Market the project approach to executives
In the last few years, a number of project-based organizations have shifted from a “contained” project management model to a more strategic perspective; consequently, project managers and researchers have started exploring strategy-based knowledge and practices. On the other hand, while a number of recent papers have emphasized the need for strong senior management support, research has demonstrated that executives are far from convinced that project management is beneficial for the organization beyond the delivery of well-defined results.
One reason might be the system/engineering-based approach of projects, which is at odds with current business and strategic management reality. The other is the inability of projects and project-based structures to consistently deliver results that produce business benefits.
Recent marketing trends have moved marketing at the heart of organizational strategy. Witness, this definition by Peter Doyle: “Real marketing is the philosophy of management which recognizes that the success of the enterprise is sustainable only if it can organize to meet the current and prospective needs of the customers more effectively than competition.” (p. xiii, 2002). To be marketable to executives, project management must clearly demonstrate that it can make organizations more competitive.
This paper identifies a number of points that prevent project management from becoming a strategic asset for organizations and presents possible solutions as well as a dynamic approach to the structuring of a project-based organization. This approach is in line with recent developments in corporate governance and strategy development that promote a more horizontal and bottom-up perspective; it emphasizes the strengths of project management and enables the portfolio-program-project process to effectively support organizational strategy and deliver business benefits, therefore making the project approach highly marketable.
It is now well established that the growing popularity of program/portfolio management and the emergence of PMOs as an organizational structure have prompted an accelerated movement towards project-based organizational structures (Hodgson 2002; Jamieson & Morris, 2004; Bredillet, 2004c). Sadly, because of a perceived urgency to perform, many organizations have implemented these without taking into account recent developments in business, setting up PMOs and portfolio management structures based on traditional organizational structures. Typically, PMOs are playing the same role as the quality department by defining and implementing processes and procedures; portfolio is playing the role of finance by allocating resources across the organization. In this perspective, project-based structures simply mimic traditional organizational structures, replacing management rhetoric with project rhetoric. The danger of this situation is that project-based organizations will, in a matter of time, become another past fad and that the benefits that could have been gained from moving to project-based will quickly be lost in the structural maze of these “new” organizations.
Whereas most managers and writers agree that both organizations and projects are dealing with a more and more complex environment (Tetenbaum, 1998; Lewin & Regine, 1999; Kurtz & Snowden, 2003; Jafaari, 2003; Cooke-Davies, 2004; Thiry & Deguire, 2004), most organizational and project decisions are still based on a rational, linear and uncertainty-reduction process and organizations still adopt an “agency” approach with their managers. This approach is built on shareholder interest, which implies minimizing agency costs and ensuring alignment of the agents' interests with those of the principal (shareholder). Since the basis of agency is that individuals are motivated by self-interest, agency-based structures advocate a high level of control over the agent(s). There is no purpose to build relationships and develop trust in the agency approach; it is rooted in McGregor's (1960) Theory X.
It is clear that the “agency” approach has been ruling corporate governance in the last decades of the 20th century (Clarke, 2004) and is supported by powerful government-based studies like the Harvard (1991) Compact, which followed a 1990 US Congressional hearings on corporate governance and the UK's Hampel Committee on Corporate Governance (Committee, 1997). These studies specifically distinguish the responsibility for relations with the stakeholders from accountability towards the shareholders and therefore disconnect the agent's accountability from that of the wider community.
Although, in recent years, there has been an admission of responsibility towards other stakeholders, the maximization of shareholder value is still the key measure of a manager's success. The shareholder focus is rooted in a top-down, pyramidal type of structure, which maintains a strict control over managers and is based almost exclusively on financial results (Slater et al., 1998; Barwise et al., 1989; Buckley and Tse, 1996). This perspective very clearly maintains projects at the bottom of the pyramid, exercising strict control over the delivery of specific products and focusing on 1st generation project management objectives: scope, quality, time and cost (PMCC, 2002), thereby stifling any creativity in the project approach.
