Project management requirements in multi-organizational projects
More and more companies, large and small, are entering into alliances across the national borders creating multinational project environment with complex decision-making process. Trends within such project environment trends are presented in this paper as well as the effects they have on the project reality of today. We also discuss the requirements that they induce on management of projects. The research context has been complex system procurement projects.
Two trends are obvious! The first one is a striving to be more efficient. Every task and process should be accomplished as efficient as possible. The result of it is an increased focus on corebusiness. Everything out of the line of the core-business is better to let someone else take care of. Often this leads to downsizing of client organizations, due to the ever-increased competition. The trend is mostly seen in the traditional industries, such as pulp and paper, steel and automobile manufacturing, industrial automation systems. An investment in a large industry system is seen as a seldom occurrence, and it is no longer cost-effective to keep personal with both the technical and project management competence in stand by to manage these projects when they occur (Eriksson et al., 1999). In combination with increased complexity of systems and components the systems consist of, this creates an increased need of external system integration services.
In the context of the study this trend affects the procurement strategy of clients having a need for investment in a complex production or support systems. Due to the increased focus on corebusiness the clients do not have the in-house capacity to integrate components from several different suppliers in order to create an effective system since their core business is to produce own products with right quality. In order to be effective and to reduce the capital cost, the procurement projects should also be accomplished within shorter and shorter time frames. The time from planning and placing an order to a system delivery and installation is decreasing. This can be seen as a demand for more comprehensive system deliveries within short time frames driving suppliers to closer cooperation in order to be able to deliver systems instead of components.
The second trend is the ongoing merging and acquisition of companies. Some examples of recently realized mergers and acquisitions are ABB-Elsag Bailey, Astra-Zeneca and Exxon-Mobil. The reason why these mergers and acquisitions appear on the global market seems to be that they are a part of a global strategy for the companies (Hopkins, 1999). Among motive driving alliances is a need for a larger part of the global market in order to distribute the cost for administration, development, production, logistic, service organization and sales. A strong belief is that the large-scale operations at distributed locations create an advantage. Although an issue “why this occurs” is very interesting, the goal of this paper is to summaries experiences from several studied procurement projects conducted in multi-organizational environment and elaborate on impacts they cause on the project management.
In most of merger and acquisition cases the integrated companies origin from different countries and already have well developed and established internal management processes. Each of companies have a strong business culture of their own that in a sudden, due to merging or acquisition, need to create one effective organization out of several.
The new company ends up in a situation where there are several organizations within the new organization with strong demand to cooperate effectively in order to be competitive. Among the geographically dispersed organizations the importance of technological capability in different locations increases. On some locations a deficiency of personnel with high-tech skills and experiences can be a problem. The studied suppliers and its competitors are undergoing changes into an organizational structure were division of work is created. Thus, each location will become specialized in a unique set of capabilities and technologies that need to be managed and put together in order to create system solutions (Zander, 1999).
Project Management in a Multi-Organizational Environment
Many studies have been carried out on the challenges and managerial issues of cross-functional projects. But, little has been published on the effectiveness of managerial styles across geographic and cultural regions (Kruglianskis et al., 2000), and the literature on factors for global success is limited, especially in the engineering and construction sector (Levene et al., 1999).
This paper is an outcome from an ongoing research project, were system procurements are studied by means of case study methodology. The studies were conducted on projects within a multinational contractor, with business units within several different technological areas. The contractor has an increased demand for system deliveries, and therefore an increased need of both internal and external organizational cooperations within the projects. Both delivery and development aspects in the projects have been investigated.
The two trends have changed the environment in many companies dramatically. In many cases, the mergers imply that the companies will end up having complex organization consisting of organizations spread all over the world. System solutions required by global market require close cooperation among several companies. In order to be competitive companies are forced to use globally distributed competence. But, as many companies are discovering, managing geographically dispersed projects does not mean only unique possibilities, but also unique challenges that require special skills in the project management team in order to handle the culture and complexity of the involved organizations. According to McDonough et al. (1998) the following three possibilities are the most important drivers for multi organizational project: (1) to be able to develop products which meet a set of globally consistent needs, (2) to set global product standards for delivering against a set of global needs, (3) to bring together globally distributed technical assets.
