project management project management

2 downloads 0 Views 2MB Size Report
Jan Alexander Langlo, Norwegian Centre of Project Management,. Norway. Executive Board ...... revolution, remodeling or introducing newness (EIU, 1999).
PROJECT MANAGEMENT Vol. 7, No. 1, 2001

International Project Management Journal ISSN 1455-4186

OLD TRUTHS AND NEW INSIGHTS MANAGEMENT OF PROJECTS AS PORTFOLIOS INTEGRATED SCRIPT FOR RISK MANAGEMENT THE TRUST FACTOR

Publishers: Project Management Association Finland Norwegian Project Management Forum

Project Management - Editor-in-Chief Karlos A. Artto, Helsinki University of Technology, Finland Co-Editors Professor Erling S. Andersen, Norway Doctor Kalle Kähkönen, Finland Aki Latvanne, Finland Professor Asbjørn Rolstadås, Norway Editorial Assistants Marko Korpi-Filppula, Helsinki University of Technology, Finland Iiro Salkari, Helsinki University of Technology, Finland Jan Alexander Langlo, Norwegian Centre of Project Management, Norway Executive Board Karlos A. Artto, Finland Pekka Mäkelä, Finland Kari Gro Johanson, Norway Inquiries Address submissions and inquiries to: Karlos A. Artto, Editor-in-Chief Helsinki University of Technology P.O. Box 9500, FIN-02015 HUT, Finland Telephone +358 9 451 4751 Facsimile +358 9 451 3665 E-mail: [email protected] More information about the journal can also be found from the Project Management Association Finland web site at: http:// www.pry.fi/pmaf_mag.htm Submissions Manuscripts should be submitted to the Editor-in-Chief in electronic format by E-mail. Journal Policy Project Management, ISSN 1455-4186, is published by two publishers: 1) Project Management Association Finland (PMAF) and 2) Norwegian Project Management Forum (NPMF). NPMF is a joint venture between Norwegian Association of Project Management (NAPM), and Norwegian Centre of Project Management. The mission of Project Management (PM) is to promote theory and practice in the field of project management and project-oriented business. It is the policy of PMAF and NPMF to publish one issue of PM yearly, which will be distributed free of charge. In addition to the world-wide free distribution, the Finnish and Norwegian project management associations include the yearly issues in their publications list, which enables that individuals and organizations outside the distribution network can have single copies to be sent to them for a reasonable price. The main distribution channels comprise circulation arranged by national project management associations to their members and distribution to the attendants of international events on project management in cooperation with the arranging organization. The circulation of the journal is 5 000 copies. The aim of PM is to reach extensively interest of project management experts and professionals worldwide in any sector both in academic world and industry, and this way to extend communication between all different sectors of industries including the public sector, universities and research organizations. The PM seeks articles on any aspects of project management for publication. In addition to reviewed academic articles, it welcomes papers of more practical nature. Authors are encouraged to submit the following types of original manuscript: summaries of research results; surveys on current practices; critical analysis and developments of concepts, theories, practices, methodologies, application or procedures; analyses of success or failure in the business context; and case studies. The division of the journal

content follows subdivision of papers into different paper types. The paper types recognized are application papers, research papers, and notions and summaries. In the selection of research paper manuscripts for publication the primary importance will be based on the original contribution and novelty value and the extent to which they advance the knowledge on project management. In selecting application papers, it is required that the paper discusses recent advancements of project management in any industrial sector or public sector in terms of empirical applications, applicability, and practical utility. Papers are submitted in electronic format to the Editor-in-Chief. Copyright notice Copyright of the Project Management is fully owned by the publishers, which reserve all rights to the published material as defined in the following. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the publishers. All articles in PM represent the views of the authors and are not necessary those of PMAF nor NPMF. International Board of Advisors and Contributors Professor Luis Alarcon, Universidad Catolica de Chile, Chile Professor Erling S. Andersen, The Norwegian School of Management BI, Norway Professor Karlos A. Artto, Helsinki University of Technology, Finland Professor David Ashley, University of California, USA Professor John Bale, Leeds Metropolitan University, UK Professor Juan Cano, University de Zaragoza, Spain Professor Franco Caron, Politecnico di Milano, Italy Professor Chris Chapman, University of Southampton, UK Doctor David Cleland, University of Pittsburgh, USA Doctor Nashwan Dawood, University of Teesside, UK Professor Mats Engwall, Stockholm School of Economics, Sweden Professor Pernille Eskerod, Southern Denmark Business School, Denmark Professor Roger Flanagan, University of Reading, UK Professor Carlos Formoso, Federal University of Rio Grande do Sul, Brazil Doctor J. Davidson Frame, University of Management & Technology, USA Professor Roland Gareis, University of Economics and Business Administration, Austria Doctor Ari-Pekka Hameri, CERN, Switzerland Doctor Keith Hampson, Queensland University of Technology, Australia Professor Francis Hartman, University of Calgary, Canada Otto Husby, Control Bridge AS, Norway Simon Indola, Nokia Networks., Finland Doctor Kalle Kähkönen, VTT Building Technology, Finland Professor Daniel Leroy, Universite des Sciences et Technologies de Lille, France Marko Luhtala, Nokia Mobile Phones Ltd., Finland Professor Rolf A. Lundin, Umeå University, Sweden Professor Jens Riis, Aalborg University, Denmark Professor Asbjørn Rolstadås, Norwegian University of Science and Technology, Norway John Russell-Hodge, Synergy International Limited, New Zealand Professor Rodney Turner, Erasmus University Rotterdam, The Netherlands Veikko Välilä, Industrial Insurance Co. Ltd., Finland Doctor Stephen Ward, University of Southampton, UK Doctor Kim Wikström, Åbo Academy University, Finland Doctor Terry Williams, Strathclyde Business School, UK

Table of Contents Editorial: Management of Projects as Portfolios ......................................................... 4 Karlos A. Artto, Editor-in-Chief, Project Management

Notion on Project Management Education Project Management Education in Project-oriented Societies .................................... 7 J. Rodney Turner, Erasmus University Rotterdam, The Netherlands Martina Huemann, University of Economics and Business Administration Vienna, Austria

Notion on Studying Projects in Societies Assessing and Benchmarking Project-oriented Societies ......................................... 14 Roland Gareis, University of Economics and Business Administration Vienna, Austria Martina Huemann, University of Economics and Business Administration Vienna, Austria

Notion on Industrial Risk Management Application Risk Analysis to Assess Completion Time of a Tram-Line ....................................... 26 Enrico Cagno, Politecnico di Milano, Italy Franco Caron, Politecnico di Milano, Italy Mauro Mancini, Politecnico di Milano, Italy

Research Contracting and the Flying Trapeze: The Trust Factor ............................................. 32 Roch DeMaere, University of Calgary, Canada Greg Skulmoski, University of Calgary, Canada Ramy Zaghloul Mohamed, University of Calgary, Canada Francis Hartman, University of Calgary, Canada Rethinking Project Management: Old Truths and New Insights .............................. 36 Kam Jugdev, University of Calgary, Canada Janice Thomas, Athabasca University, Canada Connie L. Delisle, University of Calgary, Canada The Impact of Performance in Project Management Knowledge Areas on Earned Value Results in Information Technology Projects ....................................... 44 Ralf Müller, Henley Management College, UK J. Rodney Turner, Erasmus University, The Netherlands Towards An Integrated Script for Risk and Value Management ............................... 52 Stuart D. Green, The University of Reading, UK Project Management Association Finland, Corporate Members, Board ................... 59 Norwegian Centre of Project Management .............................................................. 60 Norwegian Association of Project Management, Board 2001 .................................. 61

Cover: Photograph by Aki Latvanne

KARLOS A. ARTTO

EDITORIAL

Management of Projects as Portfolios Karlos A. Artto, Editor-in-Chief, Project Management Keywords: Project Portfolio Management, Management of Project-oriented Corporation, Project-oriented Business

Many articles in this issue of the Project Management discuss the role of projects in organizations, and even the role of projects in whole societies. Furthermore, many articles in this issue discuss promoting project management to develop companies' business operations. Such promoting aspects are included in e.g. articles that suggest rethinking project management, marketing and selling the project management within the organization, project management support, and project management education.

R

ecently, the project research personnel in my school and personnel in our partner companies have made a substantial effort into aligning projects and their management to management of the corporation as a whole. Such development of strategic project management is contained in the concept of project portfolio management. Project portfolio management is applied for maximizing the value/benefit of the projects as a whole, balancing portfolios relative to e.g. risk/reward and resource allocation, and aligning projects to business objectives. According to our definition, project portfolio management constitutes the management of a multiproject organization and its projects in a manner that enables the linking of projects to business objectives. This implies development at two levels. First, there is a need to bring a holistic view to the process of managing single projects. A holistic project-oriented approach basically requires the adoption and inclusion of all relevant knowledge on the rich field of project management.

Page 4

However, the project concept must be redefined to include the activities from the very early pre-project phases to very late post-project phases. Such view suggests that the project must be managed already before the project is formally established, and that the project must be managed after completing the execution and dissolving the formal project team. This approach to the extended project process widens the scope of project management outside the traditional planning/execution centered view. Second, management processes and approaches must be developed at the level of business units or other organizational units above projects. Such management approaches and processes relate to questions of how responsibilities, decision making and information sharing are arranged and supported in a multi-project environment so that they are linked to the overall business scheme. This widescope management perspective is needed to enable transparency across projects, across whole portfolios of projects, and across different organizational units.

In a pre-study for ambitious developments of project portfolio management in corporations and public organizations, we raised not only the importance of defining portfolios and their boundaries with appropriate responsibilities in organizations, but also the importance of managing the interaction across boundaries between the portfolio and its projects, between single projects, between different portfolios, and between different corporations in business networks (Artto et al. 2001). We concluded that organizational models, management practices, methods and tools for the strategic management of projects should be developed, the key areas of development in our current research schemes (Dietrich 2001, Ikonen 2001) being: - Definition of extended project process, its phases, and major decision making points (with objective setting, group decision making, and commitment building) - Definition of major decision making points at the level of the organization above projects

- Selection and prioritization criteria for individual projects and whole portfolios - Project portfolio management process with links to processes in single projects (including organizational, methodological and process practices to link strategy to projects) - Organizational models, responsibilities and structures at different levels in the organization - Setting portfolios and their boundaries in the organization - Interacting across multiple portfolios and their projects cross-portfolio optimizations - Use of projects and project portfolios to transform company towards strategic directions - Relevant feedback information from portfolios and their projects that imply changes in strategy - Organizational and methodological constructs that link portfolios to customers' and partners' portfolios, and negotiating priorities in business networks

- Definition of the relevant information content for decision making and objective setting, and communication of the results of the decision making to the organization. - Information sharing and communication for effective crossproject, cross portfolio and cross-functional views. - Methodology and tools for decision support and implementing the criteria - Learning from other companies participating in the research schemes through seminars and workshops (benchmarking). Project portfolio management is about aligning projects with business performance goals. In today's complex business networks, this is undoubtedly more important than ever. Industrial corporations and public sector organizations have expressed their urgent need for in-depth portfolio management knowledge and tools. Successful implementation of project portfolio management requires industry specific understanding and tight cooperation in a time frame suitable for today's dynamic businesses (Dietrich 2001, Ikonen 2001).

References Artto K. A., Martinsuo M., Aalto T. (eds.), 2001. Project Portfolio Management. Strategic Business Management Through Projects, Project Management Association Finland, Helsinki Dietrich P., 2001. Plan for Project Portfolio Management Information System Development, City of Espoo, Finland, Unpublished Document, in Finnish Ikonen T., 2001. Project Portfolio Management (PPM) Development, Research Plan, Global Project Business (GPB) Technology Program at the National Technology Agency (TEKES), Finland, Unpublished Document

Karlos A. Artto Helsinki University of Technology (HUT), Finland Department of Industrial Engineering and Management P.O. Box 9500 FIN-02015 HUT, Finland Tel: +359 9 451 4751 Fax: +358 9 451 3665 E-mail: [email protected]

We are where you are. Wärtsilä is the world’s leading supplier of complete ship power solutions and a major provider of turnkey solutions for distributed power generation. In addition Wärtsilä operates a successful Nordic engineering steel company. More than 10,000 service oriented people working in 50 countries help Wärtsilä provide its customers with expert local service and support, wherever they are.

www.wartsila.com

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 5

Microsoft Project 2000 and Microsoft Project Central See, Use, Manage, Collaborate Powerful tools and ease of use have long made Microsoft Project the tool of choice among project managers. The latest version, Microsoft Project 2000, dramatically improves the world’s most popular project management product. With Microsoft Project 2000’s new and improved features, you can visualize and work with project information like never before, and manage complex projects more effectively and efficiently. Microsoft Project 2000’s Web-based companion, Microsoft Project Central, provides a new level of collaboration within an organization by allowing team members to actively participate in project planning and scheduling.

Page 6

CATEGORY: NOTION ON PROJECT MANAGEMENT EDUCATION

Project Management Education in Project-oriented Societies J. Rodney Turner, Erasmus University Rotterdam, The Netherlands Martina Huemann, University of Economics and Business Administration Vienna, Austria Keywords: Project Management Education, Project-oriented Society, Project Management Initiatives, Project Management Competence Project management competence is based on knowledge and experience. The provision of formal project management education programmes is essential to the development of the new profession project management. In this paper we discuss the development of project management education using the United Kingdom as a base case. We then describe the current state of education in project management in Austria, Germany and Switzerland and investigate new developments in Austria and Switzerland, initiated by project management initiatives programm I austria and SwissPM. Finally we give an overview of project management education in projectoriented societies around the world. The paper derives from the work of the Global Working Party on Education and the International Project Management Association (IPMA) research initiative into the Project-oriented Society.

Introduction The state of maturity of project management education in countries around the world is currently being investigated by two initiatives. These are: 1. the global working party for education in Project Management, (Turner and Huemann 2000) 2. the IPMA research initiative into the Project-oriented Society, (Gareis and Huemann 2001). In this article, we report on what education in project management is provided in United Kingdom, and give an overview of the project management education and new developments in Austria, Germany and Switzerland.. We then give an overview on the current status in project management education in different countries around the world, drawing on the work of the two initiatives above.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Based on the definitions in the Oxford English Dictionary, Turner and Huemann (2000) define education as: structured extended programmes to impart knowledge and develop competence and training as: short courses to develop specific skills.

Provision of Project Management Education in the United Kingdom We start by describing what project management education is provided in the United Kingdom, one of the more mature project-oriented societies. We use the developments in the United Kingdom over the last half a century as a base case to illustrate the developments that have occurred. We consider: - tertiary education - work-based programmes - primary and secondary education

Tertiary Education in the United Kingdom In the United Kingdom, the provision of education in project management started at the top and worked down. People started undertaking doctorates or masters degrees by research, and then offering post-experience education at masters degree level. From there it percolated down through the levels of tertiary education, and into secondary and primary education. Perhaps this was necessary; it was first necessary to train the trainers for lower levels. Perhaps also it was inevitable; interest at the higher levels creates interest at lower levels. In other countries that came later to project management education it was different. Taught masters degrees were offered first, either programmes specialising in project management, or with project management as an essential component on wider programmes. From there, it spread up and down to other levels. This was the case in Austria for instance. Page 7

Doctorates and Masters Degrees by Research In the UK, the first doctorates in project management related subjects were done in the 1960s by some of the now leaders of the profession, Peter Morris, Martin Barnes and John Perry. It is now theoretically possible to do a research degree in almost any business, engineering, construction, building or information systems faculty. Rodney Turner has supervised or examined people at Bournemouth, Cranfield, Lancaster, Leeds Metropolitan, Loughborough and the Open Universities, and at Henley Management College. He is also aware of people doing doctorates at Herriot Watt, Leeds and Reading Universities, Imperial College, and UMIST. There are about 120 universities and university colleges in the UK, and so there are active doctoral research programmes in project management in at least 10% of them.

Table 1. Taught master degrees in Project Management at the UK's Universities

Taught Masters Degrees In the United Kingdom, the first taught masters degrees in Project Management were offered by Cranfield University and Henley Management College in the late 1970s, sponsored by the Engineering Construction Industry Training Board, (ECITB). Because of the sponsor, these programmes were initially not generic, but focused on the construction industry. Since then, both programmes have become generic, and there are now a growing number of programmes offered, Table 1. At some universities, generic programmes are offered. They cover the management of all types of projects. At others they tend to focus on projects of one type or another. Note that in the United Kingdom, it is not possible to give a degree the name of a specialist discipline. Thus the name Master of Project Management is not used. All the qualifications in the top part of Table 1 are called MSc (Project Management) or MBA (Project Management). (The title, Master of Project Management is used in other countries, for instance at the University of Limerick in Ireland and the University of Technology Sydney in Australia.) Then there is a range of specialist degrees from related disciplines. These cover things like Construction Project Management or Risk Management, and are included in the bottom part of Table 1. Interestingly, to our knowledge there are no masters programmes in InformaPage 8

Table 2. Bachelors degrees or equivalent in project management in the UK

tion Systems Project Management, (although there are courses in Information Systems Management incorporating project management). Finally there are many other masters degree programmes which incorporate project management as a compulsory or optional module. Most MBA programmes include a course on operations management which will address project management, or include a project management module. Similarly many courses on engineering, construction or information systems will include a project management module. With about 120 universities and university colleges in the UK, a little over 10% of them offer taught masters degrees in project management or closely related disciplines. A very large proportion would offer project management modules as part of other degree programmes. This figure of about 10% seems to be the level reached by the more mature countries, (Britain, Australia, New Zealand and Ireland, al-

though with the latter two, 10% is just one university or university college each).

Bachelors Degrees There are three bachelors degree programmes in project management in the UK, Table 2. You will see that all of these are from the building or construction industry. However, project management is also taught as a compulsory or optional module on many other programmes in management, engineering, construction or information systems. For instance, project management is a compulsory module on the programme of information systems management at Bournemouth University. Rodney Turner is on record as saying the project management cannot be taught to undergraduates, that it is essentially a subject for post experience study, (Turner 1995). Clearly that is not now true, and perhaps it is part of the developing project management maturity of societies that as project-based

ment department, in the use of its propriety project management methodology, PRINCE 2

National and Scottish Vocational Qualifications, NVQs and SVQs National Vocational Qualifications (NVQs and SVQs) were introduced in the UK during the 1990s. These are works-based education programmes that give maximum credit to works based experiences, and to keep formal study to a minimum. NVQs and SVQs in Project Management are offered by a number of professional institutions and other bodies. Figure 1. Kolb's experiential learning cycle ways of working become more widespread that people become more receptive to them at an earlier age. Rodney Turner is himself teaching project management modules on several undergraduate programmes in the Netherlands, and Martina Huemann in universities and Fachhochschulen in Austria. However, perhaps some of the sentiment remains true, in that post-experience and pre-experience people have different learning styles, which needs to be recognised by the educators. For preexperience people the education programme must primarily aim to impart explicit knowledge, whereas for post-experience people it can also aim to develop implicit knowledge, skills and behaviours through Kolb's learning cycle, Figure 1, (Turner et al. 2000). Educators need to adapt their style to the audience, and to be aware of the danger of mixing students at different stages of development in the same class. (Students perhaps also need to be aware that educators have different teaching styles, some aimed at post-experience learners and some at pre-experience). At least three other universities or colleges also offer postgraduate certificate and diploma programmes, Table 2. In the UK's university system, a postgraduate diploma is considered as being equivalent to a bachelors degree, but is offered to post experience students in a much narrower and more focused subject. The three institutions offering postgraduate diploma programmes all specialise in teaching post experience people. Certificate and diploma qualifications are also offered by several professional or other bodies. These measure attainment of very specific skills after a shorter training programme, and are discussed at the start of the next sub-section. P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Works-based Education and Qualifications in the United Kingdom Available in the UK are several different types of works-based qualification, including: - certificate and diploma qualifications - national and Scottish vocational qualifications, NVQs/SVQs - certification by professional institutes All these qualifications certificate the attainment of a specific skill or level of competence. In these cases, the qualifying bodies merely examine the candidate. It is beholden on the candidate to determine what education they require to meet the requirements of the examination, and to compose their own course of study from courses available on the open market, (Lane 2000, 2001), leading to an examination by a professional or other body. Indeed, if someone feels competent, they can sit the examination with no study, (risky). According to the European norm, EN45013, it is required that the training body and examining body should be separate, (a requirement not met by all higher education institutes, except possibly the colleges of London University).

Certificate and Diploma Qualifications Professional Certificate and diploma qualifications are also offered by several professional bodies. The best known certificates and diplomas in this category are those offered by the Information Systems Education Board, ISEB. However, the Association for Project Management offers a range of knowledge certificates as well. There is also a certificate offered by the CCTA, a govern-

Certification by Professional Institutes There is growing interest in certification in the UK. Two competing programmes are offered: 1. the multi-stage programme of the International Project Management Association, IPMA, operated by the Association for Project Management, APM 2. the single stage programme of North American Project Institute, PMI The only stage of the PMI programme (PMP) is equivalent to the first stage of the APM/IPMA programme (APMP), and both are aimed at people at the beginning of their professional or management career. Both are based on a test of knowledge, with some measure of professional experience. The second stage of the APM/IPMA programme contains a further test of knowledge and experience, with some test of appropriate skills and behaviours. The third stage (Certificated Project Manager, CPM) is a rounded test of competence for experienced project managers. For more detailed descriptions refer to Turner and Huemann (2000), or to the literature of the relevant associations, or their web pages, (www.ipma.ch, www.apm.org.uk, www.pmi.org).

