The project value mindset of project managers
The triple constraint (TC) paradigm constitutes the conceptual foundation of project management. Although limited in its effectiveness, as documented by the high project failure rates, and strong criticism from several authors, the research on the TC paradigm lacks a theoretical base allowing an integrative perspective of the different lines of critiques.
As an alternative, the project value paradigm (PVP) is offered enabling a reevaluation and integration of the widely discussed limitations of the TC paradigm. It is derived from the economic theories of entrepreneurship and serves as the conceptual base for an empirical study conducted over the last two years. The main research goal of this study is to answer the questions why and how project managers are creating project value during a project's implementation.
Following the TC paradigm, project managers are charged with reducing, if not avoiding, project risks and project uncertainties. In contrast, the economic literature argues that uncertainties are the precondition for entrepreneurial opportunities. It follows therefore that as projects face more or less uncertainties, the question remains if project managers who were able to create project value were actually seeking and exploiting opportunities to improve the value proposition of a project. The disposition or attitude of project managers towards these decisions and activities seems to be a central variable. These dispositions are integrated in the construct of a project manager's project value mindset (PVM). The PVM stands in contrast to the basic premises of the TC-paradigm. It suggests that those project managers with a PVM, will more likely create more project value. Thus, the central hypothesis investigated in this study proposes a link between a project manager's PVM and the created project value.
Over a period of two years, data were collected with a survey instrument developed by the author and co-investigators. To avoid single informant bias, data were collected for each individual project from the responsible project manager, three project team members, and the senior manager (sponsor) responsible for funding the project. The final sample consists of 594 individual responses related to 114 projects. Using structural equation modeling, it could be demonstrated that the higher the perceived value of a project manager's PVM, the higher the likelihood that value opportunities are exploited and the higher the achieved project value. The results support the hypothesis positing a relationship between a project manager's PVM and project value. The research makes the theoretical discussion of the entrepreneurship research field accessible to develop a comprehensive theory of project management. Finally, the research stimulates the discussion of the TC paradigm limitations as well as it supports the call for changing the paradigm in order to explain common project management issues.
The discrepancy between project management practices and theoretical efforts to explain them is criticized by many different authors over the past decade. The critique is focused at questioning the theory and, as a consequence, requesting a new or alternative theory of project management. Most of these critiques are based on the general project management paradigm, resulting in a discussion of symptoms without reflecting on the specific underlying assumptions of the existing paradigm. This approach leaves still many questions unanswered. This paper reports on a study that was partially funded by the Project Management Institute (PMI) in 2008 and 2009 with the objective to offer an alternative perspective to the general discourse in project management. It is an attempt to change the thinking about how to explain project management specific phenomena or as Albert Einstein is quoted as saying “we will never solve problems using the same logic we were using when we created them.”
This study focuses on the central role that project managers assume when implementing projects. In recent discussions, authors suggest that the mindset of project managers is an important variable to understand the pattern of decisions made during a course of action. But the mindset is not independent of the underlying and accepted paradigm. Despite its critique the TC paradigm is still dominating the literature and the standardization of project management related education. In general, the TC paradigm is based on two fundamental assumptions: satisficing and determinism. These two assumptions will be changed to maximizing and entrepreneurism to build the foundation for the PVP.
Based on the two project management paradigms, the overarching research question is to understand to which degree a project manager stays closely to the TC paradigm by satisficing the triple constraints versus the degree to which a project manager attempts to maximize the project value and achieves better project results. Differently phrased, the question could be also described as to which degree a project manager “breaks with” the TC paradigm and demonstrates a value maximizing mindset.
The main research objective is to empirically demonstrate the importance of a project manager's value mindset on the creation of project value. The empirical establishment of this relationship will help to understand the interaction of project management specific procedures (planning, controlling, etc.) with the behavioral decision level of the management of projects. It will also have significant theoretical and practical implications for the discussion of improving project performance and for the training of project personnel in general.
Research Objectives and Contributions
Uncertainties of projects are sources for opportunities and, as such, have to be recognized and exploited. This is only possible if project managers are alert for these opportunities. A precondition for this alertness is the motivation to maximize a project's value, which is driven by the established paradigm. These arguments are linked to the field of entrepreneurship that is occupied with the question of opportunity recognition, evaluation, and exploitation. A comprehensive literature review suggests that research on entrepreneurial behaviors of project managers is sparse and the possibility of the occurrence of opportunities on the project level is not systematically explored. This theoretical gap leads to the second major research objective.
With this research effort the main arguments of the entrepreneurship research field are integrated into the conceptual discourse of project management. For once, this discussion will allow the theoretical treatment of the existence and occurrence of uncertainty during project implementation. The importance of uncertainty and its theoretical differentiation from the concept of risk is not well understood. In most practical and theoretical discussions, uncertainty and risk are treated as closely related theoretical phenomena. Furthermore, uncertainty is seen in most discussions as a negative consequence for managing projects. This is the general conclusion when uncertainty is analyzed through the lens of the TC paradigm. In addition, changing the paradigm perspective to a maximization paradigm allows the discussion of the potential positive effects of uncertainties. The treatment of project uncertainty through the lens of the maximization paradigm leads to the second contribution of this study. The enrichment of the theoretical foundation of project management by changing the paradigm from a satisficing and risk avoidance to a maximizing and opportunity-based perspective. This conceptual paradigm change allows the reevaluation of many empirical results and their importance for project success. One major question which the empirical research on success factors is concerned with is the importance of senior managers for project success. In a TC-paradigm driven project management organization, opportunities could only be perceived and exploited by senior managers as they make decisions about project changes.
