Managing projects in complex business environments
the contribution of systems thinking
REINER ALBERT SCHNEIDER
Orbitak Projektmanagement GmbH
MSc in Project Management, Lancaster University Management School
Master in Business and Intercultural Studies, Passau University
Progress or Regress?
Traditional organizations react anxiously when the unpredictable unfolds in a not predetermined manner. Change is regarded a threat rather than an opportunity. “The potential value of unexpected developments is rarely tapped, … we go immediately into problem-solving mode and react, or just try harder” (Senge, 2006, p. 289), as illustrated in Figure 1.
Figure 1. Traditional Planning and Control Approaches Increase Uncertainty Due to Environmental Complexity
- Uncertainty due to the perceived chaos and change in the project environment leads to reinforced planning and control.
- Excessive planning and control increase complexity.
- Complexity causes additional uncertainty and a vicious cycle arises.
Instead of decreasing uncertainty, current planning and control measures only increase it by increasing complexity. The technocratic approach of planning ignores the complex interdependencies in globalized business. “Immediately apparent is the contrast between the clinical nature of the description of how to go about the task of implementation and the messiness of experience” (Streatfield, 2001, p. 113). The use of projects for generating flexible answers to changing business needs is compromised even more to achieve a deceptive sense of stability. How can project management overcome the perceived contrast of stability and innovation?
The patterns leading to the vicious cycle derive from the project environment. The controlling maneuver to bring a project “back on track” faces the challenge to define the right track in a constantly changing market. The delay in the desired scope alignment with market requirements often leads to additional “quick fixes” (Figure 2). Their unintended consequences, due to unpredictable market reactions, led to even higher complexity and uncertainty in the project.
Figure 2. The Underlying Cause of Ineffective Control Measures is Their Delayed Impact that Triggers Additional Quick Fixes
All variables in the model are dependent on each other, therefore none can leverage the process depicted in the cycle autonomously (Callet, 2004). Which type of measures trigger fast results and thus increase market responsiveness? How can project management help reduce uncertainty while adding value to organizations by managing complexity?
Current Project Management Paradigm
Traditional project management methodologies are widely considered insufficient for complex projects (Williams, 1999; Love et al., 2002). This triggered a questioning of the current hard paradigm that claims objectivity through reductionist techniques such as WBS and project control tools (Pollack, 2007). The mechanistic worldview from engineering-oriented methodologies often fails to identify emerging market trends that derive from consumer behaviour.
A soft paradigm is suggested, and Crawford and Williams (2004, p. 650) compared “hard” and “soft” projects by using seven key issues: goal clarity, goal tangibility, success measures, project permeability, number of solution options, participation, and stakeholder expectations. Similarly, a recent study (Atkinson, Crawford, & Ward, 2006) lists project improvement, cross-unit outcomes, and strategic alignment among the recurrent article topics in recent years. All three topics underline the quest for internal project team enhancements in order to cope with the growing complexity through change and inter-dependence.
In other words, project management has to shift from a rational, linear control perspective (Thomas & Tjaeder in Cicmil, Williams, Thomas, & Hodgson, 2006) toward an appraisal of complex business environments and internal team processes. As technical components and social processes require equal consideration in this context, interdisciplinary research might convey new impulses especially for the Automotive industry from social and scientific disciplines to challenge the underlying assumptions of traditional approaches.
Advanced Project Management Paradigm
The continuously evolving requirements of projects have triggered research into the actuality of projects, taking “live experience” from project team processes as a starting point (Cicmil et al., 2006). A project unfolds with and within a wider business context. Sensing changes early on minimizes the effort to realign project scope to market requirements.
A fundamental paradigm shift abandons a world of certainty, constants, and determinisms to embrace an environment of fluidities and paradoxes (Bredillet, 2002). Project teams act as a catalyst to embrace change and adequately react to it. When change takes place, the internal project team processes predetermine success or failure of the project as the speed of scope adaptation becomes ever more critical in industries such as Automotive where product lifecycles become shorter.
Two strands of research emerge from these considerations. First, a deeper look at internal team processes that create meaning in complex situations and produce innovative solutions has to be taken, and second, the adaptation of the project scope to environmental changes to meet expectations and requirements has to be investigated. Project management is not merely a production-related phenomenon concerned with planning and executing a given task, the emphasis must be on value creation (Winter, Smith, Morris, & Cicmil, 2006) by addressing customer needs effectively.
