A Framework for Building Successful Project-Based Organizations

A Framework for Building Successful Project-Based Organizations  - JS Project

Prezentacja na XX IPMA World Congress, Szanghaj, październik 2006

Autorzy:

Dr. Ralf Müller, Umeå School of Business

Dr. Jerzy Stawicki, PMP

Abstract - Organizations' move towards improved project-orientation requires appropriate governance structures. The paper presents a governance framework for organizations to gradually move from process orientation to project orientation. The framework provides an economic balance of investments and returns at three consecutive migration steps, and for project, program and portfolio management.

Keywords - portfolio management, project based organization, project management governance

1. INTRODUCTION

The increased use of projects as the way of doing business  [1] has led to the development of a variety of tools and techniques for better project management. However, project failure rates are still high and awareness is growing that projects are not executed in an organizational vacuum. Governance of project management became the term and method to manage the multitude of parallel projects in an organization. Project management governance is defined by the Association of Project Management (APM) [2, p. 4] as:

The governance of project management concerns those areas of corporate governance that are specifically related to project activities. Effective governance of project management ensures that an organisation's project portfolio is aligned to the organisation's objectives, is delivered efficiently and is sustainable. Governance of project management also supports the means by which the board, and other major project stakeholders, are provided with timely, relevant and reliable information.

APM suggest four dimensions of governance:

  • Portfolio direction effectiveness and efficiency
  • Project sponsorship effectiveness and efficiency
  • Project management effectiveness and efficiency
  • Disclosure and reporting

This list covers the different organizational levels and their specific responsibilities in governing the project-oriented company.

Beside these strategic dimensions for governing project management in an organization, a number of tactical tools and techniques developed over recent years. These include training and certification programs for project and program managers, as well as traditional organizational measures, such as audits and reviews of projects, mentor programs, Project (Management) Offices, benchmarking and project management maturity models.

Given the variety of tactical techniques and strategic governance dimensions, the questions arises what techniques are appropriate for which organization? Some of these techniques require relatively small efforts (like reviews), while others potentially aim for a change of the entire organization (like maturity models). With organizations being at different levels of ‘projectization' the need arises for a categorization of the different techniques by their efforts and returns in relation to the extent of project-orientation in an organization. To that end, the study aims for categorizing the different techniques in order to balance the magnitude of return and investment. Therefore the following research question is raised:

How do organizations develop from process orientation towards a project-oriented company?

The final result is a framework for organizations to choose appropriate strategic dimensions and tactical techniques, given their position between process and project-orientation.

2. METHODOLOGY

The study was done using Participatory Action Research, a methodology especially suitable for studying management of change in organizations by jointly involving employees and researcher in the change process. It derives theory from the studied cases which can be used in other contexts [3]. It differs from the more traditional research methods by not only describing phenomena, but by also changing it. Saunders Lewis and Thornhill [3] describe the action research process as cyclical, starting with an initial idea and criteria for change intervention, and then

  • Finding facts and analyzing them (reconnaissance)
  • Planning action steps for the intervention
  • Implementing the planned steps
  • Monitoring implementation and effects
  • Evaluation of the accomplished results

At the end of each cycle a decision is made whether to stop the process (i.e. objectives have been accomplished or are given up), or to continue in a next and similar round of process steps.

To that end critical reflection was used to understand the personal experiences [4]. Theory was developed following [5], through interaction with fellow researchers and consultants for second person research, and initial publications and their feedback used for third person research [6]. The findings were subsequently discussed during dozens of seminars with several hundred practitioners from various industries and Master students in Management from a number of Universities in Europe. Validity is implied in the presentation of transformational experience as an explicit reflection on the change process.

The developments in organizations from process orientation towards a project-orientation were analyzed in four different organizations, between 1996 and 2006. Involvement of the researchers has been either as consultant or employee responsible for project management improvement in the case organizations. Table 1 shows the industry, geography and scope of the organizations.