The trends also imply that projects need to cross different geographical regions and cultures, i.e. business culture, management styles, and organizational cultures (Kruglianskis et al., 2000). Thus, new challenges are presented to the project management team of the global multi-organizational projects compared to traditional projects. McDonough et al. (1998) emphasize that these managerial challenges are due to: (1) the teams are comprised of individuals from different cultures who speak different languages, (2) the members of the team are physically disbursed across the globe, which imply that face to face meetings are difficult, (3) the different involved organization will have a number of subgoals, each of which seem as most important by the different organization
Aside from the differences created by different cultures, these teams often need to accomplish more complex tasks that involves crossing not only cultural, temporal and geographic distances, but also functional and professional boundaries. These complex tasks should be accomplished in an ever-decreasing timeframe. Altogether, delivering a comprehensive system solution on the global market give rise to a number of issues the project management team needs to manage.
In our study we have identified four issues the project and local management teams need to manage in a multinational company consisting of many different organizations. These are commitment, culture, control, and communication. To succeed in multi-organizational system delivery projects there are a lot of other important issues, but in this paper we presents the four we found had a substantial impact on the outcome of the studied projects.
One of the issues we found extremely important to resolve in a project conducted within multi-organizational environment is the commitment among the involved companies as well as among the project members. On the organizational level, there are in most system delivery projects only one of the involved companies having responsibility and the commitment towards the client. The other involved companies are comparable with a subcontractor to the responsible company. However, in most cases when the objective of the project is high-tech complex industrial systems, involved companies do not have a legal contract with the responsible company, but execute the project on the agreement basis. To create such a legal contract in a case of big industrial systems would have taken too long time and probably would have had extremely negative impact on a very needed flexibility in problem solutions during the projects execution phase. Even if a legal contract had been signed it would probably have caused too long delay in the project clarifying that was responsible to solve the problem. The most probable case would be that something was omitted when the contract was created! Procurement project in offer phase most likely didn’t cover all details and thus the legal contract among all involved companies can’t either be complete. What happens then with the project?
Thus, it is very important to create commitment among the involved organizations. The needed commitment can only be achieved if the top management support these projects, for instance by stating the company should be a comprehensive system supplier and priorities multi-organizational projects. Management must be the driver to create a unified project and build the linkage among the involved organizations (Kruglianskis et al., 2000; Levene et al., 1999).
On the individual level commitment is even more important in the multi-organizational project. In this kind of projects the management team has little or no formal control over the members involved in the project worldwide. The members are probably involved in a couple of other projects as well. Therefore is very important for the project management team or top management of the organization to motivate the team members. Still, there will be difficulties for the project member to decide if his or hers loyalty is towards the local company where he or she is employed or the project. When the project enters into these kinds of conflicts the project manager and the organization must find a way to handle them.
Culture is another important issue, which can be divided into organizational culture and individual culture, but in this paper the division is not made to its full extent. Culture differences are very common appearance in the multi-organizational projects, due to the fact that members of these kinds of projects are most likely to possess different expertise and origin from different countries. Thus, the members speak different mother tongue languages, express themselves differently, have different problem-solving approaches, expect different information processes and project management styles.
Problems based on these differences can be avoided to some extent if each geographically dispersed organization develops one product or a number of products as independently as possible of each other. This implies a project strategy that minimizes the amount of dependence and need for communication between the different parts of the project by reducing any common development.
However, the final goal is still a comprehensive system solution. In order to achieve the goal, well-defined interfaces within the project are required. Consequently, there is, as always in projects, a need for clear goals to be established and communicated early in the project and a lot of work has to be concentrated to the definition of the interfaces between the different products.
