Study of organizational change management in project-driven organizations using maturity models

Abstract

Through a longitudinal study of a construction firm in the Middle East, we show that the systematic approach of maturity models for identifying and implementing improvement actions can increase the effectiveness and comprehensiveness of improvement efforts in a business culture perceived to be resistant to western-style management solutions. Maturity models are strategic tools designed for organizational improvement and firms should understand how these models differ from and resemble other approaches. In light of this, we looked at overall organizational improvement steps in a project-based setting. This study helps firms understand the benefits of maturity models along with considerations for applying them.

Introduction

Development of communication and information technology has increased the rate of change in the business environment and has resulted in a more dynamic and, to some extent, complex environment (Potocki, & Brocato, 1995; Garies & Hueman, 2000). This imposes major challenges on firms, and of utmost importance, the constant need for adopting new paradigms. Organizations often use improvement and change management approaches to deal with this need. These approaches address requirements of effective implementation of the necessary changes and are concerned with sequence of activities, processes, and leadership issues that produce improvements (Cummings, & Worley, 2009).

As complex adaptive systems, organizations need to act in harmony with different external agents while focusing on their own strategic goals (Sutherland & Willem, 2002). To address this need, dividing the entire work into manageable projects has been taken into account as a way to facilitate interaction with the dynamic business environment and reflect the organization’s overall strategic goals (Project Management Institute, 2003; Jugdev, & Thomas, 2003). These types of organizations are known as project-based or project-driven organizations.

To improve the effectiveness of managerial efforts, managers of project-based organizations define multiple managerial levels to provide a capacity for prioritizing projects and aligning them with organizational strategies (Project Management Institute, 2003). In this context, organizational project management maturity is an indication of the firm’s capability to exploit projects in support of its strategic goals (Kerzner, 2001).

The role of projects in the performance of project-based organizations draws more attention to the strategic planning for identifying, prioritizing, and redirecting activities that improve project management capabilities (Green, 2005). In this context, maturity models, and particularly organizational project management maturity models, focus on improving management of a single project and/or a portfolio of projects and aim to improve the alignment of project objectives with organizational strategies.

Providing a strategic tool for planning and managing organizational change has been the subject of much research. Numerous authors have tried to uncover different organizational change attributes and have developed various tools and models to help understand the key components and factors associated with the change process and facilitate change management. Quality systems have been a major area of inspiration and investigation for such models. Different domains such as the quality management system, organizational quality strategies, and organizational business management processes have been included in the scope of improvement models.

Additionally, capability and competence of personnel involved in these processes have been covered by some other models. Some maturity and excellence models are also designed to specifically address change management requirements in project-driven settings. Organizational project management processes are the focus of such models. Diagnosing and analyzing the organization, designing interventions, and leading and managing improvement actions are common steps in all change approaches (Cummings & Worley, 2009). In summary, a wide array of maturity models are available, each of which covers a specific dimension of an organization’s work, including operational and strategic processes, employees’ capabilities, and elements of the management system.

Maturity models are all similar in terms of components and mechanism of diagnosing the organization, designing interventions, and leading and managing improvement actions, and are designed to offer these three components of change management in a single package. For instance, a self-assessment tool is incorporated in all models for identifying improvement areas. Additionally, to define different levels of maturity, best practices are put together and arranged in another element of the model called the body of the knowledge. Combining these components into a single tool and design of a mechanism for their interaction provides a systematic approach for improvement.

Several studies have focused on the relationship between the organizational maturity level and project performance in terms of completing projects on time, within budget, and according to specifications (Yazici, 2009). In this study we examined the strategic role of maturity models and their ability to provide a comprehensive and effective approach for organizational improvement. We first reviewed their background and common concepts and then studied the application of these concepts in a longitudinal study of a project-based construction company. For this study, we chose a project-based firm to highlight organizational project management features, which are widely adopted by organizations in the construction sector. We show that increasing the effectiveness and comprehensiveness of improvement efforts is one of the main advantages of maturity models.

