatesh & Bala, 2008).
16. ‘Homophily.’ The adoption of a project management improvement initiative by individuals is more likely if they are homophilous,
in other words, if the members involved in the process of change are similar in certain attributes (Greenhalgh et al., 2004; NHS
Modernisation Agency, 2003; Rogers, 2003).
17. ‘Interpersonal channels.’ In communication, mass media is important for creating awareness, but ‘interpersonal channels’ are
vastly more influential (Greenhalgh et al., 2004). The embedment of project management improvements by individuals is powerfully influenced by the structure and quality of their social network (NHS Modernisation Agency, 2003; Rogers, 2003).
18. ‘Opinion leaders.’ The existence of influencers who can encourage the take up and embedment of project management
improvement initiatives (Englund & Bucero, 2006; Greenhalgh et al., 2004; Loo, 2002; NHS Modernisation Agency, 2003; Rogers,
2003).
19. ‘Use of rhetoric’ to give a strong compelling and sustained motive for embedding a project management improvement initiative
(Green, 2004).
20. ‘Adopter involvement’ earlier in the implementation process (Burnes, 2004; Eskerod & Riis, 2009; Greenhalgh et al., 2004; NHS
Modernisation Agency, 2003).
21. ‘Motivation of knowledge holders.’ If the source has fear of losing ownership of the knowledge, they would not be motivated to
support the effective embedment of the project management improvement initiative (Szulanski, 1996).
22. ‘Credibility of the source of the knowledge,’ i.e., credible and trusted change agents (Greenhalgh et al., 2004; Szulanski, 1996).
23. ‘Relationship between the source of the knowledge and the adopter,’ i.e., stability and trust in the relationship between change
agents and adopters’ (Greenhalgh et al., 2004; Szulanski, 1996).
24. ‘Feedback on improvement impacts’ in the project and organization performance (Greenhalgh et al., 2004).
Inner Context
25. ‘Structure and resources to support change’ (Greenhalgh et al., 2004; Loo, 2002; NHS Modernisation Agency, 2003).
26. ‘Absorptive capacity for new knowledge.’ Organizations with a learning organization culture and a proactive leadership directed
toward sharing knowledge are more likely to adopt and embed project management improvements (Greenhalgh et al., 2004;
Szulanski, 1996, 2000).
Table 2: (Continues on the following page)
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
Theme
Inner Context
Key Embedding Factors
27. ‘Receptive context for change.’ With features such as strong leadership and support (Englund & Bucero, 2006; Loo, 2002;
Kerzner, 2009; Nystrom et al., 2002; Sharma & Rai, 2003), clear strategic vision, good managerial relations, visionary staff in
key positions, a climate conducive to experimentation and risk-taking (Greenhalgh et al., 2004).
28. ‘Readiness for change’ (Greenhalgh et al. 2004; NHS Modernisation Agency, 2003).
Outer Context
29. ‘Informal inter-organizational networks.’ An important influence on an organization’s decision to adopt is whether a threshold
proportion of comparable (homophilous) organizations have implemented or plan to implement improvement initiatives (Carayon,
2010; Greenhalgh et al., 2004; Johnston & Linton, 2000).
30. ‘External mandates’ (political ‘must-dos’) increase the predisposition, which is the motivation of an organization to adopt a new
project management practice (Greenhalgh et al., 2004).
Implementation
31. ‘Effective change agents’ (Greenhalgh et al., 2004; Rogers, 2003).
32. ‘Specific training’ in associated new tasks and working methods (Carayon, 2010; Loo, 2002).
Table 2: Key embedding factors.
Under the theme ‘implementation,’
several factors were identified; however,
these factors are also related to other
themes, for example ‘resources to support change’ identified under the theme
‘inner context’ or the ‘feedback on
the project management improvement
impacts’ identified under the theme
‘communication and influence.’ The literature on the routinization of innovations was very sparse and parenthetically
linked to the theme ‘implementation’
(Greenhalgh et al., 2004), and so as a
result, the direct key embedding factors
related to ‘routinization’ were not identified from literature review.
Research Methodology
The philosophical orientation of the
research reported here is ‘social constructionism.’ The basic claim of both
social constructionism and its related
theoretical orientation (known as constructivism) is that realities are constructed rather than discovered (Burr,
2003).
Burr (1995) outlines four key assumptions underpinning social constructionism: (1) a critical stance toward
taken-for-granted knowledge; (2) the
knowledge and meaning are historically and culturally constructed through
social processes of action; (3) knowledge is sustained by social processes;
and (4) knowledge and social action go
together. For example, these four tenets
88
of social constructionism encourage
the researcher to question the use of
conventional models (e.g., the project management maturity models), to
improve project management performance, and seeks to find key project
management improvement initiatives,
on which organizations should concentrate their efforts, rather than on a long
list of possible improvements. A social
constructionism orientation had consequences for how the research study
was approached. First, this research
looked for approaches that elucidated
the socially and culturally incorporated
nature of project management, and that
facilitated greater understanding of the
relationship between individual agency
and social context. Second, given the
notion of constructed/contested versions of reality discussed, the study
needed methods that bring contradictions and struggles over meaning and
surface. Finally, cognizant of Burr’s first
point about maintaining a critical stance,
we must be aware of the frames of meaning that researchers bring to the research
process, recognizing that these assumptions and values are themselves only versions of reality, echoing, competing, and
colliding with the versions presented by
the research participants.
There is no single theory existing
today that comprehensively explains
how to improve and embed project
management (Cranefield & Yoong,
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2009; Shi, 2011). Therefore, exploratory
research was undertaken, which aimed
to identify key project management
improvement initiatives and key factors
to embed these initiatives, based upon
the circumstances encountered in different organizations. The first attempt
at framework conceptualization from a
literature review was used as a skeleton
support for the exploratory study.
The exploratory research used a
mixed methodology approach involving first semi-structured interviews
and then a questionnaire survey. It
was expected that the complementary
strengths of semi-structured interviews
and a questionnaire instrument would
help the process of identifying pertinent factors and triangulation of data to
facilitate the validation of information
(Jack & Raturi, 2006).
The interview phase involved seven
different organizations (industries,
sizes, project types) and thirty interviewees who were directors; portfolio, program, and project managers;
and team members. In summary, the
interview observations led to (1) the
identification of three new key project
management improvement initiatives
(e.g., project management professionalization) and ten factors for embedding (e.g. adopter accountability); (2)
the confirmation of twelve project management improvement initiatives (e.g.,
develop a supported infrastructure)
and sixteen embedding factors (e.g.,
external mandates, slight rephrased
to external stakeholder requirement);
(3) the merging of three project management improvement initiatives into
other initiatives (e.g., develop project
categorization), and five embedding
factors (e.g., relative advantage); and
(4) the discrediting of eleven embedding factors (e.g., gender and age differences). This resulted in a revision of
the ‘initial framework’ developed from
the literature review to a ‘revised framework’ with 15 key project management improvement initiatives and 26
key embedding factors. More detailed
information on the development of the
‘revised framework’ from the interviews’ data analysis (new, confirmed,
merged, and discredited factors) can be
found in Fernandes, Ward, and Araújo
(2013b).
The second phase of the exploratory
research involved a worldwide questionnaire survey to project management practitioners with the objective
of getting views from more people and
confirming, or not, the findings from
the interviews. The third phase of the
study comprised the consolidation of
the research findings and construction
of a final ‘proposed framework.’
Mixed approaches tend to get lengthy
and almost impossible to report on a
single readable paper; therefore, this
paper focuses on how the questionnaire
research phase was conducted, the data
collected and analyzed, and addresses
issues of construct validity and reliability
of the conceptual ‘revised framework.’
Results in Developing
and Testing the Framework
The Questionnaire Data Collection
Instrument
For the second phase of the study, a
worldwide on-line questionnaire was
conducted. In order to be able to
quantify the improving and embedding
constructs, respondents were asked to
indicate the degree of influence of questionnaire items on a 5-point Likert scale,
where “5” indicates “very high” and “1”
indicates “very low.” The questionnaire
was divided into four parts, as follows:
• Part A — key project management
improvement initiatives. Question:
Please identify the degree of influence
of the following activities (project
management improvement initiatives)
on improving project management
practices in your organization.
For the improving construct, specifically, 25 survey items, corresponding to 15 key project management
improvement initiatives and 4 themes
were identified from the earlier literature and interview analysis, as shown
in Table 3.
• Part B — key factors for embedding
project management improvement initiatives. Question: The previous study
of the literature and interviews led to
the identification of several factors that
might affect ability to achieve diffusion,
dissemination, implementation, and
routinization that is the embedment, of
project management improvement initiatives in organizations. Please identify your view of the potential effect of
each of the factors listed below in your
organization.
For the embedding construct, 27
survey items, corresponding to 26
embedding factors and 6 themes,
were identified from the earlier literature and interview analysis as shown
in Table 4.
• Part C — the most useful project management practices. Question: If you
use or have used the following project
management practices, please specify
the level of benefit that you obtain
on project management performance.
If you never used it, please just tick
the box ‘not used.’ Project management practices in this study are seen
as those tools and techniques that
practitioners use to “execute a project
management process” where project
management performance is focused
on the triple constraints: control of
time and cost and progress of the
project.
