Projects as business, project managers as owners, and business excellence models

Craddock & Associates, Inc.

Abstract

Businesses, both for-profit and not-for-profit, exist to produce results; in this context, projects can be considered businesses as well. In general, businesses have three typical roles — owners, manager, and workers. When managers (and workers) view the business through the lens of an owner, organizational performance typically improves. Business Excellence Models (BEMs) provide a framework for organizations to assess their current practices against the collective practices of excellent organizations. The two most prevalent BEMs are the Baldrige Criteria for Performance Excellence (CPE) and the European Foundation for Quality Management (EFQM). When BEMs are extended to a project environment, they provide the project manager with another framework to address excellence in the project organization.

Introduction

Half empty or half full? Investment or expense? Employee or owner? Individuals react to the same scenario with different behaviors, in part, due to personal paradigms. Those differing behaviors can have an impact on the project. Both internal and external stakeholder opinions should improve when project managers view projects through the lens of a business owner. Business Excellence Models such as the Baldrige Criteria for Performance Excellence and the European Foundation for Quality Management provide tools to assess organizations holistically and identify both strengths and opportunities for improvement. These models can also be applied to projects. The result is a comprehensive framework for a project manager to manage/lead the project as a business. This, in turn, should increase the likelihood of project success.

Projects as Business

The definition of business remains elusive. Artto and Wikström (2005) briefly traced the term business from the 19th century. They observed: “In general, business is considered as an establishment for performing economic activities: businesses exist to produce a profit” (p. 344). However, they noted that non-profit organizations also conduct business, but with different objectives. Their focus was on a project business, which they defined as “the part of a business that relates directly or indirectly to projects, with a purpose to achieve the objectives of a firm or several firms” (p. 351).

Heerkens (2006) strengthened the connection between business and projects. After a brief discussion of the linkages from stockholders to project managers, Heerkens noted: “All of this leads to the identification of the fundamental purpose of a project, which is to serve as an investment of funds aimed at maximizing the return of wealth to the stockholders. This is how the world of business and the world of projects relate to one another” (p. 2).

Pojasek (2007) identified seven attributes that apply to all companies: (1) people performing tasks, (2) leadership, (3) strategic and tactical plans, (4) stakeholder influence, (5) improvement through knowledge and information, (6) a process focus, and (7) resource constraints. In other words, a project can be viewed as a business. Finally, Heerkens (2009) discussed four reasons why project managers should be concerned about and aware of the broader aspects of the business, starting with “You are likely to make better project decisions” (p. 26).

The importance of viewing projects as business is that it solidifies the intent to produce a result, the key objective of any business. It also increases the access to best practices that contribute to excellence in business organizations.

Project Managers as Owners

Organizations typically have three roles: owners, managers, and workers (Rousseau & Shperling, 2003). Owners typically employ managers who guide the implementation of their decisions. The bulk of the actual work of the organization is performed by the workers. The traditional view of sponsors, project managers and project teams fits well with this scheme.

Ownership is a complex, dual concept that involves both real and psychological components (Pierce & Rodgers, 2004). Real ownership involves certain rights — the right to share the profits (or losses) of the organization; the right to access information regarding the organization, particularly its financial status; and the right to make decisions that affect the organization. Real ownership can be extended to managers and workers through Employee Stock Option Plans (ESOPs).

Psychological ownership occurs when individuals believe and act as if the thing to be owned is theirs, even if it is not so in the real sense (Pierce, Kostova, & Dirks, 2001). Psychological ownership in an organization is linked to improved individual performance. This, in turn, can lead to improved organizational performance. There are at least two views regarding how this occurs. Vandewalle, Van Dyne, and Kostova (1995) described a model where psychological ownership leads to organizational commitment and subsequent extra-role behavior (e.g., employees going above and beyond their assigned responsibilities). The end result is higher performance. Pierce and Rodgers (2004) described a slightly different model where ownership (in general) leads to improved self-concept that motivates the individual to perform better.

Both of these models start with ownership and end with improved individual performance. Collectively, improved individual performance should lead to improved organizational performance. O'Driscoll, Pierce, and Coghlan (2006) summarized this phenomenon: “When individuals feel ownership for the organization, they are likely to engage in extra-role citizenship behavior (that is voluntary and intended to be positive in nature, and for which there is no promised or implied quid pro quo” (p. 394). Brown (1989) offered a businessman's view: “It's psychological ownership that makes the competitive difference” (p. 15).

