THE BOARD OF DIRECTORS AND PROJECTS
David I. Cleland is currently professor of engineering management in the Industrial Engineering Department at the University of Pittsburgh. He is the author/editor of twenty-two books and has published many articles appearing in leading national and internationally distributed technological, business management, and educational periodicals.
Dr. Cleland has had extensive experience in management consultation, lecturing, seminars, and research. The first edition of his book, Systems Analysis and Project Management, won the McKinsey Foundation Award as one of the five outstanding management books in 1968.
He was the recipient of the “Distinguished Contribution to Project Management” Award given by the Project Management Institute in 1983, and received the 1983 Institute of Industrial Engineers (IIE)-Joint Publishers Book-of-the-Year Award for the Project Management Handbook.
In 1987, Dr. Cleland was elected a Fellow of the Project Management Institute.
Project management has moved out of the realm of a “special case” of management and is becoming recognized as a strategy to use in bringing about change in contemporary organizations. Senior managers, including the members of the corporate board of directors, can provide for the design and execution of project management strategies as a means for maintaining surveillance over the changes the organization must face in its future-a future that is becoming more global in nature.
Global competition is both intense and unforgiving. The effective strategic management of both product and process technology is one of the principal factors accounting for success in the global marketplace. I use the term technology in the sense of a specialized method of achieving a practical purpose. Each function or discipline of an organization exists to provide a technology-driven means to achieve a practical purpose in supporting the organization's end results: its mission, purposes, and objectives. These end results must change to remain competitive in the changing political, economic, social, legal, and technological environments the organization faces. This is where an opportunity exists for the corporate board of directors to achieve their greatest purpose.
BOARD OF DIRECTORS SURVEILLANCE
Corporate directors will find it difficult to become involved in all of the projects under way in the firm. They can delegate authority and responsibility to senior and general managers to participate in the strategy-driven projects under way in the enterprise. There are, however, some projects that should remain under the surveillance of the board members at all times. This surveillance should be maintained during the entire life cycle of these projects. This means that the directors should review the adequacy of the planning for the projects and the efficiency and effectiveness with which the projects are being implemented in the furtherance of corporate purposes.
The projects in which the directors should be particularly interested include:
- New product and process development projects which have the promise of giving the company a distinct competitive advantage in the marketplace. The advantage can come from the promise of a technological breakthrough or incremental advancement in a product, service, or process technology, such as improved marketing approaches, manufacturing innovations, or quality improvements.
- Projects whose execution requires the commitment of substantial resources such as the building of new facilities or the development of supporting organizational resources.
- Projects which are the outgrowth of a “strategic alliance” being negotiated for the cooperative sharing of project resources and strategies with other firms such as in research consortia, sharing of manufacturing facilities, or the exploitation of emerging markets.
- Other projects for supporting the strategic purposes of the firm such as cost reduction, information systems, investment projects, quality and productivity improvement activities, for example.
What projects are under way in the company to correct the adverse conditions which may threaten the firm's continued existence? The Board of Directors must ensure that such projects exist and maintain surveillance over these projects!
ACTION
A STRATEGIC AUDIT
Board members are held responsible for exercising a special kind of management surveillance. The directors must be alert to any problems or opportunities that can have a long-term or strategic influence on the performance of the company. The prudent director, when sensing adverse profitability trends, competitive threats, loss of market share, regulatory changes, or quality problems, or other threats to the firm's future existence, needs to ask the question:
What projects are under way in the company to correct these adverse conditions?
If no projects are found, then it is highly probable that the managers of the enterprise have not developed any effective strategies to commit resources to correct the situation. Then the prudent director should ask for a “strategic audit” to determine whether the corporation's strategies are really positioned to carry the firm into the future.
In the successful enterprise a healthy “stream of projects” can be found. These projects are usually in different phases in their life cycle and represent a commitment of resources to prepare the enterprise for its competitive and unforgiving future.
Once the board members recognize what the strategic audit of these projects can tell them about the strategic health of the enterprise, project management will become a regularly-used and respected way of coping with the future. A few examples can serve to illustrate the relevancy of this
- A high-technology systems company has a new product development under way which has the potential to advance the technological performance of the resulting product far above what the nearest competition is able to do. The directors of this company review this project at each of the board's meetings.
- Another company has embarked on a major restructuring and updating of its manufacturing facilities. This restructuring is being carried out as the existing plants continue production. The new plants require major changes in hardware, software, logistic support systems, product distribution, worker training, and supporting information systems. Major cultural changes are being made in this company. The directors require that the senior project manager and the general managers of the operating divisions provide briefings to the directors on a regular basis on the plant restructuring project. To show director support for this important project, the directors visit the construction sites on a regular basis.
- A large company has committed strategic resources to become more active in the forthcoming integration of the economic community of Europe in 1992. This commitment comes about primarily through the building of “strategic alliances” with foreign companies in the European community. These strategic alliances take the form of research consortia, shared marketing, and shared manufacturing facilities. The risks in these strategic alliances are high. The board of directors follows the projects that are being used in these strategic alliances with great care. The risks and the costs of failure are simply too great to do otherwise.
When the directors of the company become involved in reviewing the efficiency and effectiveness with which the key projects are being managed in the enterprise, an important message about the value of project management to the enterprise is sent throughout the organization. Everyone benefits from this message—the organization is better equipped to cope with future changes.