Role of project maturity and organizational culture on project success
Despite the common expectation that organizational project management maturity (PMM) improves project management performance, current research offers little to support this argument. A survey-based research was conducted with project managers to determine the relationship between project maturity and organizational culture and how this relates to project success. This study investigates the relationship between maturity levels on eight PMI knowledge areas and perceived organizational performance. A survey conducted with project professionals and engineers from 75 U.S. organizations revealed project management maturity significantly relates to business performance. Also, project management maturity interacts with market culture in improving business performance. Furthermore, clan or group culture contributes significantly to project and business performance. The study also showed that there is a great opportunity to improve the project management practices of manufacturing as well as service organizations.
Project maturity, recently modeled as OPM3 by Project Management Institute (2004), aims to integrate, assess, and improve project management practices. The effects of a company's project management system and management's ability to execute projects successfully are recognized (Kerzner, 2005). In 2004, a survey of 200 respondents in 30 countries and conducted by PricewaterhouseCoopers (PWC), concluded that the greater an organization's project management maturity (PMM), the greater the positive impact on overall project performance. However, there is no one optimum level of maturity that is appropriate for every organization (Wheatley, 2007). Although we expect companies with more mature project management practices to have better project performance, the previous findings are conflicting. There is no evidence that PMM's contribution to organizational success offers a competitive advantage (Ibbs and Kwak, 2000; Jugdev and Thomas, 2002; Mullaly, 2006; Grant and Pennypacker, 2006). These studies show the need for further research in project management maturity and how it relates to project and resulting business performance.
Several researchers stated the significance of organizational factors in the transfer of knowledge and technology and work team effectiveness (Bryde, D.J., & Brown, D. ,2004; Dvir, D., Sadeh, A., & Malch-Pines, A., 2006).. Firms with more flexible change-oriented cultures were associated with higher levels of technology transfer compared with more stable direction-oriented cultures that were associated with higher levels of knowledge transfer. Furthermore, an organizational culture that supports communication and cooperation between teams was significantly related to better team leader effectiveness and team member satisfaction. Janz and Prasarnphabich (2003) emphasized the importance of knowledge-centered culture and found a significant relationship between organizational climate and cooperative learning. Nahm et al. (2004) pointed to the need for more research incorporating organizational culture; specifically in manufacturing technology adoption. Although these findings are promising, there is very little research being conducted in the role of organizational culture in project management. Despite the extensive research in project management processes and techniques, as well as project leadership, organizational culture is largely under-examined in project management research.
The purpose of this study is to determine the relationship between project maturity and organizational culture and how this relates to project and resulting business performance. Organizational performance is an indicator of how an organization competes. Organizations with higher maturity levels are expected to be successful in terms of project performance and have a competitive advantage in the marketplace. Furthermore, a correct alignment of organizational culture and project management maturity efforts may also lead to improved performance.
Project Management Maturity (PMM) and Organizational Performance
Previous research in PMM's contribution to project success presents conflicting results: Ibbs and Kwak (2000) demonstrated no statistically significant correlation between project management maturity (PMM) and project success based on cost and schedule performance. Jugdev and Thomas (2002) could not find a correlation between the process capability and project success of many maturity models. Mullaly (2006) raised the concern about lack of evidence of PMM's contribution on organizational success as a means of competitive advantage. Grant and Pennypacker (2006) found no significant differences in PMM in four major industries.
Ibbs and Kwak (2000) found that 38 large international companies averaged 3.26 on a relative scale of 1 indicating lowest maturity and 5 indicating highest maturity levels. A recent PWC study based on 200 respondents reported that the average maturity score was 2.5. More than 60% of the respondents wished to increase their maturity level, and 71% of companies wanted to increase their level by more than one step (Bannan, 2005). Grant and Pennypacker (2006) revealed that, as a result of a survey of 126 organizations from various industries, the median PMM level is 2 out of 5, with respect to 36 of the 42 components analyzed. Mullaly's (2006) longitudinal study revealed an increase in maturity in level 1 organizations over the years and a decrease in levels 2 and above; furthermore, no significant relationship between PMM and performance was found.
