Strategy implementation by projects
Perttu H. Dietrich
Helsinki University of Technology (HUT)
Merja I. Nurminen
Finland Post Corporation
Strategy implementation often occurs as a result of executing development projects. As a starting point to set the research question, this paper uses a questionnaire survey. This survey suggests that managing multiple projects as an integrated entity leads to increased ability to implement strategy. The research question of this paper is: What are explanations for the phenomenon that managing multiple projects as an integrated entity correlates with effectiveness of strategy implementation? Using this research question, this study seeks answers from the field of strategy research. The strategy research area is analyzed by deductive reasoning; the findings from the strategy area are compared with the existing knowledge in the contemporary project management research line. Through such deductive reasoning the study derives foundations from the strategy literature, while simultaneously suggesting suitable characteristics for a normative managerial framework. This paper suggests characteristics in the overall management system that could be considered as explanations for effective strategy implementation with multiple projects.
We concluded that management mechanisms for the management of a whole project entity represented a strategic control system that was introduced in the strategy research. Strategic control systems employ a management of values and performance measurement. Value systems reflect top management's perception of the firm's overall strategic purpose, mission, and vision. Performance measurement systems motivate, monitor, and reward achievement of specific goals and ensure predictable goal achievement. The study suggested characteristics for an overall management system to support the alignment of multiple projects to the strategy. Indeed, we concluded that the management of a project entity as a specific management activity enhances translating strategic objectives into operational level objectives. It also serves as a means for top management to communicate directions to lower levels, clarify and enhance responsibilities at all levels or the organization, and enable authorization, delegation, and quick decision- making. It likewise enhances vertical and horizontal communication that supports systematic goal setting and monitoring, helps solve inconsistencies and compromises, provides managers with a sense of priorities and serves as a motivator. Finally, managing projects as an entity requires that appropriate and systematic communication mechanisms and systems for information dissemination are in place.
When addressing the strategy implementation theme in our analysis, we recognized that the mere purpose of implementing deliberate strategy through projects is not enough for a successful alignment between strategy and projects. In the reality, the one-way path from strategy to projects must be understood as a two-way connection between projects and strategy. The supplementary views relevant to the theme are those that concern mechanisms of strategy formulation and formation, emergent strategy, bottom-up strategy renewal, autonomous initiatives, interactive control, and strategic adaptation. The literature review on the strategic adaptation theme suggested characteristics for a multi-project management system that enhances strategic renewal. Such characteristics include the ability of middle management to contribute to strategic issues, the interaction among different managerial levels, the availability of adequate channels for interaction and communication, the openness and supportiveness of organizational culture, the accurate amount and quality of analyzed and synthesized strategically relevant information of initiatives, and the appropriate initiation-selection-retention process for initiatives and interactive control systems.
Our strategy implementation analysis suggests that managerial approaches in the strategy research are comparable to those of a project management research area. However, the strategy literature provides a more integrated and organic viewpoint about the problem of strategy implementation in an organization characterized by multiple projects than the project management literature does. Based on this, our findings contribute to new knowledge. This occurs through suggesting characteristics in the overall management system to be considered as explanations for effective management of multiple projects towards a defined strategy. The explanations derived in this study must be re-researched in future studies for appropriate validation. This paper also suggests further research activities to explore the management of multi-project settings and strategy.
Keywords: Strategy, strategy implementation, strategy formulation, projects, multi-project settings, project portfolios, and programs.
Results of an Empirical Study
This paper uses an extensive empirical questionnaire survey to derive observations about a phenomenon concerning strategy implementation with multiple project settings. Assuming the phenomenon is as given, the research question is further derived and elaborated. An empirical questionnaire survey concerning management of multiple projects in Finnish organizations was conducted at the Helsinki University of Technology (HUT), Finland during 2003. The questionnaire was sent to 1,102 of the largest Finnish public and private sector organizations. The target respondents were identified and selected by individuals from every organization with at least 100 employees. The distribution of selected organizations could be considered to cover all Finnish organizations employing at least 100 employees. The questionnaire concerned project-like development activities. The occupational titles of target respondents were directors and managers of development, quality, product development, and technology, as well as project directors and project managers. The response rate was 26,1%. 96% of the respondents answered that they had project-like development in their organizations. The project-like development was defined by two development project types: internal development projects and product development projects. Examples of internal development projects included: development of internal information systems, processes, quality, organization, new business models, human resources, or strategy in project form; and equipment or machinery investments conducted in project form. Examples of product development projects included the development of technology, existing products, new products, and product platforms in project form.
We used the question “Is the set of projects reviewed as a whole?” to reflect the level of managerial activities that rely particularly on managing multiple projects as an integrated entity. In the questionnaire, the set of projects referred to organization's co-existing development projects. To measure the effectiveness of strategy implementation, we asked if “The objectives of the projects are aligned with the strategy of the organization” and “The strategy of the organization is realized well by the project entity.” These two questions used a five-point Likert scale to record the respondents’ level of agreement to arguments regarding their organizations’ present project entity. Exhibit 1 illustrates the questions and their use to measure variables of multi-project management and effectiveness of strategy implementation.