The modern project management is becoming more flexible and less hierarchical with a control based to a large extend on commitment, motivation and local team leadership (Kruglianskis et al., 2000). Hence, the project manager should not try to control the project management process in the local projects. Instead every subproject should be able to use their normal project model and working processes, as long as this model does not come into the direct conflict with the overall project model. Consequently, if this approach is used there will be two decision-making processes the subprojects have to adapt to, one from the overall project and one from the local project.
The drawback of a more flexible project management approach is that it is harder for the project management team to make sure the involved local organizations work cost efficient with their project tasks. The project control processes need to be established in a way that ensures the project management team has correct information about time, costs etc. The difficulties are to be found in how the project management team really can have the control and see what is behind the figures in the progress reports.
Each company has not only a project model of their own, but also a unique business culture, which characterize the way information is exchanged. In some countries information is considered to be a privilege, in other all information is available to every one involved in the project and is required for project’s progress. In some environments information is reliable only if comes from the boss. Complete openness among involved companies would help to bridge over differences in the information distribution ways. This is very important issue, since it is crucial for the picture of the project’s current state.
The consequence of geographical distance is that face-to-face meetings seldom take place and with infrequent intervals. Instead, the need of communication has to be taken care of with help of different communication technologies. The fast evolution of IT has provided several useful tools that help to overcome distances. For example the use of project common databases, videoconference systems, e-mail, etc., has improved the communication, both speed and richness. However, experiences shows that more frequent face-to-face meetings at the beginning of project make communication much more open using means of communication technology.
It is extremely important that the project management team is aware of the fact that information technology is the enabler for information exchange, not the solution. Information technology cannot be used effectively until the involved organizations have a common understanding of the project goals and they start to build a mutual trust and confidence. Thus, the project management team must encourage continuous dialogue between the involved organizations regarding lessons learned and the status of the project between the involved organizations and their members.
Project Management Requirements
Managing a multi-organizational project does not imply a fundamentally different approach from that needed to succeed in single organization project (Kruglianskis et al., 2000). However, the project management team must be aware of the fact that cultural differences exist among the involved project members, and use a project management approach based on commitment and trust among the involved organizations and members. Further, both project and mother organization management must encourage the creation of strong linkages and a continuous information exchange among the involved organizations and key players. To be able to manage the four issues, there are some requirements that can be imposed on the project manager.
The trends and the multi-organizational environment presented in this paper are based on our case studies and a literature survey. In this section we present some requirements the project management teams have considered as critical for successful conclusions of projects in the multi-organizational environment.
Authority, How Much is Enough?
Managing a multi-organizational project involve a need of handling both technical and organizational complexity. In the case it is a global project Kruglianskas et al (2000) say “Project managers must cross organizational, national and cultural boundaries and work with people over whom they have little or no formal control.” This is a situation that is quite different from the one that a project manger encounters in a project limited to a single locality. There is a need for understanding of cultural differences, but also a need of top management support from the involved companies. In a complex organization consisting of more companies always appears a political situation. Conflicts are almost certain among interests of the project and different local companies. In order to keep control over the different interests the top management needs to be involved giving the right priority to the different activities, especially to the conflict ones. In our studies we have seen an urgent need of top management guidelines. It is very important that project manager require help from top management before the conflict develops.
One way to handle different organizations is that instead of trying to introduce one unified project methodology at all locations, the overall project manager should focus on getting enough control. The focus should be on project management quality, rather than quantity. This might allow the involved organizations to use their own project management methodology, if not in conflict with the overall project. In a multi-organizational or global project, there is always cultural differences that has to be managed one way or the other. It can therefore be difficult to use an authoritarian project management style and at the same time interact with the different local project management processes. Thus, it is better to focus on quality and on a few deliverables easy to control. This is also supported in a study made by Chatterjee et al. (1992) who suggests that post-merger performance is better if the firms allow multiculturalism and prevent too much control.
