Project versus program business case decisions
Typically, at project level, in presenting the “justification” for the project, the business case explores the necessary information to support decisions to commit to the achievement of the outputs. At program level, the business case needs to present the necessary information to support decisions that will, over time, increasingly commit an organization to the achievement of its outcomes or benefits. In order to do so, the business case resorts to a number of reasoning processes in logic and argument such as deductive, inductive, abductive-inference or analogy.
This paper presents the major differences between the decision-making processes in a time limited project environment and the decision-making processes in the longer timescale of the program environment. It is too often commonplace that the more classic decision making theory and practice of breaking down big decisions into smaller decisions used in a project approach is exported to the program approach, the underlying assumptions being that the sum of many small decisions leads to one good mega decision as well as the conviction that people think and decide in a rational manner using probabilistic facts in a constructive way. This paper outlines the major differences between project and program business case construction and explores more recent trends in decision making to help program managers when the volume and/or complexity-induced information overload limits or precludes the use of a traditional decision making approach.
Decision Making (DM)
Mintzberg (in Sambharya, 1994) considered DM to be the most crucial part of managerial work and organizational functioning. Different definitions of what a decision is and involves abound in literature that spreads through the knowledge of many centuries of all disciplines (Schull, Delbecq & Cummings, 1970). DM is very important to most companies. Modern organizational definitions can be traced back to von Neuman and Morgenstein (1947) who developed a normative decision theory from the mathematical elaboration of the utility theory applied to economic DM. Their approach was deeply rooted in sixteenth century probability theory. This trend has persisted until today and can be found relatively intact in present decision analysis models such as those defined under the linear decision processes. This approach uses probability theory to structure and quantify the process of making choices among alternatives. Issues are structured and decomposed to small decisional levels, and re-aggregated with the underlying assumption that many small good decisions will lead to a good bigdecision. Analysis involves putting each fact in consequent order and deciding on their respective weight and importance.
Most descriptive research in the area of DM conclude that humans tend to use both an automatic non-conscious thought process as well as a more controlled one when making decisions (Hastie and Dawes, 2001). This dual thought process is possible because of the human mind's capability to create patterns from facts and experiences, store them in the registers of long-term memory and re-access them in the course of assessing and choosing options. Many authors refer to this mechanism as “intuitive DM” a term that has not gained much credibility in the business environment and is still looked down upon by many decision analysts, therefore, it is not surprising to find that a linear mechanistic approach to DM permeates project management's literature. Throughout its development, the project context seems to have neglected the importance of the softer and/or more qualitative aspects of the management domain. These are now being recognized as essential for good business to develop, and, in the new context of projects and programs, quantitative aspects of the DM process are progressively becoming secondary issues to such qualitative issues as the meaningfulness of a decision for different stakeholders and the overall organization.
Project managers are repetitively expected to listen to different stakeholders' needs and account for the numerous quantitative variables when making decisions, however, both information overload and organizational constraints usually make this difficult to implement. Very little guidance can be found in the project literature when it comes to decision making. If anything, the overwhelming importance of the DM issue seems rather accepted as common knowledge for project managers. It is not mentioned or explored in the PMBOK® Guide(PMI, 2008a) despite the bulk of recent research and growing interest in this domain. In spite of the increasing importance placed on DM knowledge and skills, many project and program managers continue to struggle with the concept that can stand in the way of career progression and may be one of the primary factors preventing project and program success.
Project management practice is permeated with the thought that in order to facilitate DM in the project context, simple (linear) evaluation tools should be widely used and, depending on the context, some more advanced evaluation tools are regularly applied. However, it has now long been documented that decision-support tools are no longer sufficient with organizations becoming flatter and increasingly projectized and with project managers' roles that have grown to accommodate the complexity of the business environment. This situation has added considerably to the number of variables and the dimensions of an already complex web of relationships brought about by the stakeholder focus. With such changes as the implementation of PMOs, Portfolio Management, Program Management and Project Based Organizations, project managers are now called upon to interact with an ever expanding pool of stakeholders and other tools, such as meetings, reports and electronic networks are also important facilitators in managing strategic projects. Intuition, judgment and vision have become essential complement tools for successful strategic project and program management.
Without an appropriate framework, some authors have suggested that managers do not characteristically solve problems but only apply rules and copy solutions from others (March, 1991). Managers do not seem to use new decision-support tools that address potential all-encompassing sector-based elements, such as flexibility, organizational impact, communication and adaptability, nor technological and employee developments (e.g. Intellectual Capital). There is therefore a potential for managerial application of new, value creation decision-support tools that could develop within new DM frameworks. Because these are not mature tools, in a first instance they might be introduced in a more qualitative way – ‘a way of thinking’, as suggested by Amram and Kulatilaka (1999), to reduce the managerial skepticism. Recent decision-support tools might be fruitfully combined with traditional tools to address critical elements and systematize strategic project management. It is now increasingly accepted that traditional problem-solving techniques are no longer sufficient as they lead to restrictive, linear Cartesian conclusions on which decisions were usually based in the past. Instead, practitioners need to be able to construct and reconstruct the body of knowledge according to the demands and needs of their ongoing practice (Schön, 1987). Reflecting, questioning and creating processes must gain formal status in the workplace (Bredillet, 2004).
