Introduction
At a time when projects are increasingly important to strategic organizational success, how is it that project management is considered an operational activity? This paper examines the evolutionary trends in project management and their implications for the future of project management. In particular, it posits an alternative future where project management is a strategic alternative and explores what it would take to get there.
We fell into the trap of thinking about project management as an operational construct with little relevance to the strategic level of the firm for a number of reasons. Primary among these relates to a narrow definition of project success. The focus on “start, do, and finish” and emphasis on the iron triangle are useful but limited our focus to the short term and prevented us from putting project management into the organizational context. We historically confused the project and product life cycles. We ignored the fact that the project life cycle is actually a subset of the product life cycle. We insisted on defining two or more teams, that is, a project team and business team, and were then perplexed over which team was responsible for which deliverables. We often believed that the project ended when we finished the project management deliverables and handed things over to operations. We fell into the trap of not recognizing that some of our responsibilities extended into the product life cycle. Finally, traditional approaches to asset valuation focused on tangible assets ignoring the potential of intangible assets like experiential knowledge sharing or know-how, to contribute to strategic advantage. Project management thus was valued using operational measures and for its operational contributions.
These factors resulted in a tactical view of project management as getting something done on time on budget and this influenced how we present it to executives. If we believe that project management has value at the strategic level of the firm, we need to get out of this operational rut. As we emerge from this trap, we move from critical success factor (CSF) lists to integrated success frameworks. We start to see that project management success is more than a microcosm of inputs and outputs; project management success links to product goals and corporate plans. Ultimately we need a more sophisticated perception of the challenges and contributions of project success. This paper presents a synopsis of trends in terms of project management's value at the operational level over the past 30 years and the increasing awareness that it has the potential to become a strategic asset. As many if not most firms require superior project management to be competitively successful today, it is important that we understand what it means for project management to be considered a strategic asset and what it will take to get it there.
Operational Management versus Strategic Management
There are key differences between strategic management and operations management. These differences are evident in the terms used to describe roles and responsibilities of these levels of the firm (Floyd & Woolridge, 1997; Mintzberg, Ahlstrand, & Lampel, 1998).
The strategic level is where the visionary planning, and leadership work occurs. The operational level is more concrete and involves follow through on the strategy. Typically, middle managers have a role in implementing strategy but not forming it. They ensure that project management practices are in place and they support project management as an operational construct. Companies generally under appreciate middle managers but firms that involve them in strategy development achieve better performance (Floyd & Lane, 2000; Floyd & Woolridge, 1992a, b; Floyd et al., 1994, 1997).
Exhibit 1. Comparison Between Strategic and Operational Level of Firms
Exhibit 2. Evolution of Project Management Success and Value Across the Project and Product Life Cycles
Recent empirical research on selling project management to executives confirms that project management is viewed of as a tactical but not strategic construct (Thomas, Delisle, Jugdev, & Buckle, 2001). Executives believe that project management is important but not at the strategic level. The operational-level terms in Exhibit 1 reflect the roles, functions, and processes in project management that is typical of an applied discipline. The next section explores the evolution of the success literature in project management with an eye to highlighting the growing sophistication in measurement attempts and breadth of value being recognized.
The Challenge of Defining Project Success
Several areas of misunderstanding on measuring project management success contribute to its perceived value at the operational level. The challenges relate to terminology issues, confusion between project management and product life cycles, when success is measured within the life cycles, and which stakeholders are asked to assess success (Delisle, 2001; Hartman & Jergeas, 1997; Might & Fischer, 1985; Pinto & Slevin, 1987; Thomas, 2000; Thomas & Tjader, 2000). Success is a complex and ambiguous construct that changes rapidly and “is in the eyes of the beholder.” Both the project and product are geared toward organizational goals but have different objectives. A main area of misunderstanding relates to the definitions and descriptions. Product success refers to the business goals whereas project management success refers to the application of the methodology, tools, and techniques (Baccarini, 1999; Munns & Bjeirmi, 1996).
The PMBOK® Guide describes the project as a subset of the product life cycle with the product life cycle typically including an operational phase followed by decommissioning or retirement. Although the PMBOK® Guide indicates that there are different terms used to describe project phases, it does not address the inconsistencies and lack of standardization (PMI, 2000). Project management contributes to product success but there are factors outside the control of the project manager that could influence product success or failure (Munns & Bjeirmi, 1996). One can no doubt think of examples where projects were not managed well from a project management perspective yet viewed as successful. For example, the Sydney Opera House took 15 years to build and was 14 times over budget but is proudly displayed as an engineering masterpiece (Bac-carini, 1999; Munns & Bjeirmi, 1996). Examples also abound whereby projects were managed well from a project management perspective yet perceived to be unsuccessful.
Terminology issues between the project management and product life cycle compound the misunderstandings between project management and product success. Project life cycles generally involve the initiation, implementation, and termination phases that link the project to the firm's operations(Lim & Mohamed, 1999). The life cycle is “a collection of generally sequential project phases whose name and number are determined by the control needs of the organization or organizations involved in the project” (PMI, 2000, p. 192. Some life cycles use the word initiation interchangeably with conceptualization or planning; others use the word execution for construction and implementation and some use handover synonymously with closeout (Freeman & Beale, 1992; Munns & Bjeirmi, 1996; Pinto & Prescott, 1990; PMI, 2000).