The research into the influence of organizational factors in project management is ongoing. Ives (2005), as a result of interviews conducted with managers, concluded that the importance of effective sponsorship and governance, definition of scope and success, structure and authority, availability of funding and resources, and simply organizational context on project success was significant. Hyvari (2006) studied the relationships between critical success factors and organizational variables. Organizational context, especially the size of the organization, was perceived to be an important factor in project success. Belassi et al. (2007) found a significant relationship between positive work environment, strong leadership, and new product development project success.
Organizational culture is defined as the set of values, beliefs, and behavioral norms that guide how members of the organization get work done. Many organizational factors are attributed to team effectiveness. Organizational context is defined as management processes, organizational culture, and organizational systems that exist within an organization. Doolen et al. (2003) found a significant and positive linear relationship between team leader effectiveness and team satisfaction and the organizational culture that supports communication and cooperation among teams. The variables used to define organizational culture were based on parameters, such as the extent to which organizational culture supports the positive inter-team interactions or the integration of the team into the rest of the organization, and the extent to which organizational culture values and supports teams and teamwork. Their study focused on production teams and addressed one business unit in a Fortune 50 high-technology company.
Nahm et al. (2004) revisited the impact of organizational culture on time-based manufacturing and performance. Based on a sample of 224 firms, they determined which espoused values supported a high level of time-based manufacturing performance. Schein's (1992) conceptualization of culture was used for cultural orientation. Schein describes a hierarchy of artifacts, underlying assumptions, and espoused values used to measure organizational culture. Schein's measurement is based on constructs such as customer orientation, beliefs on investing in facilities and equipment, and beliefs on working with others, and asks about the perceptions of the subjects regarding these constructs. Their study showed a positive relationship between customer orientation and beliefs, between beliefs and time-based manufacturing, and between time-based manufacturing and performance. Although Schein's hierarchy provides a meaningful framework to understanding the organizational culture, it lends itself more as a measure of organizational climate that is studied by the risk, reward, warmth, and support dimensions. Risk is the orientation toward potentially innovative initiatives with uncertain outcomes; reward is a measure of how employee performance is recognized; warmth is a measure of friendliness in the organization; and support is a measure of the organization's interest in the welfare of the employee (Hyvari, 2006; Ibbs, et. al., 2000; Ives, 2005).
A recent publication in project management found that the very basic assumptions of an organizational culture itself may restrain the knowledge transfer processes (Eskerod and Skriver, 2007). In fact, the authors claim that a project orientation may restrain knowledge transfer because it leads to knowledge silos. A case study is used to underline the restraining nature of organizational culture based on Schein's hierarchy.
This case study uses the Organizational Culture Assessment instrument (OCAI) developed by Cameron and Quinn (1999). OCAI is used to diagnose an organization's culture and is helpful in determining ways to change the culture. OCAI is based on a theoretical model called the competing values framework (CVF). CVF was developed initially from research conducted on the major indicators of effective organizations. Two major dimensions that organized the indicators into four main clusters emerged from the study. One dimension differentiates effectiveness criteria that emphasize flexibility, discretion, and dynamism from criteria that emphasize stability, order, and control. The second dimension differentiates effectiveness criteria that emphasize an internal orientation, integration, and unity from criteria that emphasize an external orientation, differentiation, and rivalry. Together, these two dimensions form four quadrants, each representing a distinct set of organizational effectiveness indicators. These indicators define the core values on which judgments about organizations are made. Each quadrant has been given a label to distinguish its most notable characteristics. Cameron and Quinn define four broad cultural orientations in organizations: clan, adhocracy, hierarchical, and market. The clan culture stresses the importance of participation, cohesion, shared values, commitment, and high morale, whereas the adhocracy culture assumes that innovation and initiative lead to success and encourage entrepreneurial, creative, and visionary behavior. The hierarchical culture is characterized by a structured workplace with formal rules and policies and a focus on efficiency, timeliness, and control. The market culture perceives the external environment as hostile, with demanding consumers and a need for the organization to be both results and production oriented.