More and more studies and papers are identifying the short-term results focused on shareholder value and financial measures as a ‘cul-de-sac' (Clarke, 1998; Blair, 1995). According to Barwise et al. (1989) and Brewer et al. (1999), financial-based tools are ‘myopic’ instruments as they undervalue overall strategic benefits against pure financial measures. These tools usually focus on strategic convergence (efficiency), rather than promote strategic advantage (effectiveness), a view developed very convincingly by Jugdev and Thomas (2002) at the PMI Research Conference in Seattle. In the same vein, Buckley (1998), Amram and Kulatilaka (1999) and Thiry (2004a) argue that strategic (project or program) decisions are made, based on strategic considerations that have often little to do with tangible benefits.
Recently new approaches have developed in the corporate governance area. Stewardship is based on an extension of McGregor's (1960) Theory Y; it promotes the concept that executives can have higher motives than simple self-interest. Stewards are motivated by higher order needs than agents, their relationships are longer-term and subjected to intrinsic factors, rather than extrinsic factors; they identify wit the organization and have high value commitment to it. They are more likely to use personal power than institutional power and are more prone to find themselves in involvement-oriented situations than control-oriented situations (Davis, Schooman & Donaldson, 1997).
More progressive and ‘enlightened' companies are now using a wider range of performance indicators that take into account a wider stakeholder perspective. The emergence of the “Balanced Scorecard” (Kaplan & Norton, 1992, 2000) worldwide, the EFQM Business Excellence Model (EFQM, 2000) in Europe and Baldridge Awards (early 1990's) in the US as measures of corporate success are proof of this recent movement. Empirical data is also starting to demonstrate the value of a wider stakeholder approach (Kotter & Heskett, 1992).
In the project management area, P2M, the Japanese body of knowledge, identifies 3rd generation project management as “the total management of projects, or cradle to grave of projects, viz., from program conception for value creation, through flexible and modular development of programs or projects, and ongoing projectized management of operation and maintenance (O&M), utilizing value and knowledge created on programs or projects” (PMCC, 2002, p.8). This is also the view adopted by forward looking organizations in North-America and Europe.
In conclusion of this section, I would like to quote and Plender and Clarke: “in a world where competitive advantage stemmed more and more from the intangible values embodied in human and social capital” (Plender, 1997), “a stakeholder approach may be not just a moral imperative, but a commercial necessity” (Clarke, 1998).
The Project View
Bob Schmetterer, Chairman and CEO of Euro RSCG Worldwide (http://www.eurorscg.com/), one of the prominent marketing firms in the world, writes: “Until you truly and deeply explore and understand the definition of your business, you cannot possibly begin to take advantage of the opportunities before you.” (Schmetterer, 2003, p.91) It emphasizes the need for the project management community to comprehend the environment in which they want to manage projects. He gives many examples of organizations that had seen their business in a technical sense rather than a business sense, for example, railroads that have always though they were in the railroad business and not in the transportation business, therefore missing opportunities all along the 20th century, when transportation developed exponentially. Project management will similarly be missing vital opportunities if they cannot fast adapt to the new complex/stakeholder-based environment of business.
Recently PMI has developed OPM3 (PMI, 2003) as an organizational project management maturity model in the hope that it would help bridge the gap between projects and strategy. Sadly, for the bridging of the gap, project management has consistently taken a process/system/engineering-based approach, embedded in control (Winch, 2004, Jafaari, 2004; Cooke-Davies, 2004), of which the PMBOK Guide® (PMI, 2004) is a good example. Emphasizing this view at executive level as the sole features of project management will not lead to better integration of projects and strategy, but keep projects in the product delivery mode they are currently in.