Basic Assumptions of TC Paradigm and PV Paradigm
In the view of Thomas Kuhn (1970), paradigms are guidelines for theoretical thoughts and scientific research. They represent conceptual views of the world consisting of formal theories. By choosing a paradigm, its user accepts the actual scientific practice, which includes law, theory, application, and instrumentation together (Kuhn 1970, p.10). From the perspective of management, Pfeffer (1982, p. 228) mentions that “A paradigm is not just the view of the world but embodies procedures for inquiring about the world and categories into which these observations are collected. Thus paradigms have within them an internal consistency that makes evolutionary change or adoption nearly impossible.”
Only few authors explicitly analyzed the TC paradigm's limitations for the implementation of projects. A major underlying critique of the TC paradigm and its related tools and techniques is that they cannot explicitly handle uncertainty, for example, the critical path method is criticized for not being able to model uncertainty appropriately (Whitty & Maylor, 2009). The underlying assumption is that uncertainty could be avoided by maximizing determinism, for example, the more effort that is put into collecting data about a project in the planning stage, the less likely it will face risks. Uncertainty is not really mentioned and is often mixed with risk.
Another major critique is the definition and measurement of project success. One problem is, as Freeman and Beale (1992) pointed out, that, “… success means different things to different people.” This perspective is supported by the view that it could be ambiguous when determining whether a project succeeded or failed (Belassi &Tukel 1996; Freeman & Beale 1992; Pinto & Slevin 1989). Other authors differentiate between project success and the project management success (Baccarini, 1999; de Wit, 1988) or they add criteria that are industry specific. The problems of defining and measuring project success are related to the conceptual level. Many authors start with the TC paradigm in mind and try to extend and supplement it. This approach does not change the basic principles under which the criteria are selected. Project success is still measured as an adherence to the triple constraints with some other criteria that should be fulfilled as well. The underlying assumption of these discussions is that project success could be achieved by satisficing predefined objectives, for example, it is the measurement against predefined objectives and not the type of objectives that poses the limitation.
The two identified assumptions pose limitations on the management of projects. From a project manager's perspective, the challenge is to avoid variation from the baseline. A valid performance measure with this approach would be only possible if the project is implemented under deterministic conditions, for example, uncertainty that leads to a radical change of a project's value proposition is encountered neither in the available management tools nor in the management approach. Consequently uncertainties are not taken into account even though projects are facing uncertainties. The other problem is that the baseline has to be “realistic.” If the baseline is too ambitious, a negative deviation is built into the project plan. Another less obvious and less discussed possibility is when a baseline is too low and the baseline could be met easily. From the perspective of the TC paradigm, this conceptually means that the project manager needs to minimize the negative variation from the baseline, but is not challenged to maximize the value of a project beyond the baseline. There is no empirical evidence about the practical magnitude of this conceptual problem.
Conceptual Framework of the Study
This chapter provides an overview of the different components that are considered in this study. Rather than conceptually developing the different components of the framework for this study, the study's framework is shown. This gives the reader a structured overview of the model discussion that follows in the succeeding chapters of this book. The research framework of this study consists of four variables:
- 1) Project Value Mindset—The project value mindset (PVM) describes the attitude of a project manager, which maximizes the value of a project, by making value-focused project decisions and by seeking and exploiting opportunities beyond the baseline that will lead to increased project value.
- 2) Exploited Opportunities—Those opportunities recognized and exploited by the project manager during the project implementation.
- 3) Project Value—Those values defined by efficiency, scope, stakeholder, and shareholder satisfaction.
- 4) Project Situation—Those characteristics of the project which include uncertainty and complexity.
An overview of the relationships between the model variables and the research hypotheses are indicated in Figure 1.
Figure 1: Project Value Mindset (PVM) Research Framework
The hypotheses are depicted in Figure 1 by the arrows which describe the proposed relationships between the model variables. The proposed hypotheses for this study are:
- H1: The higher a project manager scores on the project value mindset (PVM) scale, the greater the likelihood that project value opportunities are exploited.
- H2: The higher a project manager scores on the project value mindset (PVM) scale the greater the likelihood of an increase in project value.
- H3: The more project value opportunities that are exploited by a project manager, the greater the likelihood of increased project value.
The theoretical basis of the model variables and their proposed relationships are discussed in the next sections of this article.
Project Success vs. Project Value
Most authors agree that project success is insufficiently defined by the TC paradigm, but a general definition is still not agreed upon. The problems of defining and measuring project success are related to a conceptual level as many authors begin with the TC paradigm in mind and try to extend and supplement it. This approach does not change the basic principles under which the criteria are selected. Project success is still measured as an adherence to the triple constraints complemented with other criteria that should be fulfilled as well. It is measuring project success towards a baseline that is predefined before a project is started and modified during the project execution. From a project manager's perspective, the challenge is avoiding variation from the predefined baseline. This enforces a satisficing approach that does not necessarily lead to the value maximization of a project. A valid performance measure with this approach would be only possible if the project is implemented under completely determined conditions, for example, negative deviation is then directly related to poor management performance of the project manager or stakeholders. This means also that projects are successful if the baseline is met.
The main problem with this approach is that uncertainties are not taken into account. Contextual conditions of projects are changing constantly and what once looked like criteria to define value could dramatically change, for example, a new product development project now competing against another product, although it was started without the expectation of a competitor's product. It is impossible to accurately predict a project's objectives because of the inevitable occurrence of uncertainty.
The basic TC principle of determining project success leads to critical conclusions like successful projects do not appear as time and budget critical (Wateridge, 1995). To ask, in general, which performance criteria are more important than others, is an incomplete question. This question has to be modified as it depends on the specific circumstances under which a project is implemented. The question should be “which success criteria best reflect the achievement of project value?” (e.g., time is a very critical success criterion for consumer product development projects). A delay leads to significant losses of market share. Also project budget can be an important success criterion for example, significant cost overruns in a fixed price contract will lead to an overall loss.