Exhibit 1: Questions Employed and Related Variables of Measurement
In order to analyze whether the degree of managing multiple projects as an entity correlates with effectiveness of strategy implementation, we created a single measure indicating an organization's effectiveness in strategy implementation through projects. Factor analysis was used to establish a common sum variable representing how well the objectives of the projects are aligned with the strategy of the organization and how well the strategy of the organization is realized by the project entity. The analysis revealed that the factors which are supposed to measure the effectiveness of strategy implementation are correlated with the single factor found, the factor loading for both variables being 0.884. This single factor accounts for 78.191% of the total variation, which is very satisfactory. The related SPSS tables resulting from the factor analysis are in Appendix 1 (p. 26).
Now having two variables, we used one-way analysis of variance to examine the differences between the means of the organizations’ effectiveness in strategy implementation. The results show that differences in the means of the organizations’ effectiveness to implement strategy were significant, showing a 0.05 significance level. This result reveals a strong positive correlation between degree of managing multiple projects as an integrated entity and effectiveness of strategy implementation. This means that in those organizations that manage multiple projects as an integrated entity regularly, the strategy was more effectively implemented compared to those with only occasional or non-existent management of multiple projects as an entity. The related results of analysis of variance are presented in Exhibit 2.
Exhibit 2: Results of the Analysis of Variance
The analysis of variance also shows that the total sample in the analysis is 273, as opposed to the original sample of 288. This is due to the fact that we decided to disqualify 15 organizations because of the informants were not able to state whether their organizations were managing multiple projects as an integrated entity. Exhibit 3 compresses the primary findings of our empirical setting. Its horizontal axis indicates the organization's degree of managing multiple projects as an integrated entity. The vertical axis indicates the organization's effectives of strategy implementation.
Exhibit 3: Correlation between “Degree of managing multiple projects as an integrated entity” and “Mean of effectiveness of strategy implementation”
The analysis of the previous section is based on a relatively large sample of cross-sectional data that is valuable for describing the reality in the most valid manner. A natural interpretation concerning the observed empirical phenomenon suggests that managing projects as an integrated entity enables organizations to better align their projects with strategy. This implies that managing projects as an integrated entity—or multi-project management activity—decreases the gap between the planned strategy and the realized strategy. Assuming this as true, the observed empirical phenomenon, however, does not explain why the management of multiple projects as an integrated entity leads to increased ability to implement strategy. Based on our empirical observation about this phenomenon, this paper seeks to explain this phenomenon by stating the following research question:
What are explanations for the phenomenon that managing multiple projects as an integrated entity correlates with effectiveness of strategy implementation?
Existing Knowledge on Strategic Management of Multi-project Settings
The strategic management of multiple projects is addressed by the recent project portfolio management literature. It puts a practical-oriented managerial emphasis on the theme of strategy implementation with multiple projects. The studies by Cooper, Edgett, and Kleinschmidt (1997a, 1997b, 1998a, and 1998b), Archer and Ghasemzadeh (1999), McDonough and Spital (2003), and Aalto, Martinsuo, and Artto (2003) all provide a good overview of the current status of the project portfolio management research line. This line comes from a product development context, having its theoretical background in the fields of corporate investments and corporate finance. According to this research, the strategic alignment of project entities occurs through decisions made from a focus on the whole portfolio of projects rather than on decisions made separately for single projects. The terms portfolio selection and project selection are used frequently to indicate an inherent strategic decision activity. The managerial applications include decision-oriented generic process models, strategic buckets approaches, strategy table schemes, stage-gate or phase-review decision-making, portfolio decision-making, portfolio reviews, group decision-making techniques, decision support tools, and visualization techniques, among others. Introducing strategy to portfolio decision-making is one important objective in these suggested applications. Allocating scarce resources to projects is a central issue. The managerial set-up in project portfolio management studies is often to invest in product development projects under uncertainty, which implies that real options thinking becomes a relevant issue.
Concerning the more traditional project management research line, Morris (1994) provides an excellent analysis of the evolution of project management. Morris shows that when modern project management began to develop in 1950s and 1960s, it was the efficiency rather than the effectiveness paradigm that was prevalent. This occurred due to the general trend of seeking effectiveness in manufacturing through improved coordination. Projects were seen as manufacturing vehicles for coordinating the work, rather than as strategic business vehicles. The extensive volume in large infrastructure and defense projects at that time required that work was conducted in multiple simultaneous projects. Programs became important managerial schemes involving the management of multi-project entities. In the beginning, the managerial discipline developed for programs relied mostly in administrative schemes related to purchasing and coordinating timely interdependencies between individual projects. Perhaps due to historical reasons related to this evolution—and despite the changes in the content of the program's concept—today's project management research still uses the term program for referring to the management of multiple simultaneous projects. This occurs despite the fact that in today's project management literature the program concept is brought to a more strategic context and includes the fulfillment of strategic objectives in the entire business system, through dependent or independent multiple projects (Turner, 1999; Turner and Simister, 2000). This information relates to a trend in recent project management research that shows a steadily increasing emphasis on strategic business-oriented content in projects. Current project management practices, however, fail to show a strategy connection in practice. For example, Lycett, Rassau, and Danson (2004) argue that current program management is still too rigid and emphasizes the original work coordination-oriented project management view rather than a managerial strategic change perspective. According to Lycett et al., the current program management approach does not give enough recognition to the business context of programs, such as the strategic, business cycle, or R&D.