A project manager, acting as an owner will typically make decisions for the good of the overall organization, not just the project. In a few cases, this could result in a project shutdown that might be counter to a project-based view.

Business Excellence Models

Overview and History

Business excellence is “‘excellence’ in strategies, business practices, and stakeholder-related performance results that have been validated by assessments using proven business excellence models” (Adebanjo & Mann, 2008, p. 16). A Business Excellence Model (BEM), then, is a holistic framework or checklist that describes the practices of excellent organizations in a way that enables assessments to determine the strengths and opportunities for improvement in an organization. These assessments include both internal or self-assessments and external or third-party. Adebanjo and Mann also discussed how the evolution of terminology from Total Quality Management (TQM) to business excellence was “partly as a result of the considerable confusion as to the meaning of TQM” (p. 16).

Grigg and Mann (2008) estimated over 80 nations used a BEM as the basis for their National Quality Award (NQA). Their estimate was further divided into three subsets, with approximately 50 of the 80 nations using the Malcolm Baldrige National Quality Award (MBNQA) model. Another 25 or so nations had adopted the European Foundation for Quality Management (EFQM) model. Stated differently, the MBNQA and the EFQM models were used for approximately 93% of the national BEMs in Grigg and Mann's study.

In a similar study, Talwar (2011) identified 100 NQAs in 82 different countries. The major BEMs cited are the MBNQA, EFQM, and the Deming Prize. Talwar did not have access to the details of every NQA. However, for the 81 NQAs summarized by Talwar, approximately 80% either fully adopted or used features from the three major BEMs. Talwar noted the structural similarities of the MBNQA and EFQM models, as compared with the Deming Prize. Further, the Deming Prize was cited in less than 10% of these 81 NQAs. Also, Adebanjo and Mann (2008) noted that the Baldrige Criteria for Performance Excellence and the EFQM are the best-known of the BEMs. For these reasons, the MBNQA and EFQM are the focus of this paper.

The long-term organizational benefits of National Quality Awards have been debated, with arguments both for and against their value. For example, Leonard and McAdam (2002) included quotes from both Deming and Crosby, each noted experts in the quality discipline, which disparaged the MBNQA. On the other hand, Hendricks and Singhal (2001) evaluated the financial performance of firms associated with TQM implementations. They concluded: “Firms that have won awards from independent award (a proxy for more mature TQM implementation) do significantly better than just supplier award winners” (p. 269). Perhaps the explanation for the difference in these views relates to whether the NQA is a destination or the BEM is the framework to excellence.

Baldrige Performance Excellence Program

The Malcolm Baldrige National Quality Award Program was established in 1987 by U.S. law. The Baldrige Criteria for Performance Excellence (CPE) were initially used in the following year to evaluate applicants for the Malcolm Baldrige Award (Evans & Dean, 2000). The program was recently rebranded as the Baldrige Performance Excellence Program. The program is managed by the U.S. Department of Commerce (via the National Institute of Standards and Technology).

The current (2011–2012) version of the Baldrige CPE is described in seven categories. The first six are focused on various processes. The last category addresses results.

  1. Leadership
  2. Strategic Planning
  3. Customer Focus
  4. Measurement, Analysis, and Knowledge Management
  5. Workforce Focus
  6. Operations Focus
  7. Results

Both processes and results categories are evaluated. The process evaluations address (1) the overall approach, (2) the deployment of the process, (3) evidence of process learning or improvement, and (4) the integration within the organization. As an organization matures from an overall management perspective, it should begin to incorporate concrete examples across all four of these process attributes.

The results evaluations address (1) the levels of performance, (2) the performance trends, (3) whether comparative data are used for evaluation, and (4) the integration within the organization. Similar to the process evaluations, the results evaluation attributes are a gage of how “mature” an organization is regarding its overall management.

All seven categories are structured from high-level to detailed questions so that an organization can use its responses to determine its level of maturity and key opportunities for improvement. Three versions of the Baldrige CPE are published. The primary version is the Criteria for Performance Excellence for use by the business and nonprofit sectors. The other two versions, the Health Care Criteria for Performance Excellence and the Education Criteria for Performance Excellence, are essentially the same, with wording changes to reflect the “customers” and processes for those two sectors.