By comprehensiveness we refer to the capacity of the change management approach for covering different aspects of the organization’s work. By effectiveness of the approach we mean the capacity of its mechanism for identifying, prioritizing, and leading required improvement actions. Despite advantages in comprehensiveness and effectiveness, organizations may need to adopt more than a single model to cover different aspects of their work and address their overall strategic needs. For instance, process maturity models do not cover personnel capabilities, and people capability models do not address maturity of processes.

To facilitate concurrent implementation of multiple models, model developers and designers have tried to provide a framework for integrating the various methods and demonstrating the importance of coordination between planning and implementation of different improvement efforts in the organization. The same concept applies to the concurrent application of maturity models and other management paradigms designed for quality management systems, such as International Organization for Standardization (ISO) standards, when organizations use them as the processes early in the journey toward maturity.

The company we observed for this study is located in a developing country in the Middle East, with a different business culture and a perceived resistance to the adoption of western-style business solutions such as maturity models. However, in the review of the company’s developmental steps we found several instances of the successful use of a number of these approaches and models, which shows the applicability of them in a Middle Eastern cultural setting.

Literature Review

Maturity models are strategic tools used by senior managers to identify improvement areas and to prioritize improvement actions (Kerzner, 2001). The concept of maturity lies in the process improvement domain, where it is believed that processes operate predictably as controllable systems capable of delivering the outputs reliably and predictably. Process capability models apply this notion and define the process capability as “the quantifiable range of expected results that can be achieved by following a process” (Federal Aviation Administration, 2001, pp 2-7). Accordingly, process maturity levels are defined using the concept that the expected outcome of a process is affected by the extents to which an organization deploys specific practices in its processes. For instance, the outcome of a statistically controlled process is different from those of uncontrolled processes (Baumert & McWhinney, 1992). The same concept is used by different maturity models to define specific practices associated with each maturity level.

Generally, maturity models involve improvement in a specific aspect of a process. They use improvement concepts developed in the quality movement and are used in such methods as “Statistical Quality Control” and “Total Quality Management (TQM)” (Software Engineering Institute, 1995).

The history of maturity models reveals that after widespread application of quality management techniques in manufacturing processes, those methods were applied to software development processes by the Software Engineering Institute (SEI). Later efforts of SEI expanded the application of the maturity framework to processes and people involved in system and software development and maintenance (Software Engineering Institute, 1998). These separate models were then merged into one integrated model (Bate & Shrum, 1998). Subsequent to the common application of these capability-maturity models, different models were proposed for processes and people involved in organizational business management system and project management systems.

Studying the main concepts and features of each of these approaches reveals the evolution pathway of maturity models. Preliminary approaches, known as quality improvement programs, focused on improving various components of business and gave equal importance to all of these components. To increase the effectiveness of improvement efforts, experts at SEI introduced a total-system perspective so as to keep the total system in focus and improve those parts that do not operate on their full efficiency, and hence, do not allow the overall system to achieve organizational business objectives (Cleland & Ireland, 2006).

To address the multidisciplinary nature of improvement efforts and provide a means for considering the organization-wide impact of change, the Federal Aviation Administration (FAA) applied two main concepts described as “integrated process improvement” and “improving process integration” to the SEI’s capability maturity models (Cleland & Ireland, 2006). As mentioned earlier, SEI undertook a similar effort for integrating its capability maturity models.

From this point forward, the application of maturity concepts has been extended beyond the software engineering domain, and different authors and institutions have tried to develop their own models for project management processes and even for specific management topics such as risk management, supply chain management, earned value management, people competencies, and the like (Construction Industry Institute, 2006, 2009; Wurth, Aranda, & Vadgama. 2009).

Subsequent to prevalent application of these maturity models, in 1999, Project Management Institute (PMI) launched a program for developing a model addressing the attributes of project-driven organizations. After reviewing 27 of the then available maturity models, PMI published OPM3 in 2003 (Project Management Institute, 2003). As mentioned with initiatives behind developing an integrated capability maturity model by FAA, OPM3 was also developed to consider the organization-wide impact of change in project-based organizations.