Primary and Secondary Education in the United Kingdom At a workshop benchmarking the results of research into the project oriented society, (Gareis and Huemann 2001), some of the six countries present (Austria, Denmark, Hungary, Romania, Sweden, UK), claimed that all their primary and secondary school children received education in project management, and Page 9

some said none did. In particular the UK and Sweden said it depends how you interpreted the question. In the UK, almost all primary school children are given termly project to complete. Some of their learning is through being set this research exercise to complete each term; it is part of the National Curriculum. The question was whether these projects counted as project management education. Some argued that because the children were given no guidance in project management systems and process, this did not count as project management education. Others argued that it did count as project management education because: 1. It gave the children a project mindset. They learnt from an early age that project-based ways of working are an important alternative to more routine ways of working. This mindset is important for the development of the project-oriented society. 2. The children are probably given guidance in simple systems and processes, appropriate to their age. At six years old, children do not have the structural skill to apply a work break down structure, nor the social skills for complex team behaviours. But they can be taught to set themselves a simple objective, work out what they have to do in a limited amount of time, and set themselves weekly tasks. They can also learn to share work amongst themselves, drawing in their different skills. That is all part of developing the mindset. Thus most of us concluded that at primary schools in Western European countries, and particularly the UK, Sweden and Denmark, children are given education in project working appropriate to their age. The children may not be given explicit knowledge of project systems and processes, but they are given implicit knowledge of project objective setting, project scheduling and project team working. However, at secondary schools, where perhaps the children are now ready for more explicit training in project management, none is yet given in the UK, Sweden, nor Denmark. They continue to do some of their work through projects, and so continue to develop the implicit knowledge of project working. Page 10

Provision of Project Management Education in Austria, Germany and Switzerland We now describe project management education provided in German speaking countries. We also discuss new developments currently being undertaken in Switzerland and in Austria to further develop the project-oriented societies. In Switzerland the project SwissPM, organised by the Swiss Project Management Association (SPM), concentrates on the implementation and further development of project management education and training to develop Switzerland into a project management competence centre. The Austrian Project Management Association (PMA) has chosen a different approach to further develop the competences of the projectoriented society Austria. Within programm I austria, the strategy is to promote project management in industry, and to provide project management to families, schools and municipalities, to raise a wider understanding of the profession project management.

Tertiary Education in German Speaking Countries Universities In Austria and Germany there is the possibility to specialise in project management in doctorate programmes at technical or management universities. At the master degree level there are several universities that include a project management courses in their programmes. In Austria and in Switzerland there are no programmes equivalent to a master degree in project management. At the University of Economics and Business Administration Vienna project management is formally established in a chair. Project management is offered formally as an elective within the curricula of business administration, international trade and economics at this university. In Germany project management is formally established as a chair at some universities like the University of Bremen and the University of Giessen. There are also professor of construction project management at the Universities of Wuppertal and Dortmund. The Munich Centre for Management Development (Universität der Bundeswehr) offers an MBA in Project Management.

This programme is carried out in cooperation with Henley Management College, (see Table 1). The programme is designed to prepare general managers for senior positions in project based organisations and to enable technical managers to improve their pm competence and gain a broader perspective on management.

Fachhochschulen There are several Fachhochschulen in all three countries, with project management as an integrated compulsory module on certain degree courses, from engineering, management, export, information systems, telecommunication, tourism, art and social professions. Further there are Fachhochschulen , which give project management a much higher emphasis often in the connection with a specific industry. In all three countries there are Fachhochschulen that provide project management in a generic form suitable for all industries. At Fachhochschulen the students might or might not be post experience. As in the UK, some universities offer postgraduate certificate or diploma programmes. There the students are post experience and study in a much narrower and more focused subject. One example for such a programme is the postgraduate programme International Project Management organised by the University of Economics and the Technical University Vienna. The participants come from all different kinds of industries and have already at least some experience in project management Austria has three Fachhochschulen offering project management programmes. Germany has at least ten offering project management education in at least some modules. Programmes in construction and engineering especially include courses in project management. The University of Bremen has a post graduate programme (European Project Manager) in their offer, Table 3. In Switzerland, as a part of the project management initiative, SwissPM, (mentioned above), project management was integrated in all programmes at the Private Hoschschule Wirtschaft (e.g. Graduate Business School St.Gallen). Further one postgraduate programme in project management was established. The contents of the project management education were based on a survey analysing the requirements of Swiss-German companies re-

garding education (Niederer et al 2000).

Professional Certificates and Diplomas Professional certificates and diploma qualifications are also offered by several professional or other bodies. For instance in Germany the German Project Management Association (GPM) together with RKW offers programme (PMFachmann/-frau) which qualifies for the IPMA D-level certification. Also other project management education programmes are closely linked to the certification. For instance, the project management programme at the Graduate Business School St.Gallen prepares candidates for IPMA certification Level C. Vocational qualifications like in the UK do not exist in Austria, Germany or Switzerland. However, IPMA project management certifications exist in all three countries.

Primary and Secondary Education in German Speaking Countries At secondary school level, project management is part of the curricula in trade schools in Austria. For instance in all trade schools the pupils age 19 (last grade of trade school) have to do a

project work in their specialisation they have chosen, e.g. marketing or information technology. The projects are based on real cases and are coached by practitioners. Project management methods like project work break down structure, project environment analysis scheduling methods are applied. In an annual competition these projects are judged for an award. The criteria against which they are judged focus mainly on content , but also include whether they have done the project management professionally. Many of these pupils are taught by professionally qualified teachers. Some of the teachers in trade schools are certified at IPMA D-level. In High Schools project work is part of the curriculum, but no project management is thought to date. Within programm I austria further attempts to integrate project management in these schools have been started. In a pilot school project management is introduced to selected teachers and pupils. The project management methods are applied for instance in event projects (school theatre, school ball, class journeys, etc.) In Switzerland the school system is changing. Project work has been widely integrated in all kind of school types The establishment of project man-

Table 3. Fachhochschulen or equivalent programmes in Austria, Germany and Switzerland P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

agement in primary and secondary education is described as one of the essential promoters to become a truly projectoriented society and stay competitive in the long run. Within SwissPM one the objectives is to integrate project work/ project management according to the age level. In the age group 16 and up selected pm methods should be introduced. Even the importance of the age group was stressed, the initiative gave priority to the establishment of project management in Fachhochschulen.

Summary The UK is probably one of the most mature societies world-wide for the provision of education in project management, with 10% of higher educational institutions offering taught masters and research degrees in project management, and many professional institutions supporting opportunities for works-based education. Areas of immediate development would be the widening of provision at undergraduate level, particularly the offering of first degrees in information systems project management, and the introduction of teaching on project management systems and process at secondary school. However, it must be recognised that, at all levels, education in project management must be appropriate for the age. In comparison to the UK, in Austria, Switzerland and Germany there is less project management education provided. In Austria and Switzerland no master programme in project management is offered. At which level of education project management is provided also depends on the university or school system in that particular country. In Austria for instance the university system is rather rigid, so no master degree programmes in project management can be found. But in the newly established Fachhochschulen project management is offered widely. To react to the demand of educated project managers in the last view years further to one postgraduate programme that has been in existence since the early 80s two programmes have been established. In all four countries project work has already been integrated at primary and secondary level, but that does not necessarily mean that project management methods are included. One exception to mention are trade schools in Austria, were project management is explicitly taught to pupils age 19.

Page 11

Country Provision So how does the provision of project management education in these countries described above compare with other countries? Table 4.1 and 4.2 show the status of education in project management in several countries from around the world. All the countries listed have been represented in the meetings of the global working party in education (Turner and Huemann 2000) or the benchmarking of the project oriented society (Gareis and Huemann 2001) or both. The schedule of meetings is shown in Table 5.

From Table 4.1 and 4.2, it can be seen that the UK has the greatest maturity in the provision of project management education. However, several countries are close behind, including Sweden from Europe, the USA and Canada from the Americas, Australia, New Zealand and South Africa for the Commonwealth of Nations. In the more mature countries, about 10% of universities or university colleges offer doctorates and taught masters degrees in project management. This figure is achieved by Britain, Sweden, Australia, New Zealand and Ireland. The USA, Canada, Ger-

many, Switzerland and Denmark have about half that figure. We would expect eventually the number of universities offering bachelor degree qualifications to grow to a similar number. Unless, that is, as argued by Turner (1995), project management is essentially a post experience qualification, and individuals will learn some other profession as their first discipline, and project management second as a post-experience discipline. We predict that there will be a growing number of programmes combining project management with another major, construction

Table 4.1. Country provision of education in project management (Europe)

Table 4.2. Country provision of education in project management (outside Europe) Page 12

project management, information systems project management, etc. But as societies become mature in their use of project management, and it becomes a more widely used way of working, project management must be taught at secondary and primary schools. Perhaps at primary schools, the level of teaching will not progress beyond what is done at the moment. That is all that is needed to give very young children an appreciation of the role of projects and the methods of working. But at secondary schools, older children need to be given formal instruction in project management systems and process. This process will be self propagating, as more and more people become familiar with the techniques, they will become more natural, and will percolate through all levels of education in the society.

Table 5. Meetings of the global working party (GWP) on education in project management and the project-oriented society (POS) benchmarking research project.

Conclusion and Future Research We conclude that project management education provisions differ in different societies because of its specific context. Some reasons for differences in project management education are: - the maturity of the projectoriented society - history of provision of project management education - the rigidity of education system in the society - government support to establish project management education - provision of project management training by project oriented companies Societies with a high competence as project-oriented society have a broad offer in project management education. Closely linked to that assumption is the history of provision of project management education. e.g. The UK has not Pr o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

only a broad offer in project management education, but also a quite long history in the application of project management in industries. The rigidity of the education system often makes it rather difficult to introduce project management in the education structures existing. When new study types are established it is much easier to introduce new ideas e.g. a lot of project management education was introduced in Austria, when Fachhochschulen were established only a couple of years ago. The university system in Austria still is rather rigid and not able to react to the demand for project management personnel. In some countries like the Ukraine the government supports the establishment of project management education. In the Ukraine a lot of project management education at universities (e.g. master programmes in project management) are provided. Romania has a low competence as project oriented society but provides quite a lot of project management education at university level (Gareis and Huemann). The establishment of education was supported by EU funding. Probably project management education can serve as a starting point for (further) developing the project-oriented society. In other countries a lot of project management education and training activity can be observed within projectoriented companies to compensate the lack of project management education supported by state. We will conduct further research regarding - the links between project management education and the maturity of the project-oriented society - and to develop an ideal model for project management education in the project-oriented society.

References

XII(3), March. Lane, K. (ed) 2001. Project Manager Today, special issue with Training and Education Focus, XIII(3), March. Turner, J.R. 1995. The Qualification Arena: making informed choices, in The Project Management Year Book 1995/96, Association for Project Management, High Wycombe. Turner, J.R., Huemann, M. 2000. Formal education in project Management, in The Project Management Year Book 2000, Association for Project Management, High Wycombe. Turner, J.R., Keegan, A.E., Crawford, L. 2000. Learning by Experience in the ProjectBased Organization, ERIM Report Series, ERS-2000-58-ORG, Erasmus Research Institute of Management, Rotterdam, (http://www.erim.nl).

Professor J. Rodney Turner MA, MSc, DPhil (Oxon), BE (Auck), CEng, FIMechE, FAPM, CMath, MIMA, MInstD Department of Marketing and Organization Faculty of Economics, Erasmus University Rotterdam Burgemeester Oudlaan, 50 3062 PA Rotterdam, The Netherlands Tel: +31-(0)10-408-2723 Fax: +31-(0)10-408-9169 E-mail: [email protected]

Dr Martina Huemann

Gareis, R., Huemann, M. 2001. Assessment and Benchmarking of Projectoriented Societies, in Project Management, Vol. 7, No.1.

PROJEKTMANAGEMENT GROUP

Niederer, R., Greiwe S., Minnig C., Schwarb, T. Projektmanagement in der Schweiz: Praxis und Ausbildung (Project Management in Switzerland: Practice and Education), in Projektmanagement, 3/2000.

Franz Klein-Gasse 1 A-1190 Vienna, Austria

Lane, K. (ed) 2000. Gateway guide to qualifications and training, in: Project Manager Today,

University of Economics and Business Administration Vienna

Tel: +43-1-4277 29401 Fax: +43-1-368 75 10 E-mail: [email protected]

Page 13

CATEGORY: NOTION ON STUDYING PROJECTS IN SOCIETIES

Assessing and Benchmarking Project-oriented Societies Roland Gareis, University of Economics and Business Administration Vienna, Austria Martina Huemann, University of Economics and Business Administration Vienna, Austria Keywords: Project-oriented Society, Project-oriented Companies, Benchmarking, Competitive Advantage A society, which applies projects and programs as temporary organisations to perform unique processes of medium or high complexity, can be perceived as a project-oriented society (POS). It is the objective of a POS research initiative, to develop and to apply a model of the POS, which identifies and describes the specific processes and services of a POS, and provides criteria for the measurement of the competencies of a POS. This paper reports about the results of this research. It describes the POS model and it shows its application in assessing and benchmarking a group of six project-oriented societies - namely Austria, Denmark, Hungary, Romania, Sweden and the United Kingdom. programm I austria - The Austrian Project Management Initiative is presented as an example for the further development of the competencies of a POS.

The POS Research Initiative The Structure of the POS Research Initiative The IPMA - International Project Management Association conducts a research initiative with the objective to develop the model of the POS. In a "POS Conception Project" the model of the POS was constructed and elements for the description of a POS were defined. Based on these conceptual results the project "POS Benchmarking" is performed currently. The objectives of this project are to assess the competencies of different POSs, to analyse commonalties and differences between these POSs and to define strategies for further developing the competencies of the POSs. A first group of POSs has been benchmarked. It is planned to benchmark a further group of POSs in 2002.

The Research Approach In the POS research initiative a systemic-constructivistic research approach is applied based on the following three fundamental paradigms: Page 14

- the radical constructivism (see Glasersfeld 1992) as the epistemological approach, - the social systems theory (see Luhmann 1995) as the organisational approach, and - the qualitative social research (see Lamnek 1995) as the methodological approach. The research emphasis lies on the generation of hypotheses and the development of the POS model. The empirical assessment and benchmarking work supports the creation of a viable POS model. The research is carried out in a cyclic process and consists of several loops of information gathering, hypotheses generation and reflection. For the information gathering a multi-method approach, including questionnaire based assessments, documentation analyses, observations, and group discussions, is applied. The interpretation of the data gathered and the hypotheses generated is done in several workshops with representatives of the different POSs. The

quality of the assessment data depends on the assessment process applied in the single POSs. The benchmarking results represent the perception of the POS Team. The POS model as well as the assessment and benchmarking results are social constructs. These constructs are further developed and examined in different team structures to allow for different perceptions. The POS is perceived as a social system. According to Luhmann`s categorisation of social systems in interactions, organisations and societies, the society is the most complex social system. Social systems establish and maintain themselves by constructing a difference to their social environment. Therefore, Luhmann (1995) defines a social system as everything, for which a differentiation in internal and external is possible. Other societies as well as the economic and political systems of a society under consideration are defined as context of the POS.

The Project-oriented Society: Basic Hypotheses More projects and programs (of projects) are performed in companies, but also in municipalities, schools and even families. "Management by Projects" becomes an organisational strategy of "Projectoriented Companies", to cope with increasing complexities and dynamics in the business environment .The globalisation of the economy, new technologies with ever shorter product development cycles, and the application of a new management paradigm, characterised by virtual organisations, empowerment, knowledge management, etc. promote the application of project and program management. Not only traditional industries but also the public sector and non-profit organisations consider projects and programs as appropriate organisations to perform complex business processes. New project types, such as marketing-, product development-, and organisational development projects, gain in importance. A society, which applies projects and programs as temporary organisations to perform unique processes of medium or high complexity, can be perceived as a POS. The research initiative is based on the following hypotheses: - Societies are becoming more project-oriented. Projects and programs are applied as temporary organisation forms. - Project management is not just a micro-economic but also a macro-economic concern. - POSs can be defined by national or by regional boundaries. - POSs are characterised by specific processes applied by project-oriented companies, such as project management, program management, project portfolio management, personnel management, and organisational design, and by specific project management related services, provided by PM education, PM research, PM marketing, and PM standardisation institutions. - Different POSs have different competencies to perform these specific processes and to provide these PM related services. Competencies of POSs can be benchmarked.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

- The more competencies a POS has, the more competitive it is internationally. There is no ideal POS. The competencies required by a POS depend on its context, especially on the importance of projects and programs, and the management culture of the society. - The competencies of a POS can be further developed. This can be done by national project management initiatives. - POSs with similar competencies have a high potential for efficient co-operations. POSs with high competencies can transfer their knowledge to societies with little competencies. All but the last hypothesis have been considered in the empirical work and interpretations so far.

The Model of the Projectoriented Society Boundaries of the POS The perception of a society as a POS is a construction; it requires the observation of a society with a specific "pair of glasses", the glasses of project-orientation. The focus is on those communications of the society, which relate to projects, programs and project portfolios. Generally, the boundaries of societies can be constructed according to different criteria. By applying a functional differentiation as primary differentiation criterion for the construction of societies, subsystems, like economy, science, education, politics, law, art, religion, etc. can be defined. As far as this functional differentiation of the society is concerned, the POS model concentrates on the subsystem economy, but also considers supporting activities of the subsystems education, science and law. As secondary differentiation criterion for the construction of societies Luhmann (1995) suggests territories and the extent of the economic development. Examples for application of the secondary differentiation criterion are: - National territory: e.g. USA, Canada, Australia, Sweden, Austria - Regional economic associations: e.g. EU, Nafta - Regions with the same language:

e.g. English speaking countries - Extent of economic development: developed , transformation, developing countries. Here the boundaries of the POS are defined to include all communications of a nation's economy-system, which relate to projects, programs, and project portfolios and those communications of a nations science-, education, and law-system providing services related to project, program and project portfolio management.

Context of the POS The competencies of a POS are influenced by the importance projects and programs have for a POS, by the overall structure of the society and by its history and expectations about the future. The importance of projects and programs for the society can be determined by assessing the number of project-oriented industries and companies. Information about the history and the future of the society can be described regarding the social sub-systems economy, science, education, politics, law, religion, arts, etc.

Processes and Services of the POS The POS model considers on the one hand the processes of project-oriented companies (POCs), such as project management, program management, project portfolio management, personnel management and organisational design, and on the other hand the services of PM related institutions, such as PM education, PM research, PM marketing and PM standardisation institutions, as elements for describing a POS. The POS model can be visualised by a spider web. The axes of the spider web represent the processes and services of the POS. Below the elements of the POS are shortly described: - Project management: A project is a temporary organisation for performing a unique, short- or midterm process of medium or high complexity. PM is a business process of the project-oriented company. The PM process starts with the project assignment and ends with the project approval. It consists of the sub-processes project start, project co-ordination, project controlling, project discontinuity management and project close-down.

Page 15

Project management 100

PM standardization

80

Programme management

60 40 20

PM marketing

Project portfolio management

0

Personnel management in projectoriented companies

PM research

PM education

Organizational design of projectoriented companies

Figure 1. The spider web model of the project-oriented society -

-

-

Program management: A program is a temporary organisation for performing a unique, mid-or longterm process of high complexity. A program is a set of projects and tasks which are closely coupled by common objectives. Programs are limited as to time and budget. Program management is a business process of the project-oriented company. The program management process consists of the subprocesses program start, program co-ordination, program controlling, program close-down and occasional the management of a program discontinuity. Project portfolio management: A project portfolio is a set of projects (and programs), which are performed by a project-oriented company at a certain point in time. A project portfolio is more than the sum of its projects. A project portfolio database is the basis for project portfolio management. Information of this database can be used to decide, if new projects should be started and to establish priorities among projects. The objective of project portfolio management is to optimise the results of the project portfolio. Personnel management in projectoriented companies: Personnel management processes in projectoriented companies are recruitment, disposition and development of project personnel. In projectoriented companies a PM career path includes the PM-roles Junior Project Manager, Project Manager, Senior Project Manager and PM

Page 16

-

-

-

-

-

Executive. Organisational design of projectoriented companies: Projectoriented companies have specific integrative organisational structures, such as PM Offices, Project Portfolio Groups or Expert Pools, and specific integrative tools such as PM procedures and standard project plans. PM education: Formal PM education programs are provided by different institutions and might lead to academic degrees in PM. The PM approach taught and the number of courses vary in different programs. PM research: PM research projects and programs, PM related publications and events and PM related research financing are services provided by PM research institutions. PM marketing: The primary PM marketing institution in a POS is the national PM association. Services like membership, certifications of project managers, PM events, etc. are services provided by these institutions. PM standardisation: Services provided by PM standardisation institutions, such as a national norming institute, are PM norms and formal PM requirements for public tenders.

The POS Questionnaire The context of the POS as well as each element of the POS model is specified in detail in the POS questionnaire. The questionnaire consists of

- Part A: Context of the POS and importance of projects and programs in the POS, - Part B: Services of PM-related institutions in the POS, and - Part C: Practices of projectoriented companies in the POS. Part A of the questionnaire asks for context information regarding the managerial competitiveness of each society based on international competitiveness reports such as the Global Competitiveness Report (Sachs et al.1998) and the World Competitiveness Report (International Institute for Management Development 1997). Part B of the questionnaire asks for the services of PM-related institutions such as PM education, PM research, PM marketing and PM standardisation institutions. Part C consists of questions regarding the practices of project-oriented companies in project management, program management, project portfolio management, personnel management and in organisational design. In Figure 2 and Figure 3 examples of questions of the questionnaire are shown. The questionnaire of the POS model can be applied for assessing and benchmarking POSs.

Assessing and Benchmarking the Competencies of POSs A POS requires competencies, i.e. knowledge and experience, to perform its specific processes and to provide the PM related services. The assessing and the benchmarking of the competencies of POSs is performed in the project "POS Benchmarking". The first level of the work break down structure of the project "POS Benchmarking" is shown in Figure 4. The conception of the POS model started in May 1999. The assessments and the benchmarking of the POSs of BM Group 1 was performed in the period from October 2000 to March 2001. It is planned to start the assessments and the benchmarking for the BM Group 2 at the end of 2001. The project organisation chart of the project "POS Benchmarking" is shown in Figure 5. The members of the project organisation are listed in Table1.