The development of possible learning and sensemaking processes largely remains a theoretical endeavour. It is, however, a starting point to assist project managers out in the field in their quest for effectiveness. Researching the project actuality contributes to understanding “what kind of skills and competencies are relevant to complexities of project arrangements” (Cicmil et al., 2006, p. 678) and therefore empirical research “about what managers actually do to live effectively in the paradox of organizing” (Streatfield, 2001, p. 128) should further inform the theoretical model presented in this paper.
An internal sensemaking process (Weick, 1995) can review existing planning and its underlying assumptions in a collaborative process. Through interactive planning, the project team “constructs strategies to close the gap between what might happen and what we want to happen” (Flood, 1999). Continuous adaptation and project scope alignment can be achieved through internal learning processes that allow teams to organize themselves flexibly. The team thus realigns processes to purpose by continuously reinventing itself. This second cycle (Figure 3) re-establishes effectiveness through double-loop learning results by constantly questioning the underlying assumptions of the project scope and the project environment, whereas the single-loop learning (Argyris, 1977) in the first cycle only contributed to fighting windmills better, that is, more efficiently.
Figure 3. Counteracting Cycle with Internal Project Team Practices to Prevent a Vicious Cycle from Excessive Control in Complex Environments
On this basis, a project team can redefine its paradigm in viewing the world and realign the project scope to market requirements. An interactive learning and sensemaking process thus enables teams to reduce uncertainty by managing complexity. Simultaneously, the constant environmental change sets a sequence of planning and counteracting cycles in motion. Sensing trends early is crucial in order to react rapidly and gain competitive advantage in fast-changing business environments. Additionally, an understanding of market needs and organizational requirements becomes critical to appraise the project's long-term consequences:
To purposefully support project flexibility and effectiveness maintaining a wider perspective, a focus on processes to address the new tasks rather than a direct task focus is essential to maintain the value added from project management.
The analysis of past datasets cannot be assumed to be the key to future success in complex systemic environments (Stacey, 2007). The dominating positivist hard paradigm must be supplemented by a constructivist soft paradigm (Bredillet, 2002) to continuously generate new meaning. Therefore, lower levels in organizations, especially project teams, are increasingly concerned with strategic issues. Project management must provide methodologies to help complete these tasks successfully.
Basic Concepts of Systems Thinking
The scientific revolution had introduced causal, mathematical laws to describe the relationship between events (Bredillet, 2002): “the vision of the world as a teleological cosmos was replaced by the description of events” (von Bertalanffy, 1972, p. 408). An entity was deconstructed to be investigated. This reductionism had trouble, however, explaining why understanding the components does not necessarily lead to comprehension of the whole (Pollack, 2007. The conception of cohesion and interlinkedness as the defining element of reality led to a General Systems Theory through which the world is perceived as consisting of numerous dependent parts (Stacey, 2007). The working definition for the present paper is then: “A system is an entity that maintains its existence and functions as a whole through the interaction of its parts” (O'Connor & McDermott, 1997).
“Open systems” (von Bertalanffy, 1972) are the central development toward underpinning the criticality of relations between nodes in systems due to the numerous linkages with the environment. Open systems “are capable of taking in energy and matter from its environment in order to adapt to increasingly complex organizational structures” (Hammond, 2002, p. 436), as opposed to closed systems that pursue standardization and control (Flood, 1999). Our cognitive limitations often restrain us from understanding organizational dynamics without reducing them to mechanical interactions while we know they should be regarded as living organisms (Morgan, 1999) or systems.
Prigogine's work on dissipative structures explains the absorption of external influences as change, which becomes the source of new order within a system. He sees nature as creating novelty, where the possible is more than the real (Stacey, Griffin, & Shaw, 2000). The future is therefore under perpetual construction (Prigogine, 1997), and Bertalanffy's “Fliessgleichgewicht” (1972) describes this flux itself as equilibrium. This equilibrium is stable, the linkages themselves account for a system's robustness (Barabási, 2002), even when single parts adjust their position.
