Management of partnership projects
the management of two investment projects and changes in project management over a ten-year period--a case study
Theoretical Background of the Study
Businesses and institutions now form joint ventures, strategic alliances, networks, and partnerships faster than ever in what organization theorists call an organization revolution (Bartha-Johnson 1997). However, we know very little of how to form cooperative network processes. Research has produced knowledge of motives, conditions, and structures in networks but little information on how these network processes and procedures are formed. In recent years more attention has been given to partners and a partnership. By partnership generally a long-term partnership of an investor and a supplier is meant; it also includes a partnership development. In that case it is a question of two partners’ partnership. However, more investigation is needed for it to be possible to estimate the value of the partnership concept (Cook and Hancher 1990, 445).
Investments can also be implemented as a partnership. Companies’ partnerships make special demands on project management. Knowing special features in a partnership project compared to one company’s single project helps to obtain synergy advantages. The basis for a successful project management is the knowledge of the project management system. Although many studies of project management have been carried out, many investment projects still fail. Theoretical analysis has showed that there is very little research of the whole project management system process, and even less research of partnership investment project management systems. Empirical studies, too, are rare. In practice project valuation traditionally concentrates on economical and financial matters: classical investment calculations and their analysis. Behavioral investment research tends to focus on investment valuation and choice, i.e., only a part of the investment process. Empirical studies have pointed out that much more attention should be given to the whole investment process, i.e., from the definition to the closeout. There are very few studies of the investment implementation phase. However, in that phase there seem to be numerous problems. In project management behavior studies, therefore, more attention should be paid to the implementation phase and problems in it (Engwall 1995; Cook and Hancher 1990).
Investment project management methods have developed from the Gantt chart made in the First World War, through the development of critical path method (CPM) and program evaluation and review technique (PERT), to the whole project management process. In the 1980s, the use of ADP for project management was emphasized. In the 1990s, the problems of project management techniques have further been analyzed and, on the basis of these, new techniques have been presented. Information systems have strongly developed along with ready-made project control systems. The investment follow up, after closeout and project prestudies, has been emphasized (Kähkönen 1996). These were noted to influence on better investment implementation. Research was expected on how project management acts in practice (Engwall 1995).
Concerning the research of the investment project organization and project management, it has been noticed that in a part of the research, project manager’s leadership principles and project manager’s duties have been studied. A few success/failure factors in the investment project process have been observed. There are only a few studies of human resource management (Fabi and Pettersen 1992). Only in the 1990s has the significance been noticed of: project group and team (Williams 1997; Katzenbach and Smith 1993), empowerment and organizational learning (Argyris 1977, 1990; Hammuda and Dulaimi 1997; Ayas 1996; Senge 1990), and communication in project management. The focus in risk management has turned from quantitative methods to the development of risk management process and understanding in different project phases, and to the organizing of risk management (Chapman and Ward 1997; Artto 1997; Kähkönen 1997). For the requirements of project managers, A Guide to the Project Management Body of Knowledge (PMBOK® Guide) has been created. In addition, a certification process for project managers is in progress. Lately, cooperation and networks between companies has increased, however research in this area is still rare (Hedberg et al 1997; Guss 1997; Weston and Gibson 1993; Larson 1995).
On the basis of previous research in project management, critical success/failure factors in project phases and conflict situation have been reviewed (Slevin and Pinto 1987; Pinto and Prescott 1988; Adams and Barnt 1978; Cleland and King 1983; Belassi and Tukel 1996; Schultz et al 1987). The survey of critical success/failure factors has also been carried out by dividing the factors into strategy and tactics. Strategic success/failure factors belong to early project management phases (like planning) and tactics phases (like implementation). Conflict management has been noted to be a prerequisite for effective project management (Blake and Mouton 1964; Burke 1969; Thamhain and Wilemon 1975). Conflict management has been noted to be (in order): collaborate, compromise, accommodate, dominate, avoidance (Posner 1986).
Purpose of the Study
The purpose of this study is to investigate and analyze the state and significance of investment project management systems in the implementation of partnership investment projects. Therefore the study:
• Explores the theoretical framework of the investment project management on the basis of previous research
• Describes two partnership investment project management systems
• Analyzes empirical results using the theoretical framework
• Examines differences between two empirical investment projects
• Investigates observations connecting to project success.
Finally, a summary of the main results of success factors and threats in managing investment project are presented.
In the empirical part of this study, two investment management process and system factors were formed and described, and these were analyzed using the theoretical framework. The aim of the study is to increase the understanding of the special features in the implementation of partnership projects, and the possible differences in the project management process over a ten-year period.
The case study (Ferreira and Merchant 1992; Yin 1989; Scapens 1990; McKinnon 1988; Lukka and Kasanen 1995) was chosen for the reason that, to understand the investment project management process and system features, one needs depth and an intensive research method. The case study method is generally considered to fit the research of complicated phenomena in their practical settings. Complicated, in this context, means that there is only a little explanatory theory and how the phenomenon and its practical settings interact is inadequately known. The goal of case research is not quantification or even enumeration, but rather description, classification, theory development, and limited theory testing. In a word, the goal is in understanding. Case research is resource and time consuming, and it means limits for research objectives.
