Managing change through project management

Arthur D. Little, Inc.

Stephen E. DeLapp

Introduction

Project management has been an “in” concept since at least the early 1960's. Yet today, generally, it is still a relatively little understood discipline. Most managers think of it as something rather specialized, involving PERT charts, that weapons manufacturers and construction managers do. Its potentially enormous value to a whole range of management situations is barely grasped at all.

The roots of the current underestimation of project management may be found in its history. Project management grew out of the weapons development industries in the late 1950's/early 1960's [11]. Although the benefits of project management were claimed to be considerable, its emphasis in the 1960's was on the control side. The development of PERT in 1957 and CPM in 1958 gave rise to a widespread fascination with scheduling techniques. Even the standard definition of project management — ensuring the project is completed to scope, on schedule, in budget — reflected this early control orientation.

By the 1970's, interest was developing rapidly in the organizational aspects of project management. The 1978 Project Management Institute Conference at Los Angeles dealt almost exclusively with organizational issues, for example. Lately, two new veins of interest have been emerging. One is with the institutional aspects of project management, such as finance and top management issues, societal concerns, regulatory and political issues. The other is the impact of developments in information technology such as the advent of micro-based software, artificial intelligence and decision support systems, on project management practice.

The way project management has developed has had two important impacts on the way project management is seen as a discipline today:

A “balanced” view of project management, in which project management is seen as a total management approach with a unique mix of organization, systems and management requirements, is only slowly emerging.

Project management's applicability to fields other than engineering is almost universally underestimated.

Project Management: The Management Of Defined Change Situations

A project is a task with a defined end target. Project management is the management of the change process required to achieve that end target, within certain time and cost parameters.

There are five distinct steps in effectively managing a change process—in doing project management:

• Defining the change objective.

• Developing a strategy and plans to achieve that objective.

• Creating a project management group to effect the change.

• Installing a control process to monitor progress.

• Managing the project by implementing the above four steps.

A large number of management situations can be described as situations of change with defined end targets. As Table 1 shows, situations as diverse as movie making and aerospace, electioneering and rural development, and management consulting and turn-around cases, have distinct activities to be performed in each of the five project phases. Yet despite the wide applicability of project management to management generally, as a discipline it is relatively unknown in schools and universities throughout the world.

Table 1
Project Management Phases In Various Management Situations

Project Management Phases In Various Management Situations

This article will discuss some basic principles of project management by examining each of these five major steps in turn. In doing so it will use examples drawn from published research and the authors’ own consulting experience across a wide range of change situations.

The Change Objective

An organization's objectives are the single most important factors shaping its structure and behavior. The objectives define the function (purpose) of the organization. As a result, the primary and secondary organization systems are defined—with consequent major organizational groupings, relationships, information routing requirements and so on.

In defining the purpose of the change, the change objective has a clear impact on the strategy and plans required to achieve the change. The objective defines the what, why, how, when, and who. Without its objectives adequately defined, a project will run into major problems. Managers will develop their own objectives and projects will achieve inappropriate ends; resources will be committed without due analysis of their availability; and action will be carried out without taking full account of other important factors.

Several examples illustrate other factors necessary for the success of projects:

The HUD new communities program was an attempt by the U.S. federal government to become a major force in the development of new communities in the USA at the beginning of the 1970's. The results of the program have been disappointing, largely because the objectives of the program were unclear, suffered widely different interpretation, and were over-ambitious. There was no clear definition of the program's goals. As a result, different staff members managed the program toward different ends. Some administrators treated the program as a social one and so approved projects that were not economically feasible. Further, the program was too big for the resources of the real estate industry. There were not the management and technical skills available to support the program [15].

Project management in the British building industry suffers substantially because the official process description (or project manual) is overly architect oriented (it is published by the Royal Institute of British Architects [12]. The manual is so skewed to the “design is paramount” viewpoint that construction planning and costing is not even considered until the design is complete and out to bid. Thus even enlightened building designers in the United Kingdom tend to significantly underestimate the importance of project strategy, organization and controls [7].