Thus, the system renews itself continuously; creates “order out of chaos” (Nonaka, 1988). Systems dynamics, a popular strand of Systems Thinking, builds on the concept of open systems using stock variables and flow variables to describe stability and movement (Forrester, 1992). Both features were later perceived as archetypes of systemic behaviour (Senge, 2006) that allow predicting a system's development as similar patterns recur under comparable conditions. Also, the teleological character of systems is not queried, systems are simply “unfolding an enfolded form” (Stacey et al., 2000, p. 36).
Systems Thinking and Complexity
Complexity theories describe in a sense the opposite of reductionist thinking: even simple systems can produce unpredictable outcomes (Waldrop, 1992). High numbers of components or tasks are therefore only the first determining factors in systems. It produces complicatedness; complexity is however only created through interdependence, the connectivity between the elements (Baccarini, 1996).
The structure is thus determined by the linkages, not by the parts, it is constantly evolving. One familiar example is the structure of the World Wide Web that guarantees “stability, various communication channels and preferential growth at the best connected nodes” (Baran, in Barabási, 2002, p. 145).
Systems are introduced to complexity theories in the form of social and human systems. Complicated systems appear to be controllable through the technical advances of the last decades, “a living being [however] is not a stable structure but a continuous process of organizing information” (Wheatley, 1999, p. 95). Complexity stems from these non-linear patterns of social interaction. The process consequently determines the state of the system, a “becoming ontology” rather than the current “being ontology” is required to stay involved with the direct environment (Cicmil et al., 2006). Consequently, the concept of self-reference rationalizes the system's need to become something new to maintain its core (Wheatley, 1999). Paradoxically, change is constant.
Systems Thinking and Economics
Economics assumes complete rationality in actions taken by human beings. The homo oeconomicus additionally possesses full information about the environment (Mankiv, 2002). Those underlying assumptions, which contradict the systemic standpoint, partly explain the difficulties experienced by planning and control to assure economic performance in the long term in systemic environments. Accordingly, Waldrop (1992) noted that Economics still has to overcome limitations deriving from the 17th century to cope with today's complex business environment.
Today's economy is governed by knowledge interactions (Leseure, 2002); that is, intangible assets are not bought and held, but developed in a generative process. Hence, the linkages rather than the parts hold the power. This growing importance of the linkages is manifested in an exponentially growing number of agents interacting continually in non-linear ways, thus with uncertain profit, in largely open economies (Cilliers, 1998). Trade without barriers is one form of open system surrounding us. The dynamics through the increased competition, however, triggered the need to execute many tasks in parallel (Williams, 1999), which causes a need for higher levels of coordination.
Application to Project Management
System Thinking's adaptation to social sciences surfaced sets of difficulties by confronting technology and control with human behaviour (Boulding, 1970).
Project management could in this context maintain its process viewpoint, but broaden its toolset to enhance its applicability in a growing number of “soft” projects that require problem solving processes for complex rather than complicated problems. Söderlund (2004) noted that project management took over an understanding from systems engineering that currently restricts the discipline to mere implementers (Cicmil et al., 2006). The complex environment might, however, require stronger reflection skills to address the respective tasks (Kolb & Kolb, 2005).
Drawing thoughts from Systems Thinking and complexity theories can inform project management. Organizations consist of separate entities that reside within the larger system. Projects are such sub-systems with peculiar goals (Schwanninger, 2004). Their engagement with other parts in the system is a necessary process to constantly redefine their own identity (Wheatley, 1999) as projects operate as interfaces between “nodes” or simply business entities. Projects are thus self-organizing sub-systems within a larger system that flexibly adapt to changes by transforming themselves.
Stacey et al. (2000) pointed to three further areas.
- Organising around human relationships forces a project manager to use soft skills (Douglas, 2003), removing ambiguity for the team and using conflict to foster innovation while finally securing consensus.
- Complex systems change spontaneously in unpredictable ways (Stacey, 2007), which aggravates the effectiveness of the current management toolset focussing on planning and control.
- Project management has been a source of flexibility for clumsy businesses in the industrial age. The knowledge economy changed global business dramatically. To continue adding value, project management needs to establish a framework around constantly changing processes,.