This case research can be mainly classified as descriptive, exploratory research. The objective of research is to provide information concerning the nature and form of existing practices (Scapens 1990; Ryan et al 1992). The study is made from the business management and holistic point of view, where the social system is viewed as a whole and it is not suitable to research the quality of the system without participating people. In the holistic system, the researcher is in that whole which is researched. To assess the validity and reliability of the research, evidence was collected from multiple sources (triangulation) (McKinnon 1988, 34–54; Ryan et al 1992, 121–124; Ferrairi and Merchant 1992, 4). Validity means the ability of the measurement to measure what it is meant to measure. Reliability in case research is understood as the requirement of replication in analysis. The reliability of measurement means replication of measurement, not random.
Observation suits especially well to those situations where it is essential to preserve contact with the whole research object. In observation, the research object is not taken apart from its surroundings, but it is made possible to investigate the relationship of the research object and its surroundings. It is a suitable method for investigating problems that are little known in advance. Participant-observation (Yin 1989, 92–94) means the researcher participates in the group as one member. Informal interviews are often included in participant-observation. The advantage of participant-observations is that the researcher does not influence or create a research situation, so the function and behavior is authentic. The researcher can also get information that would not be revealed to an outsider. On the other hand, participating is also a restricting factor. If, for example, one does research into the function of the workplace by the participant-observation method, the general duties of group member also bind the researcher.
The case study focused on Oy AGA Ab, the Gas Company. For the empirical part of this study, two partnership projects were chosen. These project implementations required their own project organization and fulfilled, the characters of large projects. The first investment was implemented during the years 1982–1984. The research material for this case study consists of the researcher’s own familiarity with the company, interviews, participant-observations, and written documents (see Ferrairi and Merchant 1992, 4, triangulation). In addition, the researcher has self-participated in the implementation of this project. The researcher worked in the company studied during the years 1980–1986.
For interview purposes, people who participated in the first investment project in the acceptance/definition phase and/or later in the implementation were chosen. First, the Finance Director of Oy AGA Ab was interviewed. In the second phase, he went through the research material and made supplementary comments. The Finance Director belonged to the Investment Board during the implementation. Just after the close out of this project, the Project Secretary and the Project Engineer were interviewed. The researcher participated (participant-observation, see Yin 1989) in the process of building the first project management system and assisted in the implementation phase and acted as the secretary in the investment committee where the project was handled monthly. The project implementation from the acceptance to operation took about two years.
In the second investment project, implemented during the years 1993–1995, the researcher interviewed, just after the implementation: Oy AGA Ab’s Accounting Manager, Business Controller, Project Manager, and Project Engineer. After the implementation, the Project Engineer who participated in both projects and the representative of Outokumpu, the other Partner Company was interviewed. In addition, Oy AGA Ab’s Finance Director was also interviewed. The written material consisted of annual reports and articles about these projects. Also, internal Project Guidelines like, the Project Administration handbook, the Investment Guidelines handbook, Project Descriptions (Project Plans), and other project material of the implementation phase were available.
Summary and the Theoretical Framework
The investment process has been the basis of the investment project management process framework (the framework is founded on the Licentiate Thesis, Hyväri 2000). The investment project management phases were specified on the basis of the previous research: definition, planning and organizing, implementation and control, and closeout.
The investment project definition phase includes the investment process phases on the basis of which the decision to invest or not to invest will be made. After the definition, in the project implementation planning and organizing phase for the accepted investment project the implementation plan will be defined. This includes the project goals and the project organization’s specification. In the project implementation and control phase, it was noticed that the project implementation followed the accepted implementation plan. In the control phase, the results realized will be compared to the goals and the corrective actions taken. The project closeout when its results are carried forward to the end users and the final project report has been done.
The investment project organization is responsible for the fulfillment of goals set for the project. The project manager is responsible to the project board. The position of project manager varies according to the project organization form (Gray et al 1990). The project success is affected by how the relation of the project organization and line organization has been defined and the organization chart and job descriptions for project manager and other project personnel been done. The project size had some influence on choosing the organization form and also on how well the project was noted and further to project success. A connection between project managers’ authority and project success was observed. The more project managers were able to decide project management systems the better the projects succeeded.
Companies pay attention both to formal systems, i.e., tools and personnel attitudes, and behavior when creating management systems. That different kinds of leadership styles demand different kinds of management systems has been noted. What is the best leadership style depends on the situation and on the leader. According to the situation management model, people at different levels of readiness need different leadership style (Hersey and Blanchard 1988). As to the success of project implementation, it has been noticed that it has been affected positively when a project group has been able to participate in goal setting. The management system affects the person’s motivation. An increase in motivation affects further by increasing efforts and accomplishments like also a positive attitude. It has been observed that feedback makes learning faster. On the other hand, when feedback was not given the ability to learn stopped and performance became weaker. A person’s attitude and performance has been observed to have a direct connection with the density of feedback given. People who got feedback more often had a better performance level. The method and meaning of communication must be clear both to the sender and to the receiver.
