Introduction
This paper confirms the need for awareness and inclusion of cultural influences for effective project risk management.
The risk management process is well defined in A Guide to the Project Management Body of Knowledge (PMBOK® Guide) It is structured, has guidelines on outcomes and assessments. This paper supports the work already completed, and enhances the understanding of risk management by establishing a key perspective on risk – cultural influences.
The paper is structured as follows:
- Project managers and Risk Management
- Risk management process outlined
- Culture defined
- Accepting cultural differences
- Influence of culture on Risk Management
- Final thoughts
Effective risk management is key to project success. In our view, inclusion of cultural understanding and an ability to unify shared values across multiple cultures (individuals) will positively influence the quality of project planning, execution and completion.
Project managers and Risk Management
In the EMEA region, more than 2% of the PMI members are members of the Risk SIG. In the North American and South American region, about 1% of the PMI members are members of the Risk SIG. About .5% of the Asia-Pacific PMI members are also Risk SIG members.
(Membership by Regions Study, PMI Risk SIG, January 2006)
Risks are usually perceived as negative - something to worry about and to try to avoid. While most organizations are concerned about threats to project objectives, risks also represent opportunities.
Attitudes to risk are based upon individual and corporate beliefs, which are inherent in the nature of the business and the organizational culture. This attitude toward risk can affect behaviour associated with the issues of risk management.
Project risk management focuses on protecting project objectives by addressing the probability and consequences of risk events. Risk management provides a crucial process in project management. “Projects carry considerable risk. Having no previous experience, we are uncertain whether we can achieve our targets” (Turner, 1993, p7).
When project managers are asked whether they think risk management is important, the majority respond ’with a resounding ‘YES!’. However, when asked how they perform risk management on their projects, the typical response is to relate a story about risk identification using a questionnaire or prompt list. A proportion of this group will tell you something about analysis. Finally, an elite sub-group can tell you more about the calculations and the meaning behind them. They conclude in unison ‘…of course, as managers we have to do something with the information obtained from the risk management process, so we have to take some actions’. Only very rarely you will hear a story about the application of risk management as an integral part of both planning and management of the project.
People acknowledge that applying risk management on projects is very important, but at the same time, project managers apply it only partially or not at all. This can be for many reasons, which include:
- Lack of understanding of the risk management process
- Lack of confidence in delivering risk management
- Insufficient management response to risk reports
- Lack of enthusiasm for risk management
But perhaps one of the reasons is that risk management is not as efficacious is because the current risk management processes do not include any cultural influences or ways to deal with cultural differences.
The risk management process
“Risk is never managed; the organization is managed in anticipation of uncertainty or risk. The term risk management is a misnomer. Managing risk is managing the organization. In this context, managing risk must come from leaders who act to position their organizations to respond to changes in the environment”
(Kathleen K. Paige, Keynote speech, INCOSE/PMI Risk SIG Symposium on Risk, Hampton Roads (VA), United States, May 2001)
The figure below illustrates the risk management process as depicted in the PMBOK® Guide
Title: Project Risk Management Processes in relation to each other and process groups
This project risk management process provides:
- An example of a problem-solving cycle.
- A framework for analytical thinking and rationality
- For application across certain parts of the world (i.e., Europe, North America, Australia).
This “traditional” risk management process is founded in statistical ways of dealing with uncertainty (the laws of probability). Applied by engineers in a technological environment, the focus of the risk management process will be on fact finding, looking for cause, quantification and executing responses.
Whilst referencing technical risk, the laws of probability are generally well accepted. Project risk management covers more than just the technical risks of a project. It is a management process in which active project control and influencing the environment are important. It is a process in which human behaviour plays a critical role. Culture therefore is a key element that influences the application of the risk management process.
Rijsenbrij (1993) in his book presented an approach in which the “human factor” was introduced in risk management. A risk awareness process at the beginning of the project during the phase of Risk Identification, involving all project members, will prevent risks from occurring because members feel a shared responsibility. In his opinion, perceived risk is more important than actual risk. This approach is useful, because there is attention to the fact that risk management is a process, executed by people working and communicating with each other in a team environment.
