Optimizing human capital with a strategic project office

how to select, train, measure and reward people for organization success

Abstract

As two realities of the marketplace converge—projects as the engines of growth, and people as the engine of projects—we find traditional methods of dealing with human resource issues becoming dated. The strategic importance of human capital has grown exponentially as the workforce has changed from “strong backs and capable hands” to “flexible and creative minds.” This presentation expands on one aspect of the Strategic Project Office (SPO): its potential to transform an enterprise by making the most of people.

Introduction

Most project problems aren't technical problems—they are “people problems.” That's not because project teams are comprised of difficult personalities, it's because they are often subjected to counterproductive management policies. Project managers and teams are knowledge workers—and project management is flourishing in the knowledge economy. Yet our systems and methods of managing people in organizations were designed for the Industrial Age. The poor fit between human resources (HR) practices and project realities is well known: organizations struggle with project manager selection, team rewards, and performance measurement geared to projects instead of to bureaucratic cycles.

What's the answer? A study of the literature on managing knowledge workers, carried out by the Center for Business Practices in 2003, yielded many solutions for the “human issues” of managing projects. In this paper, we will discuss how these project-friendly human resource management processes can best be implemented under the auspices of an enterprise-level, or Strategic, Project Office (SPO). We'll also share the results of our research into job design for project managers and other project staff, to help you take the first steps towards project management competency-based management of your project talent.

The Value of Human Capital in Project Management

“’Human capital’ isn't a project management term,” we were told by several project management experts when we discussed the title of our forthcoming book (Crawford & Cabanis-Brewin, 2005). They urged us to change the title to make sure it caught the interest of project management practitioners. But our view is that, if human capital isn't of interest to project management experts, it ought to be. You only have to look at research on project failures to know that human motivation, intelligence, attention, and attitude are key factors in project success—or failure.

People Problems

▪  The majority of problems on projects are caused by human issues, not technical issues. (Randolph & Posner, 2002).

▪  “All project failures are political” (Johnson, 1997, p. 11).

▪  Companies find it hard to attract and retain excellent project talent, and the ability to do so will differentiate winning companies in the future. (McKinsey & Co., 1998)

▪  Three out of four executives say that the people who work for them do not have the right skills (Benchley, 2001).

As these statements make clear, there is broad recognition, both on the project level and on the executive level, that better human resource management—or “talent management,” to use a term more congruent with the management of knowledge workers—makes the difference between success and failure. Yet even though 74 percent of senior execs say that people-related issues are more important to a company's success than ever, 57 percent of companies never or rarely measure the impact of HR investments on employee satisfaction (Accenture, 2003). Thus, in many companies, knowledge workers—the majority of them also project team members—continue to be managed as though they were units of labor on an assembly line. Companies try to measure the value of knowledge work as though it were widget manufacturing. When these antiquated policies fail, companies treat labor as nothing but a cost center, and try to downsize their way to greatness.

These policies fail because human capital is the key to the knowledge-intensive work carried out in projects. Knowledge and other intangible assets now represent 80% of companies' market values (Kaplan & Norton, 2001). For companies that succeed in creating an environment friendly to knowledge sharing and transfer, there's now quantifiable proof of a sizable return. Research has shown that even a modest improvement can have a significant bottom-line impact (Accenture, 2003; Fitz-Enz, 2000). HR research firm Watson Wyatt's “Human Capital Index” (HCI) has established a solid link between a company's human capital practices and corporate profitability. Project-oriented organizations have the advantage, since the management of projects is founded on some of the high-value practices noted in the HCI, such as a culture that encourages teamwork (Watson Wyatt, 2004). The practices with the strongest links to financial success include easy access to technologies for communicating, employee input into how work gets done, and a “collegial, flexible workplace.” Other research has identified project-friendly HR practices in the research and development field (Exhibit 1).

HR Practices That Build Long-term Relationships with Knowledge Workers

Exhibit 1. HR Practices That Build Long-term Relationships with Knowledge Workers

How does managing by projects help to relieve many of the persistent people and performance problems that business faces today? One expert has identified the “zest factors” that evoke the kind of high performance work groups often experience during a crisis. These factors include:

•  a clear challenge with a specific goal

•  urgency that requires immediate action and stirs commitment

•  a sense of teamwork and cooperative action that crosses boundaries

•  the pressure of necessity

•  flexibility in work arrangements that creates innovation and grows new leaders (Neiman, 2002).