In the implementation plan, are the detailed technical, time, and cost goals, project organization, job description and responsibility charts, timetable, resource and cost plans, and also the description of the project management system is defined. In the project implementation phase, there were found to be more critical success factors and critical conflict factors than in the other phases. Factors in the investment project implementation and control phase are project organization and project implementation planning and organizing, investment implementation, information measurement, reporting, deviations handling, and corrective actions. Current values are compared to goals, and with this feedback it is possible to handle deviations and take corrective actions, i.e., from the control phase one turns back to the implementation planning and organizing phase. With the ADB-information systems, it is possible to make more effective information and control tasks. The project closes out when the set task is done and goals reached and the result has been carried forward to the end users. The project final report where feedback is given for the next projects will be prepared. The investment project management framework is presented as the summary in Exhibit 1.
Exhibit 1. The Investment Project Management Framework
AGA and Outokumpu Partnership Investment Projects
Oy AGA Ab (AGA)
AGA is the biggest and the most remarkable producer of industry and medical gases in Finland. Finnish AGA, established in 1917, is a subsidiary of Swedish AGA AB. In the years when case investments were completed, the turnover of AGA Group was 5.632 MSEK in 1984 and 13.271 MSEK in 1995. The turnover of AGA was 310 MFIM in 1984 and 610 MFIM in 1995. In the year preceding the first case investment, the investments were 20–25 percent of turnover, and in 1995 were 39 percent of turnover. The production and delivery of gases demands a lot of investment. In 1984, the balance amounted to 637 MFIM and fixed assets were 440 MFIM. In 1995, the balance was 1204 MFIM and fixed assets were 1060 MFIM. Personnel numbers were 623 in 1984 and 575 in 1995.
The head office of AGA is in Espoo. AGA has airgas, acetylene, hydrogen and laughing gas plants, and gas filling and service centers. AGA’s functions also include gas and weld applications, gas production in Finland and distribution services in the whole country, and knowledge of gas technology. It has continuously kept gas capacity on an adequate level by building new plants and conducting research and development work together with both domestic and foreign gas users and producers. As AGA is self-sufficient in gas production, it is independent of international disturbances and other production difficulties, and it secures continuous work in domestic industry.
Exhibit 2. Phases of the Project Management Process in the Theoretical Framework and in the OKSO and NiCu Projects, and the Timing of Phases
Phases of the Investment Project
In this chapter, two AGA airgas plant projects, OKSO and NiCu management systems, will be described. Project OKSO was built by AGA during the years 1983–1984 as an on-site plant connected to the Outokumpu Oy Harjavalta plant. Project NiCu was built during the years 1993–1995 by AGA connection to Outokumpu Harjavalta Metals Oy Harjavalta plants. Outokumpu Oy is an important customer of AGA. Exhibit 2 shows the phases of OKSO and NiCu, based on phases of investment projects in AGA. The phases are presented in connection with the theoretical framework.
The phases of the investment project management in the theoretical framework and in the OKSO and NiCu projects, along with the timing of phases, has been presented as a summary in Exhibit 2.
These phases are closely focused in the following chapters. Analyzing OKSO and NiCu project management systems with the theoretical framework observed that the basic system remained unchangeable. However, it was revised so as to be as good as possible for the needs of every project and so that it could produce the necessary feedback information for control purposes. With approval procedures, securing project management planning was attempted. Implementation and control phases built an ongoing process.
Differences between the OKSO and NiCu Projects
OKSO and NiCu had separate project organizations, in which people from both AGA and Outokumpu organizations participated, in addition to outside project personnel. Instructions for the project OKSO organization were in the AGA Group Project Administration Guidelines, and in the project plan for project NiCu, as well as in the Quality Manual. The OKSO experience was utilized and, on the other hand, the partnership in Harjavalta Isoproject (two billion FIM) brought additional features for NiCu. In the project, plans were decided, as were the written parties’ responsibilities, duties and authorizations, and job descriptions. In NiCu, they were carried out more punctually by more people than in OKSO. AGA Group took part in NiCu as a consulting group, and participated more in the implementation of OKSO. In NiCu, project transfer to the production and personnel training was secured by placing a gas manager in the project at the planning phase and by producing a written job description for the gas manager. In OKSO, these were agreed during the implementation. Creating an organization chart and job descriptions helped personnel participation, delivery of responsibilities, and authorization to a lower level, i.e., empowerment. In NiCu, those were done more exactly than in OKSO. In this way, it was possible to give people a free hand to act inside specified frontiers, and to motivate and bind them more effectively. In NiCu, a responsibility matrix was created. It was precisely stated who had a total responsibility, a responsibility in the implementation phase, and who had an information responsibility.