Many of us have experienced this personally, or from the reaction of a team member. Examples include: A person, who does not like taking risks (risk averse), will not perform well when asked to do project tasks with high uncertainty (e.g., uncertainty in the time needed to complete the task, or uncertainty on how to achieve the result). This same person could perform very well on project tasks that involve monitoring or quality control, or in processes that support these tasks. They could therefore be a very valuable project member, as long as they are given the proper tasks.
European and American Cultures have heavily influenced the risk management process, its definition and its application. This is because of their embedded preferences for analytical thinking and rationality.
What is culture, and where do we see its influence?
“Compared with Europe and the US, due to its historical and cultural backgrounds, Japan is said to be behind in risk prediction, risk control and countermeasures, and risk management is an important aspect of project management”
(Source: PMAJ Project Management Association of Japan (2005), P2M Guidebook, page 81)
Culture can be defined as a shared system of meanings that dictate how we appear, conduct business and react. Culture defines people's attitude, behaviour, ethics, communication patterns and etiquette.
According to Sanders and Neuijen (1992), culture can be defined in terms of an onion with 4 layers (the onion model). The core is formed by values and ground rules. Around this core, there are layers with rituals and heroes. The outer layer is formed by the display of symbols or explicit behaviours. One of the important functions of culture according to Sanders and Neuijen is (apart from standardization) the reduction of uncertainty.
In organisations, when observing and interacting with people in daily practice, the only thing we experience initially is the outer layer of culture. This represents merely a fraction of the complexity of the individual. The other layers also represent elements of culture, and therefore influence the behaviour of people. These layers are often inaccessible during early interactions. In fact people are often unaware of these layers themselves.
Culture can be a determining element, setting the thresholds for what is possible or impossible in the organization. An example to illustrate this can be found in the statement: “This organization does not have a project culture!”, a statement you hear in organizations that do not have the experience or the abilities to work in projects.
Culture from an individual perspective
Defining culture by location or its majority population is a popular way to determine nuances of behaviour or conduct. However, each culture represents much more than that: the properties of a unique individual influenced by circumstances and location of birth, shaped by childhood and adolescent experience, yet still individual, singular and lone. Understanding individual cultures broadens our capacity to understand project risk and provides greater opportunities to discover alternative responses. (Somani, 2005).
Understanding individual cultures broadens our capacity to understand project risk and provides greater opportunities to discover alternative responses:
- Being curious enough to ask simple questions; what is the typical approach you use? How do you manage…? Gaining confidence to not seek the ‘right’ answer; simply identifying alternatives in order to broaden your choice, finding new/different ways
- Sharing knowledge, increasing the awareness of those you work with in approaching things differently, assessing things from different perspective
- Exchanging ideas and reflecting on values and beliefs, recognizing that there are many ways to identify, assess and respond to situations and individuals and these are largely in response to individual history and experience.
Acceptance and understanding of cultural differences
Cultural differences provide additional risk factors both positive and negative. People are from different backgrounds in which different aspects (e.g., personal responsibility, importance of the group, importance of the personal relationship) are important. An example to illustrate this can be found in the statement: “These local people never work according to our project plan!”, a statement you might hear from a manager from abroad, who's trying to let local people work by his or her rules.
This can be countered where project managers accept and understand the multiplicity of perspectives present in every project team. They actively seek to engage team members individually to understand their background, preferences, experiences and culture in order to facilitate their inclusion and positive contribution to project risk management.
Effective cultural understanding creates and supports an environment where open disclosure, authentic concerns and opportunities can be freely voiced. These generate appropriate exploration of the risk events (positive and negative) and the subsequent recommendations as to management thereof.
The current risk management process has its limitations
As stated earlier, the project risk management process as it is described in the PMBoK® is an example of analytical thinking and rationality. Being rooted in analytical thinking and rationality, reflecting influences of European and American Cultures.
In general, project managers in many teams have begun to evolve their understanding of risk management as they increase the awareness of diversity and cultural uniqueness. This provides a rich and varied source of interpretation of the risk (perspective on positive or negative inferences of the event) and indeed the creativity to seek out…not the ‘right’ answer, but the best one.