These “zest factors” are part and parcel of projects, but they are often absent in day-to-day work life (operations). Organizing work into short-term initiatives (projects) with goals, deadlines and achievable visions, keeps the “zest factor” current. Because projects are performed by teams, they also facilitate knowledge creation and transfer. When project managers and teams work within an organizational system that supports the project paradigm, the resulting work environment is one that energizes people, achieves goals, and promotes flexible responses to organizational challenges and opportunities.

This kind of organizational climate doesn't happen by accident. A company's ability to empower and support project managers, says Oxford University's Christopher Sauer, is set up by human resource policies and organizational values that “encourage them to feel they have a personal stake in helping the organization perform better in the long term.” (Sauer, Liu & Johnson, 2001, p. 43). Therefore, in order to optimize the benefits of project management, organizations need to completely change their approach to hiring, managing, and developing project personnel to a competency-based management model. This isn't a small change. Once a company begins viewing role description, recruitment, rewards, and professional development through the lens of project management competence, many time-honored structures and patterns existing in our human resource management will change. Behaviors in the workplace are the building blocks of competence, but they are also an expression of organizational culture. Designing organizational human resource practices around competence on projects is a paradigm shift.

A Solution That Works: Competency-Based Management-by-Projects

Implementing competency-based management for project personnel, under the auspices of an enterprise-level project office, moves an organization toward improved project management capability in three important ways:

  1. It identifies what “best project managers” actually do, which allows the organization to focus training and development where it's most needed.
  2. Matching project manager and team competencies with the types of projects they are prepared to handle will result in more effective project execution, and thus better organizational performance.
  3. The detailed and rational job descriptions developed in the process of defining competencies revolutionizes recruitment, development, and performance management, giving knowledge workers an equitable process for career development, while making sure that projects have all the right skills on board.

In a competency-based environment, you determine the result you need and work backwards from that goal to pinpoint the skills and behaviors that individuals must possess. As roles become more abstract—one of the hallmarks of knowledge work—the difficulty of defining the competencies necessary becomes complex. Skill at typing is easy to quantify; skill in strategic thinking, innovation, or teambuilding much harder. Competence in the work setting is the result of an interplay between several factors:

Knowledge, which can be assessed by testing. For project managers, the “body of knowledge” also includes knowledge in their chosen field (marketing or information systems, for example); knowledge of other disciplines that come into play in the industry in which they work, such as regulatory law; and knowledge of the business side (finance, personnel, strategic planning).

Potential to perform the role is evaluated through questions that test the ability to think and solve problems in specific situations. Factors to consider include the abilities to handle stress, be flexible, negotiate, deal with corporate politics, and manage personal time; and conflict management.

Skills are learned behaviors with practical application that require practice to perfect. For a project manager, these include subject matter expertise; technical project management skills (planning and controlling); and/or human skills (influencing, negotiating, communicating, facilitating, mentoring, coaching). Technical skills become less important as the project manager's level of managerial responsibility grows: this is one reason why excellent technologists often fail as project managers.

Personal Characteristics. On the intangible, yet important, side of the ledger, are drive, enthusiasm, professional integrity, morale, determination, and commitment. In recent years, a number of project management writers have focused on these traits as being the most important for project managers, outweighing technical knowledge and skills (Toney, 2000).

Potential, skills and personal characteristics are best gauged through the use of a multi-rater tool (sometimes called a 360-degree tool), which allows the acquisition of feedback on the project managers' behaviors in the workplace from a variety of sources—typically peers, subordinates, supervisors, and/or clients. A multi-rater assessment provides a holistic view of the individual's project management behaviors and helps determine which behaviors are present or absent, how well the behaviors are displayed, and which behaviors demonstrate areas for potential growth. The results are used to pinpoint opportunities for learning, and to effectively deploy skills on projects.

The Role of the Project Office

It's worth noting that competency-model experts Lucia and Lelpsinger list three things that support organizational success:

  1. Competent leadership
  2. Competent employees
  3. A corporate culture that fosters and optimizes competence (Lucia & Lelpsinger, 1999).