The question has to be changed from a generic normative view on determining project success with a general set of criteria towards a value-oriented perspective. Several authors have indirectly addressed this perspective, for example, the Thames Barrier project took twice as long to build and cost four times the original budget, but it provided profit for most contractors (Morris & Hough 1987). The success of this project could not be explained with the TC-based approach. Turner and Muller (2004) suggest that project outcome should be measured and remunerated on a wider set of objectives, not just the achievement of time, cost, and technical requirements.
Although the discussions are TC paradigm-centric, the critiques and suggested extensions to measure project success have a common thread by pointing at a different paradigm. It is widely accepted that a project is not necessarily successful if the triple constraints are met and it is more important to create a certain level of satisfaction. This leads to some extend away from a satisficing approach and points at a maximizing paradigm.
Definition 1: Project Value
A project's value is defined by the value a project creates for its stakeholders. The project value could be represented by a single or any combination of efficiency, technical effectiveness and the satisfaction of a project's stakeholder with emphasis on clients and shareholders.
As definition 1 suggests, project value is not defined in a normative sense, rather it is defined in a relativistic sense as the value of a project could be determined in many different ways depending on its specific context and situation. The question of whether the achieved project value represents a maximum can never be answered accurately. This question is addressed only by evaluating the management process of a project in the perspective of the maximization paradigm. The expression project value was chosen to differentiate clearly from the mainstream discussion of project success.
A Project Manager's Project Value Mindset
The specific characteristics of a project manager's value mindset are derived from conceptual differences of the TC paradigm and the PV paradigm. One fundamental characteristic of the PV paradigm is its maximization premise in contrast to the satisficing premise of the TC paradigm. Another premise is that uncertainty occurs during the implementation of projects and that these uncertainties are a potential source for opportunities to increase a project's predefined value. The definition of PVM is based on these two fundamental assumptions. It is obvious that PVM cannot be derived from one singular perspective rather it is a complex concept that is related to different attitudes and traits of a project manager as discussed in the following sections.
Project Manager's Opportunity Disposition
Uncertainties during the implementation of projects are more likely a general rule and not the exception. The strategic management literature amply points out that developing the plan addresses the market while the implementation of the plan is an operations-based endeavor. The plan will most likely face uncertainties. The economists argue that uncertainty is the conditio sine qua non for the existence of business opportunities (Knight, 1948). Furthermore, entrepreneurs only evolve if individuals are “alert” to opportunities, that is, they are actively seeking or are open for opportunities (Kirzner 1973). Following this line of thought, it is imperative for project managers to seek for those opportunities that could significantly change the value proposition of a project. The disposition for seeking and creating opportunities to maximize the project value beyond the predefined value proposition is a necessary attitude. These attitudes express the quest of a project manager to seek a project value maximum beyond the baseline of a project.
Project Manager's Overachievement Disposition
The main critique of the TC paradigm is its inherent premise of satisficing, as evidenced by the concept of trade-offs. But if projects face more or less uncertainties, it is impossible to set project objectives that reflect the future “reality” of a project. This would be possible only in a deterministic world and the main objective for a project manager would be to satisfy these objectives.
The conditions are completely different under the premise of uncertainty. It is impossible to define ultimate project objectives. Changing objectives is a given and a project manager, who strictly follows the rules of the TC paradigm, would most likely not achieve the full value potential of a project.
Most discussions see uncertainty negatively related to a project's value proposition, for example, the targets of the objectives have to be lowered. However, uncertainty, as discussed earlier, could also open the door for opportunities that could lead to a higher value proposition of a project. What if the initial project targets were set too low? In this situation, the initial value proposition of a project should be completely changed. Under these conditions, it is obvious that a satisficing approach would not lead to achieving the potential project value. Only if seeking to increase the initial value proposition, would the project manager be alert for opportunities and be willing to exploit opportunities. Thus, the attitude for overachievement is a defining component of the PVM.
Project Manager's Dialectic Requirement Disposition
For any project manager, it is imperative to understand the “constraints” of a project, for example, the requirements and the specifications laid out in a project charter. Often a project manager is charged with fulfilling the requirements for which involvement during their definition was likely minimal, if at all. Under these conditions, project managers are charged to “find” the best fit between the requirements and the management process necessary to fulfill them. The traditional way to do so is to create a project baseline that best meets the requirements. In acting in compliance with the TC paradigm, project managers are calculating the critical path under the given resource constraints to assure a most likely project implementation process with a high likelihood of fulfilling the predefined requirements. This planning process that complies with the constraints follows the satisficing premise. As discussed earlier, the best possible compliance for a given set of requirements would not necessarily lead to the best possible project results or as it is called here—project value.
However, if the premise is changed from satisficing to maximizing a project's value, as the PV paradigm suggests, it is imperative for the project manager to question the given project requirements and specifications. It is most likely that the derived requirements are not representing an “optimal” set of constraints defining a “solution space” in which the maximal potential project value lies. Given that project managers have a certain level of expertise about the relationship between intended requirements and the implementation of specific problems, it seems important to question the given set of requirements and to put some effort into modifying and prioritizing requirements before and during the implementation process, in particular with the occurrence of uncertainty. Only a constant search for modifying and exceeding predefined specific requirements will lead to a potential possibility to maximize a project's value. The questioning and constant validation of project requirements and technical specifications under the maximization premise seems to be an essential attitude in describing a project manager's PVM.