If the project is well planned and the interdependency diagrams among subprojects are correctly done at the beginning of the project there should only be a need for project follow up activities done by the overall project management team. It is the local project managers that have the responsibility to run the project on the local level. However, problems in the project that occurs on local level need to be taken care of immediately, if they effect others parts of the project according to the interdependency diagram. This is absolutely necessary in order to ensure the system functionality.
Early in the project, contacts among individuals in the different organizations need to be established. The interdependency diagram can for example be created in a workshop activity. This can also establish the important commitment to the project, the system creation, which is so vital for success. A common goal and mutual understanding of each other’s difficulties and needs in the involved organizations is necessary to have from the start of the project. There is also a need for trust between the organizations if the project is to run as smoothly as possible. Trust is, however, difficult to establish if the organizations have not worked together before.
If commitment to a successful system delivery can be established by using incentives, based on quality and functionality of the system, is often better alternative comparing to an authoritarian management style based on strict contracts and fees.
Coordination of Resources and Competencies
Interfaces are important, both between sub-systems and companies. Among the subsystems to ensure an easy assembly and among organizations for a smoothly cooperation. To be successful in the co-ordination work, it is important to keep the interfaces simple and well defined.
The companies must decide if they are systems suppliers or not. It is only the top management that can make this decision and be the driver of successful cooperation among the involved companies. Further, the management must create an instance capable of handling conflicts among and within companies and projects when they occur. The loyalty in the multi-organization project can either be local, product, or towards the project. This makes a huge difference in the way the involved organizations acts in the project. If there is a system delivery or if the autonomous local organizations are delivering products with no or only little commitment to the system. It is important that everyone understands that it is the system functionality delivered to the client, in the end of the project, that really matters. In many projects suboptimizations are common.
To ensure an efficient use of distributed resources and competencies it is important to have a communication infrastructure that supports communication and information sharing over the organizational borders. A common database for the project that every one involved has access to, have been considered as very useful in the projects we have studied. Availability and accessibility of information and resources is important to focus on in a multi-organizational project environment. Access to videoconference systems has reduced the need of physical meetings, however it does not fully replace them. In the beginning of the projects it is considered important to physically meet to get to know each other to create trust and commitment. Beside the database and videoconference system e-mail, telephone, fax and other means of communication also are important. However, the projects we have studied have been conducted within companies who had well defined global information technology strategy and so that none additional investment in education or equipment was required within the project.
It is difficult to ensure the right amount of information flow to the project manager to secure that decisions are based on the best possible information at all times. However, there is often too little information, misdirected information, or in other ways falsified information, not necessarily on purpose. On the other hand, the project manager can drown in information and not have enough resources to handle it. Speed and richness of information was considered important, but most important is to ensure the quality of the information.
An Understanding for Multicultural Aspects
Managing a multi-organizational project require skills like cultural sensitivity, people skills to deal with complex forms of negotiations, and good information communicator from the overall project manager. Opinions on the impact of culture is divided, in a study by Levene et al. (1999), some felt that culture was “overplayed.”
The project manager must understand the different cultures so he or she can create a project environment were the project members feel safe and start to communicate and openly discuss problems that are important both for the local projects as well as for the overall system solution. Organizations consisting of organizations can never become a successful system supplier or system integrator, if competences spread all over the world do not collaborate.
The project manger has in a multi-organizational project more the roll of a coordinator and system integrator then system developer. He or she must focus on the existing interfaces and help the involved organization to communicate, at least regarding the interfaces between the involved organization and their products.
A system supplier on the global market of today is usually an organization consisting of many organizations, or organization network, dispersed all over the world. An organization successful in managing the difficulties in coordinating a multi-organizational project can turn the difficulties into advantages and achieve benefits through possibility of being able to provide more efficiently comprehensive system solutions to clients than other contractors.
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Proceedings of the Project Management Institute Annual Seminars & Symposium
September 7–16, 2000 • Houston, Texas, USA