Table 1: Case organizations

A Framework for Building Successful Project-Based Organizations  - JS Project

3. QUALITY OF PROJECT MANAGEMENT

Critical reflection on dozens of project audits and the associated findings revealed three major forces that impact the quality of project management in a project. These are:

  • The level of skills and knowledge of the project manager. Better educated project managers have a greater repertoire of methods, tools and techniques to manage projects and their inherent management problems. This force determines what can be done by the project manager.
  • The demand from management, especially Steering Groups and other line managers supervising project managers, is the second major influential force for the quality of project management execution. This force determines what project management deliverables are prepared and delivered by the project manager, for example, status reports, change management processes, as well as updated project plans. Deliverables not especially demanded by management are often neglected by project managers, with an adverse effect on project performance. Management demand determines what should be done for good quality project management.
  • The project manager's perception about the economic pressure in the project is the third and most detrimental force. Project managers with low economic pressure (i.e. the project is managed within the cost and time constraints) tend to have a long-term view of the project, possibly planning follow-on projects. High pressure from Steering Groups or other stakeholders as a result of economic plan deviation or unrealistic goals (e.g. in cost and time) reduces the time horizon of the project manager drastically. Being threatened with bad project results and possible lay-off, pressed project managers tend to shorten their time horizon and to work for short-term survival in their current position. Emphasizing only short term goals can lead to decisions very adverse for the project or the client relation in the long-term. This force has a major impact on what is done by the project manager in a project.

Figure 1 shows a related force field analysis. Increasing education and management demand have a positive effect on the quality of project management delivery, while the perceived economic pressure has a negative effect.

A Framework for Building Successful Project-Based Organizations  - JS Project

Fig. 1: Three major forces impacting the quality in project management delivery

4. A FRAMEWORK FOR ORGANIZATIONAL MIGRATION

Table 2 shows the typical migration of the four case companies as a three steps process. Each step constitutes the equilibrium of the three forces listed above. Migration from step 1 to 3 indicates an increasingly stronger focus of an organization on their project management capabilities and with it an increase in using project management as a strategic asset in the marketplace.

Organizations start their migration towards project-orientation with basic training and the use of a project management methodology (or parts thereof). This constitutes the simplest form of the Education force (What can be done). The need for training and methodology often arises from reviews of troubled projects, which constitutes the What is done force. Steering groups are put in place to foster the use of the methods and the application of the learned project management techniques through management demand (What should be done). All three activities are relatively small investments, which allow for continuity and a common process in project execution. Having established step 1, organizations improve project management quality in terms of the iron triangle, namely achieving time, budget, and quality goals, a success definition of the early times of project management [7].

Organizations implementing and synchronizing the three activities of step 1 achieve a good economic balance of investments and returns in project management improvement. Organizations with little project-based business may stop their investments in project management improvement at this level, because higher investments would not lead to adequate higher returns. Other organizations tend to stay at this level for a while and evaluate the improvements made in terms of project results, and then move on to step 2.

Organizations with a medium amount of project-based business tend to apply step 2 activities in addition to step 1. These are certification for project managers (education force), establishment of Project Management Offices (PMO) to improve project work within the organization (management demand force), and mentor programs to identify and influence What is done by project managers in the field. This, in conjunction with an understanding of project success being more complex than the iron triangle, takes into account several Critical Success Factors, such as customer satisfaction, appropriateness of planning techniques, and the general quality of project management together with its impact on follow-on projects with the customer. The establishment of a PMO, or similar unit for project management improvement, provides the foundation for introducing portfolio management some time in the future. In this step the investments in project management are higher than in step 1, and so are the expected returns. Improvements are mainly at the project level, with some probability that the PMO impacts processes and practices of organizational units working in or close to projects.

The third step comprises introduction of advanced project management techniques, such as specialized planning tools or industry knowledge, for focused improvement of particular aspects of project management. This increases the education force, which is controlled through the management demand force in forms of benchmarking an organization's project management capabilities within and across industries. What is done in reality is checked through maturity models and their tools to assess project management practices. This allows developing the organization's internal capabilities to manage their projects, resources and processes simultaneously and most efficiently. Step 3 requires significant investments, not only in terms of money, but also in adapting and streamlining the organization's processes to make them support the objectives of the project part of the business, and only to a lesser extent the objectives of the traditional hierarchy. This step is therefore mainly used by companies whose business is project-based. The efforts at this step aim for leapfrog improvements in project results, over and above the competitors.

Table 2: Organizations migration from tactical to strategic use of project management

A Framework for Building Successful Project-Based Organizations  - JS Project

No matter how far an organization develops, those steps, once achieved, will not disappear. Step 3 organizations still apply step 1and 2 techniques.