The variety of attempts to express the specific nature of a strategy has lead different authors to create different strategic schools (e.g., Ansoff, 1965; Chaffee, 1985; Lindblom 1959; Mintzberg, 1978; Mintzberg, Ahlstrand, & Lampel, 1998; Mintzberg, Quinn, & Ghoshal, 1995; Porter, 1980 & 1985; Weick, 1969). One important perspective, focusing on how strategy is managed, is the process view to strategy (Burgelman, 1983a, 1983b, 1983c, 1991, & 1996; Chaffee 1985; Hart, 1992; Hart & Banbury, 1994; Mintzberg, 1978; Mintzberg & Waters, 1985; Nonaka, 1988). The process view on strategy comprises both strategy formulation and implementation. The early strategic management literature used to focus mainly on the strategy formulation aspect; more recent studies also emphasize strategy implementation. Strategy research comprises both theoretical body of knowledge and practical methods, techniques, and tools for strategy-making.
The research on strategy implementation and project management have evolved independent of each other. Recent academic discussion has shown an increasing interest in bringing these two fairly independent research lines together (McElroy, 1996; Grundy, 1998 & 2000; Hauc & Kovac, 2000;). The wide body of strategy research recognizes that projects can be used as vehicles to carry out significant changes.
The project management research has made attempts to address the area of strategic management through multiple projects. As far as project portfolio research is concerned, this occurs when a strong emphasis on the area of strategy implementation through multiple projects is shown. However, we see that the project management research has not yet quite succeeded in addressing all such issues that would be important in strategy implementation with multiple projects in a true business context. Instead, the project management research line often addresses rather practical and concrete decision support and other tools that relate to strategy implementation, but when considering the strategy research area, such tools are not necessarily always in the core of strategy implementation from the business viewpoint.
The research on strategy implementation introduces a wide array of mechanisms to help achieving successful accomplishments in organizations. Strategy studies also use the term program in a wider and more business-oriented meaning than the studies evolving from the project management line of research. In fact, the strategy literature does not specifically refer to mere management of multi-project entities. We believe that using the strategy research to derive issues related to strategy implementation by multiple projects, could contribute in a significant manner to new knowledge. Such analysis contributes towards increased understanding on strategy implementation through multiple projects. This may solve many problems that have remained unsolved in the project management line of research.
Based on the reasoning in the previous section, we choose the following research methodology: to address the research question through an analysis of the strategy literature, by simultaneously comparing the findings from the strategy research area with the current knowledge in contemporary project management research. Our approach is deductive and based on analytical reasoning using scientific knowledge from strategy literature. It offers suggestions for characteristics in the overall management system that could be considered as explanations for effective management of multiple projects towards a defined strategy.
The research methodology discussion in business economics has widely used the classification originally introduced by Neilimo and Näsi (1980). This classification has been used frequently as a starting point when discussing business economics paradigms. Their classification consists of four different approaches: the nomothetical (natural scientific), the decision-oriented (management science oriented), the action-oriented (hermeneutic), and the conceptual. To these, Kasanen, Lukka, and Siitonen (1991 & 1993) added a fifth—the constructive. The aims and usability of deductive reasoning and normative managerial framework orientation lead us in this study to a research methodology that is in accordance with the decision-oriented approach.
We believe that selecting a concrete application area of a multi-project entity, and using the strategy research perspective, also solidifies the issue of strategy implementation in general. However, concluding issues from the strategy literature, with not always direct indications to multi-project environments, involve interpretations with the risk of making erroneous conclusions about the respective issues in different observed realities. Thus, it is obvious that the results of this study concerning alignment between strategy and multi-project settings are mere suggestions that must be re-researched in future studies for appropriate validation. Indeed, the ultimate purpose of this study is to serve as a basis for further research in the management of multi-project settings and strategy.
Strategy Implementation and Strategic Control
Burgelman (1983a, 1983b, 1983c, 1991, & 1996) has introduced the term “structural context” to refer to various administrative mechanisms, which enable top management to govern the selective efforts of middle and operative level managers to ensure that their activities are in line with the current concept of strategy and support coherent strategic behavior and strategy implementation. Examples of such mechanisms include strategic control systems, reward systems, and project screening criteria, among others. Strategic control systems—or top-down control systems—are methods to control an organization's performance against pre-set objectives and strategic goals, to deploy and regulate an organization's resources, and to take actions to correct deviations from prescribed objectives and strategic goals ( Goold & Quinn, 1990; Park, 1998; Simons, 1991). These mechanisms are essential for an induced, top-down strategy process to align organizational behavior and initiatives with the top management's perception on strategic domain (Burgelman, 1983a; 1983b; 1983c; 1991; 1996). As in large and complex organizations, when top management cannot have a direct impact on lower level operational activities, their effort goes to manipulating top-down control systems that aim to reduce variety and to keep the organizational behavior coherent and in line with the intended strategy (Burgelman, 1983a; Marginson, 2002; Nonaka, 1988). Top-down control systems attempt to guide individuals’ behavior to the desired direction. These systems guide lower level decision-making and reduce the decision-making burden of the individuals at lower levels by providing a sense of desired direction (Nonaka, 1988). Due to these systems, individuals at the lower levels are motivated to pursue initiatives that are in line with the stated strategy, rather than pursuing projects outside of the current strategic scope (Burgelman, 1991).