This part of the questionnaire is
related to a research question and is
out of the scope of this paper.
• Part D — characteristics of the respondent and respondent’s organization.
In order to find if respondents from
different organizational contexts in
the study identify different relevance
levels of the key project management
improvement initiatives and the key
factors to facilitate the embedment of
these initiatives (out of the scope of
this paper), respondents were asked
for personal information, their experience and work context (e.g., industry, size, types of project, geographic
location, role, project management
experience, education level, gender,
and age).
Conducting the Questionnaire
The questionnaire was distributed via
the researcher’s professional contacts
along with the ‘snowball’ technique,
which does not allow for us to control how many people received the
questionnaire. Using a non-probabilistic technique for sampling the calculation of a traditional response rate
cannot be done; however, the number
of responses is substantially larger than
the minimum sample size required for
generalization for ‘infinite’ population
sizes (377 responses at a confidence
level of 95% with a margin of error ±5)
(Raosoft, 2013).
Approximately, 3,000 potential
respondents were personally invited
to complete the questionnaire sent via
email; additionally, project management associations were asked to advertise the survey to their members and
invite them to consider taking part.
From the 300 emails sent to different project management associations,
approximately 10% supported this survey through advertisement on websites,
newsletters, mailings to members, and
LinkedIn groups. Moreover, the survey was also accepted by the research
program at PMI, which then was able
to post the survey directly onto PMI’s
website, PMI.org. The questionnaire
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Theme
(‘factor’
in factor
analysis)
Project Management
Improvement Initiative
in the ‘Revised
Framework’
General
Management
System
V1
Tailoring project management processes to particular projects.
V4
Implement corporate standardized and tailored project management tools and techniques
Corporate standardization of project management tools and techniques.
V2
Tailoring project management tools and techniques to particular projects.
V5
Implement corporate standardized and tailored project management information system
Corporate standardization of the project management information system.
V3
Tailoring the project management information system to particular projects.
V6
Provide project management
training
The development of project management training among all project stakeholders in
the organization.
V7
Manage project management
competences
The organization establishes a process to ensure project stakeholders in the organization have sufficient project management knowledge and experience.
V8
The assessment of the project management competency of staff in various roles
within the organization, including executives, project managers, and team members.
V9
The assessment of project management performance in terms of scope, time, cost,
and quality during the project’s life cycle, in order to inform the assessment of
project management staff.
V10
The existence of an internal project stakeholder’s project management competences
portfolio, which is updated.
V11
The establishment of internal project management communities.
V12
Develop a culture of learning
The development of a culture of learning (through the development of a knowledge
management system or a proactive leadership directed toward sharing knowledge).
V13
Project manager
professionalization
The professionalization of the project manager’s role, i.e., the project manager dedicates almost 100% of his or her work to project management activities.
V14
Establish project management
career path for all project management roles
The development of a project management career path for project managers (in
order to ensure that the organization has enough people with the right level of
expertise to deliver project work and that project management staff is motivated to
enhance their project management competences).
V15
Integrate the project management system with the general
management system
The alignment of project management activities with the whole organization’s
activities (for example, the strategic planning of the organization should be tightly
coupled with the project identification and prioritization).
V16
Develop supported infrastructure The creation of a project management office or a similar structure.
V17
Develop a project sympathetic
organizational structure
The development of an organizational structure sympathetic to project management
practices (for example, a projectized structure or a strong matrix structure, in the
order that the resource allocation is project oriented).
V18
Increasing the authority of project managers in the process of managing projects, for
example, by the reward or penalty of team members’ performance.
V19
Winning the respect from all departments in the organization for the project manager role.
V20
Internal benchmarking to assess project management and continuous improvement.
V21
Benchmarking to assess project management and continuous improvement using
market project management standards; for example, using a model from literature to
assess your current capability to undertake project management and to define what
may be needed to make your organization more capable in project management
terms (for example, OPM3 from PMI).
V22
Benchmarking to assess project
management and continuous
improvement
Table 3: (Continues on the following page)
90
Survey/
Item
Corporate standardization of project management processes.
Process, Tools, Implement corporate stanand Techniques dardized and tailored project
management processes
People and
Organizational
Learning
Description
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Theme
(‘factor’
in factor
analysis)
Project
Management
Culture
Project Management
Improvement Initiative
in the ‘Revised
Framework’
Survey/
Item
Description
Develop awareness of project
management value among all
staff
The development of awareness of the importance of project management among all
staff.
V23
Develop a basic understanding of organizational project
management practices among
all project stakeholders
The development of a basic understanding of project management practices, its
purposes, and its benefits among all employees involved in project activities.
V24
Establish project management
practices as internal standards
The establishment of project management practices as a standard requirement for
projects.
V25
Table 3: Questionnaire structure: Improving construct.
was lengthy, took 15 to 20 minutes to
c omplete, and was available online
between January and April 2013.
The Dataset
Completed questionnaires were received
from 793 practitioners worldwide, covering 75 different countries. The respondents’ primary roles were:
•
•
•
•
•
•
Portfolio and program managers: 20%
Project manager: 43%
Team member: 7%
Functional manager: 6%
Director: 16%
Other: 8%
The countries with the highest participation rates were: Portugal (41%);
the United States (9%); the United Kingdom (6%); Australia, Brazil, and the
Netherlands (4% each); and Canada,
Italy, Spain, and India (2% each). Participation is concentrated in these 10
countries with 76% of the responses
and the other 65 countries with 24%
of participation. The respondents were
mostly between 30 and 50 years old
(71.6%).
Almost 50% of the respondents had
more than 10 years of experience as
a project manager and 15% had more
than 10 years of experience as a portfolio or program manager and appeared
well qualified to provide valuable
information. A vast majority had at least
a postgraduate degree (83%), 33% had
a postgraduate degree, 44% had a master’s degree, and 6% a doctorate degree.
Most of the respondents were male
(83%), which perhaps gives us an idea
of the female presence in project management area worldwide. During the
conduction of the semi-structured
interviews the proportion of female participants was similar to the questionnaire (20%).
Respondents came from organizations of varying sizes (large, medium,
small, and micro [Organizations were
classified as micro if they employed less
than 10 employees and had a turnover
of less than 2 million Euros or a balance
sheet total of less than 2 million Euros]);
however, most (44%) were from large
organizations.
The sample is weighted toward the
information and technology (IT) sector
of activity but includes a sufficient number of respondents in five different sectors, allowing for comparisons between
the following subgroups:
•
•
•
•
•
•
Engineering and construction: 14%
Business services: 17%
Information and technology: 37%
Telecommunications: 8%
Industrial services: 3%
Other project types: 21%
Table 5 shows a summary of the
respondents’ characterization by their
typical project. For example, the second row in Table 5 shows that 44% of
respondents work on projects that vary
in scope, whereas 56% work on projects
that are fairly similar in scope. Data
were gathered on both the sector of
activity of the respondent’s organization
and the type of deliverable produced
by the respondent’s typical project.
For example, an individual working on
engineering and construction or business services, may be working on information technology projects as well.
The sample is split evenly for many
of the contextual variables, which renders the analysis easier and more reliable.
Construct Validity and Reliability
Analysis
The data collected through the questionnaire survey were analyzed using
the SPSS software package. Factor analysis was conducted to verify the construct validity of the conceptual ‘revised
framework.’ Construct validity refers to
the accuracy of the measurement tool
to measure what it intends to measure.
Factor analysis is a collection of methods used to study the interrelationships
among component variables. As stated
by Bollen (1989), factor analysis intends
to simplify a concept by using relatively
fewer underlying ‘latent variables.’ In
other words, factor analysis can be
used to simplify complex sets of data
(Kline, 2002) and helps at exploring the
underlying structure of the constructs in
a model (Kim & Mueller, 1978).
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Theme
Adopter and
Adoption
Embedding Factor in the
‘Revised Framework’
Outer Context
The perceived usefulness of the project management improvement initiative by the
adopters (i.e., the extent to which a person believes that using a particular project
management practice will enhance his or her job performance and that the practice has
benefits).
V26
Perceived ease of use
The perceived ease of use of the project management improvement initiative by the
adopters (i.e., the degree to which a person believes that using a project management
practice will be free from effort, for example, if the perceived level of complexity is low).
V27
Adopter motivation
Highly motivated adopters.
V28
Predisposition for change
Adopters who are predisposed to change (i.e., resources are not accommodated and
wish to learn more and do better).
V29
Nature of adoption decision
— mandatory
The adoption decision of a project management improvement initiative being mandatory
as opposed to optional.
V30
The demonstration of the value of the project management improvement initiative to the
adopter and the organization, i.e., the direct and indirect benefits.
V31
Stakeholders’ involvement
Stakeholders’ involvement in the design and implementation process of the project
management improvement initiative.
V32
Opinion leaders and key
facilitators support
The existence of individuals who are able to informally influence new adopters toward
the use of project management practices (opinion leaders).
V33
The existence of key facilitators to support the change, namely to provide some
coaching during the implementation and routinization process.
V34
Resources to support change
The organization has resources available to be channeled to support project
management improvement initiatives.
V35
Sponsorship
The organization has strong sponsorship for the use of project management practices.