Basically, the process/engineering approach refers to a known environment. This is the typical situation of well defined projects—1st generation projects—, focusing on scope management and management of the quality, time and cost triangle. In this case, “cause and effect relationships are generally linear, empirical in nature and not open to dispute” (Kurtz and Snowden, 2003, p.7).and therefore, predictable and repeatable. There is a ‘legitimate' best practice, which is underpinned with standard operating procedures and process re-engineering (Courtney, Kirkland, & Viguerie, 1997; De Meyer, Loch, & Pich, 2002). In this frame, organizational decisions follow a process of analyzing, categorizing and responding to external and internal inputs. This is what Mintzberg (1990) characterized as the “Rational Decision Model”. In many organizations projects are maintained in that environment, because they are seen in the same way as a manufacturing process producing goods through a series of well-defined, broken-down and controlled operations.
In the last ten years, project management has focused more on soft processes, organization, human resources, and communication management. This more balanced process structure has enabled a wider applicability of project management and has seen the explosion of the discipline, especially in IT.
This has led project management to delve into a process/system approach and a new kind of environment: the knowable environment. This is a situation where projects have a higher degree of uncertainty—2nd generation projects—, but it cannot yet be called complex. Cause and effect are separated over time and space—for example delivery of the IT system and implementation of the IT solution. Managers use an analytical/reductionist methodology supported by scenario planning and systems thinking. In this frame, organizational decisions follow a process of sensemaking, elaboration and response. Unfortunately, project and program managers have continued using traditional approaches in this environment, focusing on hard processes like planning and control, giving lip service to soft processes (Reiss & Rayner, 2001 & 2002). This has led to project management consistently failing to deliver business benefits (Standish, 1996; KPMG, 1997), mainly because they failed to deliver stakeholders' needs and expectations and did not gain senior management support.
Many authors and practitioners have recently identified the fact that project and program managers have to deal with more and more complex environments (Lycett et al., 2004; Jafaari et al., 2004; Morris, 2004; Cooke-Davies, 2004; Winch, 2004; Thiry & Deguire, 2004). In this frame, which is typical of 3rd generation projects—complex projects and programs—, cause and effect are coherent only in retrospect and do not repeat. Managers have to manage patterns, using perspective filters and complex adaptive systems approaches. Decision-making follows a process of probing, making sense and responding, very close to behavior observed in stock broking practice (Kurtz and Snowden, 2003) or concepts developed in “agile and iterative development” (Larman, 2004).
Project managers have to ask themselves: “Do I know what business I am in?”
▪ If it is: well-defined projects in a known environment, then the traditional process/engineering-based approach is well adapted, but project managers have to accept a restriction of their role to that of delivery masters with the project boundaries set between initiation and closure—approval and funding external to these boundaries—, as depicted in the PMBOK© Guide (PMI, 2004, p.43).
▪ If it is: projects delivering business solutions in a knowable environment, the process/system approach is acceptable, but project managers need to extend their role more fully into organization, human resources and communications management and to the stakeholders' needs analysis and the transfer and operate area, very much as in construction BOT (Build, Operate and Transfer) projects. This is especially true in the IT business.
▪ If it is: complex projects or programs in a complex environment, then project and program managers have to question their basic values and move into a “3rd generation” approach where goalposts are moving all the time. They need to adapt to emergence and see change as an opportunity, rather than a threat. They need to get away from the uncertainty-reduction perspective to move into an ambiguity-reduction perspective and start thinking in terms of business benefits (Thiry, 2004).
Project management, because it deals with the temporary, the unique and is embedded in change, could provide a solution to the management of complex systems. Agile and iterative development practitioners have already started developing processes that effectively deal with complex and changing contexts at a small scale. The organizational level could put these project management features to good use if they were well marketed and project managers could switch from a process/systems/engineering paradigm to a complex/adaptive/emergent paradigm. A few simple rules can be identified from the complexity literature:
- The source of emergence is the interaction among agents that mutually affect each other.
- Small changes can lead to large effects.
- Emergence is certain, but there is no certainty as to what it will be.
- Greater diversity of agents in a system leads to richer emergent patterns.
This means loosening up on rationality and control and accepting uncertainty and ambiguity as a rule rather than an exception.
The Corporate View
Successful marketing practice is based on exchange: “mutual understanding between buyer and seller has to be achieved” (Copley, 2004 p.xi). If it wants to be benefits-oriented, the project management community needs to understand the corporate standpoint in regards of their aspirations and expected benefits.