A city to house 60,000 people is being developed as part of the construction of a new, large steel mill in central Brazil. The project faced considerable difficulty in its early stages from lack of clear objectives. Although the project management of the steel mill was well executed, the city construction was, in some ways, almost an afterthought and several steps, including definition of objectives, were not adequately executed. As a result some individuals involved in the project adopted their own objectives. As construction of the initial element of the city commenced it became clear that there were conflicts between many of the assumed objectives, and that planning had ignored many necessary areas of city development. With no clearly defined financial and social objectives, the project as initially planned and implemented was not economically feasible and the company was committing itself to a large financial loss.

Each of the above examples reinforce the idea that for a project to run successfully, the objective of the project must:

  • Be clearly understood by all, especially the principle actors,
  • Be committed to, and
  • Be attainable.

 

The Change Strategy And Plans

A strategy defining how the project's objectives are to be achieved must be established as one of the very first project tasks. The strategy must take into account a number of major factors:

  • The political environment: relationships with government or other major organizations constraining the range of options open to the project, such as funding, licensing, import/export restrictions, employment considerations, marketing dictates,
  • Financial requirements: such as the funding available and special associated requirements, such as the use of contractors or equipment manufacturers of certain nations,
  • The complexity of the change: those projects that are less complex will present less challenge than the more complex. Complexity is used here to cover:
  • Technical complexity,
  • Size,
  • Schedule tightness (i.e., project speed),
  • Contractual relationships and potential penalties,
  • Geographical factors (isolation, spread, etc.),
  • Impact of other projects,
  • Organizational complexity, and
  • Most important of all, the organization's ability to manage the change. If the organization is not geared up to handle the change it will in all likelihood have to hire outside assistance.

 

The development projects being undertaken on a massive scale by the developing world offer clear examples of how a project's complexity, political and financial factors, and the organization's ability to manage the project, can affect project strategy. Major projects in many developing countries have a direct and vital impact on the rate of development of the nation as a whole. Such projects are thus subject to enormous pressure to conform to governmental regulations and to finish on schedule. At the same time, they are often constructed in locations where the infrastructure is not sufficiently developed; housing, access roads, communications, etc. may all have to be developed to support the project. The projects are generally technically complex and large; locally trained rsources are often scarce and expatriate assistance in manufacture, construction and implementation is therefore often required. This may bring associated difficulties in arranging hardcurrency financing, as well as dangers of cultural confrontations and risks once the expatriates begin work. Above all, there will be the uneasy sense of being overdependent on another nation or organization. These factors have a direct impact on questions of contracting strategy, project schedule and financing, training needs, marketing and sales plans, etc. [5].

Political campaigning is a project-oriented process that is severely dependent on the political and financial exigencies of the election in general and the candidate in particular. The strategy for successful accomplishment of the project (i.e., winning the election) must consider all of the various political relationships among candidates, organizations, and institutions. The same candidate may choose entirely different strategies for a campaign depending upon the positions and strategies of the other candidates. The likely amount and timing of receipt of funds is critical. If funds will be difficult to obtain, then the strategy would emphasize low cost campaign methods such as precinct walking and speeches. Availability of adequate funding may dictate extensive use of media rather than direct voter contact. For example, a strategy for a campaign with financial constraints would be for the candidate to differentiate himself from the opposition by taking a unique position on an issue or raising a new, controversial issue in the campaign.

From the strategy, detailed plans are developed covering the technical, organizational, financial and managerial requirements for implementing the project. All must be developed in parallel with each other. All are interdependent; it is crucial to realize that none operate independently of the other.

A large computer system was recently installed in a project management organization without adequate consideration of the interplay between technical, organizational, financial and managerial factors. The system, budgeted at around $250,000, was technically very advanced and capable. Unfortunately, few project personnel had sufficient time to learn the details of the system adequately. Management was never sufficiently on top of the ongoing facility project for personnel to take enough time off for training. Progress in implementation was consequently very slow. The system was eventually installed, about two years late at around twice the desired cost.

The design, construction and operation of a recent hotel development project were each well executed, but the hotel was a financial disaster. The developing company deemed that the hotel was a necessary addition of a larger development. Little guidance was given to the architect other than the number of rooms required. Upon completion of design, the project was constructed on schedule. An operating contract was then signed with a hotel management firm which on the surface appeared to be very advantageous to the owner and was the best arrangement possible. Unfortunately, the income generated from operations was not sufficient to even cover the interest payments on the construction financing charges. Evaluation of the financial and operational requirements concurrent with the development of design and construction plans would have either resulted in a more appropriate facility, or have led to the abandonment of the project altogether.