The Process of Assessing and Benchmarking the First Group of POSs The project "POS Benchmarking" is

Figure 2. An example of a PM education related question (Part B)

Figure 3. An example of a project management related question (Part C)

performed as a co-operation of IPMA and the PROJEKTMANAGEMENT GROUP of the University of Economics and Business Administration Vienna with different national PM Associations and organisations representing POSs. The process of assessing and benchmarking the POSs is the following: - Each POS nominates a POS Assessment Team with representatives of the national PM association, of project-oriented companies, PM researchers and PM students. A National Co-ordinator represents the POS in the overall POS Team. - The PM related services provided by institutions (PM education, PM research, PM marketing, PM standardisation) are assessed by national PM Institutions Teams. Internet information and documents, that describe the services of these PM institutions, are analysed. This assessment is questionnaire based. It is supported by interviews. - The assessments of the practices of the project-oriented companies are performed by national PM Practice Panels in workshop form, considering the practices in project management, program management, project portfolio management, personnel management and in organisational design. This assessment is also questionnaire based. - The analyses and the discussions of the results of the assessments of the single POSs are performed by the overall POS Team with representatives of the different POS Assessment Teams in workshop form. Commonalties and differences between the POSs are interpreted. Overall strategies for the further development of the POSs are planned. - A POS benchmarking report is prepared, and the benchmarking results are published and communicated in the single POSs.

Figure 4. Work break down structure of the project "POS Benchmarking" P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 17

Results of Assessing and Benchmarking the Services of PM Related Institutions The services provided by PM education, PM research, PM marketing, and by PM standardisation institutions in the different POSs are described and compared.

PM Education In Austria a formal PM degree is provided by three colleges (Fachhochschulen). Three postgraduate programs in PM exist, but there is no master degree program in PM. PM is provided in the form of an elective education program at the University of Economics and Business Administration Vienna. There students can do their PhD thesis or master thesis in PM and by that specialise in PM. In trade schools PM education is provided. In Denmark there is no formal degree "Master in PM", but similar as in Austria students can do a master or PhD theses in PM. PM education is provided at six universities. One bachelor degree in PM is offered. None formal degree is granted by continuing education programs. PM is included in secondary education programs. In Romania at the Academy of Economic Studies in Bucharest and at the Ovidiu University Constanta master degree programs in PM were established in 2000. In some other Romanian universities PM modules have been included. No other formal PM education exists in Romania so far. Some consulting companies offer PM training. Sweden has two universities providing formal master degree programs in PM. In many more universities (at least 10) PM education is offered and it is possible to do a master or PhD thesis in PM. No formal degrees in colleges or continuing education institutes exist, but at least 13 colleges and 3 continuing education institutes offer PM education. In Hungary two master degree programs in PM are running. PM education is provided in form of single modules at at least three universities and at some continuing education institutions. Some secondary schools in the field of environment protection have included PM in their curricula. In the UK 13 master degrees in PM (or closely related disciplines) are offered. Of about 120 universities and university colleges in the UK, about 10% offer masters degrees in PM or closely related disciplines. Doctorates in PM Page 18

can be done at at least 13 institutions. Three bachelor degrees and three diploma programs in PM exist in the UK. In all assessed POSs PM education can be found in tertiary education (universities, colleges, continuing education). UK is the most mature society regarding degrees in PM and formal PM education. Supported by EU funding Romania has established PM master degree programs. No other formal PM education is provided so far. In Austria and in Denmark no master degrees in PM are provided. PM is provided in secondary schools in Austria, Denmark, Hungary and Sweden. In all POSs except Romania project work is often included in primary education. But no PM education is provided at this education level.

The PM approach taught in PM education programs is rather planning oriented in Hungary and Romania, while in Austria and Denmark the approach is rather organisational oriented. Sweden states that their PM education is organisational oriented. In the UK education programs with different PM approaches exist, ranging from traditionally planning oriented to organisational oriented. Only Romania states that they have a national institute co-ordinating the PM education. Objects of consideration in this co-ordinations are the contents as well as the teaching methods of the PM education programs. The coordinating institute is also responsible for the co-ordination between education institutes.

B M Group 1 P OS B M P a rtn er A PM Pra ctice Pa n el

. . .

PM Ins titu tion s Tea m

P OS B M P a rtn er 7

Na tiona l Co-ordin a tor

PM Pra ctice Pa n el Na tiona l Co-ordin a tor

P OS B M P a rtn er B PM Pra ctice Pa n el PM Ins titu tion s Tea m

PM Ins titu tion s Tea m

Na tiona l Co-ordin a tor

. . .

B M Group 2

P OS B M P a rtn er X

Na tiona l Co-ordin a tor

P OS M a rketin g

P OS As s is tan ts P roject M a na g er P roject Org a ni za ti on

P OS Off ice

PM Pra ctice Pa n el PM Ins titu tion s Tea m

P OS Fin a ncin g Tea m

P OS Tea m

P roject Owner

Figure 5. Organisation chart of the project "POS Benchmarking"

Table 1. List of the organisation members of the project "POS Benchmarking"

PM Research In none of the POSs a national institution co-ordinating PM research exists. Partly the co-ordination is done by national PM associations, like in the UK, where the national association APM also carries out PM research. The assessments show that in Austria, Denmark, Sweden and the UK quite a number of PM research projects (and programmes) have been carried out during the last five years. In Austria for instance within the research programme "Best PM Practice" a process-oriented PM approach has been developed at the University of Economics and Business Administration (1996-1999). PM research initiatives often support the promotion of PM as a profession in the society. For instance in the

UK one of the most important research projects was the renewal of the APM´s body of knowledge, which was performed in co-operation with UMIST. In Sweden project sweden - based on a collaboration between universities and industries - aims at enhancing PM competence through research (see also PM marketing table). In Hungary only some PM research was carried out during the last five years. In Romania PM research has not yet been established. In Austria, Denmark, Sweden and the UK a few PM related research events took place during the last five years.

PM Marketing In all assessed POSs national PM associations exist. In Romania a national PM association was established in 2000 and

Table 2. PM education in POSs

is currently seeking for IPMA membership. The PM associations in some countries (Austria, Denmark, Sweden and the UK) offer a lot of services like PM marketing, PM events, PM publications, PM discussion platforms and developing PM standards. In Austria, Denmark, Hungary, Sweden and the United Kingdom PM certifications according to IPMA standards are carried out. In Hungary and in the UK several PM associations exist. In Austria, Denmark, Hungary, Romania, Sweden and the UK also PMI chapters exist. No doubt that APM the Association for Project Management in UK with about 9.000 individual members is a very strong and very active force for promoting PM in the UK. The most important initiative in the last five years was APM´s development of a revised body of knowledge. Other national associations are of course smaller because of the number of inhabitants in the country, but probably also because of cultural differences. For instance, while in the UK it is a habit to join clubs or associations, in Austria people do not like to formally join in. Nevertheless there also exist very active small PM associations e.g. in Denmark or in Austria. The PM approach represented by the PM associations of Sweden and Austria is organisationally oriented. Romania's approach can be characterised as rather organisationally oriented. In Hungary the association follows a rather planning oriented approach. UK stated that within the association all PM approaches ranging from organisationally oriented to planning oriented are represented. None of the societies stated that the profession project manager has already been formally established. In all POSs PM initiatives are currently running or have been accomplished. These PM initiatives are often aiming at further developing the profession.

PM Standardisation

Table 3. Project management initiatives in POSs P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

In Austria and the UK national PM bodies of knowledge according to the ICB International Competence Baseline exist. In Austria there are also some special norms (DIN, ÖNORM) for the standardisation of PM applied. Denmark is currently developing a new PM body of knowledge, which will be issued later in 2001. In Hungary the PMBok and Prince are used widely as a PM standard. In Romania no PM norms or standards exist. The UK is the only society stating Page 19

that formal PM requirements are asked for in public tenders. Namely Prince and APM competency certificates are asked for.

Results of Assessing and Benchmarking the Practices of Project-oriented Companies The data resulting from the assessments of the practices of project-oriented companies are average data relating to all project types performed by all industries in the different POSs. Different data might result from assessments of specific industries and/or specific project types in the POSs.

Project Management The benchmarking results regarding PM are shown in figure 6 and 7. Figure 6 visualises the competencies in the project start process. Figure 7 illustrates the competencies in the other PM subprocesses, namely the project co-ordination, project controlling, project discontinuity management and project close-down. In Austria in the project start process PM methods for planning (like project goals, wbs, bar chart, project cost plan, project resources plan, business case analysis, etc.), for project context (such as the project environment analysis), design of project organisation (project organisation chart, project role descriptions, etc.) and project risk management methods (such as the project risk analysis) are sometimes applied, while PM methods for designing a project culture (like project name, project slogans, project mission statements etc. ) and project discontinuity management (project scenario analysis, escalation plans, alternative plans) are seldom applied. A similar picture shows Denmark, where also PM methods to design a project culture are sometimes applied. In the project start process in Hungary PM methods concerning the design of the project organisation and the project culture are sometimes applied, while all PM methods for other objects of consideration are seldom used. In Sweden PM methods considering project context, the design of project organisations and project culture are often applied in the project start process. PM methods for planning, project risk management and discontinuity management are sometimes used. In the UK all PM methods are sometimes used in the project start process. Page 20

Figure 6. Benchmarking results: Project management - Part 1

Figure 7. Benchmarking results: Project management - Part 2

Regarding the competencies for the performance of the project start process the following general interpretations are possible: - Two groups of POSs can be differentiated. Romania and Hungary show less competencies in comparison to the other POSs. - The scores are seldom or sometimes, only Sweden claims to apply certain methods often. - There is less application of project risk management and of project discontinuity management than of the other PM methods. Austria, Denmark and Hungary show similar competencies for the performance of the other PM sub-processes. In these POSs PM methods are often used in the project co-ordination process. The project plans (goals, work breakdown structure, schedules, cost plan, etc) are sometimes adapted in the project controlling process. In Romania less PM methods are used. For instance PM methods like updating the project organisation chart are

never used. Sweden and the UK show more competencies for the performance of these PM sub-processes than all the other societies. PM methods are always used in the project co-ordination process. In the UK representatives of relevant environments, such as customers and suppliers are always invited to participate in project workshops. But these workshops like project start or project close-down workshops only sometimes take place. Regarding the competencies for the performance of the other PM subprocesses the following general interpretations are possible: - The competencies for the performance of the project coordination process is the highest in all POSs. - The competencies for the project co-ordination and for the project close-down process are pretty homogeneous. - The competencies for the performance of project controlling and for project discontinuity management are very heterogeneous.

Programme Management Austria, Denmark, Hungary and the UK show a similar picture in their programme management competencies. In Austria and the United Kingdom programme management is seldom applied. Again Romania shows less competence in comparison to the other POSs. In Sweden the sub-processes programme start, programme co-ordination, programme controlling, programme discontinuity management and programme close-down are often performed. Programme management methods are often applied and specific programme organisations are often designed.

Project Portfolio Management In general the competencies in project portfolio management are rather low in the considered societies. Project portfolio processes (like assigning projects and programmes, managing the project portfolio, etc.) are seldom performed in Austria, Sweden and in the UK, sometimes performed in Denmark and Hungary. In Austria and Sweden project portfolio management methods like project proposals, project portfolio database and project portfolio reports are sometimes applied, while they are seldom applied in Denmark, Hungary and the UK. Sweden states that in project-oriented companies project portfolio groups to manage the portfolio are always established.

Project Personnel Management

Figure 8. Benchmarking results: Programme management

Figure 9. Benchmarking results: Project portfolio management P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Austria and Denmark show a similar picture again. In both POSs project personnel development processes (like assessing project personnel, PM training, PM coaching, etc.) are often performed. In Austria, Denmark and Hungary PM development methods such as internal/ external PM seminars, PM certification, coaching of PM personnel and assessment centres for project personnel are sometimes applied. Personnel development activities are sometimes organised for the roles project owner, project manager, project team member and project coach. While in Austria and Denmark seldom a PM career path exists, projectoriented companies in Hungary sometimes have such a career path. In Denmark, Hungary and the UK PM offices, internal PM trainers, PM coaches and networks of project managers sometimes support project personnel development. In Austria such supportive structures seldom exist. Romania shows less competence in comparison with all other Page 21

POSs. Sweden and UK show high competences in project personnel management. Project personnel processes are often performed and project personnel methods are often applied, often considering all PM roles. In Sweden specific structures for supporting the project personnel development often exist.

Organisational Design Austria and Hungary show the same picture regarding their competencies in organisational design. Integrative structures, like expert pools, project portfolio groups and PM office seldom exist. Specific tools like PM procedures, standard project plans, PM marketing tools sometimes exist, while organisational development processes like auditing, self assessment and benchmarking of the PM process are seldom performed. Roles like PM office manager, (internal) consultants to support the organisational development seldom exist. The UK shows a similar picture. Again Romania shows the lowest competencies in organisational design of project-oriented companies within the assessed POSs. Denmark and Sweden have more competencies regarding the organisational design of project-oriented companies than the other POSs. In Denmark specific tools and PM roles to support the organisational development often exist. In Sweden integrative structures always exist in project-oriented companies.

approach. The quantitative and qualitative data resulting from the answers are integrated. The resulting scores are relative values, relating each national score to those of the other POSs.

POS Ratios Table 5 shows the weighted competencies for each process and service, the PM service ratios and the POC practice ratios, and the overall POS ratios for the assessed POSs. Overall one can see that the UK has the highest POS competence, while Romania has the lowest one. There are two pairs of POSs with similar competencies: UK and Sweden on the one hand and Austria and Denmark on the

other hand. While also the PM service ratios and the PM practice ratios from Austria and Denmark are pretty similar, these ratios show big differences for the UK and Sweden. UK, with a higher PM service ratio has a much lower POC practice ratio than Sweden. This might mean that the provision of a high amount of PM related services by e.g. education and research institutions does not guarantee high quality POC practice in the project-oriented companies immediately. From the Eastern European countries Hungary has a much higher competence than Romania. The POS ratios of the single POSs have to be interpreted within the context.

The overall Competencies of the Assessed POSs POS Competence Algorithm On the one hand the competencies of a POS can be shown in a spider webmodel and on the other hand a POS ratio can be calculated. The POS ratio is a weighted sum of the competencies for performing the specific processes and for providing PM related services. As project management is considered as the most important process in the POS, this process has the weight of 20%. All other processes are weighted with 10%. The weight of each question is proportional to the number of questions per process. The competencies are measured according to a scale of 0-100. In table 4 the relations between the competence scale and the answering categories in the POS questionnaire, for questions relating to the practices of POCs, are defined. The competence scores for the services provided by PM related institutions are determined in a qualitative Page 22

Figure 10. Benchmarking results: Project personnel management

Figure 11. Benchmarking results: Organisational design

Interpretation of the Competencies of the Single POSs Austria Austria has a lot of small and medium sized industries. Despite this fact the importance of projects has increased in the last few years significantly. Traditionally external projects are performed in the building and construction industry, in the engineering industry and in the IT-industry. Internal projects are performed in different industries only since recently. It is rather difficult to implement internal projects in traditional industries like the engineering industry. Especially in health services and in the public administration the importance of projects continues to rise. There is an increasing demand for PM procedures and for formal PM qualifications, such as certifications for project managers. Working in project-oriented companies is seen as being attractive. Students are interested in studying PM and companies in turn are trying to get in contact with PM graduates.

Competent staff is available in Austria, but there is little flexibility of the people to adapt to new challenges. Further there exist quite a lot of administrative regulations in Austria, which is not too favourable for project work (Sachs et al. 1998, International Institute for Management Development 1997). Austria has a POS ratio of about 400, the PM service ratio of 170 is a bit lower than the POC practice ratio of about 240. This shows that the PM related services provided by institutions are still rather limited, and that the project-oriented industry takes on responsibility to ensure adequate competencies for themselves. Denmark Denmark also has a lot of small and medium sized industries. In the past PM was only applied in a few industries, like in the building and construction industry. Denmark is now in a change process from companies based on hierarchies to project-oriented companies.

Table 4. Relationships between answering categories and the competence scale

Projects are becoming very important in the IT, public and finance industries and are more and more common in other industries and sectors. Projects are common in the areas of change management, internal organisational development and customer oriented product development. Considering the World Competitiveness Report Denmark shows a good ground for PM, for instance the willingness to work in teams is very high (Sachs et al. 1998, International Institute for Management Development 1997). For Denmark a POS ratio of about 420 has been calculated. Denmark still shows little competence regarding the PM related services (140 out of 400), but more competencies regarding the POC practices (277 out of 600). Hungary In the past projects and programmes were of little importance for Hungary. Nowadays projects are of medium importance but in the future projects and programmes will gain a lot in importance. The POS ratio calculated is about 320, whereby the POC practice ratio is quite high (239) for the project-oriented companies that exist in Hungary. Less competence is shown regarding the PM related services, where Hungary only reaches 80 out of 400 points. Concerning the managerial context an advantage for PM might be that administrative regulations are rather low and foreign investors are relatively free to acquire control in domestic companies (Sachs et al. 1998, International Institute for Management Development 1997). Romania In Romania projects were only used in some specific industries, like building construction, energy, chemistry, engineering and IT. Romania now passes through a rough economic restructuring process, applying projects for privatising large state-owned enterprises, modernising and updating strategic economic units, creating new business units. For all industries and the non-profit sector projects are becoming very important. Companies which offer consulting services for PM tend to cover a lot of project types from different areas. Demand for the application of projects and programmes of the markets is increasing.

Table 5. Weighted competences and POS ratios P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 23

It is not surprising that Romania has the lowest POS ratio with nearly 200. In the last two years emphasis was given to the development of formal PM education programmes, but except that there is not much competence in the other PM related services like research, marketing or standardisation. Nevertheless Romanian project-oriented companies show already some PM competence (63 out of 200), while programme management and portfolio management almost do not exist yet.

potentials and demands, given the dynamics of the overall economic development in these nations. The performed assessments and the benchmarking give a view at the beginning of 2001 only. It can be assumed that due to the dynamics at the beginning of 2001 the competencies of these nations as POSs will be much higher in a few years.

Sweden In Sweden projects are commonly used and important in different industries and in the non-profit sector. Sweden has some big players in telecommunication industry and has a lot of big international companies. Ericsson for instance does 80% of its business in project or programme form. Projects have also grown in importance in the non-profit sector during the last years, due to an increased awareness of EC-projects. Increasing importance of projects can be observed, because of an increase in product development and R&D. Sweden shows a quite high POS ratio of 540. Concerning the PM related services with a ratio of 160 Sweden shows a similar ratio as Austria. Looking at the POC practice ratio Sweden shows a value of 380. Sweden seems to provide an excellent managerial context for PM (Sachs et al. 1998, International Institute for Management Development 1997).

The dark area in the POS spider web for Austria (Figure 12) shows the assessed competences of Austria as a POS. The assessment results show that the competencies of Austrian projectoriented companies are most developed in project management and in personnel management, even these competencies have a score of 87 (out of 200) and 50 (out of 100) only. Programme management, project portfolio management and the organisational design are even less developed yet. This shows the traditional focus on the development of competencies for the management of the single projects. Within the services provided by PM related institutions the PM marketing efforts by Projekt Management Austria result in the score of 50. The other PM service areas are not too well developed. This analysis portrays the development potentials Austria as a POS has. The dark line in Figure 12 shows the planned competences of Austria as a POS in 2010. In Austria the further develop-

UK In the UK there is wide recognition of the role of projects and programmes in the achievement of business objectives. There is growing recognition of when projects need to be used and when routine operations should be used. UK shows a POS ratio of about 560. In providing PM related services a competence of 290 is reached. So the UK is the most mature POS regarding the provided PM services. The POC practice ratio is about 270. An explanation for this imbalance might be found in the managerial context, where structures and people are described as not flexible and adapt rather bad to new challenges (Sachs et al. 1998, International Institute for Management Development 1997). Overall Overall it can be observed that all assessed nations are still in an early phase as a POS. There are high development Page 24

programm | austria - The Austrian Project Management Initiative

ment of the POS is organised by programm I austria, which started in October 2000 and has a duration of four years. The promoters of programm I austria are Projekt Management Austria, Projektmanagement Group of the University of Economics and Business Administration and Roland Gareis Consulting. The objective of programm | austria is to contribute to the further development of Austria as a POS. By that the international competitiveness of Austria shall be ensured. The following results shall be achieved by the end of programm | austria: - PM is well known in the public - The profession "Project Manager" is implemented and accepted - Research results on the projectoriented society are published - Project-oriented companies have analysed and developed their competences - Networking of project managers and PM Office managers takes place - A structural basis for the further development of Austria as a POS is provided. One of the strategies of programm | austria is "PM for everybody". This strategy is implemented by performing projects such as "PM in schools", "PM in families", "PM in small municipalities",

Project management 100

PM standardization

80

Programme management

60 40 20

PM marketing

Project portfolio management

0

Personnel management in projectoriented companies

PM research

PM education

Organizational design of projectoriented companies

Figure 12: Actual and planned POS competencies of Austria

etc. Another strategy is the "Further development of project-oriented companies". This strategy is implemented by projects such as "PM Auditing", "Network of PM Office Managers" etc.

Conclusion Projects and programmes as temporary organisations are becoming a broadly applied form of organising for the performance of complex and dynamic processes. Therefore project and programme management is not just a micro economic but it becomes a macro economic concern. The objective of the POS research initiative is to develop a viable model to describe the POS. The empirical application of the POS model in the POS benchmarking project contributes to the development of the POS model. Furthermore, the assessing and the benchmarking of the different POSs contribute to the promotion and marketing of project management in these nations. Based on the POS benchmarking results the societies are developing strategies to further develop their society as a POS.