Project Manager's Ambiguity Disposition
The creation and exploitation of opportunities is related to situations of ambiguity. Only those project managers who are accepting ambiguous situations will be able to exploit opportunities. The disposition to tolerate ambiguous situations was defined by Budner (1962) as an individual's propensity to view ambiguous situations as either threatening or desirable first. A project manager's disposition towards ambiguity could be seen as a precondition to exploit opportunities. A disposition towards ambiguity is related to the direct treatment of uncertainty and thus an essential facet in describing a project manager's PVM as it is supported by the general literature on ambiguity.
Project Manager's Personality Traits
The attitude which an individual displays and acts upon is intertwined with one's personality and to some degree with individual's intelligence. Intelligence is a general concept that underlies nearly every human behavior and is not specific enough for the PVM concept. The traits of a project manager are more specific and are easier to be monitored. The common traits typology consists of extraversion and stability as well as conscientiousness, openness, and agreeableness. Other personality traits that are important to the project manager include an ability to be comfortable in making decisions under ambiguous situations.
Under the conditions of uncertainty and value maximization, the personality of a project manager to seek and exploit opportunities is an important characteristic of the person's mindset. A project manager's traits are linked to the decision process and thus an important facet of the PVM concept.
Project Value Mindset Definition and Conclusion
The discussion of the different components of a project manager's PVM suggests that it is a complex mix of personal characteristics, dispositions, attitudes, and context, the result of which is strongly situation-dependent.
Definition 2: Project Manager's Project Value Mindset (PVM)
The PVM of a project manager is a mental state involving several dispositions and attitudes resulting in activities to seek, discover, and create opportunities beyond a pre-defined value proposition with the intent to create and maximize a project's value.
The VPM is defined in contrast to a TC paradigm by questioning the underlying premises of the satisficing concept. It is based on a maximization premise and focuses on the maximization of project value.
Project Value Opportunities
The creation of economic value is closely related to the exploitation of opportunities and consequently an important variable for the project value paradigm. The existence and nature of opportunities traditionally occupied the economic literature and were not yet considered by project management researchers. It is argued that occurrence of uncertainties is one of the major preconditions for the existence of opportunities within an economy (Kirzner, 1973; Knight, 1948; and Schumpeter, 1934), and and it is understandable that without uncertainties, entrepreneurial profits (e.g., extraordinary profits) would be impossible.
The relevance of this topic for project management is obvious. The management of projects is challenged with managing uncertainties. If projects are unique, as all formal project definitions suggest, then uncertainties (unknown-unknowns) are inevitable no matter how much information is gathered before a project is initiated. This means that the concept of opportunity and its recognition and exploitation could be adopted for the management of projects. This argument is related to the unique nature of all projects which face, more or less, a specific level of uncertainty during their implementation. Thus, following the arguments of the economists, these uncertainties represent potential sources for opportunities to increase a project's value.
The bottom line is that projects, as they are facing uncertainties, are predestined to experience the emergence of opportunities and subsequently the recognition, evaluation, and exploitation of an opportunity during a project's implementation is a major concept of the project value paradigm as it is the source for maximizing project value.
Definition 3: Project Value Opportunity (PVO)
Project Value Opportunities represent a potential to exceed the predefined stakeholder value of a project during a project's implementation.
The project management literature acknowledges the concept of project risks (known-unknowns) and suggests many different approaches to analyze possible sources of project variation. The TC paradigm addresses these sources of variation by analyzing trade-offs and their consequences for the project results; however, it does not address the concept of uncertainty. But as Baumol (1993) pointed out, situations of uncertainty defy any optimization calculus. Thus, under a paradigm of maximization, project uncertainties could also be linked to opportunities and if exploited, will exceed the predefined project value.
The guiding question of this study is the relationship between a project manager's PVM and the creation of project value. The discussion of the potential TC paradigm constraints is a good starting point. One of the main critiques of the TC paradigm is that it is not constructed to deal effectively with uncertainty. It also does not support a maximization approach, instead it encourages a satisficing attitude. The consequences are indicated by the relatively high failure rates of projects. The main proposition is that uncertainty has to be managed effectively with a maximization approach in mind.
Project Value Mindset – Project Value Opportunity Relationship
The relationship between PVM and project value opportunities is substantiated by the theoretical arguments of the entrepreneurship research field. Opportunities have to be created, discovered, selected, and exploited to enable an entrepreneur or an organization to generate entrepreneurial profit (Shane & Venkataraman, 2001). One major precondition is the alertness of entrepreneurs (Kirzner, 1973) to seek for opportunities. The alertness, as Kirzner defined it, is reflected by the presented definition of the PVM construct. This leads to the first research hypothesis:
Hypothesis 1: PVM – PVO Relation
The higher a project manager scores on the project value mindset scale, the greater the number of project value opportunities that were exploited during a project's implementation.
This hypothesis describes the relationship between the PVM and opportunity variables that are represented by specific measurement scales. The measurement scales are developed in the next section.
Project Value Opportunity – Project Value Relationship
The second relationship in the introduced research framework is the direct influence of a project manager's PVM on project value. As expressed with Hypothesis 1 and shown in the research model in Figure 1, the influence of PVM on project value is mediated by the exploitation of project value-related opportunities. However, the recognition and exploitation of opportunities is not the only source to maximize project value. The PVM is also related to the decisions and specific activities that project managers make when implementing a project. Thus a direct relationship between PVM and project value is proposed.
Hypothesis 2: PVM – PV Relation
The higher a project manager scores on the project value mindset(PVM) scale the greater the created project value.
Exploited Project Value Opportunities – Project Value Relationship
The third relationship in the introduced research framework represents the impact of exploited project value opportunities on the created project value. The conceptual treatment of this hypothesis is straightforward. It builds on the assumption that the PVM represents the attitude of a project manager to create and seek project value opportunities. But the search alone would not necessarily lead to an increase in project value. It is actually the opportunity that was exploited that has the potential to increase a project's value.