Research Model and Variables
Figure 1: The research model and variables.
Project Management Maturity Measures
Project Management Maturity (PMM) is an important element of strategic planning because it provides a methodology, a road map to determine and compress the gaps in resources and quality (Kerzner, 2005). PMM models provide a standardized approach to measurement and benchmarking, as well as a mapped-out strategy for improvement. As suggested, “…You have to be pragmatic about what degree of maturity is actually required” (Wheatley, M, Project Management Network, 2007).
The PMM model, developed by Project Management Solutions, contains the PMBOK® Guide's nine knowledge areas listed below and is patterned after the Software Engineering Institute's (SEI) Capability Maturity Model (CMM) (Crawford, 2002; Grant and Pennypacker, 2006):
- Project Integration Management
- Project Scope Management
- Project Time Management
- Project Cost Management
- Project Quality Management
- Project Human Resource Management
- Project Communications Management
- Project Risk Management
- Project Procurement Management
This study excluded Project Procurement Management, because participants from service organizations were in the majority and procurement management did not seem to apply to them. Therefore, PMM is measured by eight PMI knowledge areas. In addition to assessing PMM levels, participants are also asked to evaluate knowledge area maturity levels in these eight areas.
Five levels of maturity are used as descriptors of the Capability Maturity Model (CMM), (Mullaly, 2006; Crawford, 2002, Humphreys, 1992). These levels are described below:
- Level 5: Optimizing Process: A fully mature project organization with processes consistently applied throughout the organization as parts of the overall management process. Processes are in place to improve project performance, to measure project effectiveness and efficiency, and management focuses on continuous improvement.
- Level 4: Managed Process: A mature project management process applied consistently to all projects, with project management recognized as a formal management discipline. Processes are integrated with corporate processes, management uses data to make decisions, and there is a solid analysis of project performance
- Level 3: Organizational Standards and Institutionalized Process: An organization with a refined and integrated project management process that is consistently applied to each project. All processes are standard and repeatable for all projects.
- Level 2: Structure process and Standards: Some project management capabilities are defined but not consistently applied.
- Level 1: Initial Process: A fully ad-hoc project management capability with no consistent or repeatable processes.
The Organizational Culture Assessment Instrument (OCAI) assesses six key dimensions of organizational culture. Six questions were asked, with each question consisting of four alternatives. Each of these alternatives describes the four cultural orientations; clan, adhocracy, hierarchy, and market. Users are asked to divide 100 points among these four alternatives depending on the extent to which alternative is similar to their own organization. These responses indicate that you are currently rating your organization. The users rate their organizations based on how they think they should be in five years in order to be successful. The six key dimensions are:
- Dominant Characteristics of the organization: what the overall organization is like
- Organizational Leadership style and approach that permeate the organization
- Management of Employees, the style that characterizes how employees are treated, and what the working environment is like
- Organizational “Glue” or bonding mechanisms that hold the organization together
- Strategic emphases that define which areas of emphasis drive the organization's strategy
- Criteria of success that determine how victory is defined and what gets rewarded and celebrated
These six constructs are all meaningful because they reveal what the organizational and management values are, how success is defined, and what the leadership and work environment characteristics are. These six constructs are the measures used for diagnosing the current and preferred cultural environment.
Organizational perceived performance is measured by two constructs: project performance and business performance. Project performance measures are adopted from Mullaly, 2006, Doolen et al., 2003, Bannan, 2005, and Dvir et al., 2006). Project performance is measured by:
- Project efficiency: meeting time and budget targets
- Project effectiveness: meeting customer expectations and team satisfaction
Business performance measures adopted from Nahm et al.'s study (2004) measured an organization's performance by sales growth, return on investment, market share gain, and overall competitive position.
- External organizational success factors are: increased market share, whether the organization improved its competitive position, and organization performance compared with the best worldwide competition.
- Internal organizational success factors are: savings benefits of projects, projects resulting in sales growth, and overall business performance compared with last year.