Finally, the Baldrige criteria are descriptive instead of prescriptive. In this sense, they are similar to the good practices in PMI's A Guide to the Project Management Body of Knowledge (PMBOK® Guide).

European Foundation for Quality Management

The European Foundation for Quality Management (EFQM) was established in 1988 (Adebanjo, 2001). The EFQM created the European Quality Award in 1991 in partnership with the European Commission and the European

Organization for Quality (Evans & Dean, 2000). The European Quality Award is now known as the EFQM Excellence Award.

The current (2010) EFQM Excellence Model is described in nine categories. The first five are focused on various processes. The last four categories address results.

  1. Leadership
  2. Strategy
  3. People
  4. Partnerships and Resources
  5. Processes, Products, and Services
  6. Customer Results
  7. People Results
  8. Society Results
  9. Key Results

Similar to the Baldrige CPE, the EFQM assessments are both qualitative and quantitative. The scoring weights are essentially the same. Results represent 45% of the overall Baldrige CPE score and 50% of the overall EFQM score.

Applicability of Business Excellence Models to Projects

There are mixed opinions regarding the applicability of BEMS in a project environment. For example, Westerveld (2003) examined the EFQM Excellence Model and determined “it becomes clear that because of the unique characteristics of projects the EFQM-model cannot readily be transferred to project situations” (p. 412). The rationale appeared to be twofold: the difference between the organizational (process) approaches of the EFQM and the PMBOK® Guide, and the difference in success criteria (results) between the two. Instead, Westerveld proposed a Project Excellence Model that looked very similar to the EFQM Model.

Similarly, Bryde (2003) proposed a Project Management Performance Assessment (PMPA) Model patterned after the EFQM model. Bryde's rationale was:

There are differences between organisations undertaking projects and those managing operations which suggest that a model more specifically focused on assessing project environments might be more useful and, importantly, perceived as more appropriate by those involved in PM than a general purpose model. (pp. 231–232).

However, Bryde's resulting PMPA model also looked very similar to the EFQM Model.

Kujala and Artto (2000) offered a different view than both Westerveld and Bryde. Kujala and Artto applied the logic that (1) BEMs apply to enterprises or organizations, and (2) projects are also organizations (albeit temporary ones). Therefore, they concluded that (3) BEMs can also be applied to a project environment. Kujala and Artto then used the Baldrige CPE Model (current at that time) to describe in detail how the various processes fit within a project. The EFQM Model could also be mapped to a project in a similar manner.

Silvius, Schipper, and van den Brink (2012) discussed how the EFQM Model applies to projects. Specifically, they proposed a four-level Sustainable Project Management Maturity Model along with an assessment instrument. They then combined this Maturity Model with the EFQM excellence maturity levels to “get a sense of the organizational ability to integrate sustainability in projects and project management” (p. 84). A similar analysis could be performed using the Baldrige CPE Model.

Finally, Kerzner (2006) observed: “One of the characteristics of companies that have won the prestigious Malcolm Baldrige Award is that each has an excellent project management system” (p. 224). The list of companies cited by Kerzner included Motorola and IBM.

The key message is that BEMs can be applied in a project context to provide another framework for excellence.

Project Success

Different paradigms lead to varying and evolving definitions of project success. The traditional view of project success is to achieve all three project constraints represented by the Triple Constraint (sometimes referred to as the Iron Triangle). The third edition of A Guide to the Project Management Body of Knowledge (PMBOK® Guide) (PMI, 2004) defined the Triple Constraint as “a framework for evaluating competing demands” and noted “The triple constraint is often depicted as a triangle where one of the sides or one of the corners represent one of the parameters being managed by the project team” (p. 378). Ward (2008) went further and defined the triple constraint more specifically: “Term used to identify what generally are regarded as the three most important factors a project manager needs to consider in any project: time, cost, and scope (specifications)” (p. 449).

Jugdev and Müller's (2005) summary of their perspective on the evolution of what constitutes project success could easily apply to other authors writing about project success:

Our views on project success have changed over the years from definitions that were limited to the implementation phase of the project life cycle to definitions that reflect an appreciation of success over the project and product life cycle. (p 19)

They noted the traditional triple constraints of time, cost, and scope were all relatively easy to measure at the completion of the project. However, to delay the determination of project success until well past the project completion is difficult under the triple constraint paradigm.