Hypothesis 3: PVO – PV Relationship
The more project value opportunities (PVO)that are exploited, the greater the created project value.
This relationship is a result of the underlying assumption that opportunities which are exploited were chosen under the maximization premise.
Research Methodology and Data Collection
The chosen research method to address the raised research questions and to finally test the research hypotheses are discussed in this section. A correlational research design was chosen to analyze quantitatively the role and influence of a project manager's PVM across many different projects within different industries.
Data Collection Method
A survey instrument was developed and data were collected during 2008 and 2009 from many different projects across a variety of industries including manufacturing, software, and telecommunication industries and many different organizations. One of the major goals was to obtain a large-scale sample allowing for advanced statistical analyses. To achieve a high return rate and to have some control over the data collection process, participants of this study were recruited from a part-time graduate program of professional who were studying and/or earning their certifications in project management. They were instructed on how to conduct the data collection and their questions about the data collection process were directly answered by the principal investigators of this study. The questionnaires were distributed to them as hardcopies or on request as files via email.
For the purpose of this research, it was necessary and important to gather data from multiple sources. As the focus of this study is a project manager's PVM, it was important to collect data on the perceptions from several members of the project manager's team as to which project-related decisions were made by the project managers, what considerations where taken, and which decisions could have or should have been made. To prevent single-informant bias issues, the contacts of this study were asked to identify five members of a project and to return five completed questionnaires for each project: from three key members of the project team, one from the project manager, and one from the senior manager (sponsor) responsible for the funding of the project. All respondents received the same questionnaire to avoid confusion in the data collection process on the side of the contact person. Due to their direct involvement, these respondent groups were believed to be the most knowledgeable about the project decisions and processes. Further, given that project team members and project sponsors were directly affected by project decisions and processes, understanding their views about the PVM and the project results was most important.
Finally, to ensure a reasonably comparable level of familiarity with the projects across the sample, project members were instructed by the contact person to choose a project with which they were most familiar and involved with throughout its implementation. Many empirical studies conducted in project settings use retrospective methods for reasons of feasibility (Meyer & Utterback, 1995; Tatikonda & Montoya-Weiss, 2001). To improve the accuracy of retrospective reports, respondents were asked by the contact person to select recent projects to control the elapsed time between the events of interest and the data collection.
Data for this study were mainly collected in the U.S. The total sample obtained thus far is 596 questionnaires. The sample includes responses from 387 core team members, 114 project managers and 95 senior managers. Actually, the original number of collected questionnaires was higher but 21 cases had to be rejected because they were incomplete or had other serious quality issues (e.g. questionnaires filled out by incorrect respondents or each respondent reported on different projects) or they did not meet the required project characteristics. These 21 cases were discarded from further analyses. The final sample used in the data analyses includes the data of 114 projects and consists of 104 mainly successful projects and only 10 unsuccessful projects. Some unsuccessful projects were possibly not reported because they were never completed. Such restriction in range tends to impact correlations more than regression weights and path coefficients and consequently do not expect seriously distorted results. All projects had a budget of at least $500,000 and their duration was at least three months.
One of the main challenges this research project faced was the measurement of a project manager's project value mindset (PVM). However, the PVM is not directly observable andan adequate measurement tool that could be applied for this study was not existent. Over the course of this research project, many different steps were incorporated to develop a valid and reliable measurement tool.
In behavioral organizational science, it is quite common to use Likert-scales to measure a respondent's feelings or attitudes about a variable that is not directly observable. Each Likert-scale consists of several questions that are called items. Each item describes a continuum between two extremes from “strongly disagree” to “strongly agree”. The respondents indicate how closely their feelings match the question or statement on a rating scale consisting of numbers ranging between 1 and 5 or more. During the summer of 2006, a 118 item questionnaire was developed. A pilot-scale investigation was performed in the fall of 2006 and spring of 2007 to evaluate the quality of the survey instrument. In total, 30 respondents with project experience were asked to provide detailed feedback of how well they understood the questions. Based on this investigation, several minor modifications were made to improve the survey instrument. Besides rewording some items, the survey instrument was extended to 120 items.
The analyses of the data were conducted in several steps. In the first step, the quality and final configurations of the measurement scales were determined. This step was conducted on the full sample of 596 surveys. Several statistical tests were used to analyze the quality of the measurement scales. In the second step the constructed scales were used to analyze the proposed relationships between the model variables depicted in Figure 1.
The first step tests validity and reliability of the developed measurement scales. Reliability refers to the consistency of a measure and a measure is considered reliable if the same result is received repeatedly. Cronbach's Alpha test was used to test for reliability of the measurement scales. It is a test commonly used as a measure of the internal consistency reliability of Likert-scales. Values below 0.70 would lead to a rejection or modification of the constructed scale. Values above 0.80 are acceptable and values above 0.90 very good. The value of alpha is not related to the factorial homogeneity because it depends on the size of the average inter-item covariance, while unidimensionality depends on the pattern of the inter-item covariances.
For the latter reason, Principal Component Analysis was used to investigate the construct validity of the measurement scales. Only if the resulting factor achieved an explained variance of at least 60% and all factor loadings were at least 0.7 for each individual item or each component of a scale, it was accepted and not further modified.
