11 September 2009

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How Mega-Project Management Creates Value for Stakeholders

The value of project management can vary with the size, complexity and risks of the project involved. Mega-projects, such as major infrastructure construction undertakings, where complexity and risks are high, can benefit greatly from effective project management. Empirical evidence helps to demonstrate this value to stakeholders.

An article in the March 2009 issue of the Project Management Journal^®, entitled “Understanding the Value of Project Management From a Stakeholder’s Perspective: Case Study of Mega-Project Management”—by Li Zhai, PhD, and Yanfei Xin, of the School of Management, Fudan University, and Chaosheng Cheng, EMBA, of the Shanghai Waigaoqiao Electric Power Engineering Co. Ltd., all of Shanghai, China—presents this kind of empirical evidence.

The article analyzes the project management practices at a large Chinese construction organization and presents a “value framework” to document the value of these practices to the four key stakeholder groups: the enterprise, customers, suppliers/contractors and the community.

While the focus of the article is on project management in mega-projects, much of the value being discussed would be expected to apply within other kinds of organizations and projects as well.

The authors collected data using a combination of interviews, questionnaires, document review and observation to study the practices at the company being studied. The value delivered by project management practices to the four stakeholder groups included the following:
                                                                                                                   
Value to the Enterprise

• Improve project performance
  • Save cost
  • Shorten duration
  • Improve quality
  • Realize commercial goals
• Improve enterprise competencies
  • Enhance ability to manage large projects and project portfolios
  • Enhance knowledge management
  • Improve technology innovation
  • Smooth organizational transformation
• Increase revenue
  • Increase project income
  • Broaden business opportunities
• Cultivate personnel
  • Create clearer career paths
  • Provide better motivation and training
• Improve customer relationship management
  • Support better customer communication
  • Achieve greater customer satisfaction
  • Retain stronger customer loyalty
  • Attract more new customers
• Cultivate favorable corporate culture
  • Promote formation of cohesive, project-based, organizational culture

Value to the Customer

• Achieve project’s objectives
  • Deliver on project’s potential value
  • Support effective post-project operations
• Achieve cost savings
  • Reduce costs through project management practices
• Foster more collaborative experience
  • Improve efficiency of communication with clients
  • Promote better sense of cooperation

Value to Subcontractors and Suppliers

•  Improve technical and management capabilities
  • Emphasize communication, cooperation and knowledge sharing among project participants including contractors and suppliers
  • Leverage organization’s technical and managerial capabilities to help contractors enhance their competencies
• Build long-term strategic partnership
  • Achieve high contractor satisfaction with relationship
  • Foster desire and expectation to collaborate in future

Value to the Community

• Avoid conflicts with the community during project implementation
  • Coordinate and manage sensitive external relations
  • Communicate and implement needed relocations and demolition smoothly
• Strengthen economic and social development
  • Meet time and quality objectives
  • Contribute to community readiness for increased international business and trade
• Foster improvements in construction industry
  • Strengthen project management talent and capabilities in industry as a whole
• Uphold high environmental standards
  • Pass all environmental assessments easily
  • Lead the industry in environmental practices

Conclusions

The article concludes that the practice of project management in large-scale projects can contribute a range of both tangible and intangible value to stakeholders. It’s also probable that many of the lessons of this study would apply equally to projects of smaller scale.

For more on the value of project management identified in this study, see the full article in the Project Management Journal.

PMI’s Project Management Journal is a peer-reviewed journal “dedicated to advancing the understanding of project, program, and portfolio management through empirical investigation and theoretical research.”

PMI members may access the full text of the article when they logon as members to the PMI.org and go to Resources > Publications.