Definition, Planning, and Organizing
In project OKSO, a preliminary Investment Proposal was made for AGA’s own two-stage project. An agreement with the Outokumpu partnership was then realized and the investment had to be again approved. In the NiCu approval procedure, Outokumpu investment plans were already known and settled in AGA as a condition for a final NiCu approval. A risk management point of view was more emphasized in NiCu, and OKSO’s experience was utilized. In the NiCu project plan, the partnership’s financial and functional risks and accident risk were more observed.
Implementation and Control
In both projects, there was a control group in which representatives of both partners participated. AGA also had an internal control group called an “investment committee,” which was first created for OKSO because of a failed project shortly before OKSO. These control groups had meetings regularly every month or every second month. They handled and accepted the costs. Of course, some cost agreements were made, as well as changes in production process and various other kinds of agreements. The project manager’s duty was to state how to solve the problems identified and estimated in the project reports. In the projects, costs were divided for AGA, AGA Group, and AGA-Outokumpu purposes. A NiCu progress report was made quarterly, and monthly in OKSO. For OKSO, cost control was carried out with a computer system, and NiCu had some kind of system. Costs control in OKSO was more accurate because the project before OKSO was failed on a cost basis. In NiCu, the completion stage was also followed and information and quality system matters were documented.
In NiCu, timetables were made in stages. OKSO had only a main timetable. The NiCu timetable was connected to the Outokumpu Harjavalta project. The project engineer of both OKSO and NiCu says: “Project management has advanced a lot since OKSO, because in NiCu was already second generation (people and computers). Ari, ‘a personal computer virtuoso,’ made all the timetables and was constantly on time. When I was in OKSO, the only computer was a pocket calculator and a pen. As I mentioned, there was only this main timetable. But NiCu had all kinds of finer timetable programs (dates to start and finish), and that helped.”
The NiCu airgas plant belonged to a bigger Outokumpu Isoproject and it could not be delayed. An Outokumpu factory stoppage also steered the OKSO project to completion. In project NiCu, more pressure had been put on the equipment supplier control and tests than in project OKSO. The plan for sharing risk was made between partners. Both partners participated in projects from the beginning to the end to get the best result, and also avoiding risks. The role of partnership agreements was emphasized. According to the Outokumpu and AGA agreement, things which could not be agreed on in the project, the partner whose responsibility it was to fill a disputable fact could fulfill commitment in a way that corresponded this partners opinion to benefit both partners. Estimating a fulfillment of commitment, the other partners’ resistance was noticed as reclamation at this point.
Estimation of Success in the OKSO and NiCu Projects
In September 1984, the airgas plant built by AGA as an on-site plant to the factories of Outokumpu Harjavalta started test production. Due to the competent and experienced project organization, the final timetable was over two months ahead of plan. The OKSO people had already participated in the same kind of projects and some had also participated in the failed project carried out just before OKSO. The 80 MFIM cost estimate for OKSO included on-site plant equipment and building costs, entrance fees to the electricity net and the cooling water system. The final investment, however, remained a little under 70 MFIM because of minor reductions in investment and a favorable at the time of supply. At maximum capacity, the plant can produce oxygen, nitrogen, and argon, together making up 100 million cubic meters per year. According to an agreement of 1 July 1983, Outokumpu will buy three quarters. With the rest, AGA secures liquid airgases for Finnish industry. AGA sales were at a good level and conditions were also good. The building of the plant was profitable both for AGA and Outokumpu. One big plant cost 30 MFIM less than the intended two smaller plants together. Production as a partnership was also more profitable.
In the literature, it was stressed that it is important to pay attention to responsibility clauses, as was in these OKSO and NiCu projects. AGA’s managing director stated: “The AGA plant in Harjavalta is an excellent example of an advanced, fixed partnership with AGA and the customer. AGA and Outokumpu signed the partnership agreement in 1983. According to that, AGA built an on-site plant in connection to Outokumpu Harjavalta’s own oxygen plant. The new plant enables enlargement of Outokumpu nickel and copper production. Ten years later, Outokumpu decided to nearly double copper and nickel production until the year 1997 through two billion investments. Production enlargement also required more gas. In August 1993, AGA and Outokumpu Harjavalta Metals signed an agreement for the building of a new oxygen plant. This plant produces airgas for the needs of both parties. As AGA, an expert in gases, took responsibility for building the plant and producing the gases, Outokumpu was free of capital binding in investment for producing raw materials. In this partnership, AGA obtained the extra capacity needed to be able to fill the increasing need for gas in Finnish industry over the turn of the next millennium. Compiling resources in that way, it was possible to obtain economical advantages for both partners.”
