This paper is concentrated around the development of a model for effective virtual project organizations. The major research questions are:
• How a virtual project team should be designed to ensure that that the project reaches its objectives?
• How to deal with the challenges a virtual project most probably will meet?
• What kind of skills and knowledge are needed to get an effective virtual team, and how could the competence be developed further through the project?
The main topic of this paper is to present a new approach for how to reach an efficient level of cooperation between participants in a virtual project organization, how we became aware of the need for use of new theories in that respect, and the work towards this new approach.
2. Research Approach
The research project Virtual Project Organizations (VPO) started in December 2000, and finished in July 2002. An essential aspect with the VPO project is that it consists of a team with two researchers and four companies; two from the oil business, one from telecom industry, and one from a major consultant firm.1 One of the objectives with this approach is to discuss whether the theories are of practical use, and whether the developed model improves the effectiveness and the efficiency of the work in a virtual project management team.
Mainly qualitative data were obtained in an interactive process between the participating companies and the researchers. These qualitative data were then discussed and analyzed by representatives from the companies in cooperation with the researchers. Exhibit 1 illustrates the interactive process. In this process, we have step by step tried to identify the different elements of the work in a virtual project organization.
This process made it possible to reach solutions that all members of the group could agree upon, which is of great importance for a group that consists of members with different education and background. This approach is called interpretation science, and the logic is described in Exhibit 2 (Andersen 1994).
The participants in the working group have during this process a greater understanding for each other's point of view. In a process like this the researchers become more commercial and result oriented while the representatives from the companies are more aware of the practical use of theories. The working group has for instance used virtual meetings as a method in this particular project.
Exhibit 1.The Interactive Research Process
Exhibit 2. Interpretation Science (Andersen 1994)
Through this analyzing process, we identified the need for a new approach for designing an effective virtual project organization. The project investigated challenges for virtual project organizations, as well as what kind of skills and knowledge are needed to get an effective virtual team, and how could the competence be developed further through the project. Finally, it addressed the use of information and communication technology.
3.Theoretical Approach
According to Hayek (1945) are all economic problems and challenges a consequence of changes. It is of great importance for a relationship or an organization to adjust to changes in an efficient way. The main task for an organization is to adjust to new conditions and framework efficiently (Barnard 1938).
It is reasonable to believe that virtual organizations are flexible and adjustable, and therefore an efficient and an effective form of organization. Flexibility and quick adjustments are the main idea behind project organizations. Virtual project organizations should therefore be a good solution.
Searching the literature of project management and business administration, we have not found models or theories that fulfils the needs or requirements which have to be represented. It seems that virtual organizational issues in project management are concerned about the operative level in a very practical way, and that there is less concern about the theoretical fundament. They often end up as concrete handbooks, like Duarte (1999) and Fisher (2001). However, a virtual organization is a topic in several books of business administration, and the main impression is the sociological approach which is descriptive and theoretically and hardly developed for decision-making (Child and Faulkner 1998). Our objective is to make a comprehensive model, which is both solid theoretically and user-friendly for decision-making.
We experienced in this project that theories of New Institutional Economics (NIE) (Furubotn and Richter 1997), such as Transaction Cost Economics (Williamson 1985) and Agency Theory (Arrow 1985) could to some extent cover the lack of theories for development of a model for how to obtain an effective virtual project organization. During the project we became aware of that the human aspect is as well as important as the technology, and therefore it make sense to add aspects of Intellectual Capital (Roos 1998). However, to ensure the practical relevance of the model we found the mentioned approaches by Duarte and Fisher as very useful as well.
According to NIE firms are a function of contracts, rather than a function of production as in mainstream economics (Furubotn and Richter 1997). A firm and also a network consist of individuals or organizations that are linked through contracts. There could be oral or written contracts, and they could be both of informal and formal character.
The economy is not free of frictions as mainstream economics often assume, but there are rather high transaction costs and asymmetric information (Coase 1937). The main issue of NIE is to make the relations in a company, a value chain, or a network as efficient as possible. The more efficient the relationship is, the lower the costs should be, in addition to the positive impact on the effectiveness. A good production relationship would most likely give more satisfied customers as well. NIE can be used to design and elaborate an efficient and effective virtual project organization. A crucial question in that respect is whether a relationship should be tight and formal or more relaxed and informal. In this paper there are used other theories and methods than NIE as well.