References

Roland Gareis

Gareis R., 2000. Competences of the projectoriented society, in: Proceedings of IPMA World Conference, London.

Projektmanagement Group University of Economics and Business Administration, Vienna

Gareis R., 2001. The Project-oriented Society: A new creation to ensure international competitiveness, Paper presented at the IPMA International Symposium and NORDNET 2001, Stockholm, Sweden. Gareis R., 2001. Research Report: Assessment and Benchmarking of Project-oriented Societies: Results of the POS Benchmarking Group1, University of Economics and Business Administration, Vienna. Gareis R., Huemann M., 2000. PM-Competences in the Project-oriented Organisation, in: The Gower Handbook of Project Management, JR Turner, SJ Simister (ed.), Gower, Aldershot, pp. 709-721. von Glasersfeld, E., 1992. Konstruktion der Wirklichkeit und des Begriffs der Objektivität, in: Gumin, H., Meier, H.: Einführung in den Konstruktivismus, München. International Institute for Management Development, 1997. The World Competitiveness Yearbook 1997, Lausanne.

Franz Klein-Gasse 1 1190 Vienna, Austria Tel: +43/1/4277-29401 Fax: +43/1/3687510 E-mail: [email protected] Martina Huemann Projektmanagement Group University of Economics and Business Administration, Vienna

Lamnek S., 1995. Qualitative Sozialforschung: Band 2 Methoden und Technologien, Beltz, Weinheim.

Franz Klein-Gasse 1 1190 Vienna, Austria

Luhmann N., 1995. Social Systems, Stanford University Press, Stanford, California.

Tel: +43/1/4277-29405 Fax: +43/1/3687510 E-mail: [email protected]

Sachs J. D., Schwab K., 1998. The Global Competitiveness Report 1998, World Economic Forum, Geneva.

The height of the monitor platform is adjustable with a crank (-15 cm), and also tilts to a maximum of 5 degrees.

Promo The Promo desk allows you to decide how you want to work.

As the Promo desk can be steplessly raised or lowered at the touch of a button and has a wide adjustment range, it is suitable for people of all different sizes. The cable cover behind the upright of the desk hides cable wires safely and allows them to move when the desk is being adjusted. The metal turbular footrest allows to rest your feet whilst working standing up. When sitting at your desk, it can be turned away.

The desk can be adjusted seamlessly at sitting, semi-sitting or standing height.The ease of adjusting the Promo desk encourages you to regularly change your working postion. The Promo desk can be adjusted from a sitting to a standing height by the simple touch of a button. A monitor sits on a separate platform that can be adjusted separately.

A separate upholstered footrest on rollers can be moved both inwards and outwards or removed altogether.

Martela Oyj Strömbergintie 5, PL 7, 00381 Helsinki, Finland Tel Int. +358(0)10 345 50, Fax Int. +358(0)10 345 5744

www.martela.fi

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 25

CATEGORY: NOTION ON INDUSTRIAL RISK MANAGEMENT APPLICATION

Risk Analysis to Assess Completion Time of a Tram-Line Enrico Cagno, Politecnico di Milano, Italy Franco Caron, Politecnico di Milano, Italy Mauro Mancini, Politecnico di Milano, Italy Keywords: Schedule Risk Analysis, Simulation, Public Transports The paper describes the approach to 'schedule' risk analysis in a project involving the construction of new tram lines to improve the urban public transport system. The risk analysis process includes risk Identification and quantification phases. Since no data record was available about project risk analysis and management in previous similar projects, both phases were based on the elicitation of experts knowledge. A simulation model has been implemented in order to evaluate the probability distribution of the overall project duration. The paper describes the assessment of strengths and weaknesses of the proposed approach and identifies areas of interest for possible future developments.

Introduction The paper describes an industrial case study concerning the schedule risk analysis developed for a project involving the construction of new tram lines to improve the urban public transport system. Due to the project complexity, many critical elements emerged, both of a general nature (difficulties in implementing a suitable project management system in the public sector) and of a specific nature (the involvement of several public authorities in the decision making process). The project risk analysis process was divided into two major phases: risk identification and risk quantification. The former aims to identify possible risk sources, risk events and corresponding risk responses. The latter aims to evaluate possible risk consequences in terms of completion delay for single activities; in this context a simulation approach was applied, using a network model of the project and considering also statistical correlation between activity durations, in order to evaluate the probability distribution of the overall project duration.

Page 26

Since no data record was available about project risk analysis and management in previous similar projects, both the risk identification and risk quantification phases were based on the elicitation of experts' knowledge. In particular, in the risk quantification phase, in order to evaluate the joint effect of different risks on each activity duration, a suitable approach was implemented based on discrete probability distribution and event trees. The case considered includes the following activities (divided into three, distinct sub-projects): 1. Construction of three new tramlines; 2. Purchase of new generation trams for these lines, together with the respective maintenance facilities; 3. Construction of a depot for the garaging and maintenance of the vehicles. The major aspects of the project are: 1. very close inter-connections between the sub-projects: work on the depot must be completed

in time to accept delivery of the new vehicles; delays in completion of the lines with respect to delivery of the trams would immobilise substantial capital, as the vehicles cannot be used on other lines; lines must be completed to test vehicles, and, in particular, one of the three lines must be completed to realise connections to the depot; 2. a long and complex financial and technical approval process by authorities outside the project organisation; 3. the large number of actors involved directly or indirectly in the various activities. These aspects mean that the time required to finalise decisions is difficult to forecast and extremely variable, so that a project management system focused on risk, in particular schedule risk, has to be implemented. The first step, during project development, was the definition of a WBS (Lavold, 1988; Raz and Globerson, 1998) in the following terms: 1. a WBS for each sub-project;

2. each WBS was divided into three or four levels using an activity based approach; the WBS for the construction of the depot is shown below as an example (Figure 1). The risk analysis process has been divided into two major phases: risk identification and risk quantification. In the first phase risk sources, risk events and associated risk responses have been identified. In the second phase, assuming that risks affect activity durations, a duration distribution has been estimated for each activity allowing , through a network based simulation model, for the estimation of the variability of the overall project duration.

DEPOT DESIGN

SUBCONTRACTING

SUPPLY

PROCUREMENT

Depot design

Tenders for construction

Fittings and line equipment

Demolitions and opening of sites

Approval and funding

Tenders for maintenance equipment

Maintenance equipment

Civil works

Specs maintenace equipment

TESTING

System testing

Utilities

Equipment installation

Completions and finishing

Figure 1. Work Breakdown Structure for the construction of the depot

Identification of risks and responses The Identification phase can be broken down into five steps: 1. identification of the sources of risk (i.e.: an element inside or outside the project which causes a significant risk for the project); 2. identification of the project risks (i.e.: uncertain event which may cause a variation in the completion date of an activity) stemming from the sources of risk; 3. classification of project risks; 4. identification of risks associated to each activity; 5. identification of responses. Since, in the present case, risk analysis was included for the first time in the project management system and the project team was therefore not sufficiently acquainted with risk analysis techniques, the most suitable approach for the first step was the use of a checklist. Experts thus identified 20 main sources of risk which were classified in the following categories (Wideman, 1992): a) external sources determined by social, environmental or legislative factors; b) internal risks concerning project management system and processes; c) technical risks concerning design process; and d) legal risks of a contractual nature. The next step was the move from sources of risk to project risks. Experts were asked to indicate the main risks in function of the sources of risk given in the previous step (see for instance Figure 2). The identified risks were classified by type and associated to the WBS. Each P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Figure 2. Extract from the risk identification document. DEPOT ENGINEERING

Approvals and funding

Outstanding tecnical approval Outstanding financial approval Def. tech. features maintenance eqpt.

Difficulties in project development Re-design

PROCUREMENT

Supplies of fittings/lines

Change of supplier

Approval of maintenance eqpt.

CONSTRUCTION

Demolitions and opening of sites

Outstanding technical approval

TESTING

Testing of maintenance eqpt.

Non conformity to tests

Construction difficulties Civil works

Delays in supply Disputes with supplier

Construction difficulties

Conflict with contractors Utilities/eqpt.

Construction difficulties Conflict with contractors Finishing and completions

Construction difficulties Conflict with contractors TENDERING

Tenders for the suplly of maintenance eqpt.

Legal disputes

Figure 3. Risks involved in the construction of the depot (activities not shown do not involve uncertainty) Page 27

project activity may be affected by one or more risks causing a possible variation in the activity duration. The result can be presented in a hybrid structure (see the example in Figure 3) derived from the cross-tabulation of the risk list and the WBS for each subproject. The last step in the Identification phase concerns specification of the appropriate responses to the risks found (Diekman et al., 1988). A discussion of risk management procedures goes beyond the objectives of the present paper. However, the criteria used can be summarised briefly. Project managers were asked to indicate the main responses to the identified risks and, where appropriate, to assess in quantitative terms the reduction in the probability of occurrence or in the impact. This information was used in the final phase of the analysis to highlight the iterative nature of the process and compare results obtained after implementing various responses with those initially obtained without any corrective measure. The Identification phase represents the prerequisite for the following quantification phase which quantifies risks and aims to provide some quantitative measure of the variability in the duration of each activity.

Risk quantification Risks identified in the previous phase must be quantified in terms of the level of uncertainty (by assessing the relative probability of occurrence) and the entity of the consequences (variation induced in the duration of the activity), so obtaining a range for overall project duration. This operation was divided into two parts: 1. determination of the probability distribution for the duration of each activity; 2. assessment of possible correlations between activities and determination of overall project duration.

Determination of the probability distribution for the duration of each activity The main inputs to the first part of the quantitative analysis were: - risks associated to each activity, i.e. the results of the preceding identification phase; - estimated duration of each activity.

Page 28

Figure 4. Representation of the relations between risks In the present case, in order to follow managers customary behaviour, they were asked to provide a deterministic duration for each activity, assuming this value referred to a target estimate, i.e. execution of the respective activity under normal conditions and without manifestation of any risk. The variability in the duration of activities can be described in terms of the distribution of the offsets from the target point estimate. Therefore, it was necessary to estimate the range of the possible variations in the individual variables (in the present case the activity duration, with respect to the target values: the range is given by the minimum and maximum that the variables are not expected to exceed) and the probability distribution of the values within the range. In general, the starting point for the collection of data for the analysis is historical data and/or recourse to the subjective opinion of experts (Bowers, 1994). In the present case, historical data was not available, as it was the first case of implementation of a risk analysis in the public transport sector and there had been no systematic archiving of information. Consequently, only expert opinion could be used (refer to Cagno and Caron, 1997, to identify the most suitable type of questionnaire on the basis of the availability and reliability of the data). The interviewees rejected the possibility to assess the impact of each risk, in terms

of delay, and the respective probability of occurrence by means of a continuous distribution, as it was less intuitive. Consequently, each risk was given one or more discrete values for the variation induced in the expected duration and for the respective probability of occurrence. Strictly tied to the question of the sources of the input data to the risk analysis process is the problem of how to represent this data for the analysis (Williams, 1992). It was felt appropriate to use an empirical discrete distribution and a methodology which uses event trees to derive the probability distribution of the duration from the joint effect of the various risks affecting the activities. To determine the probability distribution of each activity by appropriately combining the effects of the risks associated to each activity (Ren, 1994), the first step was to identify relations between the associated effects and so construct a model to define the overall impact of the risks affecting the activity. When the effects of two events are additive, the risks are given 'in series', otherwise they are given 'in parallel', i.e. the occurrence of both risks causes an overall delay equal to the greater of the delays induced by the individual risks. Figure 4 gives an example of the modelling for one of the activities in the project, considering also conditional probabilities.

sessment of project risks involves calculating the probability distribution of the overall duration of the project. Among the various probability analysis techniques, simulation based on the Monte Carlo method (Rubinstein, 1981) was considered the most appropriate for the purpose. The simulation approach (Cagno and Caron, 1997) is substantially defined by three elements: input variables, output variables, and a project representation model which highlights relations between the project elements. In the present case, the input variables were given by the probability distributions for the duration of each activity in the project, while the output variable was the overall duration of the project. The durations of the individual subprojects were added to the latter in order to assess performance separately and with respect to the total duration. The quantitative output of the simulation was a cumulative probability curve which shows the relation between the

ous activities were examined to detect any statistical dependence. As historical data was not available, expert opinion was again used. The main criterion in establishing correlations is the presence of common sources of risk. The underlying idea is that if two activities have a common source of risk, they must be considered potentially related. The Table 1. Calculation of the delay first step was, therefore, to draw up a distribution of two elements linked 'in list of potentially related activities on the parallel' basis of the given criterion. The experts then assessed the list of pairs to identify In cases where two elements are effective correlations. The level of corlinked in parallel, e.g. R1 and R2 overrelation then had to be quantified. The lapping in Figure 4, the overall delay ideal situation is to derive a direct esti(RP) is equal to the larger of the two mate of a correlation coefficient which elements: RP = Max (R1;R2). A simple can be used as an input to the simularepresentation of the calculation using tion. Unfortunately, experience shows a table (cf. Table 1) shows the results that deriving a number which represents obtained for delays R1 and R2 (Figure the correlation between two activities 4). is neither easy nor intuitive, and there If the elements are linked 'in seis a risk of defining an insignificant figries', e.g. the RP delay (given by the calure. The easiest approach is thus to deculation of R1 and R2) and R3 in Figfine conditioned distributions for the ure 4, the overall delay is given by the correlated pairs. The sum of the individual dependencies bedelays: RS = RP + tween the activities R3. An example is were represented as given in Table 2, in follows: which the calcula1. the entity tion takes account of of the induced delay the fact that the on the dependent probability of the valactivity was defined ues of R3 is depenwith reference to the dent on the values of duration of the RP. activity identified as Proceeding in Table 2. Calculation of the delay distribution of two elements linked 'in series' independent; as the the resolution of the duration of the latter system, the distribuincreases, the induced delay is tion of the overall delay induced in the possible project durations and their greater (Figure 6); activity is obtained. If this distribution probability of occurrence. To construct is added to the deterministic duration a representative model of the situation 2. the induced delay is then simply estimated previously by the experts, the in question, account had to be taken of added to the values of the variability in the duration of each activ- two different types of relation between dependent distribution, taking ity is obtained, which can be represented the activities: account, however, of the fact 1. temporal dependence, i.e. by an empirical discrete distribution (Figthat this delay is progressively precedence relations between ure 5). It should be noted that the use absorbed for higher values in the activities which identify the of empirical discrete distributions allows dependent distribution. In other sequence of events; multi-modal distributions to be shown, words, given a delay induced by as well as highlighting the contribution 2. statistical dependence, i.e. the duration of the independent of each risk to the variability in durapossible correlations between distribution, for short durations tion. This information may prove useful variations in duration of the in the dependent activity, the in a subsequent risk management phase. different activities. The distributions obtained represent the The grid was based on the activiU tilitie s co n structio n principal input to the subsequent Quan- ties in the project WBS, and time detification phase, based on a simulation pendency relations between the activimodel, allowing for the calculation of the ties and the points of convergence beprobability distribution of the overall tween the sub-projects were defined in project duration. consultation with project managers. The other fundamental aspect was Determination of overall project Dur a tio n (m onths ) duration how correlations between activities were The second part of the quantitative as- managed. In the present case, the variFigure 5. Duration distribution 0 ,2 5

P ro b a b ility

0 ,2 0

0 ,1 5 0 ,1 0

0 ,0 5 0 ,0 0

4

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

5

6

7

8

9

10

Page 29

2. the probability distribution for the total duration; 3. the sensitivity analysis for the individual sub-projects and, consequently for the overall project. Tab. 3 summarises the principal results for the duration distribution of the overall project and the individual sub-projects. The figures reveal two critical areas: 1. the duration distribution for the construction of tramlines Nord, Sud and Testi has a higher standard deviation than that for the other projects; 2. the realisation of the depot determines final completion of the overall project. It should be noted that the variance associate to the tramline projects is absorbed in the final convergence point, as the longest path crosses the depot project. Indeed, the standard deviation for the total duration is very similar to that for the duration of the depot project. The graph in Figure 9 shows the distribution for the total duration as a cumulative curve. It is evident that for a completion probability of 80% within a fixed date, an overall duration of 79 months must be expected, i.e. 18 months

Page 30

P ro b a b ility

0 ,2 0

0 ,1 5 0 ,1 0

0 ,0 5

0 ,0 0

4

Conclusions Major contracting projects are generally subject to the risks of exceeding initial budget and delays in completion time.

6

7

8

9

10

Figure 6. Independent activity and induced delay

Simulation of an alternative scenario As a demonstration of the iterative nature of the risk analysis and management process, identification of the main responses to project risks, together with the respective effects on the probability of occurrence and/or on the impact of the risks, led to revised estimates of the duration of the individual activities based on new assumptions and assessed by simulating the consequent impact on overall duration. The expected results mainly concern reduced variability in overall duration as a result of the reduction in overall project uncertainty by means of the definition of appropriate responses. Table 4 summarises the main results of the duration distributions for the overall project and the individual sub-projects in the second simulation. In effect, the values obtained are below those in the previous case, but the same observations remain, i.e. the fact that the depot project is the aspect which most determines total duration. As a result of the reduction in the level of project risk, the output distribution (Figure 10) shows less dispersion. In the new scenario, a completion probability within a fixed date of 80%, is given after 75 months, a period which in the previous scenario guaranteed only a 50% probability of completion. A sensitivity analysis of the new scenario was carried out. Comparing the results with the previous cases, the criticality of the variables in terms of the impact on results was the same, but the level of impact of design fell after implementation of the responses.

5

Dur a tio n (m onths )

F i n i sh i n g (1) 0,3 0,2 5

P r o b a b i li ty

The most significant comments refer to the following results from the simulation: 1. the expected value and the standard deviation for the total duration of the project and the individual sub-projects;

U tilitie s co n structio n 0 ,2 5

0,2 0,1 5 0,1 0,0 5 0 5

6

7

8

9

10

11

D u r a ti o n M o nth s)

Figure 7. Dependent distribution for an induced delay of zero F i n i sh i n g (2 ) 0,3 0,2 5

P r o b a b i li ty

Assessment of results

longer than the optimistic estimate for the completion of the depot. The software used can perform a sensitivity analysis of the input variables to assess the effect of each on the final result. Results can be presented in a bar chart illustrating the impact of each variable. The sensitivity analysis was performed for the overall project and the individual sub-projects. The activities with the greatest impact on the final results are 'design', 'technical and financial approval' and some parts of the 'construction' phase.

0,2 0,1 5 0,1 0,0 5 0 6

7

8

8,5

9,5

10

11

D u r a ti o n (m o n th s)

Figure 8. Dependent distribution for an induced delay not equal to zero

Table 3. Parameters of the output distributions 1

PROBABILITY

delay is added in full, while for longer durations it is progressively absorbed into the delay of the dependent activity (Figure 8). If the induced delay is zero, the dependent activity maintains the delay distribution derived in the previous Quantification phase (Figure 7). These correlations were then inserted into the model to ensure that the simulation did not underestimate the real variance of the output distribution. The simulation using the defined model and the data collected was carried out with the @Risk software package. Five thousand iterations were performed.

0,8 0,6 0,4 0,2 0 60

63,5

67

70,5

74

77,5

81

84,5

88

91,5

DURATION (months)

Figure 9. Probability curve for overall duration

95

This means that a systematic and rigorous analysis of the major sources of project risk is necessary as early as the first phases of the life cycle. In the case considered a risk analysis approach has been developed in order to do obtain a distribution probability of the overall project duration. In fact, the possibility of realising the initial 'schedule' objectives must be assessed in the face of uncertainties associated to the duration of activities in the individual projects. From this point of view, the aim of the risk analysis and management process is first the formulation of reliable estimates for project time planning based on the identification of the principal risks and their effects on the individual activities and on overall duration. Secondly, it should develop the foundations for the correct management of these risks by means of the definition and implementation of appropriate responses. Assessment of the results of this process leads to the identification of critical areas within the project which are mainly responsible for the variability in total duration. These results should therefore not be seen as a definitive solution to the difficulties faced in the project, but rather as a starting point in the control process towards realising the initial objectives.

The process of eliciting the data necessary to assess uncertainty (Bowers, 1994) is probably the most important aspect of the analysis, particularly when data records are scarce or not available, as in the public transport case considered. The importance of a Risk Management Corporate Memory, which can correct and progressively improve an organisation ability to draw up reliable estimates, suggests the need to invest in this aspect. This can form the structure of a system to capitalise experience and archive information on past projects intelligently, so possibly improving future estimates.

References

Enrico Cagno, PhD (Engr) Politecnico di Milano Department of Mechanical Engineering P.zza Leonardo da Vinci 32 20133 Milan - ITALY Tel: +39 02 23994730 Fax: +39 02 70638377 E-mail: [email protected]

Bowers J.A., 1994. "Data for Project Risk Analyses", International Journal of Project Management. Cagno E. and Caron F, 1997. "Integration of Subjective Judgements and Historical Data", in Kähkönen K., Artto K. A. (eds.), "Managing Risk in Projects", E&FN SPON. Chapman C.B., 1997. "Project Risk Management". Diekmann J. et al., 1988. "Risk Management in Capital Projects", University of Colorado at Boulder. Lavold G., 1988. "Developing and using the work breakdown structure" in Cleland D., King W., "Project Management Handbook", Van Nostrand Reinold. Raz T. and Globerson S., 1998. "Effective Sizing and Content Definition of Work Packages", International Journal of Project Management.

Franco Caron, Professor, corresponding author Politecnico di Milano Department of Mechanical Engineering P.zza Leonardo da Vinci 32 20133 Milan - ITALY Tel: +39 02 23994812 Fax: +39 02 70638377 E-mail: [email protected]

Ren H., 1994. "Risk Lifecycle and Risk Relationships on Construction Projects", International Journal of Project Management. Rubinstein R.Y., 1981. "Simulation and the Monte Carlo Method", J. Wiley Inc., New York. Touran A., Bolster P.J. and Thayer S.W., 1994. "Risk Assessment in Fixed Guideway Transit System Construction". Ward S.C. and Chapman C.B., 1991. "Extending the use of risk analysis in project management", International Journal of Project Management.