In developing strategies and plans, trade-offs between scope, cost and schedule factors must be thoroughly considered. Each has an impact on the other; the better the quality, the more expensive the product. The relationship between project cost and schedule is clearly more subtle, however. The longer the project, the greater the opportunity cost of the money required to implement it; the sooner the project is completed, the quicker revenue will flow. But there are limits to that thinking; speed costs money.

Trade-off analysis is used extensively in the housing industry. Large scale housing construction is inherently a very risky business in which a builder must coordinate a great number of variables, many of which are outside his control. In developing plans the builder must evaluate what the market wants, what his financing costs and requirements will be, and what construction schedule is required. Builders are most sensitive to the market requirements. A housing development is oriented toward a specific market segment which has price, location, style, material and amenity requirements. These must be traded off against material, location and construction costs. The project schedule is driven by market factors such as seasonal selling and potential sales rate, financial factors such as the cost of financing and inflation, and other factors such as weather and potential political delays. Failure by developers to evalute all of these factors have resulted in failure of projects [6].

The Project Management Group

Projects deal with two kinds of organization, the “transition (or project) organization” and the “objective organization.” The objective organization is the organization that will manage the thing being produced by the project. Objective organizations are, as a rule, steady state. As such they are well covered in the literature. The following refers to the management of transition organizations.

Most change processes require a full time management effort; major ones always do. There is a scale of increasing project management effort:

• Part-time responsibility shared between managers

• Part-time liaison

• Part-/full-time task forces

• Part-/full-time integrators/coordinators

• Part-/full-time project managers

Research has shown that the amount of project management effort required is a function of 3 characteristics of the project [8]: (1) Size, because generally the larger the change, the greater the management effort required to control it; (2) Speed, because the rate of change around an organization is recognized as one of the major factors determining organization structure [3] — a flexible, organic structure is more appropriate in conditions of high rate of change and uncertainty, whereas a more rigid type is more appropriate in more stable environments; and (3) Complexity, because the structure of an organization is dependent on a number of factors in addition to size and speed, which may be grouped under the label “complexity” [10]. These additional factors include:

• Degree of uncertainty,

• Technical complexity,

• Pattern of technical, contractual, geographical and schedule differentiation, and

• Type of interdependence between major project groups.

 

The management group for any change process divides into three subgroups [10]. These three must be kept separate from one other. They are:

• The independent project manager,

• The independent planning and control group, and

• Functional groups.

In film making, the producer/director may be likened to the project management group. There are a number of planning and control groups ranging from continuity to floor management. Functional groups cover a wide spectrum of personalities, from production to actors, from editing to the camera crews.

The project organization will change as the project develops [10]. In managing the change process towards its defined change objective, different skills located in different organizational units must be employed at different stages of the project. For example,

On large facility projects, early work focuses on site preparation, employing large firms with special earth moving equipment and skills. Later, different firms are employed for construction and equipment erection.

In urban development, as the project unfolds there is a move from site selection, design and finance (and frequently political) concerns, to construction and property marketing.

In all design-build projects (R&D, telecommunications, defense, aerospace, construction) there is a move from conceptual design/research work by certain specialized groups, through detailed design and production by quite different groups.

The extent of project management authority varies, both between projects and, as shall be seen shortly, as a project develops. In most long established process companies, the project manager has considerable ultimate responsibility and authority. In many newer companies, however, the project manager may have a much weaker role and, in effect, may act only as an integrator. The degree of authority given to a project manager depends on the size of the project task faced (project size, speed, and complexity), the availability of experienced project managers, and the tradition of the company.

Matrix organizations offer a blend of direct project management and functional management authority. The essence of a matrix organization is that specialists report functionally to their functional/technical managers, but to project managers for overall project guidance. The functional managers take the “who” and “how” decisions on specific technical decisions within the ambit of his own functional expertise — the engineering manager for engineering decisions for instance. The functional manager “sells” his resources to project teams. The project manager has responsibility for planning, coordinating and cajoling his team to produce work of the required quality and cost, to schedule.