V36
Project management maturity
The project management maturity level of the organization (i.e., if the organization’s
project management maturity level is high it is easier to embed project management
improvement initiatives).
V37
Tension for change
The organization perceives that the current situation is intolerable and that a change is
needed (tension for change).
V38
Absorptive capacity for new
knowledge
The ability of the organization (people) to systematically identify, capture, interpret,
share, and re-codify new knowledge to operationalize/implement and use it effectively
(absorptive capacity for new knowledge).
V39
External stakeholder requirement
The awareness of other similar organizations that have done or plan to do the same
project management improvement initiative (inter-organizational project management
practices).
V40
Inter-organizational project
management practices
Pressure from customers or suppliers to adopt a new project management practice
(external stakeholder requirement).
V41
Unstable economic environment
A turbulent economic environment that presses organizations to become more
competitive and embed improved project management practices.
V42
Environmental culture
Culture in which the organization is contextualized.
V43
The project management improvement initiative is piloted on a limited basis in order to
demonstrate the benefits of project management practices and to better customize and
tailor project management practices.
V44
Gradual implementation
The gradual implementation of project management improvement initiatives.
V45
Specific training
The existence of appropriate and specific training for the operationalization of the
project management improvement initiative.
V46
Implementation Piloting
Table 4: (Continues on the following page)
92
Survey/
Item
Perceived usefulness
Communication Demonstrating the project
and Influence
management improvement
initiative value
Inner Context
Description
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
Theme
Embedding Factor in the
‘Revised Framework’
Implementation Adaptation/re-invention
Routinization
Survey/
Item
Description
The project management improvement initiative is adapted and modified in order to suit
the organizations’ needs (adaptation/re-invention).
V47
Integration with the existent
practices
The integration of the project management improvement initiative with the existent
practices.
V48
External collaboration
The involvement of parties external to the organization, who have personal experience
with the benefits of project management.
V49
Feedback on project management improvement impacts
The organization collects and provides continuous feedback on the project management
improvement impacts.
V50
Project management quality
assurance process
An implemented project management quality assurance process, to monitor compliance
with the organization’s project management standards and to take notice of feedback
from the project staff on how to improve the project management practice use.
V51
Adopter accountability
Adopter accountability, i.e., there are consequences that might be positive—rewards or
negative—penalties if project staff are complying or not with the standardized project
management practices.
V52
Table 4: Questionnaire structure: Embedding construct.
Project Types
Engineering and
Construction (17%)
Business Services
(19%)
Information and
Technology (46%)
Telecommunications (6%)
Industrial
Services (3%)
Type of project
scope
Fairly similar in
scope (56%)
Quite different in
scope (44%)
Type of project
level of technical
innovation
High level
of technical
innovation (44%)
Low level of technical Standard product
innovation (24%)
and technology
(32%)
Typical project
cost
Up to $68,500
(16%)
$68,501–$342,500
(25%)
Typical project
duration
Up to 3 months
(5%)
3–6 months (20%)
Other Project
Types (9%)
$342,501–$685,000
(12%)
$685,001–
$1.400,000 (12%)
$1,400,001–
More than
$6,850,000 (19%) $6,850,001 (16%)
6 months–1 year
(35%)
1–2 years (25%)
More than 2
years (15%)
Table 5: Respondents’ characterization by typical project.
As indicated in Figure 2, three factor
analyses were conducted:
• Factor analysis #1 for the improving
construct;
• Factor analysis #2 for the embedding
construct; and
• Factor analysis #3 where all items were
included to test for differences between
improving and embedding concepts.
Prior to the factor analysis, Bartlett’s
test of sphericity and a Kaiser-MeyerOlkin (KMO) test were conducted to
help assess the factorability of the data.
Bartlett’s test of sphericity should be p <
0.5 to be significant, whereas the KMO
index ranges from 0 to 1; in general, a
factor analysis is assumed to be appropriate if the KMO is higher than 0.6,
although 0.7 and above is a better indicator of ‘factorability’ (Kim & Mueller,
1978; Field, 2009).
Having conducted the factorability,
‘factor extraction’ tests using Keiser’s
criterion and Scree plot analysis were
conducted. ‘Factor extraction’ is the
determination of the number of ‘factors’
(in this research, ‘themes’) necessary to
represent the data (Kim & Mueller, 1978).
Kaiser’s test is one of the most commonly
used techniques, otherwise known as the
eigenvalue rule (Field, 2009). Using this
rule, only the ‘factors’ with an eigenvalue
greater than 1 should be considered for
further investigation (Kim & Mueller,
1978), whereas the Scree test involves
plotting each eigenvalue associated with
each extracted ‘factor,’ and at the point
the plot starts to level off in a linear
manner often indicates the number of
‘factors’ (themes) to select for a specific
construct. A combination of these techniques was employed in a complementary manner in this research.
The Extraction Method used was the
Principal Component Analysis. The SPSS
software package offers seven methods
of ‘factor extraction,’ namely: weighted
least squares, generalized least squares,
maximum likelihood, principal axis
factoring, alpha factoring, image factoring, and principal component analysis.
The chosen rotation method was the
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Improving
Project
Management
Practice
Processes Tools and Techniques
People and Organizational Learning
General Management System
Factor
Analysis #1
Project Management Culture
Factor
Analysis #3
Framework for Embedding
Useful Project Management
Improvement Initiatives
Adopter and Adoption
Embedding
Project
Management
Practice
Communication and Influence
Factor
Analysis #2
Inner Context
Outer Context
Implementation
Routinization
Figure 2: Construct validity of the ‘revised framework.’
Varimax method, because it minimizes
the incidence of items that have high
loadings on each given ‘factor’ (theme),
simplifying the interpretation of results.
Appendices 1 and 2 present the rotated
‘factor’ (theme) matrix loading and the
variance explained for each theme for
the key project management improvement initiatives (improving construct)
and for the key embedding factors
(embedding construct), respectively.
Table 6 summarizes the factor analysis steps followed by this research and
the results obtained to establish construct validity and better determine the
structure of the themes for improving
and embedding project management
practice.
The three questionnaire items
excluded from the improving construct
are about the concept of tailoring:
• V4: Tailoring project management processes to particular projects
• V5: Tailoring project management tools
and techniques to particular projects
• V6: Tailoring project management
information systems to particular projects
When these three items were
included in the questionnaire, the
94
objective was to ask about the importance of tailoring; in other words, when
the organization is standardizing project management, processes should be
adapted to different types of projects
handled in the organization. However,
from the data analysis, perhaps the
respondents understood tailoring as
something that each project manager
might do when using project management processes, meaning that instead
of using standardized project management processes, he or she should tailor
the processes to the specific project’s
needs. This might be the reason why
these items have a low correlation
coefficient level with other items, and
even the KMO score slightly improves.
Therefore, because there are doubts
that the items used are, in fact, measuring the constructs they claim to
be measuring, these three items are
removed from the following analysis.
The conceptualization of this research
was that when an organization is standardizing its project management processes, tools, and techniques, it must
also carefully tailor the standardized
project management processes, tools,
and techniques to different project
categories in the organization (i.e.,
‘one size does not fit all’).
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
Once the final structure of the
themes was established, it was necessary to conduct a reliability analysis
(ability to replicate results when repeating the study under the same setting),
using Cronbach’s alpha analysis for the
three themes under the improving construct and the six themes under the
embedding construct. Table 7 shows
that all Cronbach alpha values for each
theme are above the 0.5 minimum
threshold, and the 0.7 desired threshold (Nunnally, 1978), which means the
results are reliable.
Discussion
Since the beginning of this research, a
distinction has been made between the
concepts of improving and embedding.
In order to confirm this separate conceptualization, a third factor analysis
was conducted, including in the same
analysis all the questionnaire items for
improving and embedding construct.