Even though the concepts of structural context or strategic control systems are not commonly recognized in project management research, many authors from the project management paradigm have recognized a need for mechanisms to link multiple projects with strategy (Cooper et al. 1997a, Murray-Webster and Thiry 2000, Turner 1999, Platje et al. 1994). The proposed solutions in project management research line often relate to either program management or project portfolio management. Both program and portfolio management areas address management of multiple projects entity, and both areas are often issued to ensure that the project entity is aligned with intended strategic goals of the organization. Two fundamental goals for program management are (Lycett et al. 2004): first, providing the projects with external activities for alignment between projects and organizational goals, and; second, enhancing more efficiency and effectiveness in management through an integrated approach. Moreover, one of the principal objectives for project portfolio management is to link the portfolio with strategy (Cooper et al., 1998a; 1998b). Indeed, we see an analogy between managerial schemes reported in the project management literature and the control systems described in the strategy management literature. Thus, based on how the structural context and top-down control system are defined in the strategy literature, we propose that management of a multi-project entity in project management research—whether that would be management of programs or portfolios—represents both a structural context and a related control system. In the following, we seek support for this proposition of a multi-project management scheme representing a structural context and a control system, while also seeking important characteristics of a multi-project management system for effective strategy implementation. This occurs by examining the managerial mechanisms of the structural context, as recognized in the strategy management literature, and discerning whether these mechanisms correspond with the current state of the art in project management literature.
In the following subsections we focus on two specific types of top-down systems apparent in the strategy literature: value systems and performance measurement systems. We have adopted here a rather wide interpretation for what the value system and performance measurement system concepts include. The value system concept includes, in our interpretation, the value system as defined by Marginson (2002) and Simons (1991; 1995), ideological strategy and umbrella strategy by Mintzberg and Waters (1985), and cultural mechanisms by Park (1998). Furthermore, our performance measurement system concept includes the performance measurement system concept by Marginson (2002), diagnostic control systems by Simons (1991; 1995), diagnostic controls by Osborn (1998), and administrative systems by Park (1998). We use these wide interpretations of the two concepts as a starting point. In our analysis, however, we relate various strategy studies as titled under these two concepts, even though the study would not specifically address the respective concept in an explicit manner.
Value systems are a set of procedures which top management may use to prescribe the firm's overall strategic purpose, mission and vision (Marginson, 2002). We subdivide value systems into belief systems and boundary systems. A belief system means the values, purpose, and direction that senior managers want the organization to follow. These are communicated formally and linked to the business. The management's values are often communicated in a form of vision and mission statements (Simons, 1995). A belief system is an information-based system (Simons, 1995). Belief systems put emphasis on the organization's mission, and guide individuals to seek opportunities that help achieving the mission. Hart (1992) emphasizes the dissemination of the corporate mission across the entire organization. According to Hart (1992), the lack of shared mission results to lack of commitment and may threaten organizational performance. Simons (1995) concludes that the benefits of belief systems come from communicating and understanding the beliefs and strategies rather than from mission statements themselves. Communicating strategic mission and goals effectively in the organization increases the motivation of individuals to initiate projects that fall within the desired strategic action domain (Burgelman, 1983a; Marginson, 2002; Simons, 1995). Furthermore, Hart and Banbury (1994) argue that organizations which are able to institutionalize a mission and vision should be more likely to make consistent decisions quickly.
Boundary systems aim to limit the opportunity-seeking behavior to stay within a desired action domain (Simons, 1995). Boundary systems restrict undesired directions, whereas belief systems encourage taking actions towards desired directions. Boundary systems aim to establish limits to opportunity seeking based on defined risks. In spite of their restricting nature, boundary systems also allow the organization to achieve flexibility and enhance organizational freedom by allowing managers to delegate decision-making to the lower levels of an organization (Simons, 1995). Top management defines boundaries within which organizational actions are expected to fall; lower organizational levels are free to pursuit ideas within these boundaries (Mintzberg and Waters, 1985). Strategic boundaries aim at guiding opportunity-seeking behavior to support the intended, pre-set organizational strategies and delegating decision-making to the lower levels (Simons, 1995). However, relying on strategic boundaries also has its risks. Burgelman (1991) and Simons (1995) have concluded that organizations and their environments often change faster than organizational rules. If improperly set, strategic boundaries can hinder adaptation to changing product, market, technological, and environmental conditions.
Project management literature recognizes different kinds of solutions to guide organizational behavior into selected direction with multiple projects. Strategic buckets can be used to ensure the alignment of strategic dimensions and resource allocation (Cooper et al., 1997a; 1997b). Furthermore, setting criteria for project evaluation and selection serves as a tool for top-management to ensure that organizations continuously go towards the intended direction and allow the delegation of decision-making to lower levels of the organization (Artto and Dietrich, 2004). In addition, a variety of different process models are proposed to ensure that the project selection is pursued to favor the intended strategic goals of the organization (Bridges, 1999; Archer and Ghasemzadeh, 1999; Cooper at al., 1997a; Spradlin & Kutolowski, 1999).
Concerning value systems, we see an analogy between strategy research and project management research. We conclude that managing projects as an entity serves as a value system, guiding individual projects to align with intended strategies as a whole and preventing the use of projects as vehicles to advance individualistic or opportunistic thoughts. Project evaluation and selection criteria can be seen to serve as both belief and boundary systems by communicating a desired strategic domain to guide opportunity seeking and setting boundaries for project selection. Moreover, the management of a project entity releases top-management from detailed considerations related to individual projects and guides them towards a more holistic management approach, allowing management-by-exception at the detailed level. Besides, as managing project entities often enhances strategic discussion and communication in terms of group decision-making, and project evaluation based on real-time project information and strategic criteria, it is also probable that a shared understanding of mission and strategic direction increases in this formal process.