Table 4. Parameters of the output distributions 1

Wideman M., 1992. "Project and Program Risk Management, A Guide to Managing Project Risks and Opportunities", PMI, Drexel Hill, Pa..

PROBABILITY

0,8 0,6

Mauro Mancini, PhD (Engr) Politecnico di Milano Department of Mechanical Engineering P.zza Leonardo da Vinci 32 20133 Milan - ITALY Tel: +39 02 23994980 Fax: +39 02 70638377 E-mail: [email protected]

0,4 0,2 0 60

62,5

65

67,5

70

72,5

75

77,5

80

82,5

85

DURAT ION (months)

Williams T.M., 1992. "Practical Use of Distributions in Network Analysis", Journal of Operational Research Society.

Figure 10. Probability curve for overall duration P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 31

CATEGORY: RESEARCH

Contracting and the Flying Trapeze: The Trust Factor Roch DeMaere, University of Calgary, Canada Greg Skulmoski, University of Calgary, Canada Ramy Zaghloul Mohamed, University of Calgary, Canada Francis Hartman, University of Calgary, Canada Keywords: Trust, Contracting, Risk Management, Teams, Project Management In this paper we focus on the important role trust plays in contractual relationships. A conceptual model of trust is outlined. We present practical suggestions as to how trust can be built-or at least not destroyed-through contracting activities. The suggestions include identifying and choosing trustworthy partners, "practising" or gaining experience with potential partners, and effectively allocating risks. Results from research exploring the relationship between trust and use of exculpatory clauses in the Canadian construction industry are presented. The results suggest that the use of exculpatory clauses can decrease trust between contracting partners and increase overall project costs. We present a strategy based on trust to overcome some of the problems associated with risk allocation and the use of exculpatory clauses. To aid in the analysis we compare the relationship between contracting parties to that of individuals performing on the flying trapeze. Introduction Tonight is the night. You have waited long to see the featured trapeze artists attempt a never before completed stunt. This could be historic. The two artists will co-ordinate their acrobatic movements that require the highest degree of precision possible; many say this may even be impossible to complete-at least without injury. Yet the trapeze artists have trained all their lives for this amazing feat that will require ultimate teamwork. Now is the time. High above the crowd, with music for dramatic effect, the trapeze artists begin to swing. They are focused on the stunt. They are building their concentration and coordinating their timing so that the conditions for success are optimal... NOW! One of the artists lets go, with the precise amount of momentum, he flies through the air, twisting and turning with the grace of a dancer. He completes the stunt and is cleanly caught by his partner. The crowd roars. History is made. Now imagine that the two individuals do not trust each other. Would one expect to see such precision, daring and creativity now that uncertainty exPage 32

ists as to whether the other will precisely perform? As with the flying trapeze, trust between contracting parties can be an essential foundation for successful contracting. Trust can decrease project costs (Zaghloul & Hartman 1999), propitiate open communication, and facilitate innovation. A lack of trust between partners can result in defensive behaviour, a decrease in problem-solving effectiveness, a reluctance to share or be candid (Gibb 1961; Gibb 1964; Klimoski and Karol 1976). Participants in low trust environments are more likely to conceal, disguise or distort information (Zand 1972). In an interesting experiment (Klimoski and Karol 1976), high trust and low trust groups were created to test the effect that trust has on the number of creative solutions each group could develop in brainstorming sessions. The result was that the high trust groups outperformed the low trust groups in terms of the number of ideas generated by each group and also regarding the participants' perceptions of group performance. Trust can have a positive impact on project success by stimulating

creative and innovative solutions. In this paper we focus on the important role trust plays in contractual relationships. A conceptual model of trust is outlined in the first portion of this paper. Following that, we present practical suggestions as to how trust can be built-or at least not destroyedthrough contracting activities. Finally, research results exploring the relationship between trust and use of exculpatory clauses in the Canadian construction industry are presented. The results suggest that the use of exculpatory clauses can decrease trust and increase overall project costs. Throughout this paper we compare the relationship between contracting parties to that of individuals performing on the flying trapeze to aid in the analysis

What is trust? Before moving ahead, it is important to have a common understanding of trust. The concept of trust is very complex and multidimensional and there has been much debate within academic circles regarding a definition (Hosmer 1995; Mayer et al. 1995; Rousseau et al. 1998).

In an attempt to advance the conceptual understanding of the topic, Hartman (2000) developed a model of trust that enables a more simplified understanding of the concept. The model depicts three types of trust: Blue, Yellow, and Red trust. Blue trust is all about competence and ability. Blue trust is based on the perception of the other's capacity to perform what is required. "Can they do the job?" is the question associated with this type of trust. Blue trust can be built through an organization's reputation, on a recommendation from another party, through previous experience, through credentials, etc. Our perception of another's competence is primarily founded on a rational or cognitive evaluation of the available evidence about the other party (McAllister 1995; Hartman 2000). However, just because someone can do the job does not necessarily mean that they will do the job, and that brings us to the other types of trust. Yellow trust is based on integrity. Yellow trust is founded upon the perception of the other's aptitude to act ethically, to adhere to values that we hold important, and to be motivated to not take advantage of us (Mayer et al. 1995; Hartman 2000). To evaluate this type of trust we ask, "will they look out for my interests?" Yellow trust is fragile and quickly damaged if violated. Once broken, yellow trust is very difficult if not impossible to repair (Hartman 2000). Red trust is based on intuition. Red trust is the result of a combination of emotional response and rapid processing of information and may be described as the instincts or "gut feelings" that one person has about the other, a situation, or an artefact. Red trust is not founded on a cognitive judgement or decision; rather it is emotional and hard to support with available evidence. Friendship, liking, or affect often accompanies this type of trust. Red trust can dominate over Blue and Yellow trust. For example, we may judge a particular political candidate to have high levels of competence and integrity, yet still not feel "good" about him or her for some reason we may not be able to identify and therefore not vote for him or her. To measure this type of trust we ask the question, "Does this feel right?" You may have noticed that the three primary colours represent the three different types of trust. Just as the primary colours can be mixed together to make diverse colours, so too can the different types of trust. Different types of trust (or combinations of the three) are P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

important for different relationships and situations. For example, a marriage would most likely be some tone of orange, a combination of red and yellow trust where blue trust may be of lesser importance. Business relationships would typically be some shade of blue or green trust, formed by some combination of blue and yellow trust. The situation or circumstances dictate the colour and intensity of trust requisite for the relationship. The colour model and its applications in different types of relationships are illustrated in Table 1.

The Analogy of the Flying Trapeze With a common understanding of trust, we can now glean some lessons from the analogy of the flying trapeze. There are three primary points that we wish to make with the analogy: (1) choose the right partner, (2) practice makes perfect, and finally (3) use a net…and share it!

Choose the right partner Let's go back to a time before the two trapeze artists have met. One of them, our protagonist, has an idea that will bring him fame and fortune. The idea is to perform a stunt that no one has attempted before, one that most critics would agree is likely impossible, and one that could put his very well-being in jeopardy. This proposed act is dangerously risky, requires an enormous investment in time and resources to construct the necessary structure and specialized apparatus, and it requires a partner that is both creative and can be relied upon. What if our protagonist graduated from the traditional school of contracting? To choose his partner he tenders out the job to whoever thinks they can do it and awards it to the lowest bidder… Well, maybe not. Considering the nature of this specific task, our protagonist will likely use different criteria for selecting his partner. The point of this example is that, depending on the situation, there may be other factors that

are equally (if not more) important than price when choosing a partner. Although the previous statement may seem obvious, it bears repeating as current practice (at least in Canada) would suggest that price is a prime consideration when selecting contracting partners. When there is high risk and dependence upon another party, it may be prudent to consider trustworthiness when evaluating and selecting potential partners. In most business relationships, blue trust or competence is certainly a requirement of any formal or informal arrangement; most firms would not consider partnering with an organization that they believe could not do the work in the first place. Yellow and red trust tend not to be as important. Contracts or other forms of bureaucracy are often substituted for yellow and red trust to ensure the other party fulfils their obligations. This is often the most appropriate strategy when the objective of a project is to complete a task that is second nature or business as usual for all the parties involved. Where uncertainty and complexity are low a "tight" contract is often appropriate (Skulmoski et al. 1998). However, if the project is large, risky, complex, and covers new ground it becomes an increasingly difficult task to account for everything that could possibly happen within the confines of a contract. Under these circumstances a "looser" contract may be more appropriate (Skulmoski et al. 1998). Sometimes there is no substitute for a partner who has integrity and can be relied upon to look out for your interests when things do not go as expected. The question then becomes "how does one go about identifying and choosing a trustworthy partner?" This can be a difficult process, as no potential partner would purposely send out signals that they could not be trusted. In fact, all potential candidates will be on their best behaviour with any misdemeanours of their past hidden neatly away. The first step to identifying trustworthiness is to

Table 1. Colours of trust in Different Relationships

Page 33

simply make trust a priority and part of the selection criteria. The process of recognizing clues and pertinent evidence can be facilitated if the importance of trust is salient in the contracting phase of a business relationship. Blue and yellow trust are built from evidence, this evidence can come from first hand experience or numerous secondary sources (For a more thorough analysis of identifying and choosing trustworthy partners see Barney and Hansen 1994). The most powerful evidence would be from direct experience, which leads us to the next point of the analogy.

Practice makes perfect Imagine that our protagonist on the trapeze has chosen a trustworthy partner to perform the proposed dangerous and difficult stunt and they are ready to begin working together. Would you expect them to start right out with the most difficult feat? They would most likely start out easy and work up to the more difficult stunts. Practice allows the trapeze artists to learn about each other's motivations, strengths, weaknesses, etc. This enables the trapeze artists to predict certain responses and anticipate each other's actions. Firsthand experience furnishes potent evidence regarding the type and level of trust that can be placed in the other party. If the analogy were applied to a business relationship, it would denote that the parties have some experience working with each other before implementing innovative solutions or becoming highly vulnerable to each other. It may not always be possible or practical for partnering organizations to "practice" together first; however, such experience would be invaluable for building trust and identifying trustworthy partners (Barney and Hansen 1994).

Use a net Imagine the difference in the type of stunts that our friends on the flying trapeze would be engaged in if there was or was not a net below to catch them if something went wrong. With a net we would expect to see more creativity and daring; without a net we would likely expect to see the opposite behaviour. The "net" in a project would consist of risk mitigation, backup plans, stage gates, tolerance for human error, and allowance for unexpected events that may occur even after a thorough risk analysis. Additionally, it entails that the parties recognize and compensate for the fact that implementing projects of this nature may require iterative processes Page 34

and certain activities may have to be done more than once. There are costs associated with using a "net" or implementing contingency plans when problems are encountered. Incentives could be in place to motivate the participants to do be successful in implementing a plan the first time without resorting to plan "B". Whatever the approach, a balance should be sought so that appropriate action is encouraged and inappropriate behaviour is discouraged. "Using a net" is really risk management and it includes risk identification, quantification, mitigation, and allocation. Ensuring that risks are recognised and managed is good practice in any project. This activity is an important step in that risk management and allocation can significantly influence the behaviour of the project participants and hence impact both project performance and the final cost. Additionally, the manner in which risks are shared or allocated can have a significant affect on trust and the relationship between contracting parties, and this brings us to the next point.

…Share the net Imagine that our protagonist on the trapeze positions the entire net under himself and leaves his partner with a very hard and potentially painful landing spot. How would this type of situation affect the relationship between the parties or the behaviour of the individual at risk? Potentially, this scenario could create an adversarial relationship between the two participants. We would also probably expect that the individual at risk would want to be compensated for the potential danger and would most likely perform very cautiously. The above scenario would seem inappropriate on the flying trapeze, but it is a prevalent practice in many contractual relationships in Canada. Exculpatory clauses-also known as "weasel clauses"-are extensively used in many industries. Exculpatory clauses transfer risk from one party to another, usually in favour of the party that writes the contract while the other party has little control or no control over these risks. For example, in the late 1990s when the year 2000 (Y2K) was a potential threat to all computer systems, an IT consulting firm placed one computer programmer temporarily with a client organization to be one member of a large project team to accomplish a project related to Y2K. The programmer was under the direct supervision of the client organization and the IT consulting firm was

not involved in the project in any other way and was not even informed of the project objectives. As part of the contract the client organization included a clause that stated that the IT consulting firm would be responsible for the Y2K compliance of the software to be developed. Those at the IT consulting firm felt that this was unreasonable considering they had no control over project. In this case, the utilization of the exculpatory clause resulted in much heated debate between the two organizations. Three hundred and fifty participants from organizations in the Canadian construction industry responded to a survey to gain a better understanding of the relationship between the use of exculpatory clauses, trust and project costs. The results show that exculpatory clauses are used in 75% of the contracts. A case for using exculpatory clauses can easily be substantiated because they are very effective at transferring risk. Another reason exculpatory clauses may be used could be due to a lack of yellow or red trust between the parties, resulting in a general unwillingness to be at risk to the other party. However, regardless of the reason they are used, there are two major disadvantages. First, there is a cost associated with their use. Contractors compensate by adding an additional 9% to 19% to their bids (Hartman 1998; Zaghloul and Hartman 1999). The dollar value of these premiums is between $9 billion and $19 billion CDN in that industry alone. The ironic thing about this situation is that 69% of the owners are unaware that they are paying a premium when such clauses are used (Zaghloul 2001). The second problem with using weasel clauses is that they may destroy yellow and/or red trust. Although much less quantifiable, the end result could be equally detrimental. yellow trust is a belief that the other party will look out for your interests and Red trust is an impression that the relationship feels right. Exculpatory clauses can send a clear message about how much one party values or, maybe more appropriately, does not value the other party or the relationship. The effects of low trust may be a decrease in innovation, an increase in defensive behaviour and conflict, a reduced potential for establishing a longterm relationship, and jeopardization of project success. In many cases, the current contracting practice of using exculpatory clauses does encourage a specific type of creativity-to find more creative ways

to make claims and to maximize the amount of money that can be drawn from the project at the other party's expense. And it seems the more adversarial the relationship, the more "encouragement" there is to be creative in this regard. Avoiding exculpatory clauses and adopting more efficient risk allocation practices by contracting organizations could potentially be a source for substantial increases in trust, profit and competitive advantage. Efficient risk allocation means that the party most suited for dealing with the risk takes responsibility for it. For example, in a construction project, if the party most suited to accept the risk is the owner, a potential risk allocation strategy may be the following: - Clearly identify all potential risks. The party in the best position to manage a specific risk should assume responsibility for it. - Avoid using exculpatory clauses. - Negotiate a contract that does not include the expensive risk premiums. - Set aside the savings as contingency. - Share the windfall savings if the risk does not occur. Implementing a strategy such as the one described above requires a relationship of trust between the parties because there may be more exposure to risk without the use of exculpatory clauses. However, their may be significant rewards and competitive advantage for those organizations that can make it work. Thus the development of trust could have some very tangible benefits to partnering organizations.

Conclusion Contracting is much like performing on the flying trapeze. Both entail interdependency and risk, both can be enlivening, and both can add value to the parties involved. In order to realize the potential benefits of contracting, trust should be developed between the parties. Trust can be developed between contracting partners by (1) identifying and choosing the right partner, (2) by practising working together on easier projects before more risky or difficult projects are attempted, and (3) by using effective risk allocation practices. If partnering organizations will make trust a priority, new opportunities may arise to adopt contracting strategies that may lead to increased profits and competitive advantage in the market place. P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

References Barney, J. B. and M. H. Hansen, 1994. "Trustworthiness as a Source of Competitive Advantage." Strategeic Management Journal 15(Special Issue): 175-190. Eskilden, J. K., J. J. Dahlgaard, et al., 1999. "The Impact of Creativity and Learning on Business Excellence." Total Quality Management 10(4&5): S523-S530. Gibb, J. R., 1961. Defence Level and Influence Potential in Small Groups. Leadership and Interpersonal Behavior. L. Petrillo and B. M. Bass. New York, Holt, Rinehart and Winston: 66-81. Gibb, J. R., 1964. Climate for Trust Formation. TGroup Theory and Labratory Method. L. P. Bradford, J. R. Gibb and K. D. Benne. New York, John Wiley: 279-301. Hartman, F. T., 1993. Construction Dispute Resolution Through an Improved Contracting Process in the Canadian Context. Faculty of Engineering. Leughborough, U.K., University of Technology.

Roch DeMaere University of Calgary Department of Civil Engineering Project Management Specialization 2500 University NW Calgary, Alberta, Canada, T2N 1N4 Tel +403 2202875 Fax +403 2827026 E-mail [email protected]

Hartman, F. T., 1998. The Real Cost of Weasel Clauses in Your Contracts. Proceedings of the Annual Project Management Institute Seminars & Symposium, Long Beach, California. Hartman, F. T., 2000. Don't Park Your Brain Outside. North Carolina, PMI. Hartman, F. T. and G. Skulmoski, 1999. "Quest for Team Competence." Project Management 5(1): 10-15. Hosmer, L. T., 1995. "Trust: The Connecting Link Between Organizational Theory and Philosophical Ethics." Academy of Management Review 20(2): 1-25. Jergeas, G. and F. T. Hartman, 1996. A Contract Clause for Allocating Risk. Proceedings of the American Association of Cost Engineers. Klimoski, R. J. and B. L. Karol, 1976. "The Impact of Trust on Creative Problem Solving Groups." Journal of Applied Psychology 61(5): 630-633.

Greg Skulmoski University of Calgary, Department of Civil Engineering Project Management Specialization 2500 University Drive NW Calgary, Alberta, Canada, T2N 1N4 Tel +403 2202875 Fax +403 2827026 [email protected]

Mayer, R. C., J. H. Davis, et al., 1995. "An Integrative Model of Organizational Trust." Academy of Management Review 20(3): 709-734. McAllister, D. J., 1995. "Affect- and Cognitionbased Trust as Foundations for Interpersonal Cooperation in Organizations." Academy of Management Journal 38(1): 24-59. Rousseau, D. M., S. B. Sitkin, et al., 1998. "Not So Different After All: A Cross-Discipline View of Trust." Academy of Management Review 23(3): 393-404. Skulmoski, G., K. Jugdev, et al., 1998. Remove the Finger from the Scale: A Balanced Approach to Outsourcing Contracts. Proceedings of the Annual Project Management Institute 1998 Seminars & Symposium, Long Beach, California.

Francis Hartman University of Calgary Department of Civil Engineering Project Management Specialization 2500 University Drive NW Calgary, Alberta, Canada, T2N 1N4 Tel +403 2202875 Fax +403 282-7026 [email protected]

Zaghloul, R. M., 2001. Contracts' Hidden Costs: A Trust/Risk Allocation Approach (Unpublished PhD dissertation). Faculty of Engineering. Calgary, University of Calgary. Zaghloul, R. M. and F. T. Hartman, 1999. How To Reduce Your Project Cost. Proceedings of the American Association for Cost Engineers Annual Conference, Calgary. Zand, D. E., 1972. "Trust and Managerial Problem Solving." Administrative Science Quarterly 17: 229-239.

Ramy Zaghloul Mohamed University of Calgary, Canada

Page 35

CATEGORY: RESEARCH

Rethinking Project Management: Old Truths and New Insights Kam Jugdev, University of Calgary, Canada Janice Thomas, Athabasca University, Canada Connie L. Delisle, University of Calgary, Canada Keywords: Trends, Project Management, Project Management Maturity Models, Core Competence, Old & New Economy, Professionalization, Success, Performance, Competitive Advantage Change, learning and leadership are prevailing concepts of the New Economy. This paper reviews old truths and explores new insights in project management within the following areas: a) the profession, b) success / performance measures, and c) competitive convergence vs. competitive advantages in relation to certification programs and management maturity models. Then we present some new insights on two areas of current research - developing a firm level core competence in project management and practices to promote project management to executives. The paper concludes by encouraging those in project management to learn from the old truths and be receptive to change and learning as they lead the way into the New Economy. Introduction Change, learning and leadership are three key concepts of the New Economy (Fastcompany, 2000). With the exponential growth of project management, emerging trends within the discipline lend themselves to new insights. In the Old Economy, classical or traditional project management involves getting work done on time, on budget and within scope. In the New Economy, modern project management involves leading change in organizations and learning from the process (Hartman & Skulmoski, 1998; Morris & Jones, 1998). Old Economy thinking focused on project management as a tactical construct; New Economy thinking positions project management as a strategic construct. These terms enable us to examine our practices for gaps so that we can challenge axioms (self-evident truths) and theorems (logical conclusions) about success (Delisle, 2001). "First, while the subject of 'project management' is now comparatively mature, and recognized by thousands if not millions of managers as vitally important, it is in many respects still stuck in a 1960s time warp" (Morris, 2000, p. 2).