The results show a complete separation of the key project management
improvement initiatives (items 1 to 25)
from the key factors for embedding
(items 26 to 52). That is, none of the
items for improving has a high load
under embedding themes, and none
of the items for embedding has a high
Steps
Results and Comments:
Improving Construct (Factor
Analysis #1)
Results and Comments:
Embedding Construct (Factor
Analysis #2)
Results and Comments:
Improving + Embedding
Construct (Factor Analysis #3)
1. Determine if • All items have at least half of more of their • All items have at least half of more • All items have at least half of more
correlation > 0.3, except V4,V5, V6
of their correlation > 0.3, except V42
of their correlation > 0.3, except V4,
factor analyV5, V6, V42, V38, V49
sis applicable • All data except V4,V5, V6 is suitable for FA
to data set
2. Determine
number of
‘factors’
(themes)
• Kaiser-Meyer-Olkin = 0.952
Including V4,V5, V6
• Kaiser-Meyer-Olkin = 0.960
Excluding V4,V5, V6
• The data set is the “excellent” level for
factor analysis (If Kaiser-Meyer-Olkin > 0.9)
• Kaiser-Meyer-Olkin = 0.958
Including V42
• Kaiser-Meyer-Olkin = 0.959
Excluding V42
• Kaiser-Meyer-Olkin increased 0.001,
however, it is not significant, so V42
is maintained for factor analysis
• The data set is the “excellent” level
for factor analysis
• Bartlett’s test of sphericity is significant
(p ≈ .000)
• The data is factorable
• Bartlett’s test of sphericity is significant (p ≈ .000)
• The data is factorable
• Kaiser-Meyer-Olkin = 0.958
Including all items
• Kaiser-Meyer-Olkin = 0.963
Excluding V4,V5, V6
• Kaiser-Meyer-Olkin = 0.965
Excluding V4,V5, V6, V42,
V38, V49
• Kaiser-Meyer-Olkin increased
0.002, however, it is not significant,
so only V4,V5, V6 is excluded from
factor analysis
• The data set is the “excellent” level
for factor analysis
• Bartlett’s test of sphericity is
significant (p ≈ .000)
• The data is factorable
• All items have communalities above the
threshold level, except for V12, with 0.476,
very near from the threshold 0.5
• The data shows factorability
• All items have communalities above
the threshold level, except V49 with
0.470, very near from the threshold
0.5
• The data shows factorability
• All items have communalities
above the threshold level, except
V49 with 0.483, very near from the
threshold 0.5
• The data shows factorability
• Three ‘factors’ have an eigenvalue > 1
explaining 63.4% of the total variance
• This is a 3-theme construct
• Four ‘factors’ have an eigenvalue
> 1 explaining 56.2% of the total
variance
• By adding two other ‘factors’
with eigenvalue near of 0.9, total
explained variance totals 63%
• Eight ‘factors’ have an eigenvalue
> 1 explaining 61.8% of the total
variance
• However, the nine ‘factor’ has a
eigenvalue very close to 1 (0.972)
and total explained variance
increases to 63.8%
• Scree plot shows that nine ‘factors’
• Scree plot shows that six ‘factors’
have an eigenvalue above or near
have an eigenvalue above or near 1,
1, where the plot starts to flatten in
where the plot starts to flatten in a
a linear way
linear way
• This also shows that this is a
• This also shows that this is a
9-theme construct
6-theme construct
• Using rotation results, obtain ‘factor’ • Using rotation results, obtain ‘factor’
• Using rotation results, obtain ‘factor’
loading matrix Factor Analysis #3:
loading matrix Factor Analysis #2:
loading matrix Factor Analysis #1:
• F1: V31, 32, 33, 34, V35, 36, 47,
• F1: V31, 32, 33, 34
• F1:V7, 8, 9, 10, 11, 12, 13, 21, 22, 23, 24
48, 50
• F2: V35, 36, 37, 38, 39
• F2: V14, 15, 16, 17, 18, 19, 20, 25
• F2:V7, 8, 9, 10, 11, 12, 13, 21,
• F3: V30, 50, 51, 52
• F3: V1, 2, 3
22, 23, 24
• F4: V44, 45, 46, 47, 48, 49
• F3: V14, 15, 16, 17, 18, 19, 20, 25
• F5: V26, 27, 28, 29
• F4: V1, 2, 3
• F6: V40, 41, 42, 43
• F5: V44, 45, 46, 49
• F6: V26, 27, 28, 29
• F7: V40, 41, 42, 43
• F8: 37, 38, 39
• F9: V30, 51, 52
• Scree plot shows that three ‘factors’ have
an eigenvalue above 1, where the plot
starts to flatten in a linear way
• This also shows that this is a 3-theme
construct
3. Develop ‘factor’ (theme)
structure
Table 6: Factor analysis results for improving and embedding constructs.
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Cronbach’s Alpha
Construct
Theme (‘Factor’ in Factor Analysis)
Factor Analysis #1:
Improving
F1: V7, 8, 9, 10, 11, 12, 13, 21, 22, 23, 24
0.927
F2: V14, 15, 16, 17, 18, 19, 20, 25
0.904
F3: V1,2,3
0.875
F1: V31, 32, 33, 34
0.821
F2: V35, 36, 37, 38, 39
0.826
F3: V30, 50, 51, 52
0.804
F4: V44, 45, 46, 47, 48, 49
0.832
F5: V26, 27, 28, 29
0.825
F6: V40, 41, 42, 43
0.718
Factor Analysis #2:
Embedding
Table 7: Reliability analysis: Cronbach’s alpha analysis.
load under improving themes. Appendix 3 shows that all the items measuring
the project management improvement
initiatives identified from the interview
analysis have a high load on themes
2, 3, and 4 and that all the items measuring the embedding factors have a
high load on themes 1, 5, 6, 7, 8, and
9. This justifies the distinction drawn
between these two concepts, although
there is some correlation between the
key project management improvement initiatives and key embedding
factors, as with for example, the initiative: ‘develop awareness of project
management value among all staff ’ and
the embedding factor: ‘demonstrating
the project management improvement initiative value.’ In the project
management improvement initiative,
‘develop awareness of project management value among all staff,’ the
message is that for an organization to
improve project management practice,
it is crucial that staff perceive the general benefits of the discipline of project management, and what it brings
to the success of projects and to the
organization. In the embedding factor
‘demonstrating the project management improvement initiative value,’ the
message is: If the organization wants
to embed a new practice it should
first communicate/demonstrate to
the stakeholders involved the specific
benefits of that new practice for the
stakeholders and for the organization.
96
A Refined Framework for Improving
Project Management Practice
Based on the nature of the questionnaire items V1 to V25, the following was
determined:
• ‘Factor’#1 (V7, V8, V9, V10, V11, V12,
V13, V21, V22, V23, and V24), although
V23 have slightly loaded higher on ‘Factor’#2 (V23 ‘loads’ in ‘Factor’#1–0.523
and in ‘Factor’#2–0.582), dealt with
the theme ‘people and organizational
learning’;
• ‘Factor’#2 (V14, V15, V16, V17, V18,
V19, V20, and V25), although once
more V16 have slightly loaded higher on
‘Factor’#1 (V16 ‘loads’ in ‘Factor’#2–0.483
and in ‘Factor’#2–0.500), better represented the theme ‘general management
system’; and
• ‘Factor’#3 (V1, V2, and V3) represents
the theme ‘processes, tools, and techniques.’
In summary, the factory analysis
conducted on items pertaining to the
improving project management practice construct is a 3–theme structure
instead of the originally hypothesized
4–theme structure, which included the
theme ‘project management culture.’
The theme ‘project management culture’ did not emerge, perhaps for two
different reasons:
1. ‘Project management culture’ is a
complex and vague concept and it
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
is strongly correlated with the other
themes, particularly with the themes
‘people and organizational learning’
and ‘general management system’; or
2. The questionnaire design was lacking
with respect to this theme. During the
questionnaire design, the formulation
of more detailed questions to explore
this theme directly was questioned.
Consequently, in the ‘refined framework’ (see Figure 3) the ‘project management culture’ theme was removed.
This does not mean that ‘project management culture’ is not a very relevant
theme to improve project management
practice. In popular parlance, the term
‘project management culture’ is a shorthand term for the way professionals
manage projects in their organizations.
In this sense, many of the project management improvement initiatives might
be regarded as being about project
management culture, and ‘project management culture’ is implicit in all the
three improving themes.
There were some slight differences
in the categorization into themes of a
few key project management improvement initiatives:
• The project management improvement initiative ‘project management
professionalization’ (V14) and the
project management improvement
initiative ‘establish project management career path for all project management roles’ (V15) in the ‘revised
framework’ were categorized under
the theme ‘people and organizational
learning’; however, statistical analysis confirmed that these initiatives
are more correlated with the theme
‘general management system.’ In fact,
under the construction of the ‘revised
framework,’ there was doubt about
which of these two themes these two
project management improvement
initiatives should be categorized into.
• The project management improvement initiative ‘benchmarking to
assess project management and
continuous improvement’ (V21 and
Corporate standardization and tailoring
of project management processes
Processes
Tools and
Techniques
Corporate standardization and tailoring of
project management tools and techniques
Corporate standardization and tailoring of
project management information system
Provide project management training
Manage project management competences
Develop a culture of learning
Key Project
Management
Improvement
Initiatives
and Themes
to Improve
People and
Organizational
Learning
Benchmarking to assess project
management and continuous improvement
Develop a basic understanding of
organizational project management
practices among all project stakeholders
Develop awareness of project
management value among all staff
Integrate the project management system
with the general management system
Develop supported infrastructure
Develop a project sympathetic
organizational structure
General
Management
System
Project management professionalization
Establish project management career path
for all project management roles
Establish project management practices as
internal standards
Perceived usefulness
Perceived case of use
Adopter
Adopter motivation
Predisposition for change
Resources to support change
Sponosorship
Proposed Framework for
Embedding Useful
Project Management
Improvement Initiatives
Inner Context
Project management maturity
Tension for change
Absorptive capacity for new knowledge
External stakeholder requirement
Interorganizational project
management practices
Outer Context
Unstable economic environment
Environmental culture
Key Factors
and Themes
to Embed
Demonstrating the project management
improvement initiative value
Communication
and Influence
Stakeholders involvement
Opinion leaders and key facilitators support
Piloting
Gradual implementation
Specific training
Implementation
Adaptation/re-invention
Integration with the existent practices
External collaboration
Feedback on the project management
improvement inititative impacts
Project management quality assurance process
Routinization
Adopter accountability
Nature of adoption decision-mandatory
Figure 3: ‘Proposed framework’ for embedding useful project management improvement initiatives.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
V22) in the ‘revised framework’ categorized under the theme ‘general
management system’; however, statistical analysis confirmed that this
initiative is more correlated with the
theme ‘people and organizational
learning,’ which means that most
respondents see this initiative as a
process of continuous improvement,
and therefore it loads more on ‘organizational learning,’ although some
people also see it more as a process
to assess as the research has conceptualized it.