In a second step, all scales were aggregated to the project level. In this step of the data analyses, the responses of the project managers were used for the specific project information (name, size, etc.) and to replace missing values in the individual answers. Otherwise, to avoid any respondent specific biases, only the responses of the team members and the senior managers were aggregated by calculating the mean across the developed scales of project value, PVM, and exploited opportunities. The aggregated scales were used as the input for the final step. To test the derived research hypotheses, a structural equation modeling (SEM) technique was employed. This technique allows testing simultaneously interactions between several model variables. Furthermore, it is a combination of a factor analysis combined with a regression analysis, allowing the measurement model (different scales) of a latent variable (not directly observable variable) and testing its influence on other similar constructed variables. This has an advantage in that the estimates are more accurate since a total aggregation of different scales measuring a variable is not necessary and specific measurement errors could be included in the estimation without distorting the estimates. This is in particular necessary for the PVM variable. The results of the SEM are direct tests for the hypotheses. For the model estimation LISREL version 8.51 (linear structural relationships) was used. LISREL is a statistical method that allows simultaneous analyses of hypothesized causal relationships for multiple variables (Jöreskog & Sörbom, 1993). The use of SEM also offers several test statistics to evaluate several aspects of the validity of the measurement scales. In particular, it was used to test for criterion validity by checking if the proposed causal relations are indeed of statistical significance (predictive validity) and if the constructs (model variables) are clearly explained by the several scales (concurrent validity).
Measures for Project Value
The achieved project value is a complex and multidimensional construct that is difficult to measure and many different alternative measures for project success are suggested. Pinto and Mantel (1990) identified three distinct aspects of project performance: the implementation process, the perceived value of the project, client satisfaction with the delivered project outcome. Shenhar, et al. (1997) suggested four different criteria to assess project success: meeting design goals, benefits to customers, c) commercial success, and future potential. Even though there is no convergence about the scales to be used to determine project success, it is commonly agreed, as the examples from the literature show, that multiple measures are necessary to determine project success. Following this line of thought, a project's value was measured by four different scales derived from the literature review and the conceptual discussion of the project value paradigm by using and developing 19 different items as shown in Table 1.
Table 1: Quality measures of the project value scales
|Individual PVM Scale||Number of Items||Cronbach's Alpha||Variance Explained|
The scales of efficiency, satisfaction with scope and technical quality are standard measures of the TC paradigm. The statistics for the efficiency scale testing reliability and construct validity reach satisfying levels. Originally, six items were developed to measure a project's effectiveness. The first and the third item were used from an effectiveness scale developed by Pinto (1986). Although an orthogonal factor analysis with varimax rotation of the effectiveness items yielded in two different factors representing different aspects of project effectiveness. One scale measures the achieved technical quality of the project output and the other scale measures the level of satisfaction with the fulfillment of a project's scope requirements. In summary, both effectiveness scales satisfy the statistical criteria for reliability and validity.
Client satisfaction as a success criterion is mentioned by many authors and represents an extension of the TC paradigm. The perceived client satisfaction was measured with four items. The first three items were adopted from Pinto's (1986) client satisfaction scale. As demonstrated in Table 1, the client satisfaction scale satisfies all statistical requirements.
The fifth scale measures the perception of the value the project has created for the organization that implemented the project. The implementing organization might not be necessarily the project owner. The project value scale consists of four items and, as shown in Table 1, satisfies the discussed requirements for reliability and validity.
The scores for each scale were calculated by averaging the scores across the single items of each scale. These values were used as a basis for the following statistical analyses.
Measures for Project Value Mindset Components
The PVM definition indicates that the operationalization of the variable PVM to test the research hypotheses is complex and requires several scales representing the different aspects of PVM. This problem constitutes one of the major methodological challenges of this study: How to measure the PVM of a project manager?
In this step a comprehensive measurement model consisting of seven scales was constructed. In total, seven different scales were developed based on 29 items to measure the PVM of a project manager. The scales correspond with the different conceptual components discussed in the previous sections.
Table 2: PVM component—PVM scale relations
|Conceptual PVM Components||Empirical PVM Measurement Scales|
|Opportunity Disposition||Value Opportunity Search—Project manager seeks out ways to improve efficiency and effectiveness, which should result in lowering the budgeted costs, shortening the time, or improving the functionality for the benefit of the managing firm and client.|
|Overachievement Disposition||Overachievement—Project manager seeks to overachieve the original objectives.|
|Dialectic Requirement Disposition|| |
Strategic Gap Analysis—The project manager puts effort into understanding the requirements that are beyond the written scope statement and that are relevant for the achievement of project value.
Specifications Analysis—At the project start, project manager looks for inconsistencies, seeks accuracy, and anticipates missing data or project requirements.
|Ambiguity Disposition|| |
Change Anticipation—The project manager constantly tries to anticipate sources of change.
Ambiguity—The project manager is not risk averse and, if an opportunity occurs, accepts uncertainty in order to increase the value of the project.
|Traits||Traits—Adopted from the five-factor personality characteristic, attitudinal views, and attention to detail.|
Two components of the PVM concept are measured by two scales. The dialectic requirement analysis is measured with the strategic gap analysis and the specifications gap analysis. The first scale measures attitudes and activities to specify or seek for project requirements that are not formally defined. These activities consume resources that are most likely not considered in the project plan and therefore it is the project manager's decision to “invest” in these activities. Since the investment of resources in these activities could be seen as a strategic decision the scale is called strategic gap analysis. The other scale measures activities and attitudes to adjust, modify, and identify project specifications and is therefore called specifications gap analysis. The literature differentiates between specifications as technical issues from requirements that are broader including nontechnical issues as well.
The ambiguity deposition is also measured with two scales. The ambiguity scale represents the positive attitude of a project manager towards uncertainty. The change anticipation scale represents the avoidance of changes by anticipation. The latter stands to some extent as a contrast to ambiguity.