In addition to the theoretical areas described previously, the theoretical foundation for the project has been project management, benchmarking, and performance measurement. Lastly, the approach has also been influenced by the various social sciences.
4. Design of Virtual Project Organizations
4.1 The Generic Model
In this research project we have developed a model that might be used both in design of a virtual project organization, and in evaluation and decision making of an existing project. The development of the model has been done through an iterative process involving the researchers and the project managers. The model has also been tested in various case studies, as well as for a larger audience.
Based on our research, we have developed a hypothesis that the degree of virtual success is mainly determined by the relationship the two variables:
• Coordination need
• Virtual status.
According to the terminology in the project, the “coordination need” consists of three variables:
• The Project
• Level of distribution
• Relationship.
According to the terminology in the project, the “virtual status” consists of two variables:
• Technological level
• Knowledge and skills.
In the following subchapters these parts of the model for virtual project organizations will be explained and discussed.
4.2 Coordination Need
According to the suggested model the “coordination need” consists of the variables: The project, level of distribution, and relationship.
Exhibit 3. Level of Distribution
4.2.1 Project
In this category, various aspects regarding the virtual project should be assessed. These include:
• To what extent is the product that the project should end up with defined?
• To what degree is the process for reaching this goal defined?
• To what degree may the project manager for the virtual project make adjustments in the project structure?
• To what degree have various stakeholders’ interests in the projects? In this context, stakeholders are used as a broad term.
4.2.2 Level of Distribution
The more distributed a project is, the more important it is to consider a virtual project organization. For instance if there is long geographical distances between the participants in a project, it will be costly to have physical meetings, and there are a need for virtual means to reduce the costs. It could be that the project members are located to different time zones and that they work on different time (Fisher 2001).
When a project is distributed there could be significant cultural differences, and these differences are more difficult to reduce when the project is virtual organized (Riis 2000). It is not unusual that autonomous organizations are located to different places. It is reasonable to believe that projects with participants from many different organizations are more distributed than others (Riis 2000). A complex project is often dependent on contribution from persons and organizations with different competence and background, and by that reason the project would be more distributed.
All these factors are organized in Exhibit 3, and for analyzing and discussion of the level of distribution this exhibit can be used.
In the exhibit above the value of each element can be ticked off, and an average value can be estimated. A value over a defined value would mean that the project is very distributed, and a value under a defined value would mean that the project is not much distributed. The former indicates that a virtual project organization could be a good solution, while in the latter virtual project organization would probably not be the best solution.
Exhibit 4.Three Factors (Fisher 2001)
The three factors geographical distances, time zones, and cultural differences (shown in Exhibit 4) could be analyzed together in one figure as shown below (Fisher 2001). The longer from point zero, the more distributed the project is. If that is the situation only for one of the dimensions, the project is less distributed and it should be easier to organize the project virtually. If the value is high for two or maybe all three dimensions, the level of distribution would be high, and it would most likely be rather big virtual challenges.
The model could be analyzed and discussed by these three questions:
• Question A: Are the members of the team working at the same time?
• Question B: Are the members of the team located to the same place?
• Question C: Are there cultural differences between the team members?
Exhibit 5. Relationship
Negative answer on the two first questions, and positive answer on the last would give a high level of distribution. The opposite would be a team that is not distributed at all.
4.2.3 Relationship
The level of distribution is now defined by use of the methods in the chapter above. The next step is to analyze and discuss what kind of relationship that suits best for a distributed project. Should it be a close relationship both on the formal and informal side? This question can be answered by use of the mentioned Transaction Cost Economics, which consists of the factors that can be seen in Exhibit 5 (Williamson 1985).
How frequent is the relationship among the members of the project? Is there contact between them every hour, once a day, or maybe once a week, or perhaps only once a month? If the relationship has a high frequency, there might be necessary with close formal agreements. If not, the relationship could be more informal. What is the regularity of the relationship?
With possibilities for opportunistic behavior from some of the project members, there should be formalized contracts that would reduce such behavior. Indicators for estimating opportunism are going to be included in the model. If there is requirement for high asset specificity of the different members in the project the relationship should be formal and tight. Asset specificity could both be about intellectual capital (Roos 1998) and technological determinants (Matson 2001), and indicators for both these aspects are going to be used in the model for analyses of asset specificity. If the task of the project were very specific, the need of specified assets would most probably be there.