A Refined Framework for Embedding
Project Management Practice
The eigenvalues were examined: the
results indicate that four themes (‘factors’ or ‘components’ in factor analysis) had eigenvalues above 1, suggesting
that this construct was based on four
themes explaining 56.2% of total variance. However, the eigenvalues of ‘factors’ five and six are close to one, and
including these two ‘factors,’ the total
explained variance increases to 63%. A
second criterion for ‘factor extraction’
consists of keeping those ‘factors’ or
‘components’ that explain at least 60%
of the total variance (Field, 2009). On
the other hand, the 4-theme structure
(eigenvalues > 1, which minimizes the
number of ‘factors’) mixes almost all
concepts or themes that this research
conceptualized and for meaning purposes the research wants to separate.
Therefore, a better conceptualization
is under a 6-theme construct. With the
6-theme construct, the factor analysis
results grouped the items in a structure
of themes similar from the conceptualization of the ‘revised framework.’
Based on the nature of the questionnaire items V26 to V52, it was determined:
• ‘Factor’#1 (V31, V32, V33, and V34)
dealt with the theme ‘communication
and influence’;
• ‘Factor’#2 (V35, V36, V37, V38, and
V39) dealt with the theme ‘inner context’;
98
• ‘Factor’#3 (V30, V50, V51, and V52)
dealt with the theme ‘routinization.’
The embedding factor ‘nature of adoption decision-mandatory’ (corresponding to questionnaire item V30), in the
‘revised framework’ categorized under
the theme ‘adopter and adoption’;
however, statistical analysis confirmed
that this embedding factor is more correlated with the theme ‘routinization,’
indicating that for a new project management practice to be routinely used,
the adoption process needs to be mandatory as opposed to optional;
• ‘Factor’#4 (corresponding to questionnaire items V44, V45, V46, V47, V48,
and V49), dealt with the theme ‘implementation,’ although ‘adaptation/
re-invention’ (V47) and ‘integration
with the existent practices’ (V48) have
slightly higher loadings in ‘Factor’#1
‘communication and influence.’ Even
with the necessity to communicate that
new project management practices are
integrated with existent practices and
there was adaptation to the project
needs. First, it is necessary during the
implementation process to take into
account these two embedding factors.
• ‘Factor’#5 (corresponding to questionnaire items V26, V27, V28, and V29),
dealt with the theme ‘adopter and
adoption.’ This theme after questionnaire data analysis was renamed just
for ‘adopter,’ as the embedding factor
‘nature of adoption decision-mandatory’ (V30) was included under the
theme ‘routinization’;
• ‘Factor’#6 (corresponding to questionnaire items V40, V41, V42, and V43),
dealt with the theme ‘outer context.’
Figure 3 presents a ‘proposed framework,’ which is divided into ‘key themes
and project management improvement initiatives for improving’ and ‘key
themes and factors for embedding.’
In addition, the project management
improvement initiatives and embedding factors were re-categorized into
themes based on the survey data analysis (highlighted in bold in Figure 3).
The consolidation of the findings was
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
a straightforward process, because the
questionnaire survey confirmed most
of the conceptualization resulting from
the interview analysis (‘revised framework’). Although, as referred to above,
the questionnaire items pertaining to
tailoring project management processes,
tools, and techniques were excluded
from quantitative data analysis, the final
‘proposed framework’ maintained the
concept of tailoring, as the interviews
heavily emphasized its importance to
improving project management practice.
In summary, the framework incorporates
the initial project management improvement initiatives and embedding factors
identified from the literature review,
suitably modified to reflect the alterations suggested from the program of
interviews and clarified from the questionnaire results.
This paper does not explore how
the identified key project management improvement initiatives and key
embedding factors are related; therefore, the framework just shows a link
between the boxes ‘key themes and
project management improvement initiatives to improve’ and ‘key themes and
factors to embed’ to highlight the relationship between these two concepts.
Reflections on the Research Process
The results of the research indicate that
the proposed framework is a useful analytical tool that can help explain how
organizations can embed useful project
management improvement initiatives;
however, like any conceptual framework, it is a simplification of reality
and should be used with caution, not
the least because of a number of interrelated issues related to the research
process itself:
1. Difficulty in the selection of an appropriate level of decomposition for the
conceptual framework developed. In
this research study, reasonably high
abstraction levels of factor descriptions
were adopted. In the improving construct it was necessary to make judgments about how far to distinguish
the range of project management
improvement initiatives; for example,
a key initiative identified was ‘corporate standardization and tailoring of
project management processes’ rather
than distinguishing different kinds
of processes, which each organization should select dependent on its
organizational context. In the embedding construct, the embedding factor
‘perceived usefulness’; is not further
broken down into the components of
‘perceived usefulness.’ However, it may
be useful for organizations to understand how this factor can be enhanced
when embedding a particular project
management improvement initiative,
in which case a more detailed, second level of discrimination would be
needed.
2. The inclusion of project management
improvement initiatives and embedding factors in the ‘initial framework’ was based on the researcher’s
judgment of their relevance in literature and in practice. A different
researcher setting out to answer the
same research questions might have
produced a different ‘initial framework.
A different set of primary sources
might have been identified and different judgments made about their
quality and relevance. This is an
inherent characteristic of any review
that addresses complex interventions
and seeks to unpack the nuances
of their implementation in different
social, organizational, and environmental contexts (Greenhalgh et al.,
2004).
3. The research needed to weigh practical
considerations about what information
could be obtained against objectives for
the research. This was particularly evident when designing the questionnaire
survey. Although a lengthy questionnaire was produced, it was necessary to
incorporated multiple issues in some
questions to avoid an excessive number of factors investigated. In particular, ideally more questions might have
been included relating to developing
a project management culture in the
organization. Project management culture is a complex theme and the decision was made not to further extend
the questionnaire with a long section
of questions to explore this theme.
Consequently, it is difficult to know
whether ‘project management culture’
is a complex and vague concept that
is strongly correlated with the other
themes, as the quantitative analysis
suggests, or the theme did not ‘come
up’ because the questionnaire design
was lacking in the coverage of project management improvement initiatives exclusive to this theme. Further
research work might explore the concept of ‘project management culture’
more explicitly.
Conclusions
The framework for embedding useful
project management improvement initiatives has been developed in four main
steps, whereas this papers addresses in
detail only the last two:
1. An ‘initial framework’ of key project
management improvement initiatives
and key embedding factors, derived
from the literature and the researcher’s
professional experience, identified 15
key project management improvement initiatives and 32 key factors for
embedding.
2. A ‘revised framework’ constructed following an exploratory study, consisting of 30 semi-structured interviews of
practitioners. Analysis of these interview data: (a) identified three new
key project management improvement initiatives and ten key factors for
embedding; (b) confirmed twelve key
project management improvement
initiatives and sixteen embedding
factors; (c) merged three key project management improvement initiatives and five embedding factors into
other project management improvement initiatives; and (d) discredited
eleven embedding factors, resulting
in a modified total of 15 key project
management improvement initiatives
and 26 embedding factors.
3. Responses from a worldwide, webbased questionnaire were analyzed to
test the ‘revised framework’ and produce a ‘refined framework.’ The questionnaire survey confirmed all the
project management improvement
initiatives and embedding factors
presented in the ‘revised framework’;
however, some of the initiatives and
embedding factors were re-categorized into different themes based on
the survey data analysis.
4. The final ‘proposed framework’ derived
from the consolidation of interview
data analysis and questionnaire survey
data analysis. The consolidation of the
findings was a straightforward process,
because, as noted above, the questionnaire survey confirmed most of the
conceptualization resulting from the
interview analysis.
At the beginning of the research
conceptualization, it was hoped that the
research might come up with a relatively
short list of relevant embedding factors
on which professionals should focus
their attention. However, the results of
the empirical work show that embedding project management improvement
initiatives is a complex issue, and cannot be reduced to a small list of factors.
It may be argued that even the present
list of embedding factors is not detailed
enough.
Theoretical Contribution
There are two main theoretical contributions of this research. First, this
research builds knowledge in the area
of embedding project management, for
which there is limited understanding
(Cranefield & Yoong, 2009). Even the
word ‘embedding’ is scarcely used in the
project management literature, perhaps
because there is a common notion that
if an organization is improving its project management practices, such project
management practices must be successfully embedded in the organization.