The only scale that was not developed for this study is the traits scale. It was adopted from a five-factors personality scale to measure a project manager's traits.
The following analyses to construct a scale to measure a project manager's PVM were conducted in two steps: First, the individual scales measuring the different components of the PVM were developed. The second step tests if these scales are representing the mindset of project managers as a whole.
Table 3: Quality of individual PVM scales
|Individual PVM Scale||Number of Items||Cronbach's Alpha||Variance Explained|
|Project Manager_Value Opportunity Search||4||0.87||0.71|
|Project Manager Overachievement||3||0.80||0.70|
|Strategic Gap Analysis||5||0.87||0.66|
|Specifications Gap Analysis||5||0.88||0.67|
The developed individual PVM scales achieve good to very good values, as the statistical values in Table 3 demonstrate, indicating that the developed scales could be used for further analyses.
Aggregated Measures for Project Value Mindset
In this section, the different scales are combined to measure the project-value-mindset scale. Several statistical tests were conducted to test if these scales are indeed representing the mindset of project managers.
Both statistical scale tests, the Cronbach's Alpha test as well as the PCA indicated that the scale project manager change anticipation had to be removed from the final PVM scale. The inclusion of this scale lowered the Alpha to an unacceptable level and it lowered also the portion of explained variance estimated with the PCA concluding that the project manager's change anticipation could not be statistically integrated into the overall PVM scale. From a practical perspective, this result is consistent with the entire discussion. The relatively low variance of the project manager's change anticipation scale indicates that the anticipation of changes is an act that all project managers, independent of their mindset, are considering. After this step, the number had to be reduced from seven subscales to finally six subscales. The final results of the analyses are demonstrated in Table 4.
Table 4: PVM—Overall scale
|Cronbach's Alpha 0.90||Variance Explained0.67|
|PVM Subscales||Factor Loadings|
|Strategic requirement gap||0.787|
Overall, the resulting PVM scale to measure the value mindset of project managers represents a very good base for further analyses to test the research hypotheses.
Measures for Exploited Project Value Opportunities
The existence of a specific mindset could only be validated by the specific decisions that could be related to it. Seven items were developed to measure if opportunities were exploited during the project implementation. Surprisingly, the analyses resulted in two different scales measuring two kinds of exploited opportunities. One scale measures exploited opportunities that are directly related to the TC paradigm as they describe opportunities to increase schedule, budget, and scope objectives (exploited TC opportunities). The second scale measures exploited opportunities with the purpose to increase the value of a project.
Table 6: Quality of exploited TC opportunities
|Exploited TC Opportunities Scale||Number of Items||Cronbach's Alpha||Variance Explained|
The statistical parameters of the Exploited TC Opportunities scale indicate a very good scale quality to measure if TC opportunities were exploited during the project implementation.
Table 7: Quality of exploited value opportunities
|Exploited Value Opportunities Scale||Number of Items||Cronbach's Alpha||Variance Explained|
The second scale measuring exploited opportunities to increase in general the project value (Exploited Value Opps Scale) demonstrates also a good statistical quality.
Several statistical tests were conducted, like a PC analysis across all seven items to confirm these results. Despite the exploratory nature of this study, these results are consistent with the initial idea about the constraints of the TC-paradigm and its consequences for managing projects and achieving project results.
For this step, all variables were aggregated by using the ratings of four responding project participants, for example, three project team members and the project sponsor. Due to the risk of response bias, the responses of the project managers were excluded from further analyses. These responses were only used to fill in for missing values. The data aggregation led in total to 114 projects. All further analyses are based on the aggregated data of the responses of the different respondents of 114 projects.
Component related descriptive results
The descriptive statistics of the scales show that means are pretty high across all developed scales. This is not very surprising as most reported projects were classified by the respondents as successful. Interesting are also the standard deviations of the scales.
Table 8: Descriptive statistics of the measurement scales
|Strategic requirements gap||2.95||7.00||5.1178||0.76792|
|Exploited TC opportunities||1.00||7.00||4.0293||1.05726|
|Exploited value opportunities||1.94||6.88||4.6405||1.00356|
Table 9: Correlations of mindset scales and exploited opportunities with project value
|Project Value Mindset||0.644||-0.329||0.633||0.693||0.496|
All correlations between the mindset scales with the project value scales are significant and very strong.
Empirical Tests of Hypotheses
The developed measurement scales are the basis for testing the research hypotheses. In the final step of the statistical analyses, the three research hypotheses were simultaneously tested with a structural equation model (SEM) by using LISREL VIII for the model estimation. The SEM shown in Figure 2 displays the structural model as well as the measurement model of the PM's Project Value Mindset consisting of the six scales. The error terms are not shown.
Figure 2 Standardized Path Coefficients of the Structural Equation Modela
The evaluation of a structural equation model is quite complex since no single test offers sufficient evidence to accept or reject a model. Recognizing the problems associated with the evaluation of linear structural equation models (Anderson &Gerbing, 1988; Bagozzi, 1980; Baumgartner & Homburg, 1996; Bollen, 1989), a comprehensive set of tests was employed to assess the goodness of fit. To accept the model, the following criteria have to be satisfied: a chi square (p > 0.05), which tests the null hypothesis that the estimated variance-covariance matrix deviates from the sample variance-covariance matrix only because of sampling errors. The chi-square test is limited to the extent that it is dependent on the sample size. Browne and Cudeck (1993) showed that with an increase of the sample size, any model could be rejected. Because of these weaknesses of the chi-square test, Jöreskog and Sörbom suggested two global fit indices, GFI (goodness of fit index) and AGFI (adjusted goodness of fit index). To evaluate a model's fit the AGFI was used, since its calculation is based on the GFI but it also accounts for the degrees of freedom. Values below 0.90 indicate that the model should be rejected (Baumgartner& Homburg, 1996). The RMSEA (root mean square error of approximation) is a measurement of non-centrality and estimates how well the fitted model approximates the population covariance matrix per degree of freedom. Browne and Cudeck (1993) suggest that a RMSEA <= 0.05 indicates a close fit and the model should be accepted. The CFI (comparative fit index) assesses the relative reduction in lack of fit as estimated by the chi square of a target model versus a baseline model in which all of the observed variables are uncorrelated (Bentler, 1990). Models with a CFI below the 0.85 should be rejected (Bentler & Bonett, 1980).