Matrices apply to many “steady-state” organizations, such as manufacturing, insurance, etc. [4], which have a need for a cross-functional product focus. Most project organizations, like construction, have matrices, usually strongly biased in favor of the overriding project oriented organization which dominates the company. An interesting feature of project matrix organizations is that as the project develops from design through production, there is usually a swing from a strong functional input as the project's strategic parameters are shaped (design parameters, budget, contracting details), to a greater project once these strategic issues becomes more closed and the project's scope, cost and schedule targets more defined. This matrix “swing” tends to be more pronounced on the project matrices of new matrix organizations. For example,

The project management organization of a new $4.5 billion steel mill employed over 1,000 people organized into five functional areas [9]. Six project teams provided the cross-functional project management focus. The authority of the project managers was initially weak, more akin to an integrative role, since in the early phases of this enormous project there was a clear need for very strong top management leadership in getting the project successfully launched. About 12-18 months into the project, however, as contracts were signed, the quantity of work grew so quickly that authority naturally devolved to the project teams. The devolution was not instantaneous, however — a swing not a switch — and was resented by some functional managers. In achieving the swing, organizational development techniques were used to help staff more easily perceive and better handle the change in authority.

As projects develop and responsibilities change, the project manager plays a key role in ensuring:

• Organizational boundaries are accurately defined contractually,

• Groups correctly perceive their organizational boundaries, and

• Relationships between groups work smoothly.

The development of the “objective organization” that is to operate the thing being produced by the project is also an integral part of the total project change process. However, it is too often completely overlooked. While the development of the objective organization generally evolves toward a scheduled “start-up” date, there is rarely a full-time management group developing and tracking integrated plans simultaneously for both the product and the objective organization. The success of the enterprise as a whole is dependent on all the management activities being accomplished by the time the product is ready for operation. For example,

A major European motor manufacturer recently opened a large new plant in Latin America. The plant represented a major investment risk insofar as a brand new market had to be developed, service and distribution centers had to be established throughout the country, and considerable training of the local new-hires was required in order for the investment to be successful. Furthermore, each of these major management activities had to be developed and managed in synchronization with the plant construction program and the organization development process of developing systems, plans, hiring, etc. To ensure all these activities were happening on schedule, management reviewed progress for each of the principal management activities in parallel. Interactions between each of the major management streams were closely controlled so that when the plant opened the operating company as a whole was ready to begin production successfully.

The Control Process

Project planning and control are inextricably linked. Control may be defined as measuring actual progress against that planned. The classic control cycle, which forms the basis of the science of cybernetics, is that:

• Plans are formulated,

• Actual performance is measured,

• Performance is compared against the plan, and

• Where necessary, adjustments are made (to performance and/or plans).

Given the close interrelationship of plans and actual performance, it is essential that the control group be intimately familiar with the plans, and be able to make or facilitate adjustments to plans or performance with the minimum of difficulty. For this reason, the planning and control group should be organizationally integrated.

As already noted, the planning and control group should be organizationally independent of other groups. If it is not, there is a high likelihood of bias creeping into the control data; construction departments may overemphasize the physical progress made, engineering departments may underestimate the marginal cost of their designs [10].

The main types of control data required in nearly all change situations (See Table 1) are:

• Technical (progress, problems)

• Schedule (to date, completion date)

• Cost (to date, to go)

• Cash requirements

Revenue forecasts are also frequently required.

To ensure effective control, information must be provided for each of these data classes broken out by:

• Targets,

• Current actual,

• Estimated final, and

• Projected variance from target.

Control information must be appropriate to the user's needs. Obvious though this may seem, a surprisingly large number of inappropriate control systems are sold to users who ultimately become disillusioned.

The control information must be appropriately oriented, detailed and timely. Each organizational unit has its own needs and hence its own data perspective. For example,

As a plant is built, the construction manager will want to know physical units installed; the cost engineer the measured value erected and so the value “liberated” for payment to subcontractors; the accounting manager, the cash flow projections and the value of fixed assets installed. Senior project management will want a blend of data on installed quantities to date, value, plus a number of other data on engineering and materials progress. The client (or senior company management) will want an overview of all this, fitted to other key company data. The data for each of these differing viewpoints arises more or less at the same place, the site and project offices. In serving management it must be combined and sorted in a number of ways.

A well structured control system is the key to allowing multi-level and functional sorting. The file structure and project (data) code must fit the detailed data needs and data aggregation requirements of the users.