However, this research conceptualizes
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
and provides empirical evidence that
improving and embedding are different
constructs. The research examines the
problem of improving and embedding
project management practice using a
‘success factor’ approach, and identifies a set of key project management
improvement initiatives and factors that
can influence the embedding of these
initiatives in organizations, based on
empirical work. Second, the research
formulates the embedding construct by
drawing on existing knowledge about
diffusion; dissemination; implementation and routinization from information
and technology tools; and new practices
in healthcare services, and by considering how these ideas may apply to
the embedding of the project management practice construct. In doing so,
the research project adopted an “innovation lens” perspective, which is itself
a relatively novel approach. Most of the
literature on diffusion of innovation has
treated innovations as technology innovations and makes heavy use of a technology adoption perspective focused on
adopter related factors (Chan & Thong,
2009). However, this research has identified other important factors beyond
adopter related factors related to: inner
context; outer context; communication
and influence; implementation; and
routinization. By incorporating a more
diverse group of embedding factors into
the framework, the research provides
a more complete understanding of the
embedding process of project management improvement initiatives.
This conceptual framework can
be a foundation for future empirical
research. The framework has been validated by quantitative analysis of the
survey data; however, further validation
through the use of case studies in order
to highlight contextual variables is warranted.
Contributions to Practice
The main contribution to practice is
the conceptual framework itself. The
framework gathers current knowledge
100
on improving and embedding project
management practice, which can provide guidance to organizations interested in increasing their performance
in the management of projects. The
framework highlights the need for
organizations to focus on key project
management improvement initiatives,
beyond the specific project management tools and techniques and gives
some guidance on priority areas, such
as the alignment of project management
activities with the whole organization’s
activities or professionalization of the
project manager’s role. The framework
also lists a number of facilitating factors
that can lead the embedding of project management improvement initiatives. Although adopter features are an
important group of factors to consider
(Venkatesh & Bala, 2008), organizations
should not neglect a broader perspective that considers inner context-related
factors, outer context-related factors,
communication and influence-related
factors, implementation-related factors, and routinization-related factors
(Greenhalgh et al., 2004). This expanded
list of facilitating factors can act as levers
that organizations can use in devising
strategies to promote embedding project management improvement initiatives into their systems. For example, in
respect of adopters, embedding can be
promoted by:
1. Educating adopters on the positive benefits of project management
improvement initiatives (e.g., usefulness, ease of use, and value);
2. Influencing adopters’ motivation by
providing incentives (e.g., by emphasizing positive career consequences
and availability of top management
support);
3. Informing adopters about the outer
context (informing about interorganizational project management
practices and the unstable economic
environment that presses the organization to become more competitive);
4. Enhancing the ‘absorptive capacity
for new knowledge’ in the organiza-
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
tion by developing a culture of learning (e.g., by establishing small group
meeting rooms, rewarding those who
pursue learning and who teach others what they know); and
5. Implementing initiatives to enhance
the ability of their adopters in using
project management improvement initiatives (e.g., by providing adequate
training, external collaboration support, piloting, and so forth).
These actions form just one set of
actions that organizations can pursue
to facilitate the embedment of project
management improvement initiatives
using as guidance the key embedding
factors set out in the ‘proposed framework.’
Limitations of the Research
and Future Work
A main limitation of the developed
framework relates to its practical contribution to project management practitioners, as follows:
1. From the fifteen project management
improvement initiatives, what initiatives should organizations embed first
and in what order? Organizations may
select the initiatives that were emphasized by more interviewees, or that
scored highest in the questionnaire
survey, or select the ones that they
feel more ‘comfortable’ to deal with
faster. This is an important limitation
on the application of the conceptual
framework, which requires potential
users of the framework to subjectively
prioritize the relevance of the project management improvement initiatives and embedding factors for their
organizational context. Further work
could involve testing the framework
through case studies to explore the
varying importance and relevance that
different organizations (by industry,
size, strategy, geographic location, and
project types) place on the different
key project management improvement
initiatives and factors for embedding
these initiatives into organizations.
2. Although the framework suggests a
lengthy list of possible factors pertinent to the embedding project
management practice, none of these
can be thought of as a simple variable. Most of the embedding factors
interact with other factors; therefore,
the number of possible interactions
is extremely high and the nature of
interactions is likely to be highly
contingent on the project management improvement initiative and
the organizational context. It is not
possible, therefore, nor will it ever
be possible, to provide prescriptive
and transferable recommendations
on how different embedding factors
of the framework will interact with
one another in a particular situation.
Rather, such interactions might best
be explored in relation to the embedding of particular initiatives using an
open-ended question format by the
users of the framework. For example,
interaction between ‘key facilitators
support’ and ‘perceived ease of use:’
How does a particular adopter perceive that the existence of key facilitators to support the use of particular
project management improvement
initiative will in turn ease the use
of this particular initiative (and can
he or she be supported in changing
these perceptions)?
Acknowledgments
This research is sponsored by the FCT—
Fundação para a Ciência e a Tecnologia
(SFRH/BD/65423/2009). The authors
gratefully acknowledge the contributions of the 30 participants in the interview phase of the research and the 793
respondents who completed the questionnaire. Without their support this
work would not have been possible. We
also wish to acknowledge the many helpful comments received on earlier drafts
of this work from professional and academic colleagues during and after the
presentations during the VI Conference
of the PMI Portugal Chapter held in
Lisbon (Portugal), June 2012; the PMI
Global Congress EMEA—2013 held in
®
Istanbul (Turkey) in April 2013; and the
IRNOP 2013 held in Oslo (Norway), June
2013. Furthermore, the authors would
like to thank the referees of this paper for
their constructive comments.
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Decision, 41(5), 452–465.
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Gabriela Fernandes is a PhD researcher
at the University of Southampton (UK), an
invited lecturer at the University of Minho
(Portugal); she lectures and researches
on project management and spent 10
years in the coordination and management of projects in different industries.
Throughout her career, she has served as
an executive director of some companies
in the industrial and information and
telecommunications sectors of activity.
She was responsible for various communications and author of some publications in the area of project management.
She developed and taught several project
management training courses and as a
consultant, coordinated the implementation of project management systems,
as well as the implementation of project
management office structures. She
holds a degree in Production Engineering
and Management from the University
of Minho and a master’s degree in
Industrial Engineering with specialization
in Evaluation and Project Management
and Innovation from the same university. She is a member of the Project
Management Institute (PMI), was director
of the PMI Portugal Chapter, and is a
Project Management Professional (PMP)®
credential holder. She can be contacted at
[email protected]
Stephen Ward is Professor of
Management at Southampton
Management School, University of
Southampton (UK). For more than thirty
years, his teaching, research, and consulting activities have focused on risk
and uncertainty management. Stephen
has served on the British Standards
Institute Risk Management Committee
that developed the new UK standard on
risk management, and he is a Fellow of
the UK Institute of Risk Management;
research funded by the UK Institution of
Civil Engineers addressed operational risk
in major infrastructure projects and businesses. Stephen has published extensively
on the development of effective risk
management processes, particularly for
project management, including authorship
of Risk Management Organization and
Context (Witherby, 2005) and, jointly with
Chris Chapman, Managing Project Risk
and Uncertainty: A Constructively Simple
Approach to Decision Making (Wiley, 2002)
and How to Manage Project Opportunity
and Risk: Why Uncertainty Management
Can be a Much Better Approach than Risk
Management. (Wiley, 2011) He can be
contacted at [email protected]
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Developing a Framework for Embedding Useful Project Management Improvement Initiatives in Organizations
Madalena Araújo is a senior staff member in the Department of Production
and Systems, School of Engineering
of the University of Minho, in Portugal.
Her research interests have centered
104
on Decision and Utility Theory and Risk
Management, mainly applied to Investment,
Environment and Energy Projects. She
is a MIT_Portugal programme Professor,
in the Engineering Design and Advanced
Manufacturing area. She has had extensive
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
involvement in university management
duties, both as Department and Research
Centre Head, and as School Deputy Head.
She has been Departmental Erasmus coordinator for nearly twenty years. She can be
contacted at [email protected]
Appendix 1: Improving Construct: Varimax Rotation and Variance Explained
aTheme
(‘factor’ or ‘component’
in factor analysis)
Item
Project Management Improvement Initiative in the ‘Revised Framework’
1
2
3
V1
Corporate standardization of project management processes
0.304
0.287
0.789
V2
Corporate standardization of project management tools and techniques
0.260
0.247
0.840
V3
Corporate standardization of project management information system
0.271
0.161
0.793
V7
Provide project management training
0.617
0.242
0.368
V8
Manage project management competences
0.714
0.238
0.307
V9
„
0.747
0.229
0.252
V10
„
0.516
0.404
0.351
V11
„
0.725
0.191
0.278
V12
„
0.618
0.274
0.141
V13
Develop a culture of learning
0.677
0.382
0.139
V14
Project management professionalization
0.163
0.758
0.177
V15
Establish project management career path for all project management roles
0.494
0.597
0.264
V16
Integrate the project management system with the general management system
0.500
0.483
0.270
V17
Develop supported infrastructure
0.274
0.559
0.389
V18
Develop a project sympathetic organization structure
0.305
0.635
0.301
V19
„
0.286
0.755
0.169
V20
„
0.362
0.731
0.105
V21
Benchmarking to assess project management and continuous improvement
0.584
0.455
0.246
V22
„
0.616
0.354
0.250
V23
Develop awareness of project management value among all staff
0.523
0.582
0.156
V24
Develop a basic understanding of organizational project management practices among all project
stakeholders
0.628
0.420
0.185
V25
Establish project management practices as internal standards
0.436
0.536
0.394
Eigenvalues
11.620
1.281
1.048
Percent of variance explained
52.8%
5.8%
4.8%
aTheme
(‘factor’ or ‘component’ in factor analysis): 1- People and organizational learning; 2- General management system; 3- Processes, tools, and technique.