Often in discussions of competence, we focus narrowly on individuals. But this is only one level of three that must be analyzed to build organizational project management capability: How capable are individuals? How well do the teams they work in function? And how supportive is the organization? Even capable individuals cannot work miracles within dysfunctional teams and organizations. That's why culture change, not merely individual competence assessments, is required.

To develop the organization's project management capability, says Sauer, it is desirable to institutionalize the development of individual capabilities. He recommends the project office as “a focal point in the organization,” where an environment conducive to the development and practice of project management capabilities can flourish (Sauer, et al, 2001, p. 44).

Staffing the Strategic Project Office

Staffing an enterprise-level project office is full of challenges. Whether it is a one-person Center of Excellence or a fully mature SPO, the definition of roles and responsibilities, and the development of project-friendly human resource policies, will be critical to building an effective project culture.

Executive Roles

Projects are not accomplished by a project manager and team alone. Many of the potential obstacles to success— poor definition of the business case for a project, lack of alignment with strategic corporate objectives, inadequate funding, or refusal to cooperate cross-functionally among departments—must be cleared away at the executive level. That's why the project sponsor has always played such a critical role in the successful management of projects. Choose a sponsor for the SPO who can communicate the plan, and keep the organization's priorities straight. He or she must be a strong advocate for the changes involved, extremely knowledgeable about the benefits of project management, and have the ear and confidence of the powers-that-be.

As companies or divisions take on multiple projects, the process for deciding which projects to execute, when, and what resources to assign to each project, becomes critical to whether the company meets its business objectives. At this level of maturity, a portfolio manager becomes a key role in facilitating project prioritization, resource allocation, and project approval decision-making. In larger organizations with many projects underway, the job responsibilities may be split between two different positions: a portfolio manager who maintains the strategic view of business objectives and how various projects fit within them, and is responsible for the prioritization criteria and process and making decisions (or recommendations to executive management); and a resource manager who works most closely with functional managers and project managers to understand the resource needs of each project (skills, expertise, timing and numbers from various functions) and coordinate resolution of resource conflicts (Project Connections, 2004).

Equally important are the leaders within the SPO itself. If the SPO is to play the central role in guiding project management in the organization, staffing is complex. The Project Office Director position within the organization should be equivalent to that of a high-level functional manager—even a vice-president, in some cases. The SPO Director at this level is supported by large numbers of professional associates and administrative personnel. Project office sizes range from five to twenty; in large organizations, there may be hundreds of project managers linked directly or indirectly to the project office (Light & Berg, 2000).

The SPO Director must possess enough stature and respect throughout the organization to champion projects from start to finish—and to recommend canceling projects whose objectives either can't be met or are no longer valid. He or she must have the demonstrable backing of senior management, especially critical early in the transition to the SPO structure. However, instituting an SPO director alone is not enough to bring the organization into the “managing by projects” mode. It is also necessary to alter the role of functional managers from resource owners to project resource suppliers—a significant change that organizations must make to fully realize the value of effective, cross-organizational project teams.

Many hats may be worn by a SPO director, depending upon the size and scope of the SPO. The SPO Director is a “relationship manager,” working to smooth the interfaces with the business units and develop project requirements through consensus with customers. (Light & Berg, 2000) He or she is also a human resource manager, developing the skills of the SPO staff and project managers throughout the organization, prioritizing the application of Project Office resources, and contributing to definition of training requirements on corporate project management training, project management methods and processes. He or she may also act as a professional development coordinator—or oversee such a position—in order to ensure that job descriptions are created, maintained, and refined for the project management career path. Criteria are defined for interviewing, rating, and hiring for project management skills, as well as for identifying people in the organization who are currently acting as project managers and those who are interested in developing their skills in order to become project managers. Depending on the size of the project office, the SPO director may also working with each individual to identify strengths and weaknesses in the project management discipline and assisting them in identifying opportunities for developing the appropriate skills and knowledge, work with the internal training organization to identify project management training courses, and working with management to identity individuals or assignment opportunities in order to develop skills and experience. (Hennings, 1999).