Change From Outside – Strategic Alignment
The commonality of both areas is change: it can then be further divided into emergent change from within the subsystem “project” or unexpected impact from the external environment. The concept of self-organization has been adopted as the Learning Organization (Senge, 2006), which is characterized by its flexible, organic structure. Its main quality lies in testing mental models through “institutionalised organisational practices that most likely involve a facilitative organisational structure” (Flood, 1999, p. 23). As in systems theory, this adaptation becomes a proactive process to realign strategic objectives with the organizational vision. Project management then applies a concept of error-activated double-loop learning to challenge existing mental models (Argyris, 1977).
The essence of self-organization is in the creation of information (Nonaka, 1988, p. 71), and project management must include strategy development into the current function of strategy execution. The becoming ontology requires continuously testing the mental models condensed in strategic planning.
Change From Within – Innovation
The concept formative teleology is described as an idea of systems (Stacey et al., 2000) that perceives rational planning activities as underlying cause of a sequential innovation process. The system itself as a formative cause directs the subsystem's efforts toward a predefined goal.
Fonseca (2002) differentiates two major streams: a rationalistic theory building on intentional, sequential processes, and a strand that emphasizes social processes. Innovation is therefore a result of earlier efforts in a sensemaking process (Weick, 1995), which is considered to be part of the planning phase. Innovation and strategic change are often the driving force for projects in an increasingly complex environment. In turn, project management is directly exposed to systemic impact. It thus becomes a frequent starting point for innovation, change or development but should carry out this function more consciously and thoughtfully. Project management, restricted to its current paradigm, does not reach its full potential.
Innovation is however not controllable as in the rationalistic understanding that sees human thought rather than interaction at the basis of innovation. Besides, a self-organizing system possesses the ability to “react to the state of affairs in the environment, but simultaneously transforms itself as a result of these affairs, often affecting the environment in turn” (Cilliers, 1998, p. 108). The mutual influence and productive use of various resources enable systems to innovate and grow through continuous interaction. In the light of fast-paced product lifecycles and global competition as in the Automotive sector, occurring change over the project period requires repeated sensemaking efforts.
Paradoxically, project management helped organizations to be ahead of competitors by developing processes to increase efficiency. In today's business environment, however, these planning efforts have often increased complexity, therefore jeopardizing the accomplished process control. The adaptation of the current toolset ought to aim for effectiveness rather than efficiency.
The perception of managerial control as an illusion (Streatfield, 2001) is often true in project management, with high numbers of projects failing to meet their deadlines, budgets, or quality requirements (Pinto, 2006). Control is, however, at the core of project management methodologies, being a main aim of extensive planning activities undertaken in the run-up of projects (Turner, 1993; Kerzner, 2006). A common feature is their “reliance on measurable data of project outcomes” (Pinto, 2006, p. 431) to define success. The definition of clear, quantifiable goals that can be broken down into work packages is a dominant paradigm in project management.
The rigid definition of project management roles with attributed responsibilities and accountabilities (Kerzner, 2006; PMI, 2004) represents the dominating power relationship in hierarchical organizations, but restricts teams to linear thinking toward preset goals with attached quality and success criteria. Again, control is passive-reactive through its cybernetic nature. Consequently, managers are mostly “focussed on the demands and constraints of their job, [project managers develop] a tunnel vision” (Bruch & Ghoshal, 2004, p. 8).
Project Control Versus Systems Thinking
The current control paradigm originates from mechanistic worldviews, where “quantified targets are set for performance at some point in future, the time path toward the target is forecast, and then actual outcomes are compared to forecasts, with the variance fed back to determine what adjustments are required to bring performance back to target” (Stacey et al., 2000, p. 65). This cybernetic control, however, contradicts systemic “thinking in which the future is understood to be under perpetual construction” (Fonseca, 2002, pp. 71-72). Neglecting the underlying cause of deviations is, however, problematic in complex environments and superficial fixes rather than fundamental solutions are the consequence (Senge, 2006).
Cybernetic systems ignore the concept of self-organization in systems (Hammond, 2002, p. 435), that acknowledges subjective interpretations of situations due to human perception, values, and motivation, thus weaving them into a clearer picture of the systemic reality. Belief systems are on the other extreme (Simons, 2000). Entrepreneurial attitudes and creativity are only controlled by a guiding vision and corporate values, thus introducing strategic choice as a project manager's task to reach a balance between innovation and control (Fonseca, 2002).