Dark shaded: the item dealt with the respective column theme.
Light shaded: although the item has slightly loaded higher in the respective column theme, it dealt with the column theme shaded in dark.
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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Appendix 2: Embedding Construct: Varimax Rotation and Variance Explained
aTheme
Item
Embedding Factor in the ‘Revised Framework’
(‘factor’ or ‘component’ in factor analysis)
1
2
3
4
5
6
V26
Perceived usefulness
0.270
0.118
0.169
0.142
0.736
0.126
V27
Perceived ease of use
0.132
0.083
0.105
0.263
0.783
0.068
V28
Adopter motivation
0.364
0.418
0.164
0.084
0.579
0.047
V29
Predisposition for change
0.337
0.400
0.183
0.009
0.562
0.086
V30
Nature of adoption decision- mandatory
0.027
0.000
0.725
0.024
0.335
0.271
V31
Demonstrating the project management improvement initiative value
0.513
0.106
0.290
0.216
0.393
0.140
V32
Stakeholders’ involvement
0.631
0.050
0.229
0.137
0.254
0.237
V33
Opinion leaders and key facilitators support
0.660
0.182
0.029
0.106
0.210
0.288
V34
„
0.700
0.260
0.175
0.130
0.212
0.171
V35
Resources to support change
0.363
0.513
0.329
0.171
0.156
0.083
V36
Sponsorship
0.481
0.525
0.378
0.072
0.185
0.054
V37
Project management maturity
0.245
0.535
0.440
0.151
0.094
0.129
V38
Tension for change
0.046
0.695
0.008
0.173
0.181
0.279
V39
Absorptive capacity for new knowledge
0.322
0.591
0.220
0.235
0.184
0.232
V40
Inter-organizational project management practices
–0.027
0.292
0.219
0.375
0.069
0.583
V41
External stakeholder requirement
0.194
0.283
0.093
0.136
0.141
0.609
V42
Unstable economic environment
0.197
0.009
0.118
0.068
0.044
0.784
V43
Environmental culture
0.454
0.144
0.092
0.224
0.108
0.481
V44
Piloting
0.145
0.094
0.128
0.718
0.220
0.224
V45
Gradual implementation
0.257
0.151
0.076
0.752
0.149
0.162
V46
Specific training
0.450
0.208
0.342
0.510
0.163
0.054
V47
Adaptation/re-invention
0.586
0.197
0.166
0.411
0.221
–0.001
V48
Integration with the existent practices
0.555
0.185
0.214
0.405
0.131
0.113
V49
External collaboration
0.164
0.188
0.245
0.452
0.028
0.378
V50
Feedback on the project management improvement initiative impacts
0.447
0.342
0.467
0.261
0.122
0.096
V51
Project management quality assurance process
0.360
0.227
0.657
0.253
0.097
0.080
V52
Adopter accountability
0.234
0.267
0.652
0.207
0.102
0.135
Eigenvalues
11.337
1.547
1.193
1.095
0.962
0.873
Percent of variance explained
42.0%
5.7%
4.4%
4.1%
3.6%
3.2%
aTheme
(‘factor’ or ‘component’ in factor analysis): 1- Communication and influence; 2- Inner context; 3- Routinization ; 4- Implementation; 5- Adopter;
6- Outer context.
Dark shaded: the item dealt with the respective column theme.
Light shaded: although the item have slightly loaded higher in the respective column theme, it dealt with the column theme shaded in dark.
106
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
Appendix 3: Improving and Embedding Different Concepts: Varimax Rotation and Variance
Explained
Theme (‘factor’ or ‘component’ in factor analysis)
Item
1
2
3
4
5
6
7
8
9
V1
0.135
0.313
0.284
0.732
0.063
0.112
0.033
0.106
0.157
V2
0.121
0.291
0.251
0.775
0.025
0.089
0.103
0.070
0.172
V3
0.140
0.285
0.182
0.764
0.071
0.040
0.121
0.012
–0.006
V7
0.084
0.625
0.177
0.272
0.175
0.215
–0.081
0.248
0.088
V8
0.144
0.709
0.186
0.215
0.195
0.177
–0.035
0.225
0.048
V9
0.089
0.744
0.163
0.156
0.151
0.176
0.069
0.121
0.142
V10
0.213
0.519
0.386
0.237
0.086
0.002
0.051
0.062
0.221
V11
0.173
0.678
0.208
0.180
0.107
0.006
0.187
0.066
0.120
V12
0.311
0.561
0.303
0.118
–0.065
–0.050
0.194
–0.108
–0.091
V13
0.319
0.641
0.360
0.105
–0.048
0.078
0.128
0.040
–0.085
V14
0.138
0.168
0.757
0.098
0.004
–0.014
0.012
0.053
0.150
V15
0.255
0.496
0.586
0.176
–0.010
0.050
0.070
0.041
0.076
V16
0.222
0.468
0.426
0.228
0.081
0.180
0.030
0.209
–0.058
V17
0.113
0.256
0.562
0.289
0.055
0.067
0.022
0.165
0.127
V18
0.143
0.289
0.573
0.237
0.125
0.138
0.158
0.113
0.006
V19
0.070
0.294
0.684
0.123
0.213
0.209
0.118
0.087
0.062
V20
0.160
0.340
0.658
0.032
0.152
0.229
0.072
0.085
0.019
V21
0.174
0.539
0.447
0.100
0.050
0.006
0.211
–0.005
0.356
V22
0.124
0.581
0.376
0.079
0.069
0.003
0.242
–0.014
0.388
V23
0.155
0.487
0.518
0.110
0.268
0.203
0.065
0.050
0.011
V24
0.160
0.570
0.363
0.121
0.240
0.249
–0.012
0.102
0.018
V25
0.223
.391
0.493
0.343
0.145
0.186
–0.003
0.103
0.116
V26
0.360
0.155
0.195
0.086
0.098
0.662
0.097
0.054
0.081
V27
0.241
0.147
0.123
0.119
0.173
0.715
0.079
0.035
0.089
V28
0.493
0.191
0.218
–0.005
0.007
0.486
0.047
0.283
0.113
V29
0.432
0.192
0.226
0.036
–0.012
0.460
0.060
0.263
0.197
V30
0.166
0.072
0.141
0.176
0.062
0.284
0.208
0.039
0.669
V31
0.582
0.141
0.160
0.189
0.181
0.321
0.132
0.011
0.124
V32
0.595
0.227
0.093
–0.015
0.188
0.189
0.170
–0.061
0.195
V33
0.647
0.165
0.058
0.030
0.042
0.184
0.301
0.040
–0.024
V34
0.744
0.169
0.139
0.081
0.054
0.122
0.161
0.104
0.088
V35
0.498
0.097
0.215
0.135
0.155
0.081
0.072
0.395
0.183
V36
0.603
0.113
0.280
0.110
0.064
0.102
0.030
0.420
0.190
V37
0.371
0.169
0.156
0.219
0.140
–0.005
0.080
0.523
0.279
V38
0.179
0.111
0.120
0.019
0.108
0.138
0.293
0.651
–0.020
V39
0.456
0.274
0.137
0.053
0.182
0.088
0.217
0.450
0.129
V40
0.094
0.131
0.062
0.001
0.365
0.050
0.585
0.266
0.197
V41
0.260
0.142
–0.074
0.017
0.155
0.183
0.580
0.295
0.042
V42
0.153
0.027
0.149
0.152
0.119
0.023
0.727
0.011
0.105
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Appendix 3: (Continues)
Theme (‘factor’ or ‘component’ in factor analysis)
Item
1
2
3
4
5
6
7
8
9
V43
0.446
0.134
0.219
0.090
0.217
0.036
0.458
0.065
–0.035
V44
0.231
0.162
0.137
0.002
0.637
0.140
0.241
0.039
0.113
V45
0.342
0.079
0.150
0.065
0.691
0.103
0.167
0.060
0.032
V46
0.539
0.135
0.140
0.182
0.489
0.137
0.039
0.151
0.104
V47
0.643
0.120
0.122
0.130
0.361
0.176
–0.006
0.133
–0.021
V48
0.580
0.107
0.120
0.151
0.409
0.101
0.087
0.100
0.040
V49
0.217
0.189
0.056
0.028
0.509
–0.016
0.284
0.179
0.158
V50
0.563
0.296
0.118
0.045
0.240
0.067
0.067
0.246
0.309
V51
0.506
0.206
0.085
0.178
0.253
0.040
0.038
0.185
0.477
V52
0.384
0.150
0.135
0.077
0.247
0.050
0.043
0.257
0.526
Eigenvalues
18.89
3.86
1.64
1.45
1.18
1.14
1.08
1.05
0.97
% explained
38.5%
7.9%
3.4%
3.0%
2.4%
2.3%
2.2%
2.2%
2.0%
Dark shaded: the item dealt with the respective column theme.