Establishing cultural influences on risk management
Bernstein presented a direct link between culture and risk management in his book Against the Gods (1998). For risk management to be a meaningful concept, it is both necessary that people have an understanding of the concept of time, which includes the future, and that people recognise that they can (at least partly) control their environment.
People's perception of time and their perception of the environment are (among others) both important characteristics to describe different cultures, as can be concluded from the Value Orientation Theory by Kluckhohn and Strodtbeck (1973).
Nature, Time, Human Character, Activity and Relationships (Kluckhohn & Strodtbeck, 1973) are all critical dimensions in understanding individual culture and its effects on interpersonal communication and risk perspectives. An effective project manager attends to the relationship building required to understand and include varied perspectives in project planning and execution. This is particularly important in conducting effective risk management.
Time can be interpreted in many diverse ways:
- Past
- Present
- Future
- A combination of these (being through time)
Cultures with past orientation may be able to recognise, internalise and apply experience from events that happened more effectively than cultures with a focus primarily on the future. Cultures with ‘past time orientation’ which reuse previous experience, whilst valid and useful, may prevent them from creativity in predicting future events effectively. Risk registers, being a tool to store information in a structured way so it can be used later, work well in such environments.
A second aspect of the perception of time is the difference between sequential and synchronic. Sequentially organized cultures strongly link the present and the future. In fact, there is a causal link between these two, marked by milestones and deadlines that are important. All activities must be planned from beginning to end. Synchronically organized cultures do not work so much with timelines, planned and related activities. The goal or target is important; the way to get to that goal is to be discovered. A sequential perception of time leads to efficient ways to reach the goal, but results in a weak capability to adapt to uncertain situations or events. It seems risk management works better on a project in relation with a synchronic time concept. But beware; it might not be your cheapest project!
How do we relate to our environment; internally referenced or externally referenced? The inner-directed culture has a strong focus on controlling the environment. It has been heavily influenced by ‘Renaissance thinking’, which engendered a sense of personal control and influence on external issues. Inner-directed cultures are often dominating, less flexible and more goal-oriented than outer-directed cultures. The demand for risk management will be stronger in an inner-directed culture; flexibility of the outer-directed culture makes it easier for them to accept the risks (and perhaps easier to deal with them or internalise the risks).
To illustrate the potential influence of cultural characteristics on risk management, we take the example of East Asia. Widely, though not exclusively, influenced by both Buddhism and Confucianism, some of the key characteristics are (Chui 2005, p2):
- Humbleness (humility)
- Indirectness (subtlety)
- Respect for age and seniority
- Avoiding conflicts
- The concept of Shade (Yin-Yang; accept and deal with ambiguities)
Imagine application of these characteristics to the process of Risk Identification. A brainstorming process has been arranged with a large part of the project team as a tool to achieve risk identification. The following situation could occur:
- Some individuals will not give input to the process, despite the fact they have valuable information, because they think the information is not good enough
- Individuals will not describe their perceived risks accurately, because this could be considered communication which is too direct or causing conflict
- Information given by older or higher ranked project members will be considered more valuable
- Younger members will keep silent and not give their opinion (especially not when it is opposing an older or more senior member)
A traditional brainstorm is therefore not the best way for information gathering in a risk identification process where team members from these cultures. Using a Delphi technique, Nominal Group Technique or interviewing will achieve better results.
Influence of culture will not only affect the risk identification process. During the risk analysis process, when it is important to establish how serious the risks are, culture will show its influence again. Avoiding conflicts, respect for age and seniority, indirectness, humbleness. All these characteristics will influence the risk analysis process, generally speaking in a negative way when performed in a “traditional” way. These negative influences can be minimized by paying extra attention and respect to communication, social position, ranking within the organization and opportunities for expression (indirect and/or anonymous).
When performing a brainstorm session with a large contingent of the project staff in a culture with high power distance, e.g., Latin, this brainstorm session will have an important side effect apart from the fact you will only get socially desirable answers; a lowered status for the project manager. Because of the risk identification session, the project manager indicates he is not ‘the absolute expert’, and this lowers his status towards his project staff.