Surveys were distributed online to 400 project managers, with a valid response return of 21.5% during 6 months of the data collection period. The sample consisted of project managers, unit or program managers or executives of information management projects, and project groups, mostly from the service industries (56%). The questionnaire consisted of 46 project management maturity questions and 10 project and organizational performance questions. For the complete analysis of the survey, see Yazici, H.J. (2009).
Based on the responses collected from 86 project professionals from 75 U.S. organizations, the overall project management maturity level was 2.27 (of a possible 5), indicating there is a great opportunity to improve their project management practices. Project maturity levels ranged between 2.6 and 1.93. Looking closely at the sectors, in the cases of manufacturing organizations, the highest project management maturity level was found to be achieved in the project quality management area; for service organizations, the highest maturity level was achieved in the area of project time management. For both the manufacturing and service organizations, the lowest project management maturity level was in the area of project risk management, with scores ranging between 1.93 and 2.00.
In the study, nearly 54% of respondents indicated their organizations were operating at level 1, initial processes (24%) or at level 2, structured process and standards (30%); 19% rated their organizations had reached level 3, organizational standards and institutionalized process; almost 12% indicated operating at level 4; and only 8.5% assessed their organizations to have achieved level 5, optimizing process. These results agreed with Grant and Pennypacker's 2003 study (2006). This study found higher percentages for levels 4 and 5, which is a promising indication that there is an improvement in the businesses' efforts toward more managed and optimized project management processes.
The four PMM areas respondents reported to be achieved at levels 3 and higher were project scope management (46% of the respondents); project quality management (44.8%); project time management (43.7%),;and project communication management (41%). Specifically, level 3 maturity achievement (organizational standards and institutionalization) was reported for requirements definition and deliverables identification, schedule development and control, and performance reporting and management tracking. Surprisingly, cost management is one of the areas that needs improvement along with team and professional development, performance measurement, and overall risk management. Apparently, organizations managed to standardize some of the control processes with respect to time and requirements but had not mastered planning, team development, cost, and risk management.
Time management involves defining project activities, developing the schedule, and executing and controlling the plans. Service project managers perceived a structured process and standards for time management throughout the organization (in some cases an institutionalized process), which were not applicable to all projects. This result agrees with Grant and Pennypacker's study, which showed that in the professional services industry, a majority of the organizations adopted a level 3 maturity level in schedule development. In the case of manufacturing-based organizations, quality control was perceived by the project managers and executives to be achieved satisfactorily, encompassing procedures to ensure that project deliverables meet the quality objectives and attributes. On the other hand, project risk management appears to be one of the areas in which organizations need more training. Risk management is about understanding of the risk events, assessing their impacts on the project, developing and executing a plan, and monitoring progress. As Besner and Hobbs' study (2008) showed, project management tools related to risk management are among the least-used tools, demonstrating an urgent need for more training and education in risk analysis and management. Another knowledge area that was found to show poor maturity was human resource management, indicating a lack of standardization. Table 1 shows the mean scores for PMM and knowledge area maturity levels.
Table 1: Project management maturity levels mean scores and standard deviations.
|Project Integration Management||2.28||1.09|
|Project Scope Management||2.48||1.10|
|Project Time Management||2.42||1.23|
|Project Cost Management||2.38||1.19|
|Project Quality Management||2.51||1.39|
|Project Human Resource Management||2.09||1.27|
|Project Communications Management||2.39||1.12|
|Project Risk Management||2.01||1.27|
Organizational Culture Assessment
Based on Cameron and Quinn's Competing Values Framework, the distribution of culture orientations collected from 86 valid responses is shown in Table 2. Subjects were asked to distribute a score of 100 among four culture orientations. As shown, the most common culture is market orientation, a culture in which goal achievement and market share are perceived to be essential and external environment is perceived to be hostile. The second most frequent culture orientation was perceived as hierarchical, a culture in which a structured workplace with formal rules and policies exist, and the focus is on efficiency, timeliness, and control.