Light shaded: although the item have slightly loaded higher in the respective column theme, it dealt with the column theme shaded in dark.
108
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
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does it guarantee the validity or accuracy of any data,
claim, opinion, or conclusion presented in either editorial
content, articles, From the Editor, or advertisements.
Author Guidelines
Each paper should contain one key point, which the
author should be able to state in one sentence. Authors
are expected to describe the knowledge and foundations
underlying their research approach, and theoretical concepts that give meaning to data, and to demonstrate how
they are relevant to organizations. Papers that speculate
beyond current thinking are more desirable than papers
that use tried-and-true methods to study routine problems, or papers motivated strictly by data collection and
analysis.
Authors should strive to be original, insightful, and theoretically bold; demonstration of a significant value-added
advance to the field’s understanding of an issue or topic is
crucial to acceptance for publication. Multiple-study papers
that feature diverse methodological approaches may be
more likely to make such contributions.
Authors should make contributions of specialized
research to project, program, and portfolio management
theory and define any specialized terms and analytic
techniques used. Papers should be well argued and well
written, avoiding jargon at all times. The Journal has no
preference for subjects of study, nor do we attach a greater
significance to one methodological style than another.
Avoid Use of Commercialism
Papers should be balanced, objective assessments that
contribute to the project management profession or
provide a constructive review of the methodology. Papers
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that are commercial in nature (e.g., those that endorse or
disparage specific products) will not be published.
Editing Your Paper
Make sure papers adhere to the theme or question to
be answered. Writing should be clear and concise. Fulllength research articles should not exceed 30 doublespaced manuscript pages (approximately 7,500 words),
including references, appendices, tables, and figures.
Manuscript Format/Style
All manuscripts submitted for consideration should meet
the following guidelines:
• All papers must be written in the English language
(American spelling).
• Title page of the manuscript should include only the title
of the paper.
To permit objective reviews by two referees, the abstract
and first page of the text must not reveal the author(s) and/
or affiliation(s), but only the manuscript title.
Formatting the Paper
Papers must be formatted in electronic format using
Microsoft Word 2003 or earlier versions (no .docx versions,
please). For Mac users, convert the file to a Windows format. If the conversion does not work, Mac users should
save files as Word (.doc) files.
Fonts
Use a 10- or 12-point Times or Times New Roman font for
the text. You may use bold and italics in the text, but do
not underline. Use 10-point Helvetica or Arial font for text
within tables and graphics.
Margins
Papers should be double-spaced and in a single-column
format. All margins should be 1 inch.
Headings
Use 1st, 2nd, and 3rd-level headings only. Do not number
these headings.
References, Footnotes, Tables, Figures,
and Appendices
Always acknowledge the work of others used to advance
a point in your paper. For questions regarding reference
format, refer to the current edition of Publication Manual
of the American Psychological Association. Identify text
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
citations with the author name and publication date in parentheses, (e.g., Cleland & King, 1983) and list in alphabetical
order as references at the end of the manuscript. Include page
numbers for all quotations (page numbers should be separated by an en dash, NOT a hyphen).
Follow the formats in the examples shown below:
Baker, B. (1993). The project manager and the media: Some
lessons from the stealth bomber program. Project Management Journal, 24(3), 11–14.
Cleland, D. I., & King, W. R. (1983). Systems analysis and
project management. New York, NY: McGraw-Hill.
Hartley, J. R. (1992). Concurrent engineering. Cambridge,
MA: Productivity Press.
It is the author’s responsibility to obtain permission to
include (or quote) copyrighted material, unless the author
owns the copyright. Use the Wiley permission form, which is
available at the Manuscript Central site.
Graphics and Illustrations
Be sure to number tables and figures with Arabic numerals,
include titles for each, and group at the end of the manuscript. Indicate their preferred location within the body of
the text. In addition, provide artwork in 300-dpi jpg, tiff, or
PowerPoint formats.
Tips for creating graphics:
• Provide only the essential details (too much information can
be difficult to display).
• Color graphics are acceptable for submission, although the
Journal is published in grayscale.
• Helvetica or Arial font should be used for text within the
graphics and tables.
• Figure numbers and titles are centered and appear in boldface
type below the figure.
• Table numbers and titles are centered and appear in boldface
type above the table.
• Figures and tables should be cited and numbered consecutively in the order in which they appear in the text.
• Tables with lines separating columns and rows are acceptable.
Use an appendix to provide more detailed information,
when necessary.
Submission Policy
Submit manuscripts electronically using the Journal’s Manuscript Central site. Manuscript Central is a web-based peer
review system (a product of ScholarOne). Authors will be
asked to create an account (unless one already exists) prior
to submitting a paper. Step-by-step instructions are provided
online. The progress of the review process can be obtained via
Manuscript Central. Other questions regarding publication
may be sent to [email protected].
Manuscripts should include the following in the order
listed:
• Title page. This includes only the title of the manuscript.
(do not include authors’ names)
• Abstract. Outline the purpose, scope, and conclusions of the
manuscript in 100 words or less.
• Keywords. Select 4 to 8 keywords.
• Text. To permit objective reviews by two referees, the abstract
and first page of the text should not reveal the authors and/or
affiliations, but only the manuscript title.
• References. Use author-date format.
• Illustrations and tables. These should be titled, numbered (in
Arabic numerals), and placed on a separate sheet, with the
preferred location indicated within the body of the text.
• Biographical details for each author. Upon manuscript
acceptance, authors must also provide a signed copyright
agreement.
By submitting a manuscript, the author certifies that it is
not under consideration by any other publication; that neither the manuscript nor any portion of it is copyrighted; and
that it has not been published elsewhere. Exceptions must
be noted at the time of submission. Authors using their own
previously published or submitted material as the basis for a
new submission are required to cite the previous work and
explain how the new submission differs from the previously
published work. Accepted manuscripts become the property
of PMI, which holds the copyright for materials that it publishes. Material published in the Journal may not be reprinted
or published elsewhere, in whole or part, without the written
permission of PMI.
Accepted manuscripts may be subject to editorial changes
made by the Editor. The author is solely responsible for all
statements made in his or her work, including changes made
by the editor. Submitted manuscripts are not returned to the
author; however, reviewer comments will be furnished.
Review Process
The reputation of the Journal and contribution to the field
depend upon our attracting and publishing the best research.
The Journal competes for the best available manuscripts by
having the largest and widest readership among all project
management journals. Equally important, we also compete
by offering high-quality feedback. The timeliness and quality
of our review process reflect well upon all who participate
in it.
Developmental Reviews
It is important that authors learn from the reviews and feel
that they have benefited from the Journal review process.
Therefore, reviewers will strive to:
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj
111
Author Guidelines
Be Specific. Reviewers point out the positives about the
paper, possible problems, and how any problems can be
addressed. Specific comments, reactions, and suggestions
are required.
Be Constructive. In the event that problems cannot be fixed
in the current study, suggestions are made to authors on how
to improve the paper on their next attempt. Reviewers document as to whether the issue is with the underlying research,
the research conclusions, or the way the information is being
communicated in the submission.
Identify Strengths. One of the most important tasks for a
reviewer is to identify the portions of the paper that can be
improved in a revision. Reviewers strive to help an author
shape a mediocre manuscript into an insightful contribution.
Consider the Contribution of the Manuscript. Technical
correctness and theoretical coherence are obvious issues for
a review, but the overall contribution that the paper offers is
also considered. Papers will not be accepted if the contribution it offers is not meaningful or interesting. Reviewers will
address uncertainties in the paper by checking facts; therefore, review comments will be as accurate as possible.
Consider Submissions from Authors Whose Native
Language Is Not English. Reviewers will distinguish between
the quality of the writing, which may be fixable, and the quality of the ideas that the writing conveys.
Respectful Reviews
PMI recognizes that authors have spent a great deal of time
and effort on every submission. Reviewers will always treat an
author’s work with respect, even when the reviewer disagrees
or finds fault with what has been written.
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Double-Blind Reviews
Submissions are subjected to a double-blind review, whereby
the identity of the reviewer and the author are not disclosed.
In the event that a reviewer is unable to be objective about
a specific paper, another reviewer will be selected for that
paper. Reviewers will not discuss any manuscript with anyone
(other than the Journal Editor) at any time.
Pointers on the Substance of the Review Theory
• Does the paper have a well-articulated theory that provides
conceptual insight and guides hypotheses formulation?
• Does the study inform or improve our understanding of that
theory?
• Are the concepts clearly defined?
• Does the paper cite appropriate literature and provide proper
credit to existing work on the topic? Has the author offered
critical references? Does the paper contain an appropriate
number of references?
• Do the sample, measures, methods, observations, procedures,
and statistical analyses ensure internal and external validity?
Are the statistical procedures used correctly and appropriately? Are the author’s major assumptions reasonable?
• Does the empirical study provide a good test of the theory and
hypotheses? Is the method chosen (qualitative or quantitative) appropriate for the research question and theory?
• Does the paper make a new and meaningful contribution
to the management literature in terms of theory, empirical
knowledge, and management practice?
• Has the author given proper citation to the original source of
all information given in his or her work or in others’ work that
was cited?
August/September 2014 ■ Project Management Journal ■ DOI: 10.1002/pmj