Superior solutions are expected from combining control approaches according to task and situation. It takes variety to control variety (Weick & Sutcliffe, 2001, p. 62). However, project management tools distribute their measurements rather single-sidedly. A recent definition of project control being a “product of many interlinked smaller events” (Maylor, 2006, p. 275) should instead lead to systemic approaches. Distributed control and coordination through communication within and between project teams and functions is a suitable approach for systemic project environments.
Figure 5. Levers of Control for Projects in Complex Environments (adapted from Simons, 1999, p. 305)
Possible Controlling Influence on Systems
Systems Thinking favours a shift from outcome control toward process control. “Control is inherent in interaction […] not in a system or an individual standing outside the interaction” (Fonseca, 2002, p. 75). These dynamics impact as unpredictable changes on projects and can therefore only be controlled through determining process to develop reactive moves. The content itself is not predetermined; it is developed within a framework for innovative and hand-tailored solutions.
Control Versus Innovation
Belief systems and interactive control systems are two ways of balancing control and innovation opportunities through maintaining an “opportunity space, that encourages information sharing and learning” (Simons, 1999, p. 304). The significant advantage of interactive control over diagnostic control consists in its support of double-loop learning as a “catalyst to force the organization to monitor changing market dynamics and motivate debate about data, assumptions, and action plans (Simons, 1999, p. 305). This is also confirmed through the success of quality circles (Hill, 1997), that initiate a creative “catalytic dialog between top management and each project team” (Mullins, 2002, p. 791).
Interaction between parts maintains a system's viability (Wheatley, 1999). Collaborative forms of growth and development must be reflected within the system's practices of engaging between people. Consequently, project feasibility and suitability are strengthened by strengthening the linkages. The business environment has changed too much to translate past success factors into the future. “The most robust organizations will not be those that simply have plans in place but those that have continuous sensing and response capabilities” (Nohria, 2006).
Coordination and Communication
Complex projects in complex environments force project management to deal with an increasing number of stakeholders. This requires the consideration of systemic interdependencies and their unintended consequences in order to adapt strategic planning proactively. The productive interchange between control and chaos arise at the interfaces coordinated by the project management function. “Consistency in the long term, focus in the medium term, and inventiveness and involvement in the short term provide the key to leveraging limited resources in pursuit of ambitious goals” (Hamel & Prahalad, 1989, p. 157).
Coordinating the System?
Project management already provides a detailed toolset for managing stakeholders (PMI, 2004). Surfacing their attitudes in maps or grids can enable organizations to operate the right levers in systems (Senge, 2006). Additionally, “the sum of maximizing the objectives of individual projects is not equal to maximizing the objectives of the organisation and can often be substantially less” (Dooley, Lupton, & O'Sullivan, 2005). No part of a system can survive without the other, synergies provide stability. As we remember, a node's stability increases with its number of interconnections (Flood, 1999).
Programs as governance models (Blomquist & Müller, 2006) currently gain popularity in a fast-changing environment to manage change. Their emphasis is on overall business benefits rather than outcomes on a mere technical level, and bridge the gap between project delivery and organisational strategy (Lycett, Rassau, & Danson, 2004) by aligning, coordinating, and controlling projects. While adding this strategic learning perspective, the “grass roots information” from within the project team is still not processed collaboratively within the project team to support innovation (Fonseca, 2002) and improve adaptation.
Coordinating the Project Team
Allowing teams to modify previous strategic choices autonomously contributes to triggering proactive behaviour. Consultation and facilitation are a project manager's levers to adapt as the project unfolds (Pollack, 2007) in decentralized, interactive forms of control and collaboration (Simons, 2000). Clarifying the scope decreases uncertainty; a guiding vision serves as a control mechanism to increase internal commitment. An “interplay of positive and negative forces creates a dynamic tension between opportunistic innovation and predictable goal achievement” (Simons, 1999, p. 301).
Therefore, the top-down approach prevalent in program management appears insufficient. The current structure-strategy-systems doctrine budges a purpose-process-people approach (Bartlett & Ghoshal, 1995) to restore project management effectiveness in complex business environments.
A process viewpoint on projects in systemic environments moreover considers goals to be under perpetual construction (Fonseca, 2002). The system is understood as a “living being [and…] not a stable structure but a continuous process of organizing information” (Wheatley, 1999, p. 95). This change of perspective reveals the importance of relevant communication within projects about scope, quality criteria, or critical success factors.