On 6 June 1995, according to original timetable, AGA’s new airgas plant was realized. The critical element in this NiCu timetable was an air compressor. It was seven weeks late at the beginning of project but the supplier was heavily controlled, more than OKSO. Yet, at least the air compressor was only one week late and did not cause trouble. In NiCu, licenses of authorities and security explanations took the time and work capacity of a lot of key people, as, during the NiCu project, new statutes of chemistry law came into being. The plant is able to produce about 500 million cubic meters of oxygen, nitrogen, and argon yearly. Even though Outokumpu Harjavalta Metals uses the main part of the oxygen and nitrogen, AGA also gets extra capacity and so this new plant gives AGA more possibilities to serve other customers in Western-Finland. The scene for AGA was favorable. Turnover increased and profitability improved. This airgas plant was part of AGA’s 600 MFIM investment program. Thanks to the good partnership of AGA and Outokumpu, it has been possible to obtain advantages for this NiCu from Outokumpu’s billion Isoproject. It has been possible to make supplies together and this partly reduced the total costs under the budgeted amount. The approved cost estimate for NiCu was 179,1 MFIM, the internal goal was 164,4 MFIM and final costs were 138 MFIM. Savings in investment were obtained due to cheaper deliveries of main equipment (in process, compressors, containers), in building and electricity, because it was possible to utilize the same discounts in the NiCu project as in the bigger Outokumpu Harjavalta project and, at the same time, saving in supply resources. An automation system, that in the previous OKSO took lots of resources, was taken accordingly to the Outokumpu Isoproject, which brought savings in NiCu. In studies of the United States Army Corp of the engineer partnerships (Weston and Gibson 1993), it was noted that it is possible to obtain positive results with partnership projects in costs, timetables, change costs, and complaint costs; compared with projects not carried out as partnership bases (for other similar results see Larson 1995). As mentioned before, in OKSO and NiCu positive results were achieved. In the implementation phase, the project timetable/plan and technical duties have been critical factors in success (Slevin and Pinto 1987; Pinto and Prescott 1988; Honko et al 1982). In OKSO and NiCu, technical goals were reached. OKSO was ready over two months earlier than the official/budgeted timetable. NiCu was also carried out within the timetable.
It has been noticed that the competitiveness of organizations depends on how well they can work as teams and solve problems (Williams 1997; Katzenbach and Smith 1993). Extracts from the speech of the Outokumpu Harjavalta Metals Oy managing director, in the airgas plant inauguration 10 November 1995 state: “When, in 1992, Outokumpu started to prepare the enlargement of copper and nickel production, it had to decide at the same time how to produce the airgases needed in this production. A decision to concentrate on this was easy in many ways, i.e., the production of metals. Outokumpu can experience metal business with many decencies and we can say the same of Oy AGA Ab’s airgas functions. We felt that AGA knows what it does in connection with the first oxygen plant building (here in Harjavalta). AGA has kept its knowledge up to date when building the airgas industry all over the world. In my opinion, everything went well in the AGA’s new airgas plant building. It is not an insignificant detail, if we remember that the Harjavalta enlargement project was the biggest investment in Finland at that moment, nearly two billion FIM, and at its best and largest, 2,500 people worked here. The implementation was carried out so that copper and nickel production were in operation nearly the whole time. The airgas plant has been built with the newest knowledge: new colony technology, advanced electricity automation, still lower energy consumption, and higher security level are some essential factors to mention. In many sections, we have been able to utilize advantages when making these investments at the same time. Many thanks to all participants during the building, both for good cooperation and for flexible attitudes. Everything has run faultlessly and the partnership has been smooth. I have noticed the great amount of work and effort that, in these conditions, has been needed to carry out new airgas plant.” As Outokumpu Harjavalta Metals Oy managing director stated in the inauguration speech, companies could function as teams and, after the compliment for these OKSO and NiCu projects, the competitiveness of partnership organizations rose.
On basis of previous studies, the clearance of goals and general guidelines are remarkably critical factors. In the OKSO project, the project manager did not know AGA’s building habits. The project secretary did not get the information of extra and change works quickly enough. The condition of the agreements and the termination of currencies in deliveries were not totally known to the responsible people. After all, in OKSO, these factors did not cause problems but just a little confusion. In the theory part, it was noticed that team building in partnerships could be helped in a formal way of working, by arranging kick-off seminars and meetings so that project people work together from the beginning of the project phases. A kick-off seminar could have helped in OKSO. In the NiCu project, information flow between Harjavalta-Lidingö, Sweden, and Germany did not occur directly but through the middleman, and it was felt to be heavy. “One should act directly in the future,” wishes the project manager. The conditions of deliveries and agreement DDU Harjavalta was known to the project organization and purchasing people. In NiCu, the handling of delivery currency was known. According to the researcher: “These problems were avoided in project NiCu, because people had learned from OKSO’s mistakes and these problems were specially discussed at the NiCu kick off.” A Letter of Intent way of agreeing was not good; agreements should have been made at once, not 3–4 months after the signing of the Letter of Intent, because the making of agreements was much more time consuming. The NiCu project manager wished that “agreements should make ready at once.” A project breakdown could have been done in other way. The project engineer from NiCu sent greetings to future project managers: “In the future, more should be invested in recourse planning and earned value method.”