Based on the findings of the literature review, in Exhibit 1, we have summarized different steps in the evolution of maturity models and their widespread use (Cleland & Ireland, 2006; Federal Aviation Administrating, 2001; Ibbs & Kwak, 1997, 2002; International Project Management Association, 2009; Hakes, 2007; Kerzner, 2001, Project Management Institute 2003; Software Engineering Institute, 1993, 1995 1998, 2009)

Main steps in the evolution of maturity models

Exhibit 1 – Main steps in the evolution of maturity models

As mentioned in the introduction, the organization we investigated in this study is located in the Middle East where the business culture is different from the European and North American cultures. We believe this point plays an important role in our study, because the cross-cultural study of firms shows that application of management practices are functions of external enviromnent factors such as socio-economic, political, legal, and cultural factors (Negandhi, 1974). The successful use of maturity models concept in the case study can be regarded as evidence for their broad applicability.

Many authors have tried to explain the differences among industrial firms in different countries on the basis of enviromnental and cultural factors. For instance, Negandhi (1974) compared management practices and effectiveness of U.S. subsidiaries and comparable firms in Argentina, Brazil, India, the Philippines, Taiwan, and Uruguay and found differences in the extent of attention toward such practices as leadership style, decentralized decision-making, quality management program, and human resources management. Similar studies address cross-cultural differences in project management style in terms of performing practices from different project management areas and found significance differences (Zeng, Xie, Tam, & Sun, 2009).

Common Concepts Among Maturity Models

Step-by-step improvement in capabilities is a concept that distinguishes maturity models from other improvement approaches. Despite the diversity of the published models, maturity models share key features. The review of capability maturity models, EFQM Excellence model. Kerzner’s model, and OPM3 show that the mechanism of maturity models is based on three main elements:

  • Appraisal: A self-assessment tool is incorporated in the model, which is used to determine maturity of the organization. Self-assessment is one of the most important characteristics of maturity models and distinguishes them from the other improvement approaches listed in Exhibit 1.
  • Body of knowledge: In all models, capabilities and competencies associated with different maturity levels, along with capability-related performance indicators, are structured to support the function of the model.
  • Improvement: Based on the assessment results and by using the capabilities listed in the knowledge element, the improvement function of the model provides a prioritized list of actions and maps out the path toward excellence.

Additionally, the body of the knowledge of the models has a similar structure. For each maturity level, a series of best practices is defined, for which prerequisite capabilities are listed. Improvement is in fact made by attaining those capabilities, and it can be demonstrated by verifying a specific outcome that is expressed in terms of key performance indicators. Exhibit 2 summarizes these shared characteristics.

Common features among maturity models

Exhibit 2 – Common features among maturity models

Case Study

To track and explain the actual application of concepts discussed in previous sections, in this part we present a study of the XYZ Company. The company provides a wide range of consultancy and management services for all aspects of project development, from inception to implementation and post-commissioning stages. With more than 2500 employees, the company has studied and designed more than 200 large dams and has supervised the construction of more than 50 dams, 22 of which are in operation right now. The total installed capacity of hydropower projects studied and designed is more than 8000 MW. This company has also designed irrigation and drainage networks for more than 2.7 million hectare of land, along with about 10,000 km of water supply pipeline and 7000 km of sewage network.

We will first show the improvement steps in the history of the company and mention the outcomes of each step, and then analyze them to understand main phases of the organizational development and to explore the application of the improvement tools and maturity models. We gathered information from the following sources:

  • Interviews with one of the organization’s senior managers in charge of a number of recent improvement projects
  • Open-ended questionnaires sent to senior and middle managers whose area of work has been subjected to improvement projects in recent years
  • Review and assessment of relevant documents such as the organization’s mission and vision statement. Project Excellence Program, the EFQM self-assessment report, and the like

Additionally, to uncover underlying challenges and to understand the way managers have addressed them, we brought the following sources into play:

  • Findings of the review of the literature relevant to organizational change management and implementing maturity models
  • Open-ended questionnaires sent to employees involved in implementing one of the major improvement projects currently underway
  • Personal experience of one of the authors as a member of the team in charge of conducting the improvement project mentioned above from August 2006 to June 2007