Typically, project life cycles do not address phases beyond termination, such as the product use phase. This contributes to misunderstandings regarding project management, project, and product success in that success is viewed in the short term and limited to the project life cycle instead of being assessed in the course of the operational phase. Most project life cycles do not address phases beyond termi-nation (Frame, 1994; Freeman & Beale; 1992; Munns & Bjeirmi, 1996; Pinto & Prescott, 1990; PMI, 2000). It is restrictive to end the project management team's responsibilities at project closeout because it absolves them of responsibilities in post project phases and contributes to an attitude of “that's not my problem” (Frame, 1994, p. 6). Such attitudes do not address customer satisfaction concerns.
Project success is often erroneously assessed at the end of the project life cycle, when project management outcomes are available and convenient to measure (Munns & Bjeirmi, 1996). Most life cycles do not measure success beyond the final phase. This leads to a blurring of the lines between project success and project management success, limits commitment on the part of project managers for problems that arise during production phases, and creates customer satisfaction issues. These issues keep the performance focus on the project instead of organizational level. The project-centric view entrenches project management's value at the tactical level of the firm and limit executive interest in project management. These issues contribute to the view that project management success metrics occur during the project instead of also within the production phases. These issues perpetuate the focus on tangible asset metrics, as they are easier to calculate as compared to the less tangible success factors.
Evolution of Project Management Success Measures
Our understanding of success as a broader, organizational construct is also evolving. Based on the literature reviewed, we developed the following table to portray the trends in measuring performance and success in project management.
The framework involves five periods selected on a combination of year of publication and the era the article fits in terms of success measures. The past 30 years has seen a slow but growing understanding that project management success be assessed with stakeholders and beyond the project life cycle. Periods 1 and 2 emphasize the iron triangle, efficiency measures, and the implementation phase. The question asked is “Are we done?” Success is limited to the project, internal organization, and stakeholder input is minimal (Atkinson, 1999; Baccarini, 1999; Freeman & Beale, 1992; Lidow, 1999; Lim & Mohamed, 1999; Meredith & Mantel, 1995; On-Target, 1999; Pinto & Slevin, 1988b, PMI, 2000; Shenhar et al., 1997). In Period 3, the focus is on developing CSF lists. Some begin to ask about effectiveness i.e., “How well did we do?” The balance of hard and soft skills is emerging. There is increasing awareness that success is an ambiguous construct (Bounds, 1998; Clarke, 1999; Kerzner, 1994; Lester, 1998; Lidow, 1999; Lim & Mohamed, 1999; Maltzman, 2000; Peal, 2000; Pinto & Prescott, 1990; Pinto & Slevin, 1987; Shenhar et al., 1997).
The product life cycle was not considered until success frameworks emerged in the fourth period. The relative importance of CSFs varies across the project life cycle and there is awareness that success is multidimensional. There is increasing emphasis on the interpersonal dimension of project management (Belassi & Tukel, 1996; Hartman, 2000; Kerzner, 1987; Munns & Bjeirmi, 1996; Pinto & Slevin, 1988a). In Period 5, we move toward project management having a strategic focus. There are a few holistic success frameworks articulating the strategic value of projects (Shenhar et al., 1997). Shenhar specifically addresses project management in terms of a view to the future and addresses the concept of a strategic asset in project management by using the term core competence.
This overview depicts the incremental progress toward a holistic view on success. It confirms the emphasis on project management at the tactical level and the focus on CSFs that are project oriented. In addition, it exemplifies how success metrics are a form of valuation. The fact that most of the metrics are still project oriented indicates that the value of project management has yet to be construed as a strategic asset.
Holistic Views on Project Management Success and Value
Belassi and Tukel (1996) present a holistic framework that includes within firm and industry factors. CSFs vary with industry and top management support is vital. It is unique relative to earlier frameworks as it integrates project dimensions with organizational and environmental factors. Other than Shenhar et al. (1997), there has been little research in the project management stream that specifically addresses project management success in the context of strategic management. Success also varies with time and is an integrative concept that includes short- and long-term implications. Unlike earlier papers that prioritize time, cost, and scope as success criteria, Shenhar's study places customer satisfaction as the number one criterion for overall project success with the iron triangle second (Shenhar et al., 1997). It also focuses on preparing for the future and addresses project management in the strategic management context.
The project management success literature is evolving. Several useful models exist and some are being tested empirically. Very little literature focused on the value of project management in terms of organizational strategy. Instead, the models emphasized its value at the operational level of the firm. Some researchers infer that project management success relates to organizational success by emphasizing the importance of aligning the project to the firm's strategic directions and goals. These references generally refer to the senior management team in relation to the need for support to sanction and fund projects but not in the strategic asset context (Kujala & Artto, 2000; Lubianiker & Schwartz, 2001). The question then is how do we make the leap from measuring success to thinking about the value of project management to organizations? To do this we need to examine how assets are typically valued in organizations.