Page 36

Although some of the literature links project management competence to project management effectiveness, standards describing project management capabilities and the link to organizational success are still lacking (Cooke-Davies, 2000). There is a significant gap in our understanding of how project management can be integral to strategic management by defining project management's role in achieving

organizational effectiveness and long term business success. Though project management is a relatively young discipline, it has been around long enough for an exploration of some old truths and new insights. This paper highlights perspectives necessary to build a New Economy viewpoint on project management. The main themes discussed in this paper are summarized as follows:

Table 1: Old Truths and New Insights about Project Management

Trends and Definitions A number of global trends directly and indirectly influence the growth of project management. One such trend is the increased competitiveness of the global market place and emphasis on efficiency. Other trends include the exponential growth of the computer industry, reliance on Information Technology to store and analyze information, the Internet market space, deregulation, mergers and acquisitions, environmental concerns and growing customer expectations. These trends and others contribute to the corporate adoption of the following types of practices in the quest to remain ahead of the status quo: quality improvement, business process reengineering, outsourcing, restructuring, downsizing and project-based work to name a few (Stewart, 1995; Wirth, 1992). Over the past 50 years, project management grew exponentially to meet the demands of global competition. In 1998 it was an $850 (US) million industry and growing at 20 percent a year (Bounds, 1998). Membership in the Project Management Institute® (PMI), one of several standards associations worldwide, is over 78,000 as of May 2001 (PMBOK, 2001). Most early descriptions and definitions of project management were mechanistic and referred to the constructs of time, cost and scope - otherwise known as the iron or priority triangle (Archibald, 2000; Atkinson, 1999; Meredith & Mantel, 1995; Wallace & Halverson, 1992; Wirth, 1992) (Skulmoski & Hartman, 2000). Traditionally, project management referred to the discipline, methodologies, tools and techniques to manage projects and projects were "temporary endeavors undertaken to create a unique product or service" (PMBOK, 2001, p. 167). Moving towards a New Economy perspective, a more holistic description refers to addressing stakeholder needs and expectations by balancing the demands between a) time, cost and quality, b) different stakeholders, and c) identified requirements and unidentified requirements (expectations) (PMBOK, 2001). The literature also describes project management as involving a blend of "hard" and "soft" processes, tools and techniques (Kress, 1994). The literature sometimes describes project management as involving cultural, structural, practical and personal aspects (Cooke-Davies, 1990). A New Economy

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

definition of project management that captures the essence of the discipline states that project management is "the art and science of converting vision into reality" (Turner, as cited in Atkinson, 1999 p. 338). Project Management researchers and practitioners are only now beginning to explore the implications this shift in perspective has on the discipline (Thomas & Tjader, 2000). Along with the evolving understanding that project management is a complex undertaking, there is growing awareness around its professionalization.

The Profession of Project Management From the Old Economy perspective, project management is an applied discipline with value at the tactical and operational level. It is usually considered a subset or extension of a person's technical domain. In the period following World War II, project management evolved as a subset of technical knowledge areas such as defense, aerospace and civil engineering (Morris et al., 1998). It is beginning to be more widely acclaimed as a "profession" in it's own right (Verzuh, 1999). As a young vocation not yet recognized as an occupation by many census bureaus, project managers require a balance of skills in the business, technical and project management domains and are increasingly viewed as industry independent professionals (Verzuh, 1999). Clearly, practitioners and major associations view project management as a "profession" (Zwerman & Thomas, 2001). However, project management only became an "academic" discipline in the mid 1980s (Morris et al., 1998). What is less clear is what that term means to its proponents and to the discipline as a whole. For over 75 years, the discipline of sociology has studied what distinguishes a profession from an occupation. The list of attributes of a profession typically includes a body of knowledge, a culture sustained by a professional association, code of ethics, recognized authority and community sanction (Greenwood, 1966; Millerson, 1964). Project management is evolving towards professional status on some of the criteria as noted by the following trends (Zwerman et al., 2001): - Bodies of knowledge exist for the profession e.g. Project Management Body of Knowledge Guide® and some include codes of ethics;

-

The culture is sustained through professional development initiatives, conference and seminar venues as well as local chapter activities; - Professional certification designations support recognized authority; and, - Universities offer degrees at the graduate and doctoral level in project management (AACE, 2000; AIPM, 2000; APM, 2001; CCTA, 2000; CIPPM, 2001; ESIInternational, 2001; Hartman et al., 1998; IPMA, 2000; PMI, 2001). Based on the traditional definition of a profession, project management is missing an esoteric body of knowledge or theories that are unique to the practice. It is also missing community sanction or government recognition that the practice has enough impact on the public good to be reserved for "professionals" as is the case in law, medicine, engineering and accounting. The PMI recently recognized the need to examine the lack of project management theoretical roots as evidenced by its support for a research study on the topic in May 2001 (PMI, 2001). Many association bodies including PMI and academic researchers (such as Morris and Thomas) are endeavoring to develop theories of project management which will ultimately distinguish it from general management and other process skills and applications. The trickier question will be accomplishing the community sanction necessary to make it truly a profession in the traditional sense of the term. The other issue to consider is whether or not project management is mature enough as an occupation for practitioners to be measured against performance standards and whether an acceptable level of accountability is in place to regulate the discipline. Are the professional associations and practitioners in agreement on what this entails? Are they ready for this challenge? The answer to whether project management is a profession or not is likely to be debated for some time. Adding to this debate is that the New Economy global playing field is increasingly complex. Project managers work in diverse organizational structures, manage or work with multiple teams and have many operational and project responsibilities. They deal with

Page 37

changing customer demands, multiple stakeholders, senior management, teams, staff, and project responsibilities (Kerzner, 2001). The role involves considerable leadership and flexibility in a world of uncertainty. In addition to their technical responsibilities, they are increasingly aware of societal project issues (Hartman, 2000). These trends both drive towards professionalization (through the increasing potential impact on society of project outcomes and related need for community sanction and policing) and away from it (through increasing project complexity that makes it more difficult for project managers to accept responsibility for outcomes).

Performance Metrics of Success Defining the Elusive Concept of Success In the Old Economy, project and project management performance metrics as indicators of success are of particular importance in determining progress. Whether time to market, reduced cycle time or quality products are the goals or more broadly, returns on investment or market share, firms compete and seek the advantages offered by strategies and techniques such as project management. Historically, success was efficiency focused, measured in terms of the iron triangle of time, cost and scope (quality) and emphasized the implementation phase of the project lifecycle (Pinto & Slevin, 1987). Newer insights are slow in being adopted. They relate to understanding that success is not a one-time measure, it can be subjective and it is a multidi-

mensional construct. Success may refer to indicators (aspects that are paid attention to) or outcomes (aspects that are judged) (Delisle, 2001). Success metrics also changes over the project lifecycle and can extend into the product lifecycle (Atkinson, 1999; Baccarini, 1999; Might & Fischer, 1985; Munns & Bjeirmi, 1996; Shenhar, Levy, & Dvir, 1997). Success involves both objective performance metrics (efficiency measures e.g. return on investment) and subjective metrics (effectiveness and innovation measures) (EIU, 1999). Some examples of effectiveness metrics involve the customer perspective, improved internal processes, learning and competencies (Germain, 2000; Sveiby, 1997). Another area of contrast between old truths and new insights is related to success and involves the constructs of competitive convergence and competitive advantage.

Competitive Convergence vs. Competitive Advantage In the Old Economy, the emphasis is on efficiency whereas the New Economy perspective includes effectiveness and innovation metrics in a balanced manner akin to how the iron triangle warrants negotiations on time, cost and scope. Effectiveness values emphasize customer service, collaboration, organizational effectiveness and knowledge sharing. Innovation values involve market expansion and advantage creation strategies (EIU, 1999). Being more successful than the competition is key towards achieving a competitive advantage. However, as explained by Porter's productivity frontier diagram that fol-

lows, companies that compete on project management competences but rarely on a core competence in the discipline achieve operational advantages instead of competitive advantages. Firms are constantly pressured by both internal and external factors to increase productivity, improve performance and improve quality. Performance is also indicative of success and at the firm level, being successful means survival in the competitive marketplace, staying ahead of the pack and increasing profits (Cleland, 1991; Stewart, 1995; Wirth, 1992). To outperform rivals, firms must deliver greater or a more full range of value for customers or create comparable value at lower costs (Porter, 1996). Operational effectiveness means doing similar activities better than rivals. Operational effectiveness is insufficient in achieving a competitive advantage though, because after a while, firms look alike, do the same things and this leads to diminishing returns as they reach competitive convergence (Porter, 1996). Porter depicts this as follows. On the productivity frontier (based on non-price buyer value delivered and relative cost position), the frontier shifts constantly due to the diffusion of innovative practices. Common strategies such as project management, project management maturity models, quality improvement, empowerment and outsourcing can be used to keep up with the productivity frontier. However the frontier continues to shift as rivals imitate each other and generic solutions diffuse into the marketplace. Operational effectiveness is a necessary part of management but it is not the same as

Figure 1: Operational Effectiveness Versus Strategic Positioning Page 38

innovation. Operational effectiveness shifts the productivity frontier outward and continues to raise the standard of expected firm performance. However, it does not lead to a relative improvement position for firms. In contrast, strategic positioning refers to doing different activities from rivals or similar activities differently - in other words, being innovative and creative. Innovation involves revolution, remodeling or introducing newness (EIU, 1999). As explained in next section, this is an area where project management has not moved forward rapidly in the New Economy. Project management continues to support incremental improvements through Old Economy practices in relation to certification and maturity models.

Individual Certification and Project Management Maturity Models Certification programs and project management maturity models both measure competence. Certification measures competence at the individual level and the project management maturity models measure competence at the project, program or firm level.

Individual Certification Worldwide, project management associations such as PMI, the Association of Project Management (APM) and the Australian Institute of Project Management (AIPM) offer professional designations or certifications. These are based on combinations of questions that test individual rote knowledge and resumes and project summaries that assess reported experience. Most exams do not specifically test personal competencies or technical level detail (CCTA, 2000). Only the AIPM provides detailed evidence guidelines to measure capabilities. Examples of extant certification programs include: the PMI's Project Management Professional designation; the IPMA's certification; the APM certification; and, the AIPM certification (AIPM, 2000; CCTA, 2000; IPMA, 2000; PMI, 2001). The old truth is that project management is evolving as a discipline to warrant a number of certification programs as a way of establishing professional credibility. However, global standards are not in place and certifications remain continent specific for the most part. The new insight is that existing certification programs will be challenged

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

to raise the bar and assess member competences more rigorously by developing tests that go beyond rote memorization. Otherwise, project management associations run the risk of diluting the value of certification and this will detract from the establishment of the profession. Two other pressures to move from the Old Economy to New Economy relate to the growing debate on the professionalization of project management and industry demands for better-qualified personnel in light of prevailing project failures (Standish, 1996). In addition, another frontier where incremental progress is being made relates to project management maturity models.

Project Management Maturity Models Along with measuring individual capabilities, project management has focused on maturity models to assess project standards and practices as well as firm support for the discipline. As of 2001, there were approximately eight extant maturity models at various stages of development and use. Many are based on the Software Engineering Institute's five stage capability maturity model where the levels move incrementally from initial, repeatable, defined, quantitative to optimized performance (SEI, 2001). Most models are also based on the project management bodies of knowledge supported by the prevailing association. The models involve step-wise quality improvements on processes and practices. Some of the maturity models involve commercially available software and others are conceptual or involve guidelines and templates. The range of extant project management maturity models includes: Organizational Project Management Maturity Model (OPM3); Projects in Controlled Environments Methodology (PRINCE2); Project Management Assessment (PMA 2000); Project Management Maturity Model; Project Framework; EFQM Excellence; IBM Progress Maturity Model; SMART Project Management; Project Management Maturity Model (AACE, 2000; AIPM, 2000; CCTA, 2000; Hartman et al., 1998; IPMA, 2000; PRINCE2, 2000; Schlichter, 1999). Only one model is described as "open" in contrast to the others that are linear and incremental the Leshem-Nituv Engineers (Lubianiker & Schwartz, 2001).

The models are useful in advancing project management practices and standardizing processes. They combine inputs, processes and outputs as well as knowledge, experience and competencies. They investigate the premise that success could be improved by addressing project competence and maturity (Skulmoski, 2001). The models improve our understanding of practitioner competence, the working environment and the business purposes (Hartman et al., 1998). The maturity models also identify project or organizational strengths and weaknesses as well as provide benchmarking information. However, few have been empirically tested and most are based on anecdotal material, case studies or espoused best practices (Skulmoski, 2001). Project management maturity models tend to be hierarchical and the exact points of transition between the levels are not always clear. Furthermore, they often blend individual project management maturity with program or organizational maturity. From a New Economy perspective, considering the shift in skills and roles project managers play in new types of organizations and teams in the global economy (i.e. virtual teams), maturity models need re-thinking (Delisle, 2001). Just as no one certification standard exists in the New Economy, neither does a generally accepted model for project management maturity (Schlichter, 2000). This area is relatively young and lacks empirical support for determining which competencies contribute most to project success (Skulmoski, 2001). Although the models have been useful in improving project related practices, they have also resulted in competitive convergence wherein companies are "doing much of the same", and few companies are strategically positioned as a result of achieving a high project management maturity level (Kujala & Artto, 2000). The old truths on project management maturity models are that hierarchical, closed models can assess project management maturity and support project management as an operational construct as evidenced by the focus on the business unit or project level. The models typically lack a holistic, strategic dimension (Jugdev, 2001). As a consequence, business improvements appear incremental rather than strategic.

Page 39

Project Management as a Core Competence The old truth is that project management is an operational construct. The new insight is that project management has a role at the strategic planning level of the organization. There is an economics and strategy based construct called a core competence that has yet to be explored in terms of what this means to project management. Achieving a high project management maturity score is not enough as it simply contributes to competitive convergence. However, companies with high levels of project management maturity are better positioned to achieve a competitive business advantage than their rivals, especially if they integrate the practice with other strategic initiatives.

"Current research and project management applications often have a limited focus on applications at the operative level. As a result, they seldom provide links between operative and strategic management in a project-oriented organization… Projects have the potential to change the purpose and the future of the organization, and in that respect, they are part of the strategy creation process" (Kujala et al., 2000, p. 47-48). As presented thus far, the incremental progress in such areas as measuring success, performance, individual and project competence lends itself to Old Economy thinking and supports a theme of competitive convergence. How can firms then move forward and strive for New Economy thinking and practice? One approach would be to develop a core competence in project management. A core competency is what a firm does (e.g. functional skills and cultural habits, attitudes and beliefs) in contrast to tangible assets that a firm has (Nelson, 1994). This area has not been studied in project management and it stems from the Resource-Based Perspective of the firm. This perspective, rooted in economic theory, has produced the strategic management literature supporting the premise that systematic differences exist across firms that are relatively stable, and that intra-firm resources are

Page 40

unique and contribute to a firm's competitive advantage (Foss, 1997; Schulze, 1994). The Resource-Based perspective describes core competences in terms of tangible and intangible resources. Core competences are rooted in the intra-firm heterogeneous resources involving human resource practices, asset specialization, learning, culture, team-embodied skills and routines, hard to manage tasks/ processes, alliances for learning and trust (Schulze, 1994). Organizational knowledge and collective practice are dimensions of the intangible assets a firm can capitalize on to achieve a dynamic capability or innovative competitive advantage (Teece, Pisano, & Shuen, 1997). Resources must be synergistic, unique, inimitable and or unexpected otherwise efficient markets will ensure that abnormal returns from any resource will be competed away (Barney, 1986). Overall, a core competence is "a messy accumulation of learning…(and) comprises both tacit and explicit knowledge" (Hamel, 1994, p 12). In addition, core competencies are dynamic, as they change over time (Bogner & Thomas, 1994; Hall, 1994; Turner & Crawford, 1994). Thus, their definition and measurement appear difficult. Research should consider project management as more than a tactical construct consisting of tools and techniques, and introduce the softer, cultural and belief driven nature of project management. This may make it easier to see a holistic application of project management at the organizational level and encourage its application to generate a strategic advantage. One major issue may relate to addressing change at the cultural level of the firm. Looked at this way, we can make an argument that a project management culture is: - Inimitable - while there is abundant reporting of best practices, organizations find it extremely difficult to transplant these practices across organizations; - Synergistic - higher levels of project management application are found in organizations with base level cultures supportive of a high achievement, high accountability process; and, - Unique - organizations that have achieved excellence in project management tend to have their own unique approach to

applying it internally. A vanilla, "mature" application of standard methodologies does not produce excellence. DeFillippi and Arthur (1998) suggest that project management contributes to developing stable strategic resources in the following ways: - Although projects are temporal in nature, involve cross-functional teams and essentially rent human capital, they can accumulate core competencies; - Although projects do not involve a stable workforce, they can convey tacit knowledge and knowledge transfer; and, - Although projects involve very mobile staff, they can create competitive advantage through possessing inimitable resources (DeFillippi & Arthur, 1998). The old truths confirm that when firms apply project management basics as measured through the project management maturity models, most achieve competitive convergence. As such, operational effectiveness is a given. However, Porter (1996) suggests operational effectiveness "is a required practice for firm survival but it is not a strategy" (p. 78). Project management maturity models tend to support an operational approach that supports incremental improvements instead of strategic ones. Stepwise improvements are the norm for competitive convergence but not for a competitive advantage (EIU, 1999; Hartman & Skulmoski, 1999). The new insights indicate that little research has been conducted on project management core competencies. To date, certification approaches have not addressed this and the maturity models emphasize project focused incremental improvements but not tacit knowledge or dimensions of a core competence that link it to the strategic management level of the firm. Firms investing in project management stand to gain a competitive advantage in the market place by capitalizing on their project management abilities and turning them into core competencies through the alignment of operations management with strategic management. Some firms could achieve strategic project management wherein the following constructs are supported: 1. Project management maturity levels: These firms have a founda-

2.

3.

4.

5.

6.

tional project management maturity level; Success Factors: Senior managers embrace the concepts and provide leadership based on success criteria and indicators that are defined and measured up front (Belassi & Tukel, 1996); Strategic Management: Executive practices are aligned with operations management. Operational management support alone is insufficient to develop a core competence in project management, as it does not result in a program of projects that are aligned among themselves or with the strategic directions. This might lead to competitive convergence instead of a competitive advantage; Developing and Protecting: Project management core competences are supported and protected by senior management in innovative ways as warranted by the unique resource bundles. Firms that fail to do so end up in competitive convergence because rivals can easily and readily replicate their practices. 4.1. The project management program is aligned with quality management and knowledge management practices as this lends itself to explicit and tacit knowledge sharing and practice improvements. An effort to develop a project management core competence in isolation of these practices lends itself to fractured knowledge warehousing and limited sharing. This constrains the firm's abilities to holistically address quality dimensions of project management; Valuation: Project management is valued in both tangible and intangible ways and viewed more as a rent-generating asset than an overhead or cost. Firms that view project management as an expense, are less likely to view it as a strategic asset or make the investment in it; Organizational Learning: Double loop learning (learn-do-assesslearn) and the ability to address the knowing-doing gap is a joint requirement for a core competence

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

in project management (Pfeffer & Sutton, 1999) (Thomas, Delisle, Jugdev, & Buckle, 2001b); and, 7. Dynamicism: Innovation and adaptability are the norm over rigidity and control. There is a tolerance for paradoxical situations and the firm is both effective and ineffective at the same time in different aspects of function (Helleloid & Simonin, 1994; Thomas, 1998) (Anderson, 2000; Thomas et al., 2000). The old truth is that a high project management maturity level means excellence had been achieved. The new insight is that there are practices to be achieved beyond a linear maturity level focused on the project. Such practices relate are organizational in nature, involve corporate directions and core competences. This is a New Economy theory the authors are currently researching so this discussion is a first attempt to build a case for theorists and practitioners alike to view project management as a potential strategic resource and core competence (Jugdev, 2001). Furthermore, developing and sustaining core competences cannot occur without the commitment and leadership from executives or the investment in the learning process. "Without specific competences related to reshaping the firms future competences, corporate survival is no more than a chance event" (Turner et al., 1994, p. 262).

Selling Project Management Last but not least, the Old Economy supports the premise that it is enough to practice project management at the operational level and promote it in tactical ways by emphasizing tools and techniques. The Old Economy perspective supports practicing project management reactively, in response to crises, instead of proactively. A recent international research study (n= 1,867) confirms that this does not contribute to senior management appreciating the greater value possible with project management (Thomas, Delisle, Jugdev, & Buckle, 2001a). Instead it results in executives further viewing project management as a tactical construct lending itself to mid-level attention instead of senior level attention: - 71.1% agree that the selling issue is an important one for their organizations;

- 45% somewhat or strongly agree (12.4%) that selling project management is difficult to do within their organizations; - 58.6% somewhat agree that project management is used in times of crises and 16.7% strongly agree; - The concept of the Accidental Project Manager is supported. 60.2 % of respondents agree that the title project manager is usually not accompanied by increased pay or recognition while 57.8% agree that little or no project management training is given to those who take on the role of project manager; and, - 21.8 % of respondents strongly agree with the statement that project management is a valued discipline in organizations, ranking with accounting, finance and engineering and 26.8% somewhat agree. At the same time 11.8% strongly disagree and 26.1% somewhat disagree. Insights of the New Economy are that firms support practices of advocating and championing project management by aligning the value of the discipline to the firm's strategic priorities. In addition, project managers understand the organization's business priorities and speak the language of executives as they extol the virtues of the discipline; project managers and senior managers strive to develop an environment conducive to sustaining a core competence (Thomas et al., 2001b).

Summary To summarize, the paper has addressed old truths and new insights in the following areas: a) Definitions on project management in either narrow terms or holistic ways; b) The debate on describing project management as a discipline or profession; c) Success and performance measures that are now multidimensional and recognize joint connection at the operational and strategic level; d) Aspects where project management has demonstrated competitive convergence instead of

Page 41

competitive advantages e.g. certification, maturity models; e) Competences vs. core competences; and, f) Practicing project management vs. selling project management in proactive ways and demonstrating its strategic value. Earlier, we identified change, learning and leadership as three driving concepts of the New Economy. Clearly, those aware of the old truths and their limitations and willing to take the risks of venturing into the New Economy stand increased chances to succeed. Furthermore, the area of core competences in project management will bear watching for the next few years. In a world of changing organizational forms where projects are more the norm than bureaucracies, developing a core competence in project management may be the key to survival and growth for many companies. Developing the "profession" of project management may be the route to further success or a few dead ends along the journey. We encourage you to learn from the old truths and be receptive to change and learning as you lead the way into the New Economy.

Barney, J. B. 1986. Strategic factor markets: Expectations, luck and business strategy. Management Science, 32(10): 1231-1241.

References

Cooke-Davies, T. 2000. A call to take part in a survey, Vol. 2000.