By broadening the view and including program and portfolio management into the framework, we see that many of the techniques are also applicable in this context. Programs are groups of projects with a common goal and can be treated similar to projects within this framework. The techniques of all three steps are used for program management. For example, PMI recently announced a Program Manager certification. The portfolio level has room for further development. Step 1 techniques are in place for portfolio management, and partly step 2 techniques (methods, reviews, steering groups, PMO). At step 3 OPM3 [8] serves as maturity model and benchmarks portfolio management in an organization against industry best practice. It also links the projects work to the company strategy.

The need to combine the project, program and portfolio view into an overall mixed program and portfolio management governance structure was shown through research by Blomquist & Müller [9].  They showed that organizations with a mix of program and portfolio management perform significantly better than those using just one of them.

5 . CONCLUSIONS

This study developed a framework for an organization's migration from process orientation to project orientation. The presented approach has been used at companies of various types and maturity in project orientation.

The research question is now answered with reference to Table 2. Organizations develop in three steps, where each step constitutes equilibrium of investments and returns. Parallel investment in techniques that are not part of the same step unbalances the investment/return equilibrium and may cause less than optimal investments. Organizations follow the three steps and each step is an add-on to the former step. The same framework is applicable for program and portfolio management, with the latter being not yet fully developed to cover all techniques of the framework.

Practical implementation of the model has shown that the following factors are key for successful delivery:

  • Top management's buy-in to the whole process and setting the scene for project,  program and portfolio management, together with its business role in the organization
  • A holistic approach - considering the entire approach and not concentrating only on elements of it or parts of the organization
  • Adapting the scope in developing towards a project-based organization to the organization's situation and objectives - not overdoing it
  • Treating this development as a change management process, with definition of the roles and responsibilities of the various actors
  • Improving the role of project management governance, not only “traditional” project management

Application of the framework as a roadmap towards project-based organization requires top management to:

  • Identify the organization's current position in the framework by conducting an as-is analysis
  • Define the next step to achieve and the time frame for it
  • Identify the various project types, resulting in various methodologies
  • Select an approach to establish a PMO (top-down, bottom-up, or mixed)

Identifying the economic balance of investments and returns requires detailed business cases, calculating both investments and returns.
The main source of benefits are identified as:

  • PM methodology, standards, common approach to projects
  • Project Portfolio Management
  • PM corporate-wide knowledge base and competence center

Project management improvement inside a company neither should be – as we have frequently noticed – the task of HR department, concentrating on the delivery of standard trainings nor an endeavor executed inside the specific department or business area of the company. From the very beginning this should be a company-wide program, integrating the organization's activities, implemented company-wide, and on various organizational levels.

The road along the framework shows the variety of techniques and topics in project management. The framework should be implemented using a change management approach, taking into account such elements as: people and their behavior, personal goals and hidden agendas, the question What's In It For Me, willingness and ability to change. Managing the process towards the project-oriented company requires the involvement of both the roadmap and the organizational change process.

Organizations develop from process to project orientations. A variety of techniques are available to foster good project management work. The study provided a framework to economically guide organizations in their journey towards a project-based organization.

REFERENCES

[1] R. R. Turner & A. Keegan. The Versatile Project-based Organization: Governance and Operational Control. European Management Journal. 1999. 17(3): 296-309.
[2] APM. Directing Change: A guide to governance of project management. Association for Project Management, High Wycombe, UK, 2004.
[3] M. Saunders, P. Lewis and A. Thornhill. Research methods for business students, 3rd edn. Pearson Education Limited, Harlow, England, 2003.
[4] L. F. Chiu. Critcal reflection: More than nuts and bolts. Action Research. 2006. 4(2):183-203.
[5] A. M. White. Lewin's action research model as a tool for theory building. Action Research. 2004. 2(2):127-144.
[6] R. Englund and R. Müller. Leading change towards enterprise project management, in Enterprise project management - an introduction. Y. C. Shekar, ed., ICFAI University Press, Hyderabad, India, 2005.
[7] K. Judgev and R. Müller. A retrospective look at our evolving understanding of project success. Project Management Journal, 2005. 36(4):19-31.
[8] PMI. Organizational Project Management Maturity Model: Knowledge Foundation. Project Management Institute, Newton Square, USA, 2003.
[9] T. Blomquist, and R. Müller. Middle managers in program and portfolio management: practice, roles and responsibilities. Project Management Institute (PMI), Newton Square, USA, 2006.

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