Of course, the SPO Director is also a program manager, providing corporate project oversight, checkpoints, and controls, reviewing and analyzing the process of project management throughout the organization, defining and conducting project audits, and managing the project office budgets. The SPO Director must ensure organizational compliance with tax laws, governmental guidance such as the Sarbanes-Oxley Act, and accounting/financial standards.

Finally the SPO Director is an evangelist for project management: as “owner” of the project office methodologies, the Director may also be in charge of the following areas, either by taking personal responsibility for these items, or by employing a methodology expert to fulfill the functions: Authoring, maintaining and adapting the project management methods and processes, evaluating and selecting project management tools, developing knowledge management standards and processes for archiving and disseminating project documents, lessons learned, and other intellectual capital derived from project activities, developing tools for measuring the level of usage and effectiveness of project management methods used by the organization, and soliciting and incorporating feedback from project managers for the continuous improvement of the methods and processes.

In short the SPO director is an integrator of process, a manager of staff, a coordinator of project resources (including project managers), the coordinator of standards and methods as well as developer and maintainer of tools expertise, a mentor, training coordinator, and point of interface between projects, programs, and the executive staff. This role must be filled with the same care that companies take in placing a CIO, a CFO…or a CEO. We believe it is time to institutionalize a role called the “Chief Project Officer,” on a peer level with other executives in the organization. In mid-sized companies, the CPO and the director of the corporate SPO may be one and the same.

Depending on the size of the company, executive roles will vary in number and complexity. Exhibit 2. shows a fully mature corporate-level Strategic Project Office's roles and fit within the enterprise. Keep in mind that these roles can be easily scaled down to describe roles and responsibilities for a divisional SPO. Whether the SPO is corporate or divisional, however, choosing its director will be a critical success factor.

Staffing the Strategic Project Office

Exhibit 2. Staffing the Strategic Project Office

Project Manager Selection

As much care should be given to the appointment of a project manager for a mission critical project as is given during the hiring process for a key position in corporate leadership, according to Boston University's project management program (Freeman & Gould, 2003). Yet most organizations have no process for choosing project managers, and little idea what skills and personality traits are needed by project managers to help them succeed. Competency-based management by the SPO resolves these problems by implementing job descriptions based on project management competence; by developing structured interviews that consist of a competency-based list of standard questions; and by involving the people who know project management best in the hiring and performance management of project personnel. When project managers refer new hires, and have a voice in the selection and appraisal processes, better-quality people are selected for project roles, and their performance is measured and rewarded in terms that relate directly to project management skills.

In many organizations, employees have very little incentive to assume the position of project manager, largely due to a disconnect surrounding what the role entails. Poor role definition—for all the roles in a project, but especially for the project manager—places even qualified personnel into situations where they are doomed to failure by requiring them to do too much and be expert in everything. As a result of our research and experience, we've developed a framework for the division of labor on projects that we think works both for the people and for the project outcomes.

Resolving the Leader/Manager Dilemma

The project manager's challenge has always been to combine two distinct areas of competence:

The art of project management—Effective communications, trust, values, integrity, honesty, sociability, leadership, staff development, flexibility, decision making, perspective, sound business judgment, negotiations, customer relations, problem solving, managing change, managing expectations, training, mentoring, consulting. This is a “leadership” role more than a “managership” role. (Bennis, 1994).

The science of project management—Plans, WBS, Gantt charts, standards, CPM/precedence diagrams, controls variance analysis, metrics, methods, earned value, s-curves, risk management, status reporting, resource estimating and leveling. This is the “traditional” or classic project management role.

“New project management” is characterized by a more holistic view of the project that goes beyond planning and controls to encompass business issues, procurement strategy, human resource issues, organizational strategic portfolios, and marketing. As a result, the role of the project manager has expanded in both directions: becoming both more business- and leadership-oriented on one hand, while growing in technical complexity on the other. The result has been that the title “project manager” today often carries a “kitchen-sink” job description that ranges from strategic and business responsibilities to paperwork to writing code. However, there's hope. The now-widespread use of the project management office means that companies are developing specialized project roles and career paths, defining specific competencies for these roles, and providing “a fork in the road” that allows individuals who are gifted strongly either on the art side of the ledger—as program and project managers and mentors—to flourish, while allowing those whose skill lies in the science of project management to specialize in roles that provide efficiency in planning and controlling projects. While, on the surface, an enterprise project office may seem to add more bureaucracy, in fact it can simplify project management by making it possible to break out, cluster, and create specialties from the many project management tasks that have up until now often been lumped together into one near-heroic role.