The table of the fit statistics demonstrates that the estimated model fulfills all requested statistical benchmarks and demonstrates an acceptable fit. All path coefficients are significant (p < 0.05) suggesting that all model variables have to be included in the structural equation model. Furthermore, the PVM variable explains 41% of the variance of the exploited value opportunities during a project's implementation. Both, the PVM variable and the exploited opportunity variable explain 52% of the variance in the project value variable. This percentage is very high given the many other possible influences on the achievement of project success.
The SEM also supports the proposed measurement model for a project manager's mindset. The path coefficients between the latent variable (project manager's value mindset) and the six different measurement scales are very high and significant on the 1% level (p < 0.01). In sum, the SEM demonstrates that the three research hypotheses should not be rejected. It could be empirically demonstrated that links between the project manager's value mindset the exploited opportunities during a project's implementation and the perceived project value exist.
Discussion of Empirical Results
Overall the empirical results of this study are surprising. The initial expectation was that many project managers follow the dominant TC paradigm and try to create project value within the predefined constraints of their projects. Instead the strong relations demonstrate that it is more common than not that project managers strive to maximize project value in seeking for opportunities to improve the value proposition of their projects. Given all other possible influences on project value, as mainly discussed by success factor studies, the project value mindset of a project manager turns out to be an important contributor in achieving project success.
The empirical results demonstrate that the PVM should be measured with at least the six different scales measuring a project manager's traits, attitudes, and behaviors. This means, that project managers who are perceived by team members and peers to have a PVM receive simultaneously high scores on all six scales. It is possible that individual project managers could receive a high score on a specific scale but lower scores on other scales. In these cases project managers demonstrate some aspects of the value mindset but in summary they do not demonstrate a PVM as a whole.
The results show in summary how important each of the six scales are to measure a project manager's PVM. The importance of each scale was tested with two different tests (principle component analysis and SEM) with two different levels of data aggregation and both methods show similar results. The results also demonstrate the complex nature of the PVM variable and they underline the necessity to operationalize the construct in dependence of the specific context, in this case the management of projects.
The main hypothesis of this study describes the importance of a project manager's PVM for the creation of project value. This hypothesis was tested with the SEM method, estimating the strength of the direct path of the PVM variable on project value while simultaneously considering the influence of exploited value opportunities on project value. The high path coefficient is surprising and shows how important it is that project managers manage their project continuously towards improving the value proposition of their project. The strong impact indicates also that project managers who seek to satisfice the initial project value proposition will likely fail to capture the potential project value. The openness towards change by questioning the initial requirements and seeking for improving the value proposition of a project is an effective strategy to face uncertainty. This well-known companion of many projects could be addressed by seeking for opportunities to improve the initial value proposition of a project.
The relatively high mean of the scale for exploited opportunities suggests that opportunities to increase the project value obviously occur and are exploited to achieve and create value. The strong impact of exploited value opportunities on the created project value, as suggested by the high path coefficient in Figure 2, demonstrates how important it is to exploit opportunities during a project's implementation.
An important precondition to exploit project value opportunities is a project manager's disposition to seek and identify opportunities by constantly questioning a project's requirements and the motivation to maximize a project's value. The proposed relationship between the PVM and the exploited value opportunities is supported by the high path coefficient (Figure 2) and the high level of explained variance (R2=43%). This means that without a mindset to maximize the project value, promising opportunities to extend a project's value proposition won't be exploited. This link is crucial as it points to the fundamental limitations of the TC paradigm. The creation of project value by means of the exploitation of opportunities to increase stakeholder satisfaction is beyond the TC paradigm. The results support the basic critique of the TC paradigm in that only the quest to maximize the value of a project will, in the end, lead to achieving a project's value potential.
Benefits of the Study
The role of a project manager is often seen as an implementer with an operational focus, implicitly excluding the responsibility or the need for opportunity recognition and exploitation. After studying the impact of a project manager's mindset on the creation of project value, the perspective on a project manager's responsibilities and functions should be changed. Project managers have much more influence on the creation of project value than the TC paradigm conceptually could explain.
This study redefines the role of a project manager: from an implementer to a manager with strategic responsibilities in generating value for the organization. Consequently the empirical results demonstrate the need for a greater empowerment of project managers and encouragement of project managers to use more entrepreneurial behaviors. It also suggests changes in criteria used to evaluate project managers’ performance beyond the established triple constraint measures. The consequences of this study for project management are manifold and could be related to three different perspectives: The practice of project management, the education and the research.
Thomas G. Lechler was educated at the University of Karlsruhe, Germany and received the degrees of Diplom Wirtschaftsingenieuer and PhD in Management. He was the cofounder and CEO of the Vivatech GmbH. He was a NASA research fellow in project management from 2003–2005. At present he is an associate professor at the Howe School, Stevens Institute of Technology. His research focuses on the value creation through innovation with particular emphasis on the management of projects and the recognition and exploitation of business opportunities. He received several research grants from PMI (Project Management Institute) to investigate the value creation of project managers. He is a member of the GPM and the Academy of Management.
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