Consulting with the customer and project selling to end-users have been observed as previously very critical factors (Slevin and Pinto 1987; Pinto and Prescott 1988). In projects NiCu and OKSO, these were avoided because the customer and the end-users participated in project implementation and were bound to the end result. Outokumpu representatives answered the researcher’s question: where could you have been luckier? “Project implementation. I remember one thing from the Harjavalta project preparatory course. The first thing told was that, when a project has been well planned and has been accepted, changes are not allowed because one change becomes many more other changes. It extends like a chain letter.”
The OKSO and NiCu project leadership was partly outside the investing company, which caused some problems in coordination and responsibility, but these did not affect the project result. Outokumpu was not totally happy with the OKSO organization and therefore, at the beginning of the NiCu project, these parts had to be considered again. In project NiCu, the planning was divided into more parts than in OKSO, and that caused some pain to project organization. After the NiCu project implementation, the project engineer noticed that “responsibilities and empowerment could have been stated more clearly in the project plan, for example, in the matrix form.” Outokumpu representatives and the OKSO project manager commented about conflicts: “There are always conflicts in life and these must be adjusted. Both parties tried to obtain advantages from this project, so I simply tried to look after the project interests, not the interests of the other partners. Made after the agreement, the choice of an OKSO project manager suited AGA. As I see it, this was the kind of idea that, when this plant was built to the Outokumpu factory area and there were these borderlines to Outokumpu, then, when the OKSO project manager came from Outokumpu, Outokumpu could not comply too much, and it makes life in the project easier. I was not project manager in the NiCu project because the same person is not usually named again and, actually, I had other work at the Outokumpu Harjavalta project. The NiCu project manager came from AGA.”
The researcher did not observe so many situations of conflict in the OKSO and NiCu projects that it would be possible to describe in which phase or what factor caused conflict and how much was caused. Research has demanded enquiring through phases. An Outokumpu representative, OKSO project manager: “Other conflicts? In general, OKSO was carried out very well. There were special people (strong characters), but there were not those kinds who cause disturbance. I myself was happy with that, and also with the end result, i.e., with the timetable and with the costs, which stayed under the budget. The NiCu project was carried out with good cooperation and, as far as I know, there were no conflicts. Neither for the Harjavalta Isoproject, I have not heard of any conflicts.” With a basis of analysis (Jeffrey Pinto 1990, Project Implementation Profile) using these measures, it was observed that OKSO and NiCu projects succeeded in each phase. No significant conflicts were observed, or conflicts were resolved quickly so that they did not cause any negative effects on the NiCu and OKSO projects. Conflicts were handled in cooperation (collaborate/confrontation method).
Discussions and Summary
The purpose of this study was to investigate and analyze the state and significance of the investment management system in the implementation of the partnership investment projects. In this summary, the main results of success factors and threats in managing investment projects are presented. In this research, the investment project is defined as having succeeded when it fulfills the financial, technical, time, and cost goals decided in the project plan. The investment project management system helps to achieve the goals. Previous research as a basis for the theoretical framework and phases of investment project management and investment project management system factors were reviewed. Previous research also points out the critical success factors in the project phases. As a response to the research problem, the theoretical framework of the investment project management system was described. The framework could be used to analyze empirical results. The phases of investment project management are definition, planning and organizing, implementation and control, and closeout. The phases build a process.
In the empirical part, two Oy Aga Ab and Outokumpu Oy/Outokumpu Harjavalta Metals Oy partnership airgas plants, projects OKSO and NiCu were described and analyzed. The projects were carried out over a ten-year period. The investment project management process and system factors were described and these were analyzed using the theoretical framework. By analyzing the empirical factors in OKSO and NiCu using the framework, it was discovered that the project management process and system factors mainly corresponded with each other. According to the project success valuation in the OKSO and NiCu, certain conventional failures were avoided. On the basis of the analysis, it can be stated that the framework is serviceable in building the investment project management system in practice. It can help to make sure that any central factor will not remain unnoticed.
In the following, the prerequisites and threats for success in investment project management have been summarized. The summary includes empirical observations compared to the framework, differences between projects OKSO and NiCu, special features in partnership projects, and observations connected to project success.
Empirical Observations Compared to the Theoretical Framework
In the empirical analysis, it seemed just as in the framework, that the basic system in project management stays unchangeable, but it is controlled and changed to respond to each project separately. Recently more attention has been given to the definition and planning phases. In the empirical analysis section, it was stated that during implementation the changes are harmful because one change in that phase results in many other changes. Implementation and control forms an ongoing process, where the aim of the investment management system is to reveal shortcomings and to take corrective action before the project drifts into crisis. Connected to this in the empirical analysis, it was noted that the project plan becomes more precise during the project implementation and control phase. In the project final report, the need was observed to report things to be developed in subsequent projects so as to secure learning.
According to empirical observations, project managers should have a good knowledge of project management and especially of contracts and contract techniques. Project personnel and especially project managers’ experience, especially in change management, was perceived to have great significance for project success. In managing project, it is important to know how to handle both the tools and the people and to keep the balance between these. Concerning the project management organization, it was stated that organization chart and job descriptions were done and communicated. Responsibility and power questions and the way to handle crisis and organization were decided and were made clear to all participants. Project people had the opportunity to participate in goal setting. In that way, learning in the organization and commitment could be secured. Decision-making in the right place and ongoing communication directly with people without a middleman commits and motivates.