Performance Measurement Systems
Performance measurement systems are used to motivate, monitor, and reward achievement of specific goals and to ensure predictable goal achievement (Simons, 1995). The targets embedded in the formal plans of intended strategies are used as yardsticks for monitoring the organization's implementation of its strategies. Performance measurement systems are therefore essential levers for implementing intended strategies (Marginson, 2002; Osborn, 1998; Simons, 1995). Performance measurement systems comprise performance measures of success factors from important dimensions of intended strategy and enables top management to monitor organizational performance against them (Marginson, 2002; Simons, 1995). Performance measurement systems are often expressed in terms of minimum performance standards in key areas of business (Marginson, 2002). Goals are set in advance, outcomes are compared with preset objectives, and formal systems are used to communicate deviations and variances from the intended plans and preset standards to managers who can take a corrective action (Simons, 1991; 1995).
Performance measurement systems allow the organization to achieve goals without constant management oversight, and allow management-by-exception (Marginson, 2002; Osborn, 1998; Simons, 1991; 1995). Managers pay attention to measurement systems in three instances: setting and negotiating goals; receiving updates and exception reports; and following up on significant exceptions (Simons, 1995). Performance measurement systems allow delegation of decision-making to the lower levels, and they also allow top managers to allocate attention effectively to monitor and control pre-set plans and goals (Simons, 1995). Performance measurement also relates to project-based and other reward systems, which are used to motivate individuals to take actions towards achieving an organization's strategic goals.
Performance can be measured by monitoring output, by monitoring work process, or by careful selection of inputs. Input controls alone only seldom ensure that tasks are done as the management intended. Thus, complementing controls with process or output control is advantageous (Simons, 1995). The project paradigm acknowledges the three differing, above-mentioned focuses in measurement systems. The process related measurement in the project management literature is mostly related to project milestones and project life-cycle follow-up (Turner, 1999). The state-gate model of Cooper et al. (1997a; 1997b; 1998a; 1998b) is an example of a framework providing managers with the potential to delegate decision-making to the lower levels of the organization and to manage by exception. Input monitoring is closely related to project selection (Korhonen & Ainamo, 2003; Trott, 2002), and direct output measurement can be seen as project result assessment (Kaplan & Norton, 1992; 1996; 2001; Morris & Hough, 1987;).
Post-audit functions are suggested for improving the performance measurement system (Simons, 1995). In multi-project environments, extended project process and post-auditing of projects is addressed by many authors (Arenius, Artto, Lahti, & Meklin, 2002; Kujala & Artto, 2000) Post-audit measures the realized costs and benefits against the projections that were calculated during the screening stage. By post-auditing, the management aims to measure the expected strategic benefits that the projects realized. Post-auditing also relates to the wide area of learning in multiple project environments, as addressed in the project management research (Artto, 2001; Artto, Heinonen, Arenius, Kovanen, & Nyberg, 1998). However, these studies emphasize that post-auditing cannot be completed until the asset is productive and the realized economic and strategic benefits cannot be calculated until the stream of costs and benefits becomes predictable (Simons, 1995). Such post-project analyses enable appropriate feedback to the whole organization that is based on realistic information and realistic interpretations. This supports fundamental learning schemes at the level of the whole organization.
Formal goals are necessary for performance measurement systems. Goal-setting facilitates the coordination of action plans at various levels of the organization by forcing participants to determine whether adequate resources are available to meet the specific goals and if the goals contribute to the overall strategy of the business. Motivation can be enhanced if superiors and subordinates set goals jointly and the participation of subordinates often produces more reasonable goals. (Simons, 1995) Furthermore, increased communication and broad involvement in goal setting leads to higher strategic consensus, which most likely enhances the organization's capability to implement its strategy (Wooldridge & Floyd, 1990). The number of goals and measured variables is critical. Too few measurements may lead to forgetting a critical success factor, whereas too many measurements may be confusing and possibly contradictory (Goold & Quinn, 1990) A good control system should distinguish a few key and consistent objectives, thereby giving managers a sense of priorities (Goold & Quinn, 1990). Priorities and decision-making criteria become critical, as they reflect what is important for focusing attention to right things (Wooldridge & Floyd, 1990). Tension and the possibilities for trade-offs created by the simultaneous use of several organizational performance measures may lead to an organizational bias in favor one or more measures and at the expense of others. (Marginson, 2002) Performance measurement systems operate effectively only if data reported to the managers is valid, accurate, and complete (Simons, 1995).
The research question was stated as: What are explanations for the phenomenon that managing multiple projects as an integrated entity correlates with effectiveness of strategy implementation? Using strategy literature as the main source for seeking possible explanations for the observed phenomenon, we concluded that management practices with a project entity relates to a structural context of strategy research. More specifically, the management scheme for multiple projects represents administrative mechanisms. We concluded that such mechanisms belong to a strategic control system within the structural context. Strategic top-down control systems reduce variety and keep the organizational behavior coherent. They guide lower-level decision-making and reduce the decision-making burden of lower level organizational members by providing a sense of desired direction.