Important work on the research of the influence of cultural differences on work situations has been done by Hofstede (e.g., Hofstede, 1984). The concepts “Power Distance” (PDI), “Uncertainty Avoidance” (UAI) and “Masculinity” (MAS) developed links directly to the performance of the project risk management process.
Using Hofstede's references to masculinity, the Latin culture will then have little respect or value for the project manager in an open discussion, believing that they do not have the necessary Subject Matter Expert (SME) status to be the ‘leader’ (project manager).
The Project Risk Management Process, as we know it consists of 6 steps:
- Risk Management Planning
- Risk Identification
- Qualitative Risk Analysis
- Quantitative Risk Analysis
- Risk Response Planning
- Risk Monitoring & Control
Risk Management Planning, Qualitative and Quantitative Analysis and Monitoring & Control are essentially analytical processes. Risk Identification and Risk Response Planning on the other hand are essentially creative processes. Being an analytical person is not mutually exclusive with being a creative person, but generally speaking, it is hard to be an analytical and creative person together (at the same time). You could consider permitting analytical individuals to take the lead when working on planning, analysis or monitoring & control, and let more creative people lead the identification and response planning processes.
Risk Management Planning is the first step of the risk management process. To consider culture within this, means asking the following questions regarding time and control:
- Are the people on the project focused on past, present, future, or a combination?
- Is their thinking sequentially or synchronic?
- Are the people on the project basically internally or externally referenced?
- Do people act independently or do they prefer to gain consensus from colleagues?
- What type of communication will be most effective in a given situation; direct or indirect, anonymous or not, highly structured or free format, etc?
In order to expand upon the opportunities presented by working in project teams, the project manager needs to consciously plan the application of tools and techniques in risk management. These need to reflect the cultural aspects of the team in relation to:
- Preferred medium – face to face, computer technology, telecommunications, verbal, aural or written
- How to phrase questions to elicit comprehensive responses from individuals
- How to facilitate project risk response planning to ensure that all contributors continue to strive beyond seeking the ‘right’ answer and aim for the best answers which provide flexibility in action
Answers to these questions provide direction to the selection of tools that can be used successfully on a project. It makes the risk management process a much more powerful tool for controlling your project and facilitating a productive team.
Application of risk management with cultural awareness
Having discussed the importance of the interplay of cultures in the effectiveness of risk management, as project managers we need to consider how we can implement this learning in our current project environment. Here are some steps that we can include in our daily project management activities:
- Self awareness, personal cultural boundaries, preferences and flexibility
- The risk management process in the context of the project origin, stakeholders and geographic location
- Global climate, economic, political and environmental
- Creating a culture of trust, humour, and openness.
- Use of multiple technologies e.g. phone, graphics, text
Final thoughts
Often, at best, project managers consider risk management as filling out a risk prompt list or questionnaire at the beginning of the project, and ignoring it thereafter, to continue with their daily activities. For them, risk management is something that has to be done, because the project management handbook says so!
Risk management is gaining ground on the priority listing of project management tasks. Similarly the growing emphasis on stakeholder assessment, expectation management and stakeholder satisfaction has increased the need to appreciate and evolve cultural understanding.
Engaging with different individuals facilitates successful deliverable of project content. Appreciating and harnessing the cultural diversity of individuals enables creation of a team culture. This increases working effectiveness, sense of satisfaction, interpersonal skills and future project success.
Effective risk management is key to project success. Inclusion of cultural understanding and an ability to unify shared values across multiple cultures (individuals) will positively influence the quality of project planning, execution and completion.
The output of the Risk Management Planning step is to deliver a risk management plan. This must reflect the cultures, preferences, tools to apply for this project and rationale for their usage. For us, this represents a practical addition to the Risk Management Planning Process as described in the current version of the PMBOK® Guide
“It is easy to follow, but it is uninteresting to do easy things. We find out about ourselves only when we take risks, when we challenge and question”
(Magdalena Abakanowicz, on http://www.econsultant.com/quotes/risk.html)