The timeliness of (or frequency of presenting) control data varies with the level of management and stage of the project. Control information must be as up-to-date as the real life situation requires. For example,

For the site manager, controlling hundreds of men over a large piece of ground, daily and weekly reports are necessary; for senior management, monthly reports are quite adequate.

While shooting films, time is very expensive; the producer must therefore have daily control on the production process. In scripting and editing, however, monthly reporting or even the odd telephone call may suffice.

In political campaigns the timeliness of control data is critical due to the short timeframe involved. Information on fund raising must be as current as possible so expenditure plans can be constantly updated. There is no greater error in a campaign than to lose the election and still have unexpended funds.

In many projects, initial plans and targets must be modified and updated as the project progresses. Targets will change due to changes in environment, changed objectives for the project, or inability to achieve targets. The control process must provide data so that plans and targets can be constantly reviewed and updated as necessary. This is especially important on projects which span a long time period. The timing of the review and update of plans can vary significantly depending on the size, length and scope of the project. For example,

Irvine, a large town development in Southern California, experienced major changes in the plans developed in the mid 1960's. These changes were the result of major shifts in the political environment and the market. As an example, the ultimate size of the city has at various times been planned at 100,000, 400,000 and 250,000 in response to changing political factors. To cope with these changes, the local municipal government adopted a systematic procedure for annual review of the master development plan. The speed, phasing and type of development are considered during these review sessions and the plan is modified as necessary. While many projects undergo review much more often, several factors dictated this annual review process. Since progress at the master plan level is relatively slow, changes at less than one year increments would not be significant enough to provide sufficient information to evaluate implementation. An annual review process also helps insulate the plan from political pressures, provides forward looking planning, and ensures that the plan is reviewed as a whole.

Ongoing project review can alert management to the need to change other plans. Power stations typically take four to seven years to build. During that time, electricity prices and load demands may change substantially. Between 1972 and 1978, electricity doubled in price in the USA while the average cost of power stations increased seven to eight times. During this same period there were major changes in demand; many utilities found themselves with too little capacity, albeit a few had too much. Overall monitoring of the supply-demand equation, rate of facility construction and construction costs can enable utility executives to manage demand to better fit forecast supply, arrange alternative financing, or seek changes in the pace of construction [1].

The Implementation Of The Project Management Effort

Implementing the project requires a person of special outlook and skills, primarily, skills in managing people and a keen analytical ability in the exercise of project control. These skills are required across the whole project from inception to completion, and in each of the phases discussed above.

On projects which may significantly impact people's way of life, a commitment plan should be developed to ensure maximum support for the project. Key individuals who will back the project should be identified. The “critical mass” required to ensure success should be identified. The organization's readiness for change should be assessed. It may well be that time will have to be spent unfreezing old, inappropriate attitudes, establishing new priorities and goals, and helping people learn new skills. For example,

The steel mill city in Brazil is an example of a change situation requiring a “commitment plan.” The development of the city required significant modification to the existing project management organization. Major changes in reporting relationships and responsibilities were required to manage the city development process as a separate project. Realignment of organizations at any level can cause conflicts, and in this case the conflicts could have prevented successful implementation of the new management organization. To avoid this and to help ensure orderly transition, a major effort was made to gain commitment to the plan by all of the relevant managers. Managers were brought together to review and determine objectives and policies for the city project. Involving the managers in this way made them part of the project and more interested in its success. From that perspective, the need for organizational change became more clear and easier to accept. Had the change simply been imposed, the managers would have been in an adversary position with no “stake” in the project's success and might well have resisted the change.

 

Organizational Development (OD) techniques can help people prepare for and adapt to organizational change. OD skills are drawn primarily from psychology and small group theory. OD can help by:

• Providing a common language for helping individuals view interpersonal behavior,

• Increasing motivation by getting people to work better together and build team spirit,

• Explaining the process of organizational change that is happening or will occur, and

• Helping individuals and groups resolve specific problems.

In the project matrix discussed earlier, OD techniques were used extensively to facilitate the project swing, specifically by articulating what was to happen and why, mounting workshops and group sessions to clarify problems and reduce tension, and ensuring senior management overtly supported the switch of power from the functional groups to the project teams. Transactional analysis concepts were explained to project personnel to help managers better understand and deal with the tensions that were running through the organization as the matrix grew and the project teams became more important [9].