The strategic control system within the structural context consists of mechanisms and systems managed to govern selective efforts and resource allocation activities to keep projects in line with the current concept of strategy. The strategic control system employs a management of value systems and performance measurement. Value systems are based on values that reflect top management's perception of firm's overall strategic purpose, mission, and vision. Performance measurement is used to motivate, monitor, and reward achievement of specific goals and to ensure predictable goal achievement. Value systems include systems for boundaries and beliefs. Boundary systems restrict undesired directions, whereas belief systems encourage taking actions towards desired directions as communicated through mission, vision, strategic directions, and top management's beliefs. In organizations with multiple projects, boundaries for activities are managed through definition and setting criteria for project evaluation and selection, setting objectives and goals for programs and portfolios, and using different process models to ensure alignment between resource allocation and strategic guidelines. Evaluation and selection criteria, and objectives concerning whole portfolio of projects, are also vehicles for communicating beliefs, vision, and mission to the lower organizational levels. Communicating strategic mission and goals effectively in the organization serves as a manifestation of beliefs. This increases the motivation of individuals to initiate projects that fall within the desired strategic action domain. Furthermore, our interpretation is that when a project entity is assigned to a responsible manager, or when a high-level manager shows interest in managing the whole entity, it is obvious that he takes responsibility to provide instructions to lower project level. This provides clarity on how projects and their processes are conducted and a sense of what kind of projects are preferable in strategic sense. Performance measurement systems in the project management applications are those related to monitoring of, and decision-making for, project milestones, program monitoring and control, and managerial schemes for project selection and prioritization decisions. Moreover, project-based reward systems are used to motivate individuals to take actions that enhance achievement of strategic goals. Stage-gate process, portfolio reviews, and other processes that are used for managing project entities and checking project statuses enable the management team to get information on the achievement of strategic goals and on any possible exceptions and variations.
The management of projects as whole entities requires group decision-making and joint goal setting for portfolios, programs and projects. It involves several managerial levels, from project management to executive management levels, in a discussion about the strategic alignment of projects. This provides alignment between projects and organizational goals and enhances more efficiency and effectiveness in the overall management system. Furthermore, management's increased communication and broad involvement in goal setting leads to higher strategic consensus, which most likely enhances an organization's capability to implement its strategy. This analysis shows that analogies exist between the strategy research and project management research. Thus, in principle, it is possible to make interpretations of suggestions for important concepts and for managerial mechanisms in a multi-project setting, as based on the strategy research paradigm. We conclude that strategy research suggests managerial approaches comparable to those of project management research area, but the strategy-literature originated approaches are more holistic from the company's strategy implementation viewpoint. This occurs as the strategy literature adopts a viewpoint of top management, with a focus on strategic management of the whole company, rather than the opposed project management literature viewpoint of the strategic management of projects with perfect alignment to strategy. The strategy research provides a more integrated and organic viewpoint to the problem of strategy implementation in an organization characterized by multiple projects. This can be seen from our analysis and from issues presented in this synthesis. Indeed, as far as the research question is concerned, we could consider that our findings contribute to new knowledge by suggesting characteristics in the overall management system (see Exhibit 4). These characteristics can be considered as explanations for effective management of multiple projects towards strategy.
Exhibit 4: Characteristics in a management system for aligning multiple projects with strategy
Reconsidering the Process Perspective to Strategy – Strategic Adaptation
Our research question sought explanations about the correlation between managing multiple projects as an integrated entity and the effectiveness of strategy implementation. This does not directly state that managing multiple projects would lead to improved implementation of the intended or planned strategy, but leaves room for the possibility that strategic renewal occurs. If strategy renewal occurs, the original strategy plan could be revised by the initiatives that have taken the form of the project. We think that this viewpoint is relevant, especially in the case where the original strategy plan would not be successful or valid. This may be, for example, due to environmental changes and uncertainties. In such situations, the organization has to adapt to the changing situation by initiating projects responding to the new situation, not necessarily by responding to the outdated strategy plan. The resulting project entity can be successful, although not aligned with the original strategy plan. If this would be true, an adaptive organization would let successful projects renew the strategy plan rather than fight for the unsuccessful plan and simultaneously fight against successful projects. Our research question addressed the correlation between multi-project management activity and effectiveness of strategy implementation. Alignment between projects and strategy does not necessarily occur only by adjusting projects to match a pre-set strategy, which was our basic presumption in the previous analysis. We could also rethink the seeking of answers to our research question in a way that the alignment may also occur by adjusting – or renewing – the strategy, to adjust the strategy, to match new projects and novel project ideas that are introduced autonomously and independently from the pre-stated strategy.
Our analysis in the previous section is based on the perception of the strategy process that represents deliberate top-down oriented efforts in the organizational hierarchy. The basic assumption in that analysis is that strategies are first formulated by top management and then implemented at the lower levels of organizations. However, both strategy management literature (Burgelman, 1983a, 1983b, 1983c, 1991, 1996; Fredrickson & Mitchell, 1984; Mintzberg, 1978; Mintzberg & Waters, 1985; Nonaka, 1988) and project management literature (Grundy, 2000; Hauc & Kovac, 2000) recognize the existence and importance of emergent—or autonomous—components of strategy. Our interpretation concerning multi-project settings is that the emergent strategy component relates to the emergence of project initiatives and new projects that serve as vehicles to renew the strategy. In the autonomous setting, strategies can appear at any organizational level, independent of any pre-concluded strategy process. Such emergent strategies can be initiated, for example, to address observed or anticipated changes in the internal or external environment. Emergent strategies can be tracked back to a variety of small actions, initiatives, and decisions made by members of the organization at all organizational levels. Over time, these small changes may together produce major shifts in the strategic direction (Floyd & Wooldridge, 1997; Mintzberg, Ahlstrand, & Lampel, 1998). The emergence of a strategy is also a key to strategic learning and adaptation. In fact, many researchers suggested that both deliberate strategy processes based on a pre-determined plan and emergent strategy processes are needed to stay competent and to successfully manage the tension between predictable goal achievement and creative innovation (Burgelman, 1991; Hart, 1992; Hart & Banbury, 1994; Mintzberg, 1978; Mintzberg & Waters, 1985; Mintzberg et al., 1998; Noda & Bower, 1996; Nonaka, 1988;). Most of the real-life strategy processes do not represent pure intended or pure emergent strategy, but they rather have both intended and emergent components.