Technical project managers tend to focus more on process while business project managers are more concerned with business results. Ideally, a balance between the two is required, determined by the project type, organization culture and systems (Cominos & Verwey, 2002). Confusion of roles and responsibilities would be averted if these two very different roles were not both referred to as “project managers,” and this is an important step in developing project-friendly human resource policies.

The Emergence of the Project Planner Role

The development of the project planner position has been an evolutionary process. Initially, many organizations created a position called “coordinator.” The coordinator was responsible for handling administrative tasks, gathering status information, entering data into a timekeeping and scheduling system, and helping to produce status charts. Over time, additional responsibilities – such as tracking issue and risk logs, analyzing schedules, and facilitating planning sessions – were added to the coordinator role. More recently, their responsibilities increased to include handling resource constraints and allocations, schedule and critical-path analysis, and financial reporting of earned value, and other documenting sufficient to comply with the Sarbanes-Oxley Act. Thus, the role of project coordinator evolved into that of project planner. The new project planner supports the project manager by taking over critical, detail-oriented, time-intensive tasks. As a result, the project manager is free to focus on more strategic project goals and objectives.

The core tasks of “managership” have been identified as planning the work, organizing the work, implementing the plan and controlling results. These tasks align with the role of planner. Together, the project manager and planner/controller resolve the leader/manager dilemma by supplying both aspects of these roles in collaboration. What Makes a Good Project Planner?

In order to efficiently handle the responsibilities outlined above, the successful project controller/planner must possess technical expertise in project management software, and related spreadsheet and/or database (financial, resource) tools; as well as business process expertise in cost budgeting and estimating, risk analysis, critical path diagramming and analysis, resource forecasting, and change control. In contrast to the project manager candidate, the ideal project planner has the following personal and professional characteristics:

▪              Logical thinker and problem solver

▪              Organized and detail-focused

▪              Numbers-oriented

▪              The ability to interpret complicated and interconnected data

▪              Communication skills especially as they apply to project information

▪              PM Software expertise

▪              Application software expertise (accounting, procurement, etc.).

Just as in project managers of varying experience and skill, you'll find a hierarchy in the project planning and controls arena. And, just as with project managers, the organization will benefit from establishing a career path from the specialist team member level to a sophisticated project controls position.

Other roles

The team member position is where the actual day-to-day work of the project planning, estimating, statusing, and analysis is done. Within this level, more definitive project management roles—depending on the organization—can include: Project Controllers, Project Analysts, Schedulers, Planners, Business Analysts, Knowledge Management Coordinator: sometimes formerly known as the “librarian,” Estimators, Systems Analysts, Communications Planners, Project Administrators, and Methodologists. New roles we encountered during our research included:

Resource Manager: In organizations with significant project activity, the responsibility for resource management may become a full-time job. One major insurance company titles this role “The Project Manager Role Steward.” Individual project managers, rather than having to “beg, borrow, and steal” resources wherever they can find them, turn to the resource manager for assistance. The RM prioritizes resource requests, manages the “fit” of resource skills to project requirements, manage and balance scarce technical resources, aid in planning for acquisition of resources, and secure assignment of key resources to projects according to the project's relative rank on the organization's prioritized list.

Organizational Development Analyst: Another project human-resource management role, the ODA “floats” among projects, identifying the human issues that often derail projects before they become a problem and working to resolve them. ODAs are a liaison between projects and the HR department. Establishing a boundary-spanning role such as the ODA can help to alleviate tensions with corporate HR, while making sure the project personnel's needs were addressed (Agarwal & Ferrat, 2002).