The progression of thought about project success did not evolve quickly or linearly. For example, the third edition of the PMBOK® Guide published in 2004 still highlighted the triple constraint. The fourth (and current) edition of the PMBOK® Guide (2008) noted “Project success is measured by product and project quality, timeliness, budget compliance, and degree of customer satisfaction” (p. 9). The fourth edition also described four criteria for a project to be deemed successful, including “balance the competing demands of scope, time, cost, quality, resources, and risk to produce the specified product, service or result” (p. 37).

Siegelaub (2007) also proposed a model with six project constraints: the triple constraint (time, cost, and scope) plus quality, benefits, and risk. Baratta (2006) went further and declared: “The Triple Constraint model is both wrong and not useful” (p. 1). Instead, Baratta proposed a new Value Triple Constraint model where value is a function of scope and capability. Capability refers to “the underlying value-added processes used to deliver the project” (p. 5).

Clearly, the metaphor of the iron triangle to represent the three original project constraints may no longer apply. Although there is not full agreement regarding what the additional project success variables are, the expanded view of project success has more than three variables.

This expanded view of project success involves two time components. The first time period ends when the project is completed and closed. The second time period typically begins at project completion, and ends at some point in the future when there is a clearer view of the usefulness of the project results. Cooke-Davies (2002) proposed two definitional distinctions to clarify the two time periods. Project management success can be gaged at the end of the first time component; in other words, when the project ends. Typical metrics include the traditional time, cost, and scope. On the other hand, project success is based on the achievement of the project objectives, some of which cannot be determined until a period of time after the project ends.

Nelson (2005) used a similar approach but with different terminology. The traditional time, cost, and product (scope) metrics are considered process criteria, and can be measured at the time of project completion. Outcome criteria are not determined until after the project completion. Nelson's model used three outcome metrics: value, use, and learning. Nelson's study involved the retroactive analyses of Information Technology (IT) projects, so the “use” metric involved whether the intended users were actually using the system. Value involved whether the business case used to justify the project was actually achieved. Learning was a longer-ranged metric: “The project increased stakeholder knowledge and helped prepare the organization for future challenges” (p. 364).

There are other proposed project success frameworks. Bourne (2007) also retroactively studied project “failures,” including the notable Sydney Opera House. As a result, Bourne developed a model that highlighted three pillars of project success. The Delivering Value pillar included the triple constraint plus benefits realization. The Managing Relationships pillar focused on stakeholder expectations. Finally, the Managing Risk pillar addressed corporate governance and procurement. Bourne's primary focus was on managing stakeholder expectations.

Both of these studies raise the question of who is responsible for benefits realization. Very limited samples of project managers suggest a larger percentage believe the realization of the expected benefits from the project is not the project manager's responsibility.

BEMs are well-suited to address project success, both process and outcome metrics. The earlier discussion of the Baldrige CPE and EFQM models described how results account for 45% to 50% of the overall BEM assessments. The remainder of the assessments focuses on the processes that lead to these results. To use the Baldrige CPE terminology, these processes are (1) leadership; (2) strategic planning; (3) customer focus; (4) measurement, analysis, and knowledge management; (5) workforce focus; and (6) operations focus. The EFQM processes are similar.

The Seven “Musts”

First, project managers must personally lead. As stated earlier, owners typically hire managers to implement their decisions. For many projects, the project sponsor is a proxy for the owner. The role of the project manager, then, is to implement the project plan to produce the end result expected by the sponsor. Project managers communicate their leadership through both verbal and nonverbal signals.

On average, approximately 65% of the meaning in a social interaction is communicated nonverbally (Burgoon, 1994). While some estimates of this percentage of nonverbal communications are as high as 90% to 95%, the 65% statistic resulted from a broad-based analysis. Burgoon defined nonverbal communication, in part, as “those behaviors, other than words themselves that form a socially shared coding system.” Burgoon further noted that nonverbal communications “are typically sent with intent, typically interpreted as intentional, used with regularity … and have consensually recognizable interpretations” (p. 231). The important take-away here is that how a leader acts may be interpreted as the real intent, if there is a difference between his or her words and actions. Stated differently, project managers must personally lead every day, all day.