AACE. 2000. AACE International's certification program, Vol. 2000: AACE. AIPM. 2000. National competency standards for project management, Vol. 2001. Anderson, L. 2000. Argyris and Schon's theory on congruence and learning, Vol. 2000. APM. 2001. Association for project management, Vol. 2001: APM.

Belassi, W., & Tukel, O. I. 1996. A new framework for determining critical success/failure factors in projects. International Journal of Project Management, 14(3): 141-152. Bogner, W. C., & Thomas, H. 1994. Core competence and competitive advantage: A model and illustrative evidence from the pharmaceutical industry. In G. Hamel, & A. Heene (Eds.), Competence-based competition: 111-147. Chichester: John Wiley & Sons. Bounds, G. 1998. The last word on project management. Institute of Industrial Engineers Solutions, 30(11): 41-43. CCTA. 2000. Project management industry initiatives, Vol. 2000: 1-4: Central Computer and Telecommunications Agency. CIPPM. 2001. Project management certification, Vol. 2001: Center for International Project & Program Management. Cleland, D. I. 1991. The age of project management. Project Management Journal, 22(1): 19-25. Cooke-Davies, T. 1990. Return of the Project Managers. Management Today: 119-121.

DeFillippi, R. J., & Arthur, M. B. 1998. Paradox in project-based enterprise: The case of film making. California Management Review, 40(2): 125-139. Delisle, C. 2001. Communication and success in virtual project teams. Unpublished Doctoral, University of Calgary, Calgary. EIU. 1999. Assessing the strategic value of information technology, Vol. 2001: 1-105: Economist Intelligence Unit.

Archibald, R. D. 2000. What CEOs must demand to achieve effective project management. Paper presented at the First Ibero American Project Management Forum, Mexico City, D.F., Mexico.

ESI-International. 2001. ESI-International, Vol. 2001.

Atkinson, R. 1999. Project management: Cost, time and quality, two best guesses and a phenomenon, its time to accept other success criteria. International Journal of Project Management, 17(6): 337-342.

Foss, N. (Ed.). 1997. Resources, Firms and Strategies: A Reader in the Resource-Based Perspective. Oxford: Oxford University Press.

Baccarini, D. 1999. The logical framework method for defining project success. Project Management Journal, 30(4): 25-32.

Page 42

Fastcompany. 2000. Change time - Editorial, Fast Company, Vol. 39: 22.

Germain, C. J. 2000. Balance your project. Strategic Finance, 81(11): 46-52. Greenwood, E. 1966. The Elements of Professionalization. In H. Vollmer, & D. Mills (Eds.), Professionalization: 9-19. Englewood Cliffs, New Jersey: Prentice-Hall, Inc.

Hall, R. 1994. A framework for identifying the intangible sources of sustainable competitive advantage. In H. Thomas (Ed.), Competence-based competition: 149-169. Chichester: John Wiley & Sons. Hamel, G. 1994. The concept of core competence. In G. Hamel, & A. Heene (Eds.), Competencebased competition: 11-33. Chichester: John Wiley & Sons. Hartman, F., & Skulmoski, G. 1999. Quest for Team Competence. Project Management, 5(1): 10-15. Hartman, F. T. 2000. Don't park your brain outside: A practical guide to improving shareholder value with SMART project management, 1st ed.: 407: Project Management Institute. Hartman, F. T., & Skulmoski, G. 1998. Project management maturity. Project Management, 4(1): 74-78. Helleloid, D., & Simonin, B. 1994. Organizational learning and a firm's core competence. In G. Hamel, & A. Heene (Eds.), Competence-based competition: 213-239. Chichester: John Wiley & Sons. IPMA. 2000. IPMA Certification, Vol. 2000. Jugdev, K. 2001. Multiple Case Study: Developing a Core Competence in Project Management (unpublished. Work in progress). Unpublished PhD Dissertation, University of Calgary. Dr. Janice Thomas, Supervisor, Calgary. Kerzner, H. 2001. Project management: A systems approach to planning, scheduling, and controlling (7th edition ed.). New York: John Wiley & Sons Inc. Kress, R. E. 1994. Quality project management: Key success factor to exceeding buyer values. Industrial Management, 36(6): 22-30. Kujala, J., & Artto, K. 2000. Criteria for project performance in business context. Project Management, 6(7): 46-53. Lubianiker, S., & Schwartz, M. 2001. PMA 2000, Vol. 2001: Leshem-Nituv Engineers. Meredith, J. R., & Mantel, S. J. 1995. Project management: A managerial approach (3rd ed.): John Wiley & Sons. Might, R. J., & Fischer, W. A. 1985. The role of structural factors in determining project management success. IEEE Transactions on Engineering Management, EM32(2): 71-78. Millerson, G. 1964. The qualifying associations: A study of professionalization. London: Routledge and Kegan Paul. Morris, P. W. 2000. The Management of Projects: the new model: Center for the Management of Projects. University of UMIST, UK.

Morris, P. W., & Jones, I. 1998. Current Research Directions in the Management of Projects at UMIST, Vol. 2001: IRNOP III, Calgary, Alberta, Canada. Munns, A. K., & Bjeirmi, B. F. 1996. The role of project management in achieving project success. International Journal of Project Management, 14(2): 8188. Nelson, R. R. 1994. Why do firms differ, and how does it matter? In R. P. Rumelt, D. E. Schendel, & D. J. Teece (Eds.), Fundamental issues in strategy: 247-269. Cambridge, MA: Harvard Business School Press. Pfeffer, J., & Sutton, R., I. 1999. Knowing "what" to do is not enough: Turning knowledge into action. California Management Review, 42(1): 83-108. Pinto, J. K., & Slevin, D. P. 1987. Critical factors in successful project implementation. IEEE Transactions on Engineering Management, EM34(1): 2228. PMBOK. 2001. A guide to the project management body of knowledge (PMBOK Guide) (2000 Edition CD ROM ed.). Pennsylvania: PMI. PMI. 2001. PMI website, Vol. 2001: Project Management Institute. Porter, M. E. 1996. What is strategy? Harvard Business Review(Nov/Dec 1996): 61-78. PRINCE2. 2000. What is Prince2?, Vol. 2001. Schlichter, J. 1999. Surveying project management capabilities, PM Network ed., Vol. 2000.

Stewart, T. A. 1995. Planning a career in a world without managers. Fortune, 131(5): 72-80. Sveiby, K.-E. 1997. The BSC and Intangible Assets Monitor seem very similar?, Vol. 2001. Teece, D., J., Pisano, G., & Shuen, A. 1997. Dynamic capabilities and strategic management. Strategic Management Journal, 18(7): 509-533. Thomas, J. 1998. Making sense of project management. In R. A. Lundin, & F. Hartman (Eds.), International Research Network on Organizing by Projects Publication Projects as business constituents and guiding motives: 45-65. Boston: Kluwer Academic Publishers. Thomas, J., Delisle, C., Jugdev, K., & Buckle, P. 2001a. Mission Possible: Selling project management to senior executives. PM Network, 15(1): 59-62. Thomas, J., Delisle, C., Jugdev, K., & Buckle, P. 2001b. Selling Project Management to Senior Executives: The Case for Avoiding Crisis Sales. PM Journal, Accepted for publication 2001.

Turner, D., & Crawford, M. 1994. Managing current and future competitive performance: The role of competence. In G. Hamel, & A. Heene (Eds.), Competence-based competition: 241-263. Chichester: John Wiley & Sons. Verzuh, E. 1999. The fast forward MBA in project management. New York: John Wiley & Sons.

Schulze, W. S. 1994. The two resource-based models of the firm: Definitions and implications for research. 37-41.

Wallace, R., & Halverson, W. 1992. Project management: A critical success factor or management fad. Industrial Engineering, 24(2): 1-5.

SEI. 2001. SEI Capability Maturity Models, Vol. 2001: Carnegie Mellon University.

Wirth, I. 1992. Project management education: Current issues and future trends. International Journal of Project Management, 10(1): 4955.

Skulmoski, G. 2001. Project maturity and competence interface. Cost Engineering (in press). Skulmoski, G., & Hartman, F. T. 2000. The Project Achilles Heel: Misalignment. Cost Engineering, 42(12): 33-37. Standish. 1996. The CHAOS Report: Unfinished voyages, Vol. 2001: The Standish Group.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

PhD Student Project Management Specialization, University of Calgary 8311-11 Street SW Calgary Alberta T2V 1N7 Tel: (403) 258-2513 E-mail: [email protected]

Thomas, J., & Tjader, J. 2000. On learning and control - competing paradigms or co-existing requirements for managing projects in ambiguous situations? Paper presented at the International Research Network on Organizing by Projects, Sydney, Australia.

Schlichter, J. 2000. OPM3 Survey. In K. Jugdev (Ed.). Upper Darby.

Shenhar, A. J., Levy, O., & Dvir, D. 1997. Mapping the dimensions of project success. Project Management Journal, 28(2): 5-13.

Kam Jugdev, PMP, MEng, MHSA, BSc, BSc

Zwerman, B., & Thomas, J. 2001. Potential barriers on the road to professionalization. PM Network, 15(4): 50-62.

Acknowledgements The authors would like to thank the University of Calgary and Athabasca University for their valued support.

Dr. Janice Thomas, PhD, MBA, BSc Associate Professor, Centre for Innovation Management, Athabasca University Adjunct Professor, Project Management Specialization, University of Calgary 96 Manyhorses Drive Redwood Meadows, Alberta T3Z 1A1 Tel: (403) 949-4965 e-mail: [email protected] Dr. Connie L. Delisle, PhD, MSc, BA, BA (Ed) Centre for Innovation Management, Athabasca University Project Management Specialization, University of Calgary 104, 500 Elliot Avenue, Kelowna, British Columbia V1Y 5S8 e-mail: [email protected]

Page 43

CATEGORY: RESEARCH

The Impact of Performance in Project Management Knowledge Areas on Earned Value Results in Information Technology Projects Ralf Müller, Henley Management College, UK J. Rodney Turner, Erasmus University, The Netherlands Keywords: Project Performance, Project Management Knowledge Areas, Earned Value

Using the Body of Knowledge from the Project Management Institute this study explores the relative impact of the different project management knowledge areas on the Earned Value (EV) measures of Percent Schedule Variance (%sv) and Percent Cost Variance (%cv) in Information Technology (IT) projects. The results show that a planning stage after contract signature has the strongest impact on %sv, whereas Communication Management, Change Management and Human Resource Management have the strongest impact on %cv. Resource management and project planning practices are most influential on a project's risk status. A formula to calculate Return on Investment (ROI) for project management improvement activities is also developed. It allows focusing project management improvement activities on those knowledge areas that have strongest impact on project performance results and therefore the highest ROI.

Introduction A Project Management Body of Knowledge (PMBoK) provides a framework for project management execution, i.e. a broad set of management dimensions to cover the vast variety of possible projects in many industries. The Project Management Institute's (PMI) PMBoK (PMI 1996), defines 9 project management knowledge areas that comprise good project management execution today: - Project Integration Management - Project Scope Management - Project Time Management - Project Cost Management - Project Quality Management

Page 44

- Project Human Resource Management - Project Communications Management - Project Risk Management - Project Procurement Management. These project management knowledge areas are also used as a reference to review projects and project management execution. Identification of weakly executed knowledge areas allows focusing improvement activities, e.g. through awareness building or training, for subsequent improvement of the project's overall performance results.

One of the widely used measures for performance in project management is Earned Value (Alexander 2000, Sparrow 2000, Stratton 2000), which is defined in the PMI PMBoK (PMI 1996) as: "A method for measuring project performance. It compares the amount of work that was planned with what was actually accomplished to determine if cost and schedule performance is as planned" Two of the most important performance result metrics in EV are Percent Cost Variance (%cv) and Percent Schedule Variance (%sv), which are defined by Defense System Management

College (2000) and the company performing this study as: Cost Variance % = (Budgeted Cost of Work Performed - Actual Cost of Work Performed) / Budgeted Cost of Work Performed Schedule Variance % = (Budgeted Cost of Work Performed - Budgeted Cost of Work Scheduled) / Budgeted Cost of Work Scheduled where: Actual Cost of Work Performed (ACWP) = Total costs incurred (direct and indirect) in accomplishing work during a given time period. Budgeted Cost of Work Performed (BCWP) = The sum of the approved cost estimates (including any overhead allocation) for activities (or portions of activities) completed during a given period. Also known as "earned value". Budgeted Cost of Work Scheduled (BCWS) = The sum of the approved cost estimates (including any overhead allocation) for activities (or portions of activities) scheduled to be performed during a given period (usually project-todate) (PMI 1996) The two measures of %sv and %cv indicate current project performance in terms of cost and time management. They allow for calculations of projected final performance results or for development of appropriate contingency activities to improve the performance during the remaining part of the project. These knowledge areas and EV techniques are widely known in the Project Management Community, which is shown by the wide recognition that the PMI PMBoK has achieved (Turner 2000). With almost 400,000 copies in circulation by the end of 1999 the PMI PMBoK is the knowledge foundation for the more than 18,000 PMI certified Project Management Professionals (PMI 2000), who were tested in the knowledge areas and EV techniques as part of their certification exam. However, little research is done on how the knowledge areas defined by PMI influence project results measured by use of EV techniques. The objective of this research was

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Table 1: Project Management Areas to explore the results of 36 IT project audits to identify project management knowledge areas that have the largest influence on project variances, measured in %cv and %sv. Once known by the IT industry, improvement activities for cost and schedule variances can be implemented more economically by focusing on those knowledge areas that have the strongest impact on the variances, thereby leading to the highest Return on Investment.

Methodology The research aim was to determine whether generalizable laws might exist in project management execution, provided that reasonably stable relationships can be found among project results and performance in project management knowledge areas. Given the exploratory nature of the research no hypothesis was developed in advance of the study. The methodology used semistructured group interviews (here called audits) using an a priori developed questionnaire, followed by structured methods of data analysis.

Audit Methodology and Material The research is based on a series of project audits that were held worldwide by NCR Corporation, a US Headquartered, global IT company (further called: the company) in April and May 1999. All audits were performed on projects for IT data warehousing solutions in Customer Relationship Management. Contrary to the usual practice of auditing only troubled projects, these audits were performed on all projects of this particular solution, independent of the project's performance status or geographical location. The results reflect the whole spectrum from good to weak per-

formance and therefore allow for analysis of the underlying structures and relationships among the project management knowledge areas in these projects. Prior to the audit work a questionnaire was developed by the prospective auditors and management of the company as a guideline and tool for the auditors. This questionnaire was based on the PMI defined knowledge areas and expanded for assessment of project status, selling and contracting practices, and project specific business & technology management. Through that the questionnaire was aligned with the company's Project Management Methodology GlobalPM® (NCR 1998). A total of 13 Project Management Areas (PMA's) were defined. These are shown in Table 1. For each of the PMA's a set of questions was developed (an example for the PMA 'Selling' is provided in the Appendix). The responses to the questionnaire have formed the basis for the auditors to rate the PMA's according to their maturity in execution. The rating levels used by the auditors were: 1 = PMA non-existent 2 = inadequate performance 3 = adequate performance 4 = best-in-class performance In an attempt to ensure consistency in audit execution a training session was held for the audit team leaders. In this training session the leaders were familiarized with the objectives of the audit, the project documentation, audit and data collection method, how to code the responses and the nature of the audit report to be fed back to Headquarters. On a project-by-project basis the methodology used for the audits was: - Review of the project documen-

Page 45

tation, including proposal, contract, project plan, risk and quality plans, reports from earlier audits, and other plans as available, as well as the monthly project status reports - Face-to-face meeting of the audit team with the Project Manager and Sales Representative of each project. The Project Manager presented the project and its status, and discussed issues and concerns of the project. The audit team leader used the questionnaire to ensure assessment of all dimensions of each PMA. A final performance rating for each PMA was jointly agreed by the 3 auditors based on the results of the presentation, the verbal assessment of the PMA's, the response to the questions from the questionnaire, as well as the quality of the documentation provided. - Consolidation of the results into an audit report, which was forwarded to the company's Headquarters for consolidation. The reports were analyzed on a worldwide basis and the findings presented to corporate management in order to launch improvement activities within business and project management practices.

Data 16 audit teams collected data from 77 projects. For several projects the %cv and %sv values were not provided. Also some projects were in the pre-implementation stage and hence no implementation data available. This resulted in full data being available for only 36 of the

projects. The data were collected within a time frame of four weeks, from April to May 1999. Further definitions of the data can be found in Table 2.

Analysis of the Audit Results Complementary to the business-related analysis, which gained insight in the company's performance level per PMA, a more general, project management related analysis of the results was done and is described in this paper. The goal of the analysis was: - Identification of PMA's that significantly influence %cv, %sv, and a project's risk status - Identification of key PMA groupings Analysis was done on the level of PMA rating. Data on %cv and %sv were taken from the audit reports, as well as the risk level of the projects, which is classified within the company in three categories, namely red, yellow and green, which are mutually exclusive and completely exhaustive categories. Criteria for determination of the risk level were quantitative and qualitative: - Quantitative - using EV measures: - green = %cv and/or %sv less than -5% - yellow = %cv and/or %sv between -5% and -15% - red = %cv and/or %sv more than -15% - Qualitative - anticipating problems: - green = no major issues foreseen - yellow = issues foreseen and help required to solve them - red = major issues foreseen,

Table 2: Data and Research Techniques used Page 46

threatening successful project implementation The analysis was done using SPSS Rel. 9.0.0 on Windows NT as computer program. The multivariate data analysis techniques used were mainly applied as described in Hair et al. "Multivariate Data Analysis" 1998, with other supporting documentation on quantitative methods (Remenyi et al. 1998, Targett 1990). PMA's were classified as independent variables, whereas %cv, %sv and project risk level were classified as dependent variables. The analysis was done using Stepwise Regression Analysis to identify the PMA's with the largest impact on %cv and %sv. Factor Analysis was used to reduce the number of possible factors (PMA's) for a subsequent Stepwise Regression Analysis to identify the drivers for project risk levels. Discriminant analysis was applied to develop a model for predicting a project's risk level, but the resulting group sizes were too small to validate the findings. Table 2 shows the areas of exploration, research technique used, data used and the expectations underlying the research: The level of detail in reporting the results within the sections below follows the recommendation of Chin (1998).

Analysis of Drivers for %sv, %cv and Risk Only 11 of the reported 13 PMA's were included in this analysis. Subcontractor Management was excluded because it was scored sometimes 1 and sometimes 3 in case of projects without subcontractors. The PMA Selling was excluded because of collinearity with other independent variables.

expected to be 5% positive. It also shows that adequate performance (score 3) may not prevent a project from a slight negative %sv of -1%. Good planning is necessary to keep the project at zero schedule variance or above. The figure below outlines the relationship between performance in Post-contract Planning and the %sv of the project, cet. par.

Table 3: Driver for %sv

Drivers for %cv

Table 4: Drivers for %cv

Drivers for %sv The results of the stepwise regression analysis showed that Post-contract Planning has the largest impact on %sv results(Table 3). No other PMA proved to have significant impact at the .1 significance level. This model has a significance of .047 at an R2 of .111 and F value of 4.263. Post-contract planning, as defined in the company's project management methodology (NCR 1998), is a planning step that follows contract signature in order to account for any changes in the project scope or objectives that occurred between pre-sales planning and contract signature, i.e. during contract negotiations following a proposal. Questions asked during the assessment of Post-contract Planning focused on the project manager's empowerment, his possession of all contracts, the development of a Work Breakdown Structure (WBS) to a level where resources can be assigned and the availability of project management tools. The formula: %sv = -18.6 + 5.9(P Post-contract Planning) derived from the results of the analysis shows a direct relationship between the performance score in Post-contract Planning (PPost-contract Planning) and the %sv in subsequent project results (see fig. 1). Considering all other variables as unchanged, it allows a prediction of %sv increase at increasing performance levels in Post-contract Planning, e.g. in case of performance score 1 (no Post-contract Planning) a %sv of -13% is expected, while at performance score 4 (best-in-class) the %sv is 6% 4% 2% 0%

Projected %sv

1

2

3

-2% -4% -6% -8% -10% -12% -14%

Performance Level in Post Contract Planning

Figure 1: %sv as a function of Post-contract Planning P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

4

A stepwise regression analysis, at a significance level of .1, showed that Communication Management has the largest impact on %cv results, followed by Change Control and Resource Management(Table4). The model has a significance of .045, R2 of .22 and F value of 3.003. Communication Management, as assessed during the audits, looked for the existence of steering committees, executive sponsors, communication plans, status meetings, reports, customer relation plans, lessons learned documentation, and the existence of issues and action item management processes. Assessment of Resource Management, the second strongest PMA impacting %cv, was done by focusing on plans and processes for identifying eligible resources and their current organizations. Further assessed were the resource's qualifications, training and orientation needs, commitments and morale, as well as the mix of internal versus external resources and the project manager's level of control over the resources assigned to the project.

- Significance is the probability that marks the borderline between what happened by chance and what not happened by chance (Targett 1990). - R2 measures the proportion of variation explained by regression (Targett 1990). - F-value tests the hypothesis that the amount of variation explained by the regression model is more than the variation explained by the average (Hair 1998) - t-value is a significance test carried out for each variable in the regression. A t-test on each x variable coefficient will indicate if the variable has a significant effect on the y variable. (Targett 1990) - Regression Coefficient (B) is the multiplier of x variables in y = Constant + Bx Page 47

Change Control, as the third driver for %cv, was assessed by looking for updated scope and schedule baselines, as well as quality plans and resource plans to reflect approved change requests, and actions on variances in project performance together with the associated results. The negative value of the B coefficient indicates more rigorous control practices once a project is over budget. An effect like this is described by Drummond (1999) in her research on the collapse of the Taurus project, a £ 500 million IT venture by the London Stock Exchange, where increased requests for information from the project's monitoring group led to more rigorous control practices: "It was assumed that because important milestones were being missed, the project must be brought under control. When control failed the response was to 'apply more of the same' [control]." Drummond's research explains why projects with a negative %cv can have a strong correlation with good change management performance. However, a detailed answer to the question in the context of data warehouse projects requires a longitudinal study.