Table 2: Organizational culture orientations mean scores and standard deviations
Organizational Culture, PMM, and Performance Relationship
This study explores how PMM and organizational culture orientation affect project and business performance. A possible fit between organizational culture and PMM level and its influence on project, internal and external business performances is analyzed. The highest internal organizational performance level is reported for savings, followed by overall business performance compared with previous year and sales growth rates. In terms of external organizational performance, project managers perceived that their projects resulted in an improved competitive position, followed by an increased market share and a better business performance compared with the best worldwide competitor. PMM is composed of eight knowledge areas. Organizational culture is assessed using OCAI that focuses on four cultural orientations. The composite reliabilities for all constructs ranged between 0.88 and 0.96 and therefore exceeded the minimally accepted level of 0.6 to 0.7. All questionnaire responses were normalized by logarithmic transformation to reduce variations among scales. The PLS (partial least squares) method is used for the analysis.
A significant relationship is found between project management maturity and business performance (t <= 5.12, p < 0.000002). This shows that higher maturity is perceived to result in savings to the organization as well as improve the competitiveness of the organization and help increase market share. However, there is no significant relationship between project maturity and project performance (t <= 1.56, p < 0.12) which indicates that organizational factors beside maturity influence project efficiency and effectiveness. The study shows that an organization's cultural orientation is a contributing factor. Clan culture significantly relates to all performance categories: project, internal and external business performance (t = 2.90, p < = 0.005; t = 2.79, p <0.006; t = 2.38, p < 0.02). The clan culture stresses the importance of participation, cohesion, shared values, commitment, and high morale. The clan culture orientation is found to be related to project performance (i.e., timely completion of the project, the extent to which the budget requirements and expectations are met, and project team satisfaction). Furthermore, perceived internal business success (i.e., savings, sales growth, and overall performance of the organizational unit compared with the previous year) is significantly related to clan culture. Market share, improvement in the competitiveness of the organization, and the unit's performance improvement compared with their best worldwide competition were also found to correlate with clan culture. In addition to clan culture, the analysis shows the significance of market culture orientation in internal and external business performance; this is mainly due to the combined influences of market culture orientation and project management maturity (PMM). The interaction of PMM and market culture is significant at a level of p < 0.001.
A survey-based research model is designed with project professionals to study the relationships of organizational culture orientations and project management maturity (PMM) with regard to perceived project and resulting business performance. Significant findings are reported for organizations' project maturity levels as well as change efforts driven by organizational culture orientations. First, organizations should continue investing in PMM to improve their maturity levels, because level 3 and above standardizations are not achieved in all 75 organizations surveyed. The knowledge areas of cost, risk, and human resource management are the target focus areas. Second, organizations need to assess their cultural orientation and make change efforts as a result of these assessments rather than keeping organizational culture an invisible and non-measurable matter. This study shows that organizational culture has a significant influence on project performance and the long-term success of organizations. Specifically, two culture types, based on OCAI, were found to relate to perceived performance. Clan culture, which is characterized by high cohesion, collegiality in decision making, and a special sense of institutional identity is perceived as significantly influential in project effectiveness and efficiency and in the internal and external business performance of these organizations. Managers in a clan culture should facilitate effective, cohesive, and smoothly functioning high-performance teamwork. Managers should also facilitate effective interpersonal relationships and help individuals improve their performance, expand their competencies, and take advantage of personal development opportunities.
Market culture, which is characterized by aggressiveness and prospector strategies, is found to interact with project maturity to influence internal and external business performance. Organizations with market culture focus on external positioning, with the needs for stability and control; therefore, market culture complements the project management maturity practices. The efforts to increase maturity levels for improved standardization of processes are enhanced by adopting a market culture to match the demands of the competitive environment. Organizations with strong clan cultures can be successful internally as well as externally; therefore, a culture profile in which clan and market are dominant is the best strategy to reduce project uncertainty as well as external market challenges.
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* This research is published in its entirety in the September 2009 issue of PMJ.
© 2010 Project Management Institute
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