Defined by Burgelman (1983a, 1983b, 1983c, 1991, 1996), strategic context refers to the efforts of middle managers to link autonomous strategic initiatives that fall outside of the organization's current strategy plan into an organization's stated strategy. This occurs by convincing top management about the need for strategic change towards the new initiative. In this way, strategic change occurs through a political process. Many researchers (Burgelman, 1983a; Dutton, Ashford, O‘Neill, Hayes, & Wierba, 1997; Floyd & Wooldridge, 1997; Goold & Quinn, 1990 Nonaka, 1988; Westley, 1990; Wooldridge & Floyd, 1990;) have shown that middle managers can make valuable contributions to an organization's strategic agenda by having access to strategic information and an understanding of both strategic and hands-on information. This occurs as middle managers are able to conceptualize and champion strategies based on autonomous initiatives generated at the operational level. Floyd and Wooldridge (1997) suggest that middle managers synthesize information on the feasibility of projects and programs and that they justify and champion new programs. This process needs interaction among different managerial levels (Mintzberg et al, 1998; Farjoun, 2002). Openness and supportiveness in organizational culture (Burgelman, 1983a; 1983b; Dutton et al., 1997; Noda & Bower, 1996; Farjoun, 2002) and the availability of adequate channels for interaction and communication (Nonaka, 1988; Simons, 1991; 1995; Floyd and Wooldridge, 1997) are essential in the process to facilitate such contributions. Furthermore, top management needs to evaluate the adaptive potential of the autonomous initiatives to find out which of the autonomous initiatives generated at lower organizational levels have adaptive value and deserve to become part of the organization's strategy (Burgelman, 1983a; 1983b; 1991; Floyd & Wooldridge, 1997; Lovas & Ghoshal, 2000). In this process, the adequate amount and quality of analyzed, synthesized strategically relevant information in relation to the overall business is essential (Burgelman, 1991; Floyd & Wooldridge, 1997; Nonaka, 1988; Simons, 1991). It is also important that the whole process is understood, from initiation (idea generation) to selection (idea selection) and retention (adjusting strategy according to initiative) (Barnett & Burgelman, 1996; Burgelman, 1991). Interactive control systems that enhance interaction (Marginson, 2002; Osborn, 1998; Simons, 1991; 1995) can be used to focus the attention of the entire organization on emergent strategies and on strategic renewal. Simons (1991; 1995) sees that interactive control systems can be used to stimulate strategic initiatives to emerge at all organizational levels by facilitating face-to-face dialogue and building information bridges among hierarchical levels and functional departments. According to Simons (1991), one of the systems top managers use interactively is a program management system. Program management systems can be made interactive by continual personal involvement of top management in establishing new programs and milestones, monthly regular reviews of progress and action plans, and regular follow-up of new information
We propose that management practices with multi-project entities would be considered a strategic context. Such a strategic context involves middle managers in project selection to choose which initiatives—induced or autonomous—to champion and sell to top management. In this interpretation, portfolio managers, program managers, and responsible managers of organizational units represent middle managers as referred to in the strategy literature. Being actively involved in the process of managing a project entity increases the middle manager's ability to sell autonomous project initiatives to top management by creating a channel for interaction among different managerial levels. Furthermore, the managing of project entities rather than just management of separate projects requires gathering, synthesizing, and analyzing information of concern to projects and project initiatives. This enhances not only integration of the organization, both vertically and horizontally through availability of information, but it also improves communication, interaction, and learning that occurs across organizational levels and units.
As a starting point to set a research question, the paper uses an empirical survey. The survey suggests that managing multiple projects as an integrated entity leads to an increased ability to implement strategy. Assuming this being true, the observed empirical phenomenon, however, does not explain why management of multiple projects as an integrated entity leads to increased ability to implement strategy. This paper sought explanations to the phenomenon from strategy research, by stating the research question as: What are explanations for the phenomenon that managing multiple projects as an integrated entity correlates with effectiveness of strategy implementation?
The conclusion from our analysis is that the strategy research suggests managerial approaches that are comparable to those of the project management research area. However, the strategy literature provides a more integrated and organic viewpoint to the problem of strategy implementation in an organization characterized by multiple projects than what project management literature does. Based on this, the findings in this study contribute new knowledge by suggesting characteristics in the overall management system that could be considered as explanations for effective management of multiple projects towards strategy.