The XYZ Company was founded in the early 1980s in a developing country in Asia and provides engineering and management consulting services in the construction sector. With respect to different criteria, including age, the number of employees, the size and number of projects done by this company, and most importantly, adopting new management theories and paradigms, this firm is one of the leading companies in the country. Additionally, the general work characteristics of this company made it suitable for the purpose of this study. Some of the most important characteristics of the company’s work flow include:

  • Based upon the project type, when a new project starts, it is assigned to the relevant technical division.
  • Technical divisions work as parts of a larger functional department.
  • Each functional department has a supervision division in charge of providing supervisory services during the construction phase.
  • Each functional department has its own program management division that provides project management services to all projects undertaken by the host department.
  • Relevant projects are grouped as different programs and managed in a coordinated way in each department.

Exhibit 3 summarizes different steps that the organization under study has pursued to improve its capabilities and specify outcomes of each step.

Major improvement actions undertaken by the firm and outcomes of each

Exhibit 3 – Major improvement actions undertaken by the firm and outcomes of each

Analysis and Discussion

In interviews conducted as a part of this study, the participants mentioned that the major driving force for changes listed in Exhibit 3 was gaining more capability for achieving additional benefits from projects and improving the overall accomplishments of the company. In summary, we can categorize these changes into the following major areas:

  • Quality program and the organization’s mission and vision
  • Characteristics of projects in terms of location, type, size, and delivery method
  • Organizational and project-level work flow
  • Organizational structure

Analyzing the information provided in Exhibit 4 shows that during the early years after establishment of the company, the roles of projects in the firm’s business received particular attention and changes were directed toward weighting project-based characteristics of the organization. In accordance with these changes, organizational structure was tailored to match requirements of the modified work flow, that caused changes in the way roles, authorities, and responsibilities were delegated, controlled, and coordinated.

In the second phase, after determining the proper work flow, the leaders of the company decided to launch a standardization program with emphasis on quality management processes. The major objective of this stage was to establish an ordered and structured process for pursuing objectives. As such, the ISO standards were the main framework that senior management used at this stage.

Main improvement areas and related objectives derived from the case study

Exhibit 4 – Main improvement areas and related objectives derived from the case study

After the standardization step, the managers used the EFQM excellence model to further improve the quality management system. In fact, as many maturity models express and the XYZ Company illustrates, standardization should be regarded as one of the early steps of the improvement. Fittingly, we mentioned in Exhibit 3 that, in 2006, as a part of the Project Excellence Program, the company decided to use PMI’s. A Guide to the Project Management Body of Knowledge (PMBOK® Guide) framework for standardizing project management processes.

In the second stage, in line with changes in the organizational structure, the firm’s senior managers added competencies of the project personnel to the scope of improvement actions. P-CMM is the key tool they adopted for this purpose. By the end of the second stage, the company set a new vision for its future. For instance, the firm decided to add construction-related IT projects to its portfolio of projects, penetrate into the market of neighbor countries, and carry out Engineering-Procurement-Construction (EPC) projects. Consequently, the company had to expand its capabilities for undertaking a wider range of projects in terms of size, expertise requirements, delivery method, and location. In essence, after standardizing quality system processes and improving competencies of project personnel, as a project-based organization, leaders of the XYZ Company focused on the firm’s body of project management practices.

The main characteristic of the third stage of the development is its comprehensiveness. We mentioned in Exhibit 3 that, in 2005, the company’s senior management developed a plan for establishing an organizational management system focusing on six management areas and delegated the responsibility of each area to a specific unit of the firm. In fact, they expanded the reach of the improvement actions both horizontally and vertically, and apart from the quality management system, the firm’s leaders included the organizational and project level processes of the project management system into the scope of the improvement, and also focused on different areas of project management practices, including time, cost, and risk management.

Performing each of these six improvement projects required a series of activities for diagnosis and analysis, designing interventions, and leading and managing improvement actions. For instance, the project management office (PMO), which was in charge of the Project Excellence Program for improving organizational project management maturity, developed a 10-year strategic plan for that particular project and conducted a 6-month study for identifying the most fitting model. Likewise, other improvement projects at this stage had their own strategic plans and supporting studies.