In the 50's, Cyert et al., (1956) already imply that management is a series of DM processes and assert that DM is at the heart of executive activity in business. In the new business world, decisions need to be made fast and most often will need to evolve in time. However, most of the research is based on a traditional linear understanding of the DM process. In this linear model, predictions are made about a known future: decisions are made at the start of a project, taking for granted that the future will remain an extension of the past.
Decision Making in the Project Management Context
The commonly accepted definition of a projectas “a unique interrelated set of tasks with a beginning, an end, and a well defined outcome” assumes that everyone can identify the tasks at the onset, provide contingency alternatives, and maintain a consistent project vision throughout the course of the project (De Meyer, Loch, & Pich, 2002). The ‘performance paradigm’ (Thiry, 2002a, 2002b) used to guide project management holds true only under stable conditions or in a time-limited, change-limited, context (Standish Group International, 1994). This is acceptable as long as, by definition, the project is a time-limited activity, and for the sake of theoretical integrity, is restricted to the foreseeable future.
In this context, the traditional DM model has provided project managers with a logical step-by-step sequence for making a decision. This is typical of models proposed in the decision-making literature of corporate planning and management science of the past. It describes how decisions “should be” made, rather than how they “are” made. The ability of this process to deliver ‘best’ decisions rests upon the activities that make up the process and the order in which they are attended to. In this framework, the process of defining a problem is similar to making a medical diagnosis, the performance gap becomes a symptom of problems in the organization's health and identification of the problem is followed by a search for alternative solutions. The purpose of this phase of the decision-making process is to seek ‘the best solution’ (Jennings and Wattam, 1998: Ch1). Several authors have identified a basic structure, or shared logic, underlying how organizations and decision-makers handle decisions. Three main decision-making phases can be defined: Identification by which situations that require a decision-making response come to be recognized, Development involving two basic routines (a search routine for locating ready-made solutions and a design routine to modify or develop custom made solutions) and Selection with its three routines (screening, evaluation-choice and authorization) (Mintzberg, Raisinghani and Théorêt, 1976).
Decision Making in the Program Management Context
More recently, many organizations have felt a need to further develop toward a fully “projectized” structure, which goes beyond a simple portfolio approach and involves the management of strategic decisions through programs (Moore, 2000; Richards, 2001; Thiry, 2004b). This move has somewhat shifted the responsibilities and decision-making roles of project and program managers. Itis well documented that in most organizations managers are actively working within a paradox. They have an official role in a legitimate control system, facilitating an integrated transactional change process, and simultaneously participate in a shadow system in which no one is in control (Shaw, 1997).
A mechanistic style of management warranting a more rational and linear approach to DM is appropriate when goals are clear and little uncertainty exists in the prevailing environment (De Meyer, Loch, & Pich, 2002, PMCC, 2002). Program management practice is not meant to replace this management focus; rather, it encompasses it in a larger context. Here, managers cannot control their organization to the degree that the mechanistic perspective implies, but they can see the direction of its evolution. When several variables are added to a system or when the environment is changed, the relationships quickly lose any resemblance to linearity (Begun, 1994). These issues have been raised in reference to strategic issues such as the organization's competitive position, the achievement of the program's benefits and the effects of changes on the program business case (Görög and Smith, 1999; Grundy, 2000; Lycett & al., 2004; Thiry, 2004b). These same issues have traditionally been processed through a project view of change control rather than a strategic view of change management. One of the main drawbacks seems to be that these standard approaches focus on a linear program lifecycle (Lycett & al., 2004; Thiry, 2004a). According to these authors, focus on early definition and control of scope severely restricts flexibility thus negating the value of having a program. Furthermore, insistence on a rigid life cycle intrinsically limits the ability of the program to adapt in response to evolving business strategy (Lycett & al., 2004). In his work on decision-making during the implementation of strategic projects, Grundy (2000) found that cognitive, emotional and territorial aspects were so intrinsically interwoven to the DM process that he employed the concept of “muddling through” (originally introduced by Lindblom in 1959). Similarly unsatisfied with the rational model of decision-making at top management levels, Isenberg (1984) stated that managers rely heavily on a mix of intuition and disciplined analysis and might improve their thinking by combining rational analysis with intuition, imagination and rules of thumb.