Asset Valuation in the Firm
The literature on asset or resource valuation (worth) covers efficiency and effectiveness metrics on tangible and intangible assets. Project management is an organizational asset and assets extend beyond the balance sheet. They are sources of future value and have distinct life cycles. Assets must be managed to create rather than destroy value; assets stem from internal or external sources. The asset base extends to include the many relationships the firm has external to its boundaries (O'Connell, 2000). Tangible value exchanges involve the exchange of concrete goods and intangible value exchange involves tacit knowledge, i.e., knowledge, process knowledge, and know-how (Allee, 2001). Although “hard” financial performance measures are limiting, they remain the mainstay as there is no consensus on how to measure intangible assets and such a classification system does not exist (Allee, 2001; Trimble, 2000).
The growing popularity of project management stimulates interest in comparing how firms are doing relative to rivals (Cabanis, 1998). A 1999 PMI® study on quantifying the value of project management emphasizes efficiency measures and focuses on accounting metrics. The results support the positive correlation between Project Management Maturity (PMM) levels and project cost and schedule performance. The average cost of project management services as a percent of project cost is 6% of a project's total revenue (Ibbs & Kwak, 1998, p 50). It focuses on project improvements at the functional (operational) level but not as a strategic asset. The PMM literature further entrenches project management at the operational level of the firm as it focuses on incremental project process improvements (AIPM, 2000; APM, 2001; Cabanis, 1998; Cooke-Davies, 2000; Dinsmore, 1998; Hartman & Skulmoski, 1998; Ibbs & Kwak, 1997, 1998; Ibbs & Kwak, 2000; IPMA, 2000; Kerzner, 1994; Kujala & Artto, 2000; Lubianiker & Schwartz, 2001; PRINCE2, 2000; Schlichter, 2000; Skulmoski, 2001).
In the 1980s, the project management literature started to address outcome/effectiveness measures through product functionality, the degree to which it met end-user expectations, and requirements and improved processes (Atkinson, 1999; Munns et al., 1996). Quality improvement practices of performance measures and techniques for mapping processes and heightened awareness on the need to measure success from the customer's viewpoint contributed to the trend that success be viewed more broadly in project management.
The literature within project management indicates an evolving appreciation for success as a holistic term that goes beyond the project life cycle, into the product life cycle and involves organizational dimensions. However, few comprehensive CSF frameworks exist and fewer still relate project management to strategy. What has been missing to date is an exploration of project management as a strategic asset.
Strategic Asset
The Resource Based View (RBV) assesses a firm's tangible and intangible capital. It focuses on a firm's asset mix to identify strategic assets that can be characterized as rare, valuable, inimitable and non-substitutable (Barney, 2001). The RBV examines intellectual capital (tacit knowledge, skills) that stems from complex human interactions. Tacit knowledge is rooted in action. It is hard to codify and resides within the relationships between people and within a firm's routines (Nonaka, 1994).
Strategic assets are the core competencies that allow a firm to outperform rivals. The unique advantage occurs when these assets meet the characteristics of strategic assets and are supported by managerial practices. Strategic assets signify complex, higher order interactions between resources, processes, and knowledge (Eisenhardt & Martin, 2000; Grant, 1991; Henderson & Cockburn, 1994; Kaplan, Schenkel, von Krogh, & Weber, 2001; Kogut & Zander, 1992; Liedtka, 1996; Teece, Pisano, & Shuen, 1997). Strategic assets underpin a firms cost advantage (Markides & Williamson, 1994). Some examples include Sony's strengths in miniaturization and 3Ms strengths in innovation and coatings. Strategic assets are the “collective learning in the organization” (Prahalad & Hamel, 1990, p. 82). The RBV is a complex stream of study with relevance to project management, which is a knowledge-based discipline. What we need is a holistic framework that helps us identify and analyze such assets.
Examining Project Management's Potential to be a Strategic Asset
The questions of interest to us from a project management perspective is—What characterizes a strategic asset in project management and how do firms develop/sustain such assets? This has not been studied using the RBV to our knowledge. We have developed a framework that involves the following categories upon which project management could be assessed: valuable, rare, inimitable, organizational focus, durable, non-substitutable, and protective mechanisms. We have examined PMMs and surmised that they may be a factor in developing project management as a strategic asset but in and of themselves, do not result in such a competitive advantage. Germane to our assessment is that the PMMs address only explicit knowledge and do not address tacit knowledge. From our data collection based on a case study approach with four international firms, we are finding that a strategic asset in project management involves an emphasis on the tacit knowledge within the firm.
Summary
This paper has presented a synopsis of trends on project management's value at the operational level and the increasing awareness that it has the potential to become a strategic asset. We are emerging from the operational rut of viewing project management as a tactical construct and beginning to see that project management success is more than a microcosm of inputs and outputs; project management success links to product goals and corporate plans. Ultimately we need a more sophisticated perception of the challenges and contributions of project success. This may stem from current research in the area of strategic assets.
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