Connecting organization strategy to projects--the missing link
During the last few years there has been considerable interest in relating projects to strategy of an organization. This has resulted in many initiatives, to name a few:
- Development of maturity models (e.g. OPM3®)
- A clearer understanding of project portfolio management
- Identifying success criteria of projects and linking it with the objectives of the organization.
We find that there is increasing interest in these areas. While the connection between strategy and projects may have been understand from a conceptual viewpoint it is still not clearly and explicitly stated at operational levels. One reason for this could be that strategy at organizational levels has different measures as compared to that at project or operational levels. Another could be that strategy is not clearly understood by personnel at project levels and likewise top management may not appreciate operational issues. Further, the dynamic nature of organizations and the effects it has on project outcomes increases the complexity of relating strategy and projects on an ongoing basis. So, what is the missing link? Does it justify a separate knowledge area of Project Strategy Management?
This paper attempts to explain the link between strategy and projects in more explicit operational terms. It will also present the current thinking on the subject presented by models, framework, methodologies etc.
Strategy and Projects
What is Strategy?
Strategy, quite simply, even in its simplest form indicates a preferential path which we will like to follow to reach a goal/objective. This is guided by the Vision (where we will like to reach) and the Mission (what we are or what we do). Most organizations have some form of strategy whether right or wrong, explicitly stated or implicit in the way they work. When it is formally elaborated, it uses models, associated jargon, practices and follows a structured process and methodology. When informally practiced which is most often the case, it may be hidden under various functions, roles and practices. This applies to most organizations big or small, operational or projectized, any sector or industry, simple or complex.
Strategic nature of Modern project management
There has been widespread growth of modern project management and its use is increasing in newer and non-traditional sectors. The concept of “Managing by projects” is also taking root in many operational organizations. Strategic Planning, Capital Budgeting, New Product development, Organizational change, Mergers and Acquisitions, Outsourcing, etc are seen as initiatives that are executed through projects. Project management is a key strategic tool that drives these initiatives and helps reap business benefits for the organization. Excelling at project management can be vitally important and can be a means to outperform the competition (PWC, 2005)
Connecting Projects to Strategy
While strategy defines where we like to be in the future, we cannot be absolutely certain that it can be achieved through the projects that we undertake. Studies have shown that there is often a disconnect between strategy and projects in many situations. In other words the projects that we execute do not often meet strategic objectives of the organization.
Current thinking on connecting strategy to projects rests on a structure of considering project related work in terms of project, program and portfolio management. Of these, portfolio management is the vital part which links strategy and projects. Using it we are able to choose the ‘right projects rather than just do the projects right.
Organizational project management and its maturity is built on a similar structure of projects, programs and portfolios moving from a stage of standardization, measurement, control and continuous improvement. Some models have been formulated using these concepts - examples include OPM3 ®, P2M and PMMM.
While the link between strategy and projects is fairly well understood at the conceptual level, this may not be clearly stated at the operational level (Morris & Jamieson, 2004). This lack of clarity is an impediment when we move into implementing strategy especially with regard to measuring outcomes since it becomes a basis for deciding if a project is successful or not and whether it meets the strategy of the organization. It becomes all the more necessary to understand this link clearly because of the dynamic nature of organization So while strategy may be formulated, they have to be constantly aligned with changing project outcomes and ground realities at the operational level.
The way we measure outcomes of strategy at the organization level is different compared to that for projects. At the organization level, strategy is reflected in terms of financial measures like ROI, investments, cash flow etc and strategic outputs like growth, customer satisfaction, technical excellence etc. However at the project level measures are often in terms of scope, time and cost and sometimes customer satisfaction. Two reasons could be found in the difficulty of relating the measures or Key Performance Indicators (KPIs) at the two levels. One is the practice of purely looking at outcomes of scope time and cost at the project level at the exclusion of other criteria. The other is the inability to identify benefits or strategic outputs at the project level because they are not visible at this level but only at the program or portfolio levels. While in the first case we can improve the linkage by providing a strategic emphasis to project outcomes, in the second there is a genuine difficulty in relating outcomes.
Top down v/s bottom up
Bossidy and Charan (2002) mention that a key input in executing strategy is giving importance to the ‘Hows’ along with formulation of strategy. Often, we find that one factor in connecting strategy and projects is the inability or unwillingness to consider operational factors or metrics while formulating strategy. In a similar vein one can see a lack a understanding of organization strategy by persons at operational levels. Not surprisingly, it is stated that a key to effective implementation of strategy is good communication across the organization and ensuring that strategy is well understood.
Common complaints often heard in organizations at bottom of the chain are of “not knowing the big picture”, “not being informed”, “lack of communication from above”, etc. Those at the top complained that their subordinates “wasted time doing things that were not necessary”, “failed to prioritize tasks properly”, “were not properly trained in critical tasks”, and “failed to recognize critical tasks and situations”.
Bottom up approach of providing project information to the top level is appreciated by many practitioners and this has given rise to software with capabilities to provide snapshots or bird-eye views in terms of dashboards. While these are useful in reporting and resource allocation they still do not help in ensuring a link between strategy and projects.
The solution to bridge this divide between the top and bottom is effective deliberation and understanding of strategy and operational issues at both levels.
The Importance of Measures
This brings us to importance of measures in the context of this topic. It is often said that “What we cannot measure cannot be controlled”. The problem lies in answering key questions like:
- What measures at the project and program levels relate to that at the strategic level and how do we define them?
- How do we ensure that the measures at the project and program levels are reflected at the top on an ongoing basis?
- Is strategy well understood by people at operational levels?
- Are operational issues appreciated by the top management and considered while formulating strategy?