Special Features in Partnership Projects
Special features of partnership can be noticed in organizations that have started partnership projects for synergy advantages. Facts in these partnership projects were agreed beforehand and in writing. Organization to handle critical facts was agreed beforehand. The personnel in partnerships took part in the projects from making a partnership agreement to closing out the project so ensuring commitment and also getting the best result concerning project risk. In that case, during the implementation the project situation was reported to both partners. The transfer of investment to the final users was notified during the project. The end-users participated in the project implementation. Contract negotiations, contracts, and goal settings had the main roles in the decision to participate in the partnership project.
Differences between Project OKSO and Project NiCu
Project NiCu was carried out ten years later than project OKSO. In project NiCu, organization responsibility and power questions and how to handle crises were decided more precisely than in OKSO, because NiCu was part of a bigger project and in its implementation people from Outokumpu Isoproject also participated. In project NiCu, the end-users of the investment were brought into participate already in the planning phase. In connection with the OKSO project, the investment committee was started, where investment projects were followed up monthly, because cost estimates in the project just before OKSO had failed. Acceptance of the OKSO project happened in many phases, in project NiCu only in one phase. Risk control in business risks, financial, and accident risks got more emphasis in the NiCu project. Timetables were made for different levels in the NiCu project; in OKSO there was only the main timetable. In the NiCu project, this was possible because the NiCu timetable was made by computer and OKSO by hand. For the OKSO project, the ADP-system was made for cost control; NiCu used the same kind of system. The state of readiness was reported more precisely in project NiCu, also communication matters and quality matters were documented. In project NiCu, project people participated in control and tests of equipment more than in project OKSO.
Observations Connecting to Project Success
The success of project OKSO and project NiCu was influenced by qualified and experienced project organization. In addition, in Oy AGA Ab’s environment good conditions prevailed and development in sales was good. The building of plants as partnerships was profitable for both AGA and Outokumpu. Profits came both in investments and in production costs.
The management of project OKSO and project NiCu was partly outside the investing company, which caused some problems in coordination and responsibility, but this, did not have any effect on the project success. Responsibilities and empowerment could have been stated more clearly for example in matrix form. The breakdown of planning caused some pain for the NiCu project organization compared to OKSO. Clearness of goals and guidelines were, according to previous research, very critical success factor. These problems were also observed in the OKSO and NiCu projects but they did not affect the results of these projects. Planning of resources, the earned value method, communication networks, and making contracts should be paid more attention in the future. Consulting with customers and project sales to the end-user did not seem to be a problem in these projects because customer and end-users participated in project implementation and were committed through this to the end result. The researcher did not observe significant crises, or crises did not affect success of the project negatively.
In the empirical part of this research there was a case study of two partnership investment project management projects. The research results concern mainly only the researched investment management system, but they partly help to understand investment project management systems generally.
According to analyses, the theoretical framework can be used in making investment project management systems and with that making sure that no central factor is omitted. Comparing the OKSO and NiCu projects management system, it could be noticed that in both projects the same features appeared. In these projects certain conventional failures were avoided.
Considering the purpose of the study, the case study appeared as the theoretically most promising and economic method of enquiry. In this case study was observed in the profound and intensive way the problems in management of partnership projects: management of two investment projects and changes in project management over a ten-year period. This study is the basis for the further research of the project management effectiveness and success/failure factors.
The author would like to thank Professor Kalervo Virtanen and Ph.D. Kalle Kähkönen for helpful comments.
Adams, J. R., and S. E. Barndt. (1978). Behavioral implications of the project life cycle. In D. I. Cleland and W. R. King, Project Management Handbook (pp. 183–204). New York.
Argyris, C. (1977). Double loop learning in organizations. Harvard Business Review.
———. (1990, Jul/Aug). Good communication that blocks learning. Harvard Business Review: 77–85.
Artto, K. A. (1997). Fifteen years of project risk management applications where are we going? In Proceedings of the IPMA Symposium on Project Management in Helsinki, 17–19 September. K. Kähkönen and K. A. Artto. 1997. Managing Risks in Projects, London: 3–14.
Ayas, Karen. (1996). Professional project management: A shift towards learning and a knowledge creating structure. International Journal of Project Management 14 (3): 131–136.
Bartha-Johnson, Tamara. (1997). Patterns of Mind in the Theory and Practice of Co-operative Strategies (Joint Ventures, Strategic Alliances). Canada.
Belassi, Walid, and Oya Icmeli Tukel. (1996). A new framework for determining critical success/failure factors in projects. International Journal of Project Management 14: 141–151.
Blake, R. R., and J. S. Mouton. (1964). The Managerial Grid. Gulf Publishing Company.
Burke, R. J. (1969). Methods of resolving interpersonal conflict. Personnel Administration 14 (7): 48–55.