The study concludes that management mechanisms with a project entity relate to a strategic control system introduced in the strategy research. Strategic control systems employ management of values and performance measurement. The study suggested characteristics in the overall management system that support the alignment of multiple projects to strategy by concluding that management of projects as an entity enhances translating strategic objectives into operational level objectives, serves as top management's a vehicle to communicate directions to lower levels, clarifies and enhances the responsibilities at all levels of the organization, enables authorization and delegation and enables quick decisions, enhances vertical and horizontal communication that supports systematic goal setting and monitoring, helps in solving inconsistencies and avoid compromises, provides managers with a sense of priorities, and serves as a motivational factor. Furthermore, an important requirement for managing projects as an entity requires that appropriate and systematic communication mechanisms and systems for information dissemination are in place. More specifically, we concluded that:
- Management of a project entity enhances the management's ability to translate strategic objectives and purposes of the organization into operational level goals and objectives for projects.
- Management of a project entity serves as a vehicle to communicate to lower levels that top management supports innovative ideas related to certain specified directions.
- The project entity serves as a communication platform for interpreting top management's beliefs; simultaneously, clarity is increased due to top management's increased responsibility for the project entity.
- Effective and systematic project selection and decision mechanisms in managing a project entity guides single projects towards alignment with intended strategies. This occurs by preventing the use of projects as vehicles to advance individualistic opportunistic thoughts.
- Management of projects as an entity releases top-management's attention from detailed single projects towards solving more holistic management problems. Management of portfolios or programs can be delegated to lower levels due to the use of related systematic managerial methods and tools. Furthermore, the authorization of lower organizational levels provides the lower levels with flexibility and freedom while still keeping the whole in reasonable control. This authorization enables quick decisions, but it also serves as a motivational factor.
- Management of projects as an entity enables the use of well-known visualization and calculation techniques to compare the contribution of projects as an entity to the strategic objectives. This raises the viewpoint from single projects to a more holistic big picture of all projects, which may be interrelated.
- Management of a project entity enhances vertical and horizontal communication. This supports systematic goal setting and monitoring. It also improves feedback mechanisms with appropriate flexibility and authorization also in relation to reward systems, thus having a motivational influence.
- When focusing on managing projects as entities rather than as single and separate projects, a limited set of measures are applied, both at project entity and at project levels. Considerations of larger entities provide managers with a sense of priorities.
- While managing projects as entities, it is more probable that measures used for projects are common to all projects in the entity, or if different measurement systems exist, the management of projects as an entity helps in solving inconsistencies or compromising different views to any single project. This supports the achievement of appropriate decisions from the viewpoint of the whole business and its strategy.
- Management of projects as an entity requires that appropriate and systematic communication mechanisms and systems for information dissemination are in place. The availability of information is relevant. Furthermore, the recorded information should relate to such items that integrate effectively the project level, portfolio or program level, and top management's strategy management level. This integration should occur both vertically and horizontally at all levels.
Our interpretation concerning the observed empirical phenomenon was interpreted initially to suggest that managing projects as an integrated entity enables organizations to better align their projects with strategy. However, our empirical observation was based on the fact that a mere correlation existed between managing projects as an entity and the effectiveness of strategy implementation. Going beyond the actual interpretation of the initial empirical study, the alignment between multiple projects and strategy does not always refer to adjusting projects to match the intended strategy. Instead, it could be that the strategy is adjusted to match new project ideas and projects. Such new projects that are initiated autonomously and not based on the stated strategy plan may convey more successful results than what the current intended strategy would do. This reasoning led us to the recognition of an emergent strategy component that adjusts and renews strategy bottom-up, from projects and through project entities to upper management levels. The emergent strategy component relates to concepts of strategic context and strategic adaptation. Our analysis concerning strategic contexts and strategic adaptation concluded additional important characteristics in a management system with multiple projects. These characteristics would enable alignment between projects and strategy through the means of strategy renewal. The characteristics include an ability of middle management to contribute to strategic issues interaction among different managerial levels, the availability of adequate channels for interaction and communication, an openness and supportiveness of organizational culture, an accurate amount and quality of analyzed, synthesized, and strategically relevant information of initiatives, an appropriate initiation-selection-retention process of initiatives, and interactive control systems.
Our study on strategy implementation with multiple projects employed deductive reasoning for deriving foundations from strategy literature. There was a strong orientation towards suggesting suitable characteristics for a normative managerial framework. However, the characteristics of a management system suggested at this stage are mere explanations. The results do not yet represent an applicable normative framework. Thus, we propose that the explanations concerning alignment between strategy and multi-project settings derived in this study would serve as preliminary hypotheses for future studies that aim at validating such explanations. Furthermore, we suggest that future studies would continue contributing towards the approach of building a normative managerial framework for aligning multi-project settings with strategy. However, we see that the normative model building would require simultaneous conceptual research contributing to an in-depth understanding of this area through new and fundamental scientific knowledge. Finally, as far as the emergent strategy component is concerned, we only presented preliminary considerations of such appropriate characteristics in a management system with multiple projects, which would contribute to strategic adaptation. We see that this theme must be addressed in more detail by a thorough and conceptual research approach.
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Appendix 1: Tables from the Factor Analysis of the Empirical Study
|The objectives of the projects are aligned with the strategy of the organization||1.000||.782|
|The strategy of the organization is realized well by the project entity||1.000||.782|
Extraction Method: Principal Component Analysis.
Total Variance Explained
|Component||Initial Eigenvalues||Extraction Sums of Squared Loadings|
|Total||% of Variance||Cumulative %||Total||% of Variance||Cumulative %|
Extraction Method: Principal Component Analysis.
|The objectives of the projects are aligned with the strategy of the organization||.884|
|The strategy of the organization is realized well by the project entity||.884|
Extraction Method: Principal Component Analysis.
a 1 components extracted.