Proactive feedback (Hillson, 2002) complements, for example, risk management, that is presently regarded a tool to identify threats to the initial plan (Jaafari, 1999), by identifying opportunities off the beaten track. Organization is “emergent and self-organizing, and change is constant, evolving [and] cumulative” (Weick & Quinn, 1999, p. 366).
Therefore, facilitation concepts are advanced in recent project management literature (Pollack, 2007) to stimulate communicative interaction. This triggers immediate effects in complex projects: the reduction of uncertainty for individuals and the motivation to identify external factors early on. The two-way characteristic of communication (Mankins & Steele, 2005) between project team, project manager, and other stakeholders aligns short-term opportunities to the overall vision. Empirical research confirms communication as a critical success factor in complex environments (Love et al., 2002).
All incoming information is tied together through interaction, as individual cognitive capabilities are limited. The quality of these interactions can enhance interactive control as a catalyst for ongoing debate (Simons, 1999). The model of collaboration advanced in this paper resembles the “Model II Theory-in-use” (Argyris & Schön, in Argyris, 1999): through valid information, free and informed choice, and internal commitment, project control is shared, co-ordination is achieved through informed choice of participating individuals, valid information is obtained through communication. These prerequisites foster self-organization in social systems, where renewal occurs through interaction (Nonaka, 1988).
Hard frames for Soft Practices
Coordination and communication are project manager core responsibilities. The project manager constitutes a bottleneck for interaction and consequently for innovation. Coordination and communication are not separate; they come together in a collaborative paradigm outlined in this paper. Learning and sensemaking practices additionally trigger an additional value-stream from the bottom to the top, from the project team to the project manager to the organization. Both hard and soft paradigms are valid. Methodologies must incorporate this ambiguity, therefore—the ying and yang of guiding vision and diagnostic control (Simons, 2000).
Project management has not yet developed theories that combine these fragmented findings to provide practitioners with valuable guidelines for their daily work. Problems are emphasized (Cicmil et al., 2006; Winter et al., 2006), but pragmatic solutions often neglected. Problem structuring and sensemaking in ambiguous complex project environments requires mindful action as opposed to the “can-do optimism” prevalent among practitioners. Where learning from failure cannot be afforded, as in high-reliability organizations, thoughtfully dealing with problem symptoms elicits a cautious search for their root causes (Weick & Sutcliffe, 2001).
Projects are the microcosm where different functions, management levels, and professional backgrounds, with their respective worldviews, collide. Here, the possible impact of Systems thinking becomes apparent. The traditional control paradigm is supplemented by coordination and communication processes to enhance collaboration.
This perception supports a “grass-roots” or bottom-up approach to complexity management that ensures adaptation to changing environments. Hence, a framework for genuine enquiry, which begins with asking questions, is required. Collaboration contains the capacity to self-organize without external intervention (Stacey et al., 2000). The understanding of systems as being under continuous redefinition and reconstruction, however, explains the creation of novelty from this chaotic state (Nonaka, 1988). The project manager's ability to preserve a coordinative function appears central on the other hand. Order is not understood as controlling intervention but as confidence in defined interactive processes to elicit the expected results. Project managers become grand disturbers rather than caretakers of control (Wheatley, 1999), which symbolizes a paradox of control and innovation (Fonseca, 2002).
A more purposeful approach is adequate for complex environments because “once the ball is in the air, there is no way to control it” (Hamm, 2006, p. 119). Systemic feedback is mostly not controllable. The early investment in testing out ideas and challenging underlying assumptions must be followed by a pragmatic but preferably collaborative decision process. The latter can ensure efficiency through responding quickly to emerging needs, and the former increase effectiveness by making use of all available knowledge and ensuring goal-directed teamwork at later stages
Hence, in an ideal planning cycle, learning and sensemaking processes precede the planning phase to automatically develop strategies that meet the market requirements. Each identified environmental change, that is, the market requirements, triggers proactive iteration, and these processes assist in adapting project planning to strategy. Investment in reflective learning frames and accompanies traditional project planning to manage the task. Project management thus expands its process focus on task execution by executing processes to redefine the task itself.
In systemic environments there is no tradeoff between control and innovation. Instead, both become levers for adapting to a fast-paced environment.
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