Duties of the Project Manager and Project Planner by Knowledge Area

Exhibit 3. Duties of the Project Manager and Project Planner by Knowledge Area

People + Projects = Strategic Execution

Project slippage and failure rates are falling, at least in those application areas that attract research interest, such as software development and pharmaceutical R&D (Standish Group, 2002). Three factors explain these encouraging results: 1) a trend toward smaller, less complex projects; 2) better project management; and 3) greater use of “standard infrastructures”—such as those instituted through a project management office. Large companies show up as more successful in the Standish Group study for one reason, in our view: large companies lead the pack in the establishment of enterprise-level project offices. And only under the auspices of this organizational home for project management can the persistent people-management problems that plague projects can be ameliorated.

People Perform Projects

Competent and experienced project managers are not accidental: they are grown in an environment that trains, mentors, and rewards them based on performance in projects. Benefits of having a good project manager include reduced project expense, higher morale, and quicker time to market. They must be able to define requirements, estimate resources and schedule their delivery, budget and manage costs, motivate teams, resolve conflicts, negotiate external resources, manage contracts, assess and reduce risks, and adhere to a standard methodology and quality processes. Obviously, there is a growing body of knowledge about who makes the best project manager, how to develop their skills, and what kinds of rewards motivate them. That body of knowledge has an organizational home in the SPO.

The SPO scores again when you consider the strategic importance of managing the project portfolio—including allocating resources across the enterprise. When it comes to identifying existing and prospective project managers, an organizational entity devoted to project management does it best. The Gartner Group has identified several key HR-related roles for a project office, all of which are most effectively carried out on the enterprise level, and all of which include important implications for “people management,” not only within the project office, but across the enterprise:

As developer, documenter and repository of a standard methodology, the SPO provides a common language and set of practices, which boosts productivity and individual capability and takes a great deal of the frustration out of project work. Research by the Center for Business Practices revealed that over 68 percent of companies who implemented basic methodology experienced increased productivity; and 37 percent reported improvement in employee satisfaction (Center for Business Practices, 2001).

As a project management consulting center, the SPO mentors the entire organization, staffing projects with project managers or deploying them as consultants. As a center for the development of expertise, the SPO makes possible a systematic, integrated professional development path and ties training to real project needs as well as rewarding project teams in ways that reflect and reinforce success on projects. This is quite different from the reward and training systems presently in place in most organizations, which tend to focus on functional areas and ignore project work in evaluation, training, and rewards.

As a “competency center” for project management, the SPO provides a knowledge management locus not only for project management knowledge but for knowledge about the content of the organization's projects. With a “library” of business cases, plans, budgets, schedules, reports, lessons learned, and histories, as well as a formal and informal network of people who have worked on a variety of projects, the SPO is a knowledge management center that maximizes and creates new intellectual capital. Knowledge is best created and transferred in a social network or community, and the SPO provides just that. Through mentoring both within the SPO among project managers, and across the enterprise to people in all specialty areas, knowledge transfer about how to get things done on deadline and within budget is facilitated.

The project-centered enterprise, in which people are treated as though project performance really mattered to organizational performance, isn't a theory—it's the logical outcome of the application of project management to business problems. In industries where the practice of project management has long been accepted as the way to get work done, such enterprises already exist. A 2001 study by Oxford University's Chris Sauer, published in the Project Management Journal, focused on the ways that project-centered companies build the organizational capability (and of course, concurrently, individual capability) to perform projects and manage by projects. What did these companies have in common?

•  A flat organizational structure

•  Project-centered role design

•  HR management policies that are project-friendly

•  A focal point in the organization…a corporate project office.

A project office is good news for project managers and team members, as it focuses attention on the training, rewards, and career path of the project professional. But it's also good news for the bottom line, since it translates the improved capabilities of individuals into better project management…better portfolio management…and strategies that are executed, not just dreamed about.

References

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Bennis, W. (1994). On Becoming a Leader. Philadelphia: Perseus Books.

Center for Business Practices (2001) The Value of Project Management. Havertown, PA: CBP

Comninos, D. & A. Verwey. (2002) Business focused project management. Management Services, Jan. pp 72-77

Crawford, J.K. & J.M. Cabanis-Brewin (2005) Optimizing Human Capital with a Strategic Project Office: Select, Train, Measure and Reward People for Organizational Success, Boca Raton, FL: CRC Press.

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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 or any listed author.

© 2005, J. Kent Crawford and Jeannette Cabanis-Brewin
Originally published as a part of 2005 PMI Global Congress Proceedings – Toronto, Canada

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