In the third stage, to identify the most important improvement areas of the organizational project management system and to develop a step-by-step improvement plan, the PMO used such tools as OPM3 and Kerzner’s Model and compared the result of the diagnosis with findings of other improvement projects in other units, such as the human resource office. Comparing the diagnosis results helped the two offices to align the identified improvement actions and share their resources. This increased the overall effectiveness of improvement efforts.

Additionally, because project management maturity models are designed purposely for addressing requirements of a project-driven organization, using these tools in a coordinated way helped develop a long-term, step-by-step plan for improving relevant parts of the organization’s working system, including organization-wide project management processes and employees’ capabilities and increased the comprehensiveness of improvement efforts. Exhibit 4 summarizes the main characteristics of each stage described above.

As discussed, maturity models have a self-assessment tool that shows and prioritizes the improvement areas, and they have a body of knowledge that sets forth all the practices required for organizational improvement. For instance, based on the results of the evaluation questionnaire, the XYZ Company’s leaders identified a number of important practices they have to implement to standardize their time management processes at the project level, and mapped out the steps they had to take to improve those processes in the organization.

In the first and second stages, management used a set of tools for diagnosing and identifying improvement needs and then adopted a different framework for planning the change. In fact, change management planning in the first 20 years was in an ad-hoc fashion and a case-by-case basis. The main characteristic of the change in the third stage is the systematic approach provided by using a single tool, maturity models, which are designed for diagnosing the organization and mapping out improvement steps.

Tracking Overall Performance of the Organization Over Time

In order to analyze its current status, the company uses different methods such as SWOT, Hoshin Kanri, self-assessment, and internal and external audits. For example, to understand employees’ expectations and satisfaction, and to assess customer satisfaction, questionnaires are completed by employees and clients once a year. Meetings with major clients are held to receive their feedback as well. Since 2003, the company has been evaluating its success in achieving the macro-goals set for the current year, assesses the effectiveness of its strategies, and prepares a strategic plan for the following year. Below are performance data on some of the most important aspects of the company’s work. The data are provided by the company and represent overall trends in customer satisfaction the total number and value of contracts, and the rate of return between 2003 and 2008.

Satisfaction of clients with services (data for 2006 are not available)

Exhibit 5– Satisfaction of clients with services (data for 2006 are not available)

The numbers shown in Exhibit 5 are calculated using data obtained from all clients. Exhibit 5 shows that, although the company was not able to achieve its targeted rate, overall satisfaction with the technical quality of services in design and supervision projects had an upward trend. Exhibit 6 shows the cumulative number of contracts performed during each year and the total value of them in Million Euros.

Cumulative number of contracts performed by the company in each year (left) and the cumulative value of them (right)

Exhibit 6 – Cumulative number of contracts performed by the company in each year (left) and the cumulative value of them (right)

Exhibit 6 shows that the company did not enter into any new contract in 2006, but the annual number of new contracts increased in 2007 and 2008. On the other hand, as far as the value of contracts is concerned, except for 2007, there is an upward trend. Exhibit 7 shows the rate of return between 2004 and 2008.

Rate of return between 2004 and 2008

Exhibit 7– Rate of return between 2004 and 2008

Exhibit 7 shows that return on investment had a small growth between 2004 and 2007 and more than doubled in 2008. In general, the performance data provided by the company demonstrate overall improvement in customer satisfaction, number and value of contracts, and financial performance of the company between 2003 and 2008. However, it is important to note that as Exhibit 4 shows, 2003 is the beginning of the third stage of improvement actions. We believe that the positive trends between 2003 and 2008 are the results of the cumulative effect of all the improvement projects implemented during the first two stages as well as the third stage. For example, review of the annual reports and documents related to the total quality management system of the organization shows that the senior managers of the company believe that the following changes had the highest contribution to increasing customer satisfaction as shown in Exhibit 5:

“The scope of services for each project is prepared to support our strategic goals and quality policy to create a balance among the benefits of employees, the company and customers. For accurate identification of customers’ requirements and expectations, a group of experts is formed in the corresponding functional department to identify the project scope. These groups prepare the scope of engineering services by collecting information related to the project, visiting the site, meetings with customers and collecting their points of view. During the execution phase, project managers and project experts work together to supervise construction works and make necessary changes in collaboration with the design team of each project. The Project Manager and the Chief Resident Engineer study all the change requests and send them to the design team to be approved or rejected according to the technical specifications. To organize these tasks we have developed 312 technical work instructions and 30 procedures systematically. "

In essence, what the senior managers of the company mention suggests that creating functional departments, revising workflow at project levels, along with providing technical trainings to project managers and project personnel have created this positive trend. It is important to note that to examine the outcome of improvement actions implemented during the third stage, one would need to have access to performance data on project level indices and compare them with data showing performance before adopting project management maturity models. Unfortunately, such data were not available at the time of this study.

Findings of Reviewing the Improvement Steps

Because the XYZ Company is a project-based organization, the overall improvement of this firm is dependent on its project management system. However, the case study shows that organizational development and improvement in this company covered different areas such as organization-wide work processes, organizational structure, and employees’ capability. In general, changes were directed toward increasing the importance of project roles in the organization and developing more capabilities in pursuing strategic objectives.

Reviewing the improvement steps implies that senior management continually diagnosed the firm’s performance and performed a series of improvement actions that follows the general trend we discovered in the evolution of maturity models. The organization’s leaders started with the quality management system and then moved their focus to the organizational business management processes. Next, they developed an integrated approach for organization-wide improvement and focused on the project management system and the firm’s body of the project management knowledge starting at the project level. Standardization was the first step in improving each of these systems.

In summary, this case study demonstrates a successful experience of using maturity models, and specifically project management maturity models, as a strategic tool for change management planning in an overseas construction company, which is important with respect to differences in the business culture. The XYZ Company is doing business in a developing country in the Middle East, where business practices and management philosophies are derived by the large emphasis on the public sector, and studies have shown that because of highly centralized political systems and strong national and administrative cultures, the administration is highly resistant to international reform trends and adopting western-style administrative solutions (Common, 2008).

The successful experience of this company in using a wide range of improvement approaches shows the applicability of such solutions in a culture different from the one from which they originate.

Conclusion

Organizational improvement requires and is accomplished through changing strategy, structure, and work processes of organizations. Accordingly, practices related to this domain cover a wide range of activities. Maturity models are strategic tools that help understand these practices to develop a systematic approach for successful long-term changes. In this study, we looked at application of these models in a project-based construction company to understand the models’ ability to provide a comprehensive and effective approach for organizational improvement, along with issues and considerations associated with implementing them. Below is the summary of our findings:

  • As showed in the literature review, a wide range of maturity models exist with concentration on improving individual processes (capability maturity models) and groups of processes (organizational process management maturity models) of an organization. Organizations can select a combination of models to fully cover diverse aspects of their work; however, isolated implementation of these models may limit success of improvement activities. In the case study, we found that the XYZ Company had used OPM3 and P-CMM in a strategically coordinated way and this made it possible to align improvement actions and share resources and increased effectiveness of the efforts.
  • The relevant literature also shows that development of maturity models originated from quality improvement approaches. In light of this, these models can be used in line with other management and quality improvement paradigms. For example, in the case study after going through a standardization phase using ISO frameworks, the management moved toward implementing maturity models to develop a step-by-step improvement plan.
  • In the case study we also found that implementing maturity models and adopting their related concepts played an important role in building a systematic approach for identifying improvement areas and aligning different improvement actions. Likewise, this can increase the effectiveness and comprehensiveness of organizational development approaches; however, as with other improvement tools, general organizational change management barriers and challenges arise when implementing maturity models, and organizations’ leaders should address such considerations to make the most of these models.

Additionally, the successful application of the maturity models concept in a company in the Middle East, where business culture is different from the culture in which these models originated, and is known to be resistant to the adoption of western-style business solutions shows the broad applicability of maturity models.

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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.

© 2011, Hessam Sadatsafavi, John Walewski
Originally published as a part of 2011 PMI Global Congress Proceedings – Dallas, TX

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