Project Management Decision Making Framework
The literature shows that project managers seem to have a natural predisposition toward using a more traditional and structured approach to DM. This observation can be accounted for in more than one way. The difference could be caused by the nature of their roles and responsibilities or that people who have personal affinities for this type of DM approach tend to be attracted to this type of work. Further psychological testing would be necessary to establish this second type of relationship. Nevertheless, the project management literature still describes a logical step-by-step such as those described by Jennings in the 90's and by Mintzberg in the 70's. Although critics of this approach have outlined the fact that the ability of this process to deliver ‘best’ decisions rests upon the activities that make up the process and the order in which they are attended to, project managers seem to be comfortable with, and skilled at, using this method to resolve problems. Within this DM model, a process of deductive reasoning is more often used than in the program management context where inductive reasoning is more often described as a preferential thought process when engaged in DM activities. The concept of deductive reasoning was first developed by Aristotle, Thales, Pythagoras, and other Greek philosophers around 600 to 300 B.C.. This is the type of reasoning that proceeds from general principles or premises to derive particular information (Merriam-Webster). This type of reasoning is quite characteristic of most linear DM tools used in the context of “high certainty”. These toolsare aimed at achieving an optimal solution to a problem that has been modeled with two essential requirements:
a) that each of the variables involved in the decision-making process behaves in a linear fashion (of the decisional range) and;
b) that the number of feasible solutions is limited by constraints on the solution.
These techniques rely almost entirely on the logic and basic underlying assumptions of statistical analysis, regression analysis, past examples and the linear expectations and predictions they stimulate. A good example of this is the story that Aristotle is said to have told of how Thales used predictive logic to deduct, from accumulated historical data, that the next season's olive crop would be a very large one and bought all the olive presses, making a fortune in the process. However, given that deductive reasoning is dependent on its premises, a false premise can possibly lead to a false result. In the best circumstances, results from deductive reasoning are typically qualified as non-false conclusions. This can be best understood with the following simple example:
All humans are mortal. Paul is a human Paul is mortal.
From the project managers' perspective, the project's basic assumptions and constraints are the starting premises for all further decisional processes. In fact, these initial conditions of the project environment act as limits or boundaries, necessary for this type of DM process to be effective. With this said, project managers seem to describe a pattern in which large decisions are actually made during the first phases of the project, before and during the planning stage. Project management typically delivers outputs in the form of products and services and most project decisions are made to commit to the achievement of these specific outputs (PMI, 2008b). This perspective infers that a series of small decisions, that amount to the project plan, are made during the planning phaseand finally add up to what is referred to as a large decision: the approved project plan. All these decisions, that shape the project, are made at the onset of the project. All later decisions are considered less important, more specific and aimed at problem solving; often limited to one domain of knowledge at a time (i.e. technical, human relations, procurement…). Because most large decisions have been made at the onset, once the scope is defined, it limits the number of possible dependant variables in the DM process. The number of significant stakeholders involved is also limited and the overall situation is described as limited to the project's immediate environment. Much of the DM follows a relatively traditional structured model to which the deductive thought process seems to adapt readily. Exhibit 1 illustrates this DM model for projects.
Program Management Framework
A particularly interesting finding is the fact that deductive reasoning does not seem quite as popular or as universally called for in the DM processes of the program management literature. Although the process of deductive reasoning is described sporadically in the program management literature, the process of inductivereasoning seems more popular. Deductive reasoning applies general principlesto reach specific conclusions, whereas inductive reasoning examines specific information, perhaps many pieces of specific information, to derive a general principle.
A well known example of this type of thought process is found in the story of Isaac Newton. By observation and thinking about phenomena such as how apples fall and how the planets move, he induced the theory of gravity. Program managers relate stories about having to collect information through observation, questions and numerous exchanges in order to put the pieces together into a cohesive story to manage the program. The use of Analogy (plausible conclusion) is often apparent. This process uses comparisons such as between the atom and the solar systemand the DM process is then based on the solutions of similar past problems or what is often referred to as experience. Contrarily to project management where most decisions are taken to commit to the achievement of specific outputs, program management typically delivers outcomes in the form of benefits andbusiness casedecisions are taken over longer periods of time depending on the number of projects that are integrated and to the timing scale of these different projects (PMI, 2008b).
These increasingly commit an organization to the achievement of the outcomes or benefits and the DM period, although important at the beginning continues progressively as the situation evolves to accommodate the changes in this larger environment. Program managers tend to converge toward an ongoing series of large decisions (affecting the totality of entire projects) as the program evolves over time. This can be compared to the project level discourse that described large decisions at the onset and smaller ones (not affecting the overall business case of the project) as the project evolved. This is in keeping with the fact that, since programs deliver benefits as opposed to specific products or services, the limits of the program environment are not as specific or as clearly defined as those for the project. Organizational benefits are inherently linked to organizational strategy, value systems, culture, vision and mission. This creates an unbounded environment and basic assumptions are not as clear as for the project environment. This could account for the fact that deductive thought processes are less suited than inductive ones in the DM processes of program managers.
DM processes at project and program level differ significantly in the timing, pacing and number of major decisions, as well as the nature of the DM processes employed. Most large or important project decisions are bound by the project's basic assumptions and project managers tend to have a preference for deductive mental processes when making decisions. The occurrence of large or important program decisions seem to persist throughout the program life cycle as they are prompted by setting the assumptions for each project when these kick off. Because the program delivers benefits and that these cannot be as clearly defined as products or services its environment is not as clearly defined or bound by set basic assumptions and inductive reasoning seems more suited to meet the program managers' decision making needs.
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© 2010, Manon Deguire
Originally published as a part of 2010 PMI Global Congress Proceedings – Melbourne, Australia