At the higher level of organizations, questions like systems thinking, learning organizations, complexity and chaos, as well as stakeholder management are discussed as key issues. Business books are regularly published on these subjects and empirical research is starting to demonstrate their value. In general, organizations have been slow to take up the stakeholders approach, mostly due to three issues:
- the challenges of establishing mechanisms to involve a large number of stakeholders in decision-making;
- the risk of reduced accountability focus of managers and;
- the necessity to release control.
Long-term organizational environments are inherently complex due to the multiplicity of “agents” and their interactions; sadly, organizations rely on systems and technologies that collect and process information or try to break it up into small pieces to make it more manageable; although these methods may be helpful, they are far from sufficient (Bolman & Deal, 2003) and promote a vertical and controlling view of the organization. Michael Porter, in 1985 had already identified the lack of horizontal interrelationships as a key problem in strategic applications.
As shown in Exhibit 1 despite the talk of stakeholders' management and horizontality, even project-based organizations remain top-down, control-focused and project management is maintained in the lower tier of the structure, in a delivery role. Project management has just become a more efficient delivery process with a new rhetoric. These structures have failed to implement the expected dynamism and cross-functionality of the project approach, as well as the bottom-up learning perspective, which is currently driving successful businesses.
Another important point, identified by a number of management authors (Mintzberg, 1990; Hatch, 1997; Weick, 2001; Clarke, 2004) is that in complex and rapidly changing environments decision makers do not use a rational model. Although these authors acknowledge that organizations claim to apply rational models to make decisions, they have demonstrated that rational models are usually used as a retrospective justification for enacted strategies.
The question for the project management community is: “Should we adapt to what executives claim to be doing and fall neatly in line with this top-down pattern, or should we try to understand the problems they face and bring in a new approach to resolve them?”
The Business Approach
In the two previous sections, I have tried to answer the question: “Are project-based approaches responding to recent developments in organizational practice?” In this section, I will aim to respond to the question: “Are they contributing to delivering business benefits?”
Whereas organizations develop corporate strategies as deliberate medium or long-term forecasts of the future, businesses are always subjected to either external or internal pressures that force them to change to adapt or compete. These pressures generate ideas, threats or opportunities often called emergent strategies. Ideally, the organization will define its needs and expectations in the form of expected benefits. These expected benefits constitute the program level critical success factors, which are then translated into project objectives and parameters.
Projects should be executed with the intention to deliver the program's expected benefits. If all goes well and the link between strategy and projects is strong, the project deliverables will produce results that will contribute to the expected business benefits and this, in turn, will ease the pressure on the organization. Business benefits are usually linked to stakeholders' needs and expectations and, obviously, if project managers are constrained—or maintain themselves—in a product delivery role they will not be part of the needs analysis and should not be expected to be responsible for benefits delivery.
The first formal statement concerning the role of the project manager as fulfilling a linkage role between business and operations was Gaddis' (1959) characterization of the project manager as the “man in between” the demands of technologists and the demands of senior management and, as such, responsible for delivering the required asset to the agreed schedule, budget, and specification. This view has recently been reemphasized by a number of authors (Frame, 2002; Thomas et al., 2000; Kendall, 2001) who have advocated the evolution of the role of project manager toward a more business-focused ‘function' and a stronger focus on business benefits for projects (Cooke-Davies, 2002; Morris, 1997).
Interestingly, though, managers—as well as project managers—are usually judged, and rewarded or punished, on short-term results, while a project's actual benefits can only be measured effectively in the medium or long term (Brewer et al., 1999). Cooke-Davies (2002) has clearly linked project benefits to operations and stated that the successful delivery of project outputs cannot be sufficient to measure success. Benefits are a key element of project success and therefore of project significance and priority; benefits delivery goes beyond simple project management. Concentrating on short-term financial evaluation techniques or product delivery marginalizes the ‘real' measures of project benefits and maintain projects where they currently are.