Projects go through definite life cycles. Roughly, four principal phases can be identified: start-up, build-up, main phase, close-out. As the project moves through these phases there are changes not only in staffing levels and type of work, but in the relative power of groups and individuals, in the degree of delegation, and in issues which cause conflict. As a project develops there is a move first from a more creative, innovative state characterized by a fairly loose organizational form with maybe even too little project control. Second, there is often a change towards a weaker functional bias and a stronger project/production bias once the design/bid specifications become firmed-up. Third, sources of conflict change from being centered on planning priorities and schedules, to schedule and, increasingly, personality/manpower issues [14].

Such changes can be relatively traumatic and inevitably generate conflict. Conflict management has been used fairly extensively to help managers better deal with the conflicts inherent in most projects. Minimizing potential personality conflict and generally treating conflict head-on2 have been found to be the most beneficial methods for dealing with project conflict [13].

Summary

Project management is the discipline of managing change situations with defined end targets. As such it has wide applicability to a number of management situations. To date, a balanced view of project management is only slowly emerging. A balanced view must cover objective setting, strategy and plans formulation, and implementation, as well as organization and control. This article has outlined some of the fundamental principles of each of these steps, giving examples of how they apply in a number of change situations.

References

1. A Dark Future for Utilities Business Week, May 28, 1979, 108-124.

2. Blake, R.R. & Mouton, J.S. The Managerial Grid, Houston; Gulf Publishing Co., 1964.

3. Burns, T. & Stalker, G.M. The Management of Innovation. London: Tavistock, 1961.

4. Davis, S.M. & Lawrence, P.R. Matrix Organizations. Reading, Mass: Addison-Wesley, 1977.

5. Graubard, J.M., Morris, P.W.G., & Smith, J.A. Project Management in the Developing World. 1977 Proceedings of the Project Management Institute Annual Seminar/Symposium, Chicago, Illinois.

6. McMahan, J. Property Development: Effective Decisionmaking in Uncertain Times, San Francisco: McGraw-Hill. 1976.

7. Morris, P.W.G. An Organizational Analysis of Project Management in the Building Industry. Build International, 6, 1973.

8. Morris, P.W.G. Systems Study of Project Management. Building, 6-7. 1974.

9. Morris, P.W.G. & Reis de Carvalho, E. Project Matrix Organizations—Or How To Do the Matrix Swing. 1978 Proceedings of the Project Management Institute Annual Seminar/Symposium, Los Angeles, California.

10. Morris, P.W.G. Interface Management—An Organization Theory Approach to Project Management. Project Management Quarterly, 1979, X 27-37.

11. Peck, M.J. & Scherer, F.M. The Weapons Acquisition Process: An Economic Analysis. Boston, 1962.

12. Royal Institute of British Architects. Plan of Work, Handbook of Architectural Practice and Management. London: RIBA, 1963.

13. Thamhain, H.J. & Wilemon, D.L. Conflict Management in Project Oriented Work Environments. 1974 Proceedings of the Project Mangement Institute Annual Seminar/Symposium, Washington, D.C.

14. Thamhain, H.J. & Wilemon, D.L. Conflict Management in Project Life Cycles. Sloan Management Review, 1975.

15. U.S. Department of Housing and Urban Development. New Communities: Problems and Potentials. 1976.

 

 

 

 

Dr. Peter Morris specializes in project planning, organization, and control at the Arthur D. Little Program Systems Management Company, Cambridge, Massachusetts.

 

 

Stephen De Lapp recently left Booz Allen to work with a real estate company in Los Angeles where he heads their management consulting business.

 


1 This article is based on a previously published paper in the 1979 Proceedings of the Project Management Institute, 11th Annual Seminar/Symposium, Atlanta, Georgia.

2 Blake and Mouton [2] identified five major styles of conflict management: withdrawing, smoothing, compromising, forcing and confrontation. Thamhain and Wilemon [13] found that while confrontation is probably generally the most appropriate style, project managers must often employ the whole range of styles, depending on the situation.

This material has been reproduced with the permission of the copyright owner. Unauthorized reproduction of this material is strictly prohibited. For permission to reproduce this material, please contact PMI.

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