Uncertainty is the last factor in the table above. That aspect may be explained by use of the two main factors in Agency Theory (Arrow 1985), which are the aspects hidden information and hidden actions. The more information and actions that are hidden by one or more of the members of the project, the more uncertainty there would be in the project. Hidden information depends on the market situation for the particular market, and hidden actions depend on the knowledge level of the receiver for what the supplier is doing (Hynne 1998). These aspects are being adjusted and are going to be implemented into the model.
A factor called economies of scope will be added to the factors in the table above. The expression economies of scope may be used when there are many different tasks that must be done in one project. The administration and control of the project is more complex and difficult when there is a broad task. That problem could be solved by tighten the project both formally and informally with committed agreements.
High score on the factors in the table above would indicate that the recommendation for the project is a close formalized relationship between the members of the project. In the computerized model the different factors will be explained and they will get their weights depending on the importance of them regarding relationship.
4.2.4 Summary of “Coordination Need”
Based on the assessment of the individual indicators in the three categories described above, a summary of the “coordination need” is produced. This is depicted as a Spider chart, where the three axes represent the three categories. The area that the Spider chart covers then represents the “coordination need.”
4.3 Virtual Status
According the suggested model, the “virtual status”consists of two variables: technological level, and knowledge and skills.
4.3.1 Technological Level
In this category, various aspects regarding the virtual project should be assessed. The questions are divided in two sections:
• One individual part that each member—or at least a representative sample of the project—of the virtual project organization should answer. Areas that should be assessed include technological experience and maturity.
• One institutional part that covers areas like technological capability, investment need, support for technology, and general questions regarding facilitation.
4.3.2 Knowledge and Skills
Competence is of course important in all projects. Competence generates value through knowledge, skills, talents, and know-how of employees. In many ways it represents what the organization can do, its innermost potential, thanks to its employees. As such, we believe that the main components of competence are knowledge and skills.
Knowledge indicates the technical or academic knowledge of things. It is generally indicated to the level of education of a person. Knowledge, in fact, is something that has to be thought. Where knowledge covers the theoretical side, skills are its practical counterpart. By no means less important, skills are obviously related to knowledge. But a person with high knowledge can have very low skills. A typical example of separation of knowledge and skills is computer use. Many people know how to use a computer, but not many could explain how computers work or be able to build one because they don't have knowledge in computer science (Roos 1998).
Exhibit 6. Knowledge and Skills
Needed competence for working in virtual project organization must be analyzed and discussed. There should not be a too big gap between the different participants in experiences of working virtually. It is important to be familiar with computers and in most cases in use of Internet. It is vice to do an evaluation of the participants about their knowledge and skills of working virtually.
In this project indicators for both knowledge and skills are used for the evaluation. They are shown in Exhibit 6.
The first half of the exhibit consists of indicators that are more about knowledge, while the second half of the table are more about skills. The members of the virtual project should go through this table and tick off the right value for the different indicators. If there is a low score, there is a need for more knowledge or skills to ensure that the project may be run virtually.
4.3.3 Summary of “Virtual Status”
Based on the assessment of the individual indicators in the two categories described above, a summary of the “virtual status” is produced. This is depicted as a Spider chart, where the two axes represent the two categories. The areas that the Spider chart covers then represent the “virtual status need.”
4.4 Virtual Success
As described previously we have developed a hypothesis that the degree of virtual success is mainly determined by the relationship the two variables:
• Coordination need
• Virtual status.
For each indicator, for each category, and for each main category weighting might be performed. The model suggests a standard weighting, but these might be altered where applicable. The VPO project has also been testing the model in order to suggest more accurate initial weighting based on a number of predefined parameters. Based on the input and the weighting the model will generate a numerical number for the two main categories “coordination need” and “virtual status.” The used in the model is then as follows:
• If the “coordination need” is larger than the “virtual status” then we classify the project to be in a red zone. This means that major changes should be made in the project before it is started. One should also reconsider if the project should be carried out virtually.
• If the “virtual status” is marginally larger than the “coordination need” then we classify the project to be in a yellow zone, thus the project manager should re-analyze the project in order to make adjustments that might improve the probability of success.
Exhibit 7.Three Areas (Andersen and Pettersen 1996)
• If the “virtual status” is substantially larger than the “coordination need” then we classify the project to be in a green zone, thus the probability of virtual success is substantial.