Second, project managers must think and act strategically. Actually, this has both strategic and tactical components. The project plan addresses strategically how the project will achieve its objectives. It reflects the project manager's (and others’) strategic thinking in the form of tradeoffs among resource constraints. The project manager must also act tactically by developing more detailed action plans and then adjusting them as needed to reflect the realities of the project as it progresses. Projects seldom, if ever, are linear or exactly follow the original project plan.

The project manager must also be agile. White (2009) defined agility as “the ability to quickly adjust and respond to changing business needs” (p. 10). White added: “This kind of agility requires practitioners who are keenly aware of changes in the business and external environment, and who are paying attention at all times to factors that may influence the direction of the project, and communicating openly about them” (p. 10). In other words, the project manager must be bifocal — keeping his or her eyes on today and the future.

Third, project managers must focus on stakeholder needs. These stakeholders include the project's customers as well as other affected individuals or groups. Project managers must engage the stakeholders to truly understand their needs and manage their expectations.

Shenhar and Dvir (2007) identified five dimensions for project success: (1) project efficiency, (2) impact on the customer, (3) impact on the project team, (4) business and direct success, and (5) preparation for the future. However, they concluded that not all five of the metrics categories are of equal weight and offered this opinion: “In our view, project managers are responsible for achieving success in all dimensions — first and foremost, for customer satisfaction and business results” (pp. 33–34).

Fourth, project managers must manage project data and knowledge. These are key resources necessary for most successful projects. The PMBOK® Guide includes project data and organizational knowledge bases as part of the Organizational Process Assets (OPAs). These and other OPAs then become inputs to various project management processes also described in the PMBOK® Guide.

Fifth, project managers must engage team members. The bulk of the work in a project is performed by the project team. Poor project teams increase the difficulty in accomplishing the project's objectives. The project manager must actively build and support the project team. This support includes assessing both the capability and capacity of the project team, and addressing shortcomings in either. This support begins with the project's human resources plan.

Katzenbach and Smith (1993) examined the link between teams and high-performing organizations. They identified key lessons learned regarding teams and team performance, including: “Organizational leaders can foster team performance best by building a strong performance ethic rather than by establishing a team-promoting environment alone” (p. 13). In other words, the leader's behaviors must be in sync with his or her words, which ties back to the first “must” of personal leadership.

Sixth, project managers must manage project work systems and processes. People on the project team accomplish work through these work systems and processes. Project manager also rely on processes. Indeed, the PMBOK® Guide primarily discusses various processes used in the five Process Groups.

Kerzner (2006) discussed the importance of integrating project management and other management processes as a key to excellence. Kerzner observed that “companies with world-class methodologies employ a single, standard methodology based upon integrated processes. This includes business processes as well as project management-related processes.” (p. 214)

Finally, project managers must achieve expected results. The entire purpose of the project is to produce the expected deliverables within the constraints described in the approved project plan. This is the final test. This is also why the first six “musts” are critical.

The quote from Shenhar and Dvir (2007) in the third “must” above recognized the importance of achieving the project's results. Kerzner (2006) discussed the success pyramid used by Texas Instruments. The foundation (Level 1) of their success pyramid was “understanding and trust” (p. 89). The results are at Level 5, the next to the top level of the pyramid. The top level represents achieving the overall goal. In Texas Instruments’ success pyramid, this is labeled “team success” (p. 90).

These seven “musts” follow the seven categories in the Baldrige CPE discussed earlier in this paper. The first six correspond to the process categories. The final “must” obviously relates to the Results category. The EFQM Model could also have been used with similar conclusions.

Conclusions

BEMs are another tool for project managers to address project excellence, which should increase the likelihood of project success. BEMs are a complement to the PMBOK® Guide, not a replacement. While the Baldrige CPE was used as the basis for the seven “musts,” the EFQM is just as applicable. Actually, other BEMs, including the Deming Prize, will also work. The basic idea is to leverage the best practices of excellent organizations to the benefit of the project. When BEMs are extended to a project environment, they provide the project manager another framework to address excellence in the project organization.

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This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI or any listed author.

© 2012, William T. Craddock
Originally published as a part of 2012 PMI Global Congress Proceedings – Vancouver, British Columbia

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