- Is the feed-back of operational metrics to strategy present and visible on an on-going basis?
Project Portfolio Management forms one of the building blocks in relating project to strategy and can be considered as that part which aligns projects or programs to organizational objectives. This alignment becomes meaningful only if we have clarity in the measures of the outputs at the project and program level. From the customers or stakeholders' viewpoint the measures at the project level are the Critical Success Factors or CSFs and these are translated to Key Performance Indicators or KPIs for the outcomes by the project manager. The measures at the project level are related to that at the program level and subsequently to strategic objectives. This is depicted in Exhibit 1.
As stated earlier, measures at operational level are different compared to that at the top. This presents difficulties in matching and relating the measures. This is where various ways of translating strategic objectives to project objectives come in very useful. A literature survey showed that many models .framework or methodology are in use by organizations which meet this requirement. This is described in the next section and in Exhibit 2.
Exhibit 1 – Relating measures – project outcomes to strategic objectives
Models, Framework and Methodology
These relate by various means the objectives or goals at the strategic level to that at the project level. Interestingly, notwithstanding the existence of the above, various forums or organizations involved in promoting project management seem to have difficulty in using these to clearly explain the link between strategy and projects. This shows that while the knowledge and practices exist, they have not been consolidated or adapted to answer questions in the connection between strategy and projects. In very few cases they find a place in standards or Bodies of Knowledge related to project management.
Exhibit 2 – Various Models / Framework / Methodologies
Hierarchy of Objectives
One of common ways of depicting the relation between strategic objectives to that at the project level is to use the concept of hierarchy of objectives. This exists in many of the models/framework/methodologies mentioned in Exhibit 2. This is similar to creating a work breakdown structure and can be described as an Objectives Breakdown Structure. This is based on framework suggested by Robert Youker (2001) which is briefly summarized below.
Levels of Objectives
Broadly organized into policy, strategic and organizational and they correspond to Top, Middle and Working levels of management in an organization - Exhibit 3.
Exhibit 3 – Levels of Objectives
The question Why relates to the Ends which in turn relates to the Objectives. The question How relates to the Means which in turn relates to the Strategy.
The Why question moves up the whereas the How question moves down the hierarchy of objectives. See illustration in Exhibit 4.
Exhibit 4 – Why _How and Objectives- Strategy
Involves considering various options and deciding on one of them
- Strategic: Certification, On the job - Training, University education.
- Project : self study, class room, web based online
- Input : Train few and then the rest, train all uniformly
The concept of horizontal logic relates the outcomes one step further by identifying results/measures in the why-how analysis. Refer Exhibit 5
Exhibit 5 – Horizontal Logic
Project Strategy Management – A Knowledge Area?
The relationship between strategy and projects, aligning the outcome of projects with organization strategy and maintaining it on ongoing basis, has become contemporary topics. In relating strategy and projects the subject of strategic or corporate planning is considered outside the purviews of project management whereas implementing is very much a part of it. Nevertheless, it is beneficial for project managers to understand the strategy of an organization and the way it is formulated. Further as mentioned earlier, one of the reasons for the disconnect between strategy and projects could be the lack of appreciation of operational factors by senior managers and a similar lack of understanding of the strategy at the top by operational personnel. Also, relating project outcomes to strategic objectives presents its own challenges. All these point to only one direction – a need for consolidating knowledge and practices as part of another knowledge area, which can be termed as project strategy management.
Project strategy management is not the same as strategic management. Neither is it project portfolio management. It will involve all those functions and areas not covered by these two disciplines but relating to strategy. It will include
- Creating an Objective Breakdown structure
- Understanding Organization strategy - particularly by Operational personnel
- Relating project outcomes to Organizational strategy on an ongoing basis
- Appreciation of operational issues and outcomes by Senior Management
- Identifying strategy and project outcomes based on type of project, domain, complexity etc
Like other knowledge areas this will have a set of processes. Project strategy management will exist at the project, program and portfolio levels. In each domain, the perspective of the link between operational and strategic objectives will be different. While, at the project level simpler outcomes could be scope, time cost etc, at the program level it would mean understanding benefits and at the portfolio level it would choose the right projects or programs to implement.
The concept of Project Strategy Management as knowledge Area is enunciated in at least one standard P2M PMCC (2004). However here it is described as being related to portfolio management, as this standard does not have a separate domain of portfolio management. In the same standard profiling management is mentioned as part of program management which will be akin what we are describing in this paper.
Morris (2005) has pointed out the importance of strategy management at the front end of projects and has suggested its inclusion in a project management Body of Knowledge.
The Missing Link?
So what is the missing link? While the relation between strategy and projects in terms of projects, programs and portfolios is fairly understood, the same cannot be said in terms of its outcomes. The relationship between measures becomes important as they become the yardsticks for assessing if projects (and organizations) are successful or not. Not much of work is observed in literature and practice in relating the outcomes or metrics of projects, programs to that of strategy. This needs more attention as measures may need to be specific to the particular industry, sector, type of project or business model.
Survey of Literature and current practices indicate that various models, framework and methodologies are currently available and used by organizations for connecting strategy with projects. However these do not find mention in many standards or bodies of knowledge related to project management. Therefore while some organizations or practitioners may be following it, the knowledge may not be available to all. Project Strategy management should be given importance in its own right and included as a knowledge area in project management bodies of knowledge.
Since the knowledge and practices are being deployed only by some organizations, using them in specific projects and industries may result in some challenges. This could be so with respect to measurement and identification of metrics and outcomes. Therefore, more attention and research is required in connecting measures (metrics, outcomes) of projects and programs to that of strategy.
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© 2007, Raju Rao
Originally published as a part of 2007 PMI Global Congress Proceedings – Hong Kong