Chapman, Chris, and Stephen Ward. (1997). Project Risk Management, Processes, Techniques and Insights. England.
Cleland, D. I., and W. R. King. (1983). Systems Analysis and Project Management. New York.
Cook, Lynn E., and Donn E. Hancher. (1990). Partnering: Contracting for the future. Journal of Management in Engineering 6 (4): 431–446.
Engwall, Mats. (1995). Jakten på det effectiva projektet. (Hunting for the Effective Project). Stockholm.
Fabi, B., and N. Pettersen. (1992). Human resource management practices in project management. International Journal of Project Management 10 (2): 81–88.
Ferreira, Lourdes D., and Kenneth A. Merchant. (1992). Field research in management accounting and control: A review and evaluation. Accounting, Auditing & Accountability Journal 4.
Gray, C., S. Dworatschek, D. Gobeli, H. Knoepfel, and E. Larson. (1990). International comparison of project organization structures: Use and effectiveness. International Journal of Project Management 8(1): 26–32.
Guss, Connie L. (1997). Virtual project management: Tools and the trade. Project Management Institute 28th Annual Seminars & Symposium in Chicago, Illinois.
Hammuda, Ihsan, and Muhammed F. Dulaimi. (1997). The theory and application of empowerment in construction: A comparative study of the different approaches to empowerment in construction, service and manufacturing industries. International Journal of Project Management 15 (5): 289–296.
Hedberg, Bo, Göran Dahlgren, Jörgen Hansson, and Nils-Göran Olve. (1997). Virtual Organizations and Beyond Discover Imaginary Systems. Chichester, England.
Hersey, Paul, and Kenneth H. Blanchard. (1988). Management of Organizational Behavior—Utilizing Human Resources.
Honko, Jaakko, Aatto Prihti, and Kalervo Virtanen. (1982). Yrityksen investoin—tiprosessin kriittiset kohdat. (Critical Points in a Company Investment Process). Helsinki.
Hyväri, Irja. (2000). Investointiprojektin toteutuksen ohjaus. (The investment project management). Licentiate thesis. Helsinki School of Economics, Helsinki.
Katzenbach, Jon R., and Douglas K. Smith. (1993, Mar/Apr). The discipline of teams. Harvard Business Review.
Kähkönen, K. (1997). Implementation of systematic project risk management in companies—From immediate needs to the prospect of the future. In Proceedings of the IPMA Symposium on Project Management in Helsinki, 17–19 September. K. Kähkönen and K. A. Artto. 1997. Managing Risks in Projects, London: 75–83.
Kähkönen, Kalle. (1996). Understanding project initiation process. Project Management 19 (2).
Larson, Erik. (1995). Project partnering: Results of study of 280 construction projects. Journal of Management in Engineering 11 (2) ASCE: 30–35.
Lukka, Kari, and Eero Kasanen. (1995). Methodological themes. The problems of generalisability: Anecdotes and evidence in accounting research. Accounting, Auditing & Accountability Journal 8 (5): 71–90.
McKinnon, Jill. (1988). Reliability and validity in field research. Some strategies and tactics. Accounting, Auditing and Accountability 1: 34–54.
Pinto, Jeffrey K. (1990). Project implementation profile: A tool to aid project tracking and control. International Journal of Project Management 8 (3).
Pinto, Jeffrey K., and John E. Prescott. (1988). Variations in critical success factors over the stages in the project life cycle. Journal of Management 14 (1): 5–18.
Pinto, Jeffrey K., and Dennis P. Slevin. (1987). Critical success factors in effective project implementation. In D. I. Cleland and W. R. King (Eds.), Project Management Handbook (pp. 479–512). New York.
Posner, Barry Z. (1986). What’s all the fighting about? Conflicts in project management. IEEE Transactions on Engineering Management 33 (4): 207–211.
Ryan, Bob, Robert W. Scapens, and Michael Theobald. (1992). Research Method and Methodology in Finance and Accounting. Academic Press.
Scapens, Robert W. (1990). Research management accounting practice: The role of case study methods. British Accounting Review 22: 259–281.
Schultz, R. L., D. P. Slevin, and J. K. Pinto. (1987). Strategy and tactics in a process model of project implementation. Interfaces 17 (3): 34–46.
Senge, P. M. (1990). The Fifth Discipline. The Art & Practice of The Learning Organizations. London: Century Business.
Thamhain, H. J., and D. I. Wilemon. (1975). Diagnosing conflict determinants in project management. IEEE Transactions on Engineering Management 22 (1): 35–44.
Weston, David C., and Edward G. Gibson. (1993). Partnering-Project Performance in U.S. Army Corps of Engineers ASCE 9 (4): 410–425.
Williams, T. M. (1997). Empowerment vs. risk management? International Journal of Management 15 (4): 219–222.
Yin, Robert K. (1989). Case Study Research. U.S.A.
Proceedings of PMI Research Conference 2002
Effective project scheduling and time management are critical factors in the success or failure of a particular project. The Practice Standard for Scheduling transforms chapter six of the…