Thomas et al. (2000) have clearly identified the product-centric view of project managers as a key barrier to the marketing of project management at executive level. As long as the project management community continues to promote the process aspect of project management, it will not succeed in marketing project-based approaches with executives, albeit the talk about product, service or ‘result' (PMI, 2004). In a recent critique of the PMBOK Guide® 3rd Ed., Max Wideman (2005) states: “The Guide takes a complex systems view of project management […] the number of processes has been increased. […] it is our view that […] a model for regular use [should not be] too complex or too uncertain to be comprehended by those for whom it is designed […]. For promulgation as a “standard” such as this, all processes should be simple, reliable and defensible.” These are all valid interrogations; notwithstanding any personal view on the PMBOK Guide®, they should constitute food for thought. If the Guide is seen as too complicated for its regular users, imagine how executives, who are not familiar with the processes, will feel about it.
The project management community should join the more progressive organizations that promote long-term stakeholder results over short-term financial results. Project management, as a discipline, should emphasize its contribution to business benefits and therefore adopt more of a benefits-centric approach to be able to convince executives of its intrinsic value. More emphasis should be put on project management as an organizational approach than a delivery process and program and portfolio management must adopt strategic management rhetoric. The important thing is not to teach executives the PM lingo, but for project managers to learn to “talk the language of their customers”.
Porter, in 1985 (2004), and more recently, Pinto & Rouhiainen (2001) have insisted that organizations must adopt a dynamic and integrated view of their value chain. Recently a few project-based organizations that we have worked with have adopted this framework (see Exhibit 3) with relative success.
In this scheme, portfolio management's role is to ensure strategic integrity & central support; the business domains' role is to develop strategic concepts, program proposals and specialist skills, the program office's is to analyze program proposals and to implement strategic decisions to ensure that benefits will be realized. All the elements of this structure work in close conjunction with marketing to understand and fulfill the stakeholders' needs and expectations. The organizations that have implemented this framework have, however, identified a few implementation issues, like the fact that, as program proposals are developed into the business domains, there is reluctance to ‘let go' of a fledgling program because of the potential loss of budget and resources; there is also a degree of competition between the business (units) domains and the programs unit, similar to competition between line and project management in matrix organizations.
Although this framework is still far from widespread, it brings to organizations a dynamism that has always been the trademark of project management and could represent a real step forward.
I had three objectives in writing this paper they can be translated into questions and answers:
▪ What matters to executives?
- Business benefits … including financial results;
- Stakeholders satisfaction … including shareholder value;
- Demonstrating control … while acting quickly and effectively.
▪ What are the key deliverables of a project management approach?
- A proven delivery performance record;
- A potential stakeholder focus approach;
- A growing trend.
▪ How can organizational structures promote a project management approach?
For reasons explained above; “to many businesses, the stakeholder concept remains a little more than a public relations exercise” (Clarke, 1998). Project and program management, by offering a solution to stakeholder management could help resolve this organizational dilemma and become the approach of the future, but in order to do so, it must get out of its current process/systems/engineering framework to adopt a learning and benefits framework.
In order to integrate strategy and project management and convince executives of the value of project management, project managers and program managers should work hand in hand at the delivery of business benefits. Project managers should adopt a marketing approach to their projects, emphasizing key deliverables directly linked to business results. They should know who their stakeholders are and make sure they understand their needs and expectations. As for program managers, they must use stakeholder analysis to develop a marketing plan that clearly identifies expected benefits and goals in measurable terms and, as the program progresses, report on them. This is a key element of maintaining support throughout the duration of the program. Program managers should be made accountable for the delivery of the business benefits and not pass them over to business managers.
Organizations, on the other hand, must adopt a dynamic project approach, like the one shown in figures 2 and 3, rather than a static traditional structure similar to that shown in figure 1. This will enable them to make sure that the whole value chain is integrated and directed at stakeholders' satisfaction whilst delivering expected financial results.
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© Michel Thiry
Originally published as a part of the 2005 PMI Global Congress Proceedings – Edinburgh, Scotland