5. Challenges for Virtual Project Organizations
5.1 Challenges Based on the Project Management Process Groups
One approach in viewing the challenges that virtual project organizations met is to use the classification in project management process groups suggested by Project Management Institute (PMI®)(Project Management Institute 1996). What are important virtual success criteria for the process groups? The project CoDisCo (Acedo, Andersen, Langlo, and Rødne 2001) answered this question as follows:
• In the initiating process group it is required that the project team members, the project organization, and the project resources be aligned and dedicated. This is normally done by focusing on four elements; shared reference, common tools, processes, and skills.
• The planning processes are characterized by searching for information in order to reduce the risk involved in making the final plan and estimates. It is vital that the information is upto-date, and that all partners and competence resources are consulted during the planning processes, and thereby committing them to the project plan and objectives.
• The main executing processes focus on making the project organization work as smoothly and efficiently as possible. Conflicts have to be confined and solved, the team should carry out continuous team building, and both the formal and informal organization should support the communicative processes during project execution.
• Throughout the project life cycle, the project management should ensure that the project is carried out as planned, and if not, corrective action should be taken. In order to avoid unnecessary time delays from deviations are identified until corrective action is taken, certain elements should be implemented; elements like reporting procedures and processes, individual responsibilities and attitudes, and finally organizational measures like controlling and guiding mechanisms for the project.
In the closing processes, the single most important thing in the view of a distributed project would be to make sure that experience gained in this project is documented and distributed or made available for further and future use.
5.2 Other Challenges
Kayworth and Leidner (2000) have identified four critical success factors in order to master the complexity in virtual teams: communication, culture, technology, and project management.
Riis (2000) refers to an inquiry regarding virtual project organizations, where those that were most successful had the following characteristic:
• The decision to start the project was taken on a based on a thorough deliberation.
• The project was approved at the highest level or the level below.
• The project manager was integrated in the project early, before the decision to start the project was taken.
• The project had sufficient resources.
• The project reached its goals within the allocated time and budget.
Riis (2000) summarizes that enterprises that have been successful in this area started such projects after the foundation and resources were available. In addition they have compensated for the virtual factor by means of traditional methods.
Riis (2001) emphasis that the preparation and the initiating phase are more important in virtual projects than in the traditional ones, where people can “stick their heads together” in order to extinguish fires. Utzon and Schaumberg-Müller (2000) agree that planning is important. They emphasize the importance of a thorough kick-off meeting.
An important question is how the leadership role should be handled in virtual teams, and which challenges a leader may expect. A survey regarding this issue concludes that the same basic qualities needed for a traditional team are also valid for a virtual team (Fisher 2001). In addition the leader of the team should focus on some challenges that are especially important in virtual tams (Duarte 1999):
1. To instruct and manage a production process without the traditional feedback functions.
2. To chose the suitable communication and collaboration tools.
3. To be a leader in a multicultural working environment.
4. Professional and personal improvement of the fellow worker without the traditional feedback functions.
5. Development and maintenance of trust without the traditional feedback functions.
6. Alignment of people across the hierarchical and organizational structures.
7. Adaptation and development of existing organizational processes in order to fit them into a virtual environment.
The challenges experienced in VPO are quite aligned with the challenges described previously. In summary, additional guidelines are:
• The importance of organizational alignment and the fact that the management has a true commitment to the task at hand (Tolo 2001).
• The focus on the performance level, the process, and the enablers, as depicted in Exhibit 7.
• The fact that virtual projects should have some physical meeting at a certain interval (Fagerhaug, Hynne, Hardersen, and Kommisrud 2001).
• The need for a facilitator in the virtual meetings (Fagerhaug, Hynne, Hardersen, and Kommisrud 2001).
• The need for basic technical competence in the virtual project organization (Fagerhaug, Hynne, Hardersen, and Kommisrud 2001).
6. Conclusion
This paper has suggested a model for designing a virtual project team in order to ensure that that the project reaches its objectives? The model has been developed in close cooperation between researchers and project manager. The model has been tested in a number of virtual projects. However, the model should be tested further. Additionally, empirical data should be collected in order to streamline the weighting of the categories.
This paper has also discussed challenges that a virtual project most probably will meet. It has also discussed what kind of skills and knowledge is needed to get an effective virtual team?
Notes
1. Statoil, Norsk Hydro, Telenor and Cap Gemini, Ernst & Young.