Drivers for Project Risk Levels In the next step the drivers for a project's risk level, expressed in red, yellow or green were identified. Factor Analysis was used to reduce the data and identify the underlying structure and relationships of the PMAs in preparation for a subsequent Regression Analysis, which identified the factors driving the risk level. A Principal Component Factor Analysis with Varimax rotation was used to reduce the data and to explore the structure of the PMA's assessed. A factor loading of .48 with power 80% for a sample size of 36 was used (Hair et al. 1998) to identify the component structure. The rotation converged after 4 iterations with a KMO of .746 at a significance level of .000. A scree test showed that three factors are necessary to represent the data from the audit reports. Care has to be taken in accepting the results because of the small sample size that might lead to an overstating (overfitting) of the results. The factors identified represent groups of project implementation knowledge areas, selling and planning activities, as well as Human Resource Management. So they can be named as: Factor 1: Project implementation Page 48

Figure 2: Structure of PMA's Factor 2: Project selling & planning Factor 3: Resource management Figure 2 shows the structure of these Project Management Areas(PMA's). This indicates a clear distinction between a project's selling & planning activities, management tasks during implementation, and the management of resources.

Results for Drivers on Project Risk Levels With the three factors identified as independent variables and the project risk level as dependent variable a Stepwise Regression Analysis was performed to identify the factors that determine a project's risk level as defined in Table 5. The results show that Factor 3 and 2 (Resource Management and Project Selling & Planning respectively) are the main drivers for a project being red, yellow or green. The model has an R2 of .20, F value of 4.116 with a significance of .025. The negative Beta Coefficients for factor 3 and 2 show that higher performance levels in the factors and its components will result in lower risk levels (green risk status). The result confirms the importance of resource management (factor 3) for project results, as already outlined in the analysis of %cv, and identify this PMA as being influential on several measures throughout this analysis. The second important factor for a project risk level is project selling and planning. This factor comprises the PMA's Selling, Contracting, Contract Management and Post-contract Plan-

ning, showing the importance of good pre-sales and planning work for the lowering of a project's implementation risk. It confirms earlier findings from the %sv analysis, which outlined the importance of post-contract planning for project results. - Principal Component Analysis identifies the underlying structure of relationships. Component analysis summarises most of the original information (variance) in a minimum number of factors for prediction purposes. Varimax rotation is a method to achieve simpler and theoretically more meaningful factor solutions. The Varimax method has proved very successful as an analytic approach to obtaining an orthogonal rotation of factors (Hair 1998). - Factor loadings indicate the degree of correspondence between the variable and the factor, with higher loadings making the variable representative of the factor (Hair 1998). - Power is the probability that a significant relationship will be found if it actually exists. Complements the more widely used significance level alpha (Hair 1998). - KMO, the Kaiser-Meyer-Olkin measure of sampling adequacy tests whether the partial correlation among variables are small (SPSS 1998). - Scree test is used to identify the optimum number of factors that can be extracted before the amount of unique variance begins to dominate the common variance structure (Hair 1998, citing Cattel 1966)

Table 5: Factors Driving Risk Levels

Return on Investment Calculation The Ibbs and Kwak model for ROI calculations in project management (Ibbs & Kwak 1997, Ibbs 2000), together with the results from the study above allow for a calculation of ROI per individual PMA identified here as having significant impact on project results. With the %cv or %sv improvement achieved through investment in a particular PMA the overall ROI per project or per organization can be calculated. Assuming that a spending of x for improvement in a particular PMA yields an improvement in %cv leads to the formula

ment, implement improvement activities and capture spending for it (x) 3. Calculate %cv(post invest) for the time after improvement activities are finished and new practices are implemented 4. Calculate the improvement in %cv using the formula for δ %cv 5. Calculate ROI per project using the formula above. The same calculation can be applied on an organizational level by substituting the %cv calculation, spending and costs per project with those per organizational unit.

Example then the ROI per project can be calculated as:

where: - ROI = Return on investment in improvement of PMA performance - Project cost = Estimated costs per project (or estimated cost to complete, if the improvement activity took place during the cause of a project) - δ %cv = incremental %cv improvement after spending x on training or other improvement activities on a PMA - %cv(post invest) = %cv for the period after the implementation of improvement activities - %cv(pre invest) = %cv prior to implementation of improvement activities - x = cost of training or other improvement activities for a given PMA The steps for calculating the ROI per project are: 1. Calculate %cv(pre invest) of a project using earned value techniques as described above 2. Determine PMA for improveP r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

An organization's annual project costs are $ 10,000,000 with an average %cv of - 1%. Training and process improvement activities in Communication Management were implemented at a cost of $ 450,000. Average %cv for the three reporting periods after implementation is 0.5%. Using the formulas above the improvement in %cv is: δ %cv = 0.5% - (-1%) = 1.5% That leads to a ROI of:

The return on investment realized through the improvement activities in Communication Management is 33%, equal to annual cost savings of $ 150,000.

Conclusions Findings of general applicability for IT data warehouse projects are the high impact that Communication Management, Resource Management and Change Control have on %cv, as well as the impact of Post-contract Planning on %sv. Communication Management and Post-contract Planning have been found as the main drivers for %cv and %sv respectively. In the past researchers repeatedly identified communication skills as cru-

cial for successful project management (Pitman 1994). However, its priority in influencing cost variances in IT data warehouse projects was not yet investigated. These findings are in line with the annually issued reports from The Standish Group (Standish Group 1998b, Standish Group 1995), which repeat the importance of executive support and communication with users for successful IT projects. Improving the management of communication will have the strongest positive impact of all PMA's on a project's cost variance. Post-contracting planning has the strongest influence on %sv in IT data warehouse projects. This planning, performed after the contract is signed when the true scope and budgets of the projects are known - ensures that project plans are realistic, up-to-date and can be implemented in a timely manner. It shows the importance of up-to-date planning for reliable schedule estimates. Resource Management has been found influential on two of the three measures, i.e. cost variance and project risk level. It is also a main factor that determines the structure of the PMA's. The quality of Resource Management is thus a major factor determining project results. Building on the model of Ibbs and Kwak (Ibbs & Kwak 1997, Ibbs 2000) a ROI formula was developed that can be applied on project level or on organizational level to determine the respective return on improvement investments in individual PMA's. This provides the financial measures which may be supplemented by non-financial ones, such as balanced scorecards, to present project management value (Crawford et al. 2000). The sample of 36 audit results of projects with varying performance levels allowed for the identification of PMA's driving project results in terms of cost and schedule variances. The benefit of having a sample comprising the whole spectrum from good to weak performance was offset by the fact that it was focused on one specific data warehouse solution only. The applicability of the results beyond IT data warehouse projects must be investigated. The Standish Group reports on reasons why projects fail define cost overrun as a major problem in the IT industry (Standish Group 1998a) and communication as one of the three main factors for project success (Standish Group 1998b). Other research shows the Page 49

central importance of communication for successful projects (Cleland 1988 and 1995, Tushman 1979, Couillard 1995, Clarke 1999, Bajaj 2000, Kuprenas et al. 2000). The analysis done in this study confirms and complements these findings by identifying Communication Management as the main driver for cost variations. In the past many research studies focused on project team internal communication. Much lesser research was done on the Project Manager's external communication, especially communication with Steering Committees and Project Sponsors. Building on the existing work of (Turner 1993, Remenyi et al. 1999) further research is recommended in external communication for Project Managers to comprehend the whole scope of Communication Management.

References Alexander, S. 2000, "Earned Value Management: Bureaucratic Decree or Managerial Choice?," in Proceedings of the Project Management Institute Annual Seminars & Symposium, September 7-16, 2000, PMI, Houston, Texas, USA. Bajaj, D. 2000, "Examination of Relationships Between Client, Project, Project Team, Documentation and Variation Claims on Projects," in Proceedings of IRNOP IV: Fourth International Conference of the International Research Network on Organizing by Projects, 1 edn, Sydney, Australia, pp. 333-345. Chin, W. W. 1998, "Issues and Opinion on Structural Equation Modeling", MIS Quarterly, vol. 22, no. 1, p. vii-xvi. Clarke, A. 1999, "A practical use of key success factors to improve the effectiveness of project management", International Journal of Project Management, vol. 17, no. 3, pp. 139-145. Cleland, D. L. & King, W. R. 1988, "Behavioral Dimensions and Teamwork in Project Management," in Project Management Handbook, John Wiley & Sons, Inc., USA, pp. 860-866. Cleland, D. L. 1995, "Leadership and the projectmanagement body of knowledge", International Journal of Project Management, vol. 13, no. 2, pp. 83-88. Couillard, J. 1995, "The role of project risk in determining project management approach", Project Management Journal, vol. 26, no. 4, pp. 3-16. Crawford, K. & Pennypacker, J. S. 2000, "The Value of Project Management: Why Every 21st Century Company Must Have an Effective Project Management Culture," in Proceedings of the Project Management Institute Annual Seminars & Symposium, September 7-16, 2000, PMI, Houston, Texas, USA.

Page 50

Defense Systems Management College 2000. Earned Value Management Gold Card. Internet publication: http:// www.dsmc.dsm.mil/educdept/ ev_hold_card.htm, Defense Systems Management College, USA. Drummond, H. 1999, "Are we any closer to the end? Escalation and the case of Taurus", International Journal of Project Management, vol. 17, no. 1, pp. 11-16. Hair, J. F., Anderson, R. E., Tatham, R. L., & Black, W. C. 1998, Multivariate Data Analysis, fifth edn, Prentice Hall, USA. Ibbs, C. W. 2000, "Measuring Project Management's Value: New Directions for Quantifying PM/ROI," in Proceedings of PMI Research Conference 2000, 1 edn, PMI, USA, pp. 35-40. Ibbs, W. C. & Kwak, Y. H. 1997, The Benefits of Project Management, Project Management Institute, USA. Kuprenas, J. A., Vanir, M. 2000, "Impact of Communication on Success of Engineering Design Projects," in Proceedings of PMI Research Conference 2000, 1 edn, PMI, USA, pp. 323-332.

Standish Group, 1998b. CHAOS '98: A Summary Review. A Standish Group Research Note 1998, pp. 1-4. 1998, Standish Group, USA. Stratton, R. W. 2000, "The EVM Maturity ModelEVM3 ," in Proceedings of the Project Management Institute Annual Seminars & Symposium, September 7-16, 2000, PMI, Houston, Texas, USA. Targett, D. 1990, Quantitative Methods, Pitman Publishing, London, UK. Tushman, M. L. 1979, "Managing Communication Networks in R&D Laboratories", Sloan Management Review, Winter 1979, pp. 3949. Turner, J. R. 1993, Handbook of Project-based Management: Improving the Process for Achieving Strategic Objectives, 1 edn, McGraw-Hill, UK. Turner, J. R. 2000, "The global body of knowledge, and its coverage by referees and members of the international editorial board of this journal", International Journal of Project Management, vol. 18, pp. 1-5.

Corresponding Author

NCR 1998, GlobalPM 4.0, 4 edn, NCR Corporation, USA. Pitman, B. 1994, "Stop wasting training dollars: Train for outcomes, not outputs", Journal of Systems Management, vol. 45, no. 6, p. 25. PMI 1996, A Guide to the Project Management Body of Knowledge, 1996 edn, Project Management Institute, USA. PMI 2000. "A Journey Towards the New Millennium". Internet publication: http:// www.pmi.org/news/review/ 1999%20Review.pdf 1999, pp. 1-15, Project Management Institute, USA. 6-52000. Remenyi, D., White, T., & Sherwood-Smith, M. 1999, "Language and a post-modern management approach to information systems", International Journal of Information Management, vol. 19, no. 1999, pp. 17-32. Remenyi, D., Williams, B., Money, A., & Swartz, E. 1998, Doing Research in Business and Management, SAGE Publications, UK. Sparrow, H. 2000, "EVM=EVM:Earned Value Management Results in Early Visibility and Management Opportunities," in Proceedings of the Project Management Institute Annual Seminars & Symposium, September 7-16, 2000, PMI, Houston Texas, USA. SPSS 1998, SPSS V9.0 for Windows or Windows NT Versions 3.51 and 4.0. Standish Group, 1995. Sample Research Paper CHAOS '95. Internet publication: http:// standishgroup.com/visitor/chaos.htm , 1-8. 1995, Standish Group. 6-5-2000. Standish Group 1998a. CHAOS '97 - The Changing Tide. Internet publication: http:// www.standishgroup.com/_compass/ chaos97.htm 1998, 1-4. 3-31-1998.

Ralf Müller MBA, PMP Director, Global Program Management Office NCR Corporation, Teradata Division Sjöbogatan 10, 212 28 Malmö, Sweden Tel: +46 40 68 91 312 Mobile Phone: +45 40 56 91 88 Fax: +46 40 68 91 512 E-Mail: [email protected]

J Rodney Turner MA, MSc, DPhil (Oxon), BE (Auck), CEng, FIMechE, FAPM, CMath, MIMA, MInstD Professor of Project Management, Department of Marketing and Organization Faculty of Economics, Erasmus University Rotterdam Burgemeester Oudlaan, 50 3062 PA Rotterdam, The Netherlands Tel: +31-(0)10-408-2723 Fax: +31-(0)10-408-9169 E-mail: [email protected]

Appendix: Questionnaire Example Question The project team will be asked to present a brief overview of their project. Target 30-40 minutes maximum. The audit team should capture answers to these introductory questions, and perhaps some from the introductory section as well.

Question

Yes No

A. Selling 1. Is there a dedicated PS Project Manager on this project?

What is the overall status of the project? (Include EV reports) Overall forecasted Revenue and Margin at completion:

2. Was a project manager assigned at the appropriate point in the sales process (prior to project qualification)?

Forecasted Professional Services (PS) Revenue and Margin at Completion:

3. Has the same salesperson been involved in this project since pre-contract planning? Cost/schedule variance against plan: What was the original revenue and margin planned at contract (the original baseline)?

4. Is there a pre-contract project plan?

Current percent complete:

5. Was a Work Breakdown Structure (WBS) developed?

Overall status (Red, Yellow, Green):

6. Was the WBS used in cost estimating?

What is current level of customer satisfaction? High or Low, why, how do you know?

7. Was there a risk assessment conducted prior to bid review?

What was the overall engagement/sales strategy for the project? (phased, fixed price, etc.)

8. Was a risk management plan developed as part of the precontract project plan?

Have the project team present their project documents, and describe how they are being used to manage the project. What are the top three issues facing your project?

9. Was bid approval obtained according to the process?

10. Did the customer have expectations on budget, scope, or performance before proposal?

11. Did the customer provide budget or time constraints?

12. Did we properly adjust project scope to meet customer budget to time constraints?

13. Did the bid change after the initial approval?

14. Were recommendations made at bid review implemented?

15. Was a process by which changes would be managed agreed with the customer?

16. Did the PM sign the proposal indicating concurrence with scope, cost, and terms/conditions?

17. Are the PM and sales organizations working together to identify migration opportunities on this project?

18. Is there a supplier/subcontractor strategy for this project? ("Yes" if no suppliers needed)

19. Did you use a formal methodology or tool for cost build-up?

20. Did you use a formal methodology or tool for pricing?

21. Was risk included in the project price?

22. Was a P&L plan developed for the project?

www.metso.com

Linking Innovations Metso Corporation is a global supplier of process industry machinery and systems. Metso’s core businesses are Metso Paper ( fiber and paper technology), Metso Minerals (rock and mineral processing) and Metso Automation ( automation and control technology).

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

Page 51

CATEGORY: RESEARCH

Towards An Integrated Script for Risk and Value Management Stuart D. Green, The University of Reading, UK Keywords: Risk Management, Value Management, Postmodernism, Dramaturgical Metaphor, Rhetoric, Strategic Choice. It is contended that the current conceptual distinction between risk management and value management is unsustainable. The origins of the two traditions are reviewed and critiqued from a postmodernist perspective. It is concluded that they differ primarily in terms of their rhetoric, rather than their substantive content. Insights into the current practice of risk and value management are provided by considering their enactment in terms of 'performance'. The scripts for such performances are seen to be provided by the accepted methodologies which determine the language to be used and the roles to be acted out. A coherent integrated script for risk and value management can be provided by the methodology known as strategic choice, which replaces the language of 'risk' and 'value' with that of 'uncertainty'. The benefits of adopting this alternative script are illustrated through six case studies. Introduction Risk management and value management are both widely recognised to be an essential part of best practice (Construction Industry Board, 1997; HM Government, 1995). Although significant attention has been directed to the two topics in isolation, there has as yet been little progress in the development of an integrated approach. The separation of the two disciplines is well illustrated by the way in which the Construction Industry Research and Information Association (CIRIA) and HM Treasury have both published separate guides to risk management (Godfrey P.S., 1996; HM Treasury, 1993) and value management (Connaughton J. N. and Green S. D., 1996; HM Treasury, 1996). The main objective of this paper is to propose an integrated approach for risk and value management. In developing the argument in support of the need for an integrated process, it is initially necessary to establish the intellectual origins of the two disciplines. The case will be made that the two disciplines only really differ in terms of the rhetoric in which they are presented. It will then be suggested that an alternative script for integrated risk and value management can be provided by the strategic Page 52

choice approach. The benefits of this approach will be illustrated through a summary of six case studies. The case will also be made for a continuous process of intellectual deconstruction of established concepts as an essentially requirement for an innovative and reflexive construction industry.

Value Management Two schools of thought can be identified in the value management literature. The first follows the tradition of systems engineering and seeks to achieve given identified functions at minimum cost (Dell'Isola A., 1982; Miles L. D., 1972; SAVE International, 1997). This approach tends to be implemented by an external team in response to a projected cost overspend and is usefully labelled 'value engineering' (Green S. D., 1994). It is essentially a technical activity that seeks efficient means of achieving known ends. The second school of thought focuses on the strategic interface between client organisations and construction projects (Barton R. T., 1996; Kelly J. and Male S., 1993). From this point of view, the primary purpose of value management is to resolve ambiguity and establish a shared commitment to a common

set of design objectives (Connaughton J. N. and Green S. D., 1996). The emphasis no longer lies on the technical evaluation of design alternatives, but on a process of communication and consensus building with the active participation of the project stakeholders. Within this school of thought, value management is primarily perceived as an aid to the briefing process rather than a technique of cost reduction. Whereas value engineering is characterised by an underlying positivism, the emerging 'second generation' of value management owes its allegiance to an underlying epistemology of social constructivism (Green S. D. and Simister S. J., 1996). Sources such as Barton (1996) are especially notable in emphasising the role of the facilitator rather than the application of mechanistic techniques. It is useful to classify the above two approaches to value management as 'hard' and 'soft'. Similar distinctions have been made within the more established fields of operational research (Rosenhead J., 1989) and systems theory (Checkland P. B., 1981). The same two alternative 'hard' and 'soft' approaches are also evident within the construction risk management literature.

Risk Management The Hard Paradigm The established techniques of risk management are well described in Chapman and Ward (1997), Flanagan and Norman (1993) and Raftery (1994). Such sources directly reflect the 'hard' paradigm of value engineering in that they are primarily concerned with quantitative techniques. The emphasis given by Raftery (1994) to the role of external 'experts' in the risk management process is especially notable. The intellectual origins of these approaches can be traced back to probability theory and the concept of 'risky utility' (von Neumann J. and Morgenstern O., 1947). It is the concept of risky utility that underpins the frequently described techniques of expected monetary value (EMV) and expected net present value (ENPV). The dominant assumption behind these approaches is that risk relates to the uncertainty of future outcomes. It is further assumed that the stakeholders can agree on a common interpretation on the likelihood of their occurrence. In many respects, previous critiques of 'hard' value engineering are also directly relevant to the corresponding paradigm of risk management. Both approaches are limited to problem contexts that are technical, static and well-defined. It is invariably assumed that the definition of the 'problem' is in itself unproblematic. Traditional risk management is too often limited to 'technical' issues. The definition of 'technical' frequently embraces financial issues and hazardous operations. Nevertheless, the 'soft' factors relating to the ways in which stakeholders think, behave and interact are at best under-emphasised, and at worst ignored.

An Emerging Alternative Paradigm The established texts on risk management (Chapman C. and Ward S., 1997; Flanagan R. and Norman G., 1993; Raftery J., 1994) are further notable in the way that they tend to be prescriptive rather than descriptive. The included case studies tend be to highly idealised and divorced from the organisational context from which they were derived. Those few sources which set out to describe current practice are notably at odds with the prescriptive literature, e.g. (Akintoye A. S. and MacLeod M. J., 1997; Stevens D., 1996). However, there is evidence that a tentative 'soft' paradigm of risk management P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

is gaining ground. Sources such as Godfrey (1996) place much less emphasis on the use of quantitative techniques, stressing the team nature of risk management and the corresponding importance of an independent facilitator. The risk management process is no longer conceptualised in terms of 'decisionmaking', but as a means of continuous learning. In this respect, Godfrey's approach to risk management echoes many of the characteristics of 'soft' value management. Indeed, it is notable that both are advocated primarily as a means of resolving conflict within the project team.

The Epistemology of Risk Management On the basis of the available literature, it would seem that the emerging soft paradigm of risk management remains less conceptually developed than its equivalent within value management. Certainly within the domain of construction management, there is a notable absence of any risk management approaches laying claim to a guiding epistemology of social constructivism. This is not to say that the hard paradigm is without its critics. Mak (1995) has challenged the paradigm of quantitative risk management and the validity of its underlying reliance on normative Bayesian statistics. Nevertheless, the articulated alternative falls some way short of social constructivism. Mak emphasises the use of heuristics in searching out solutions that are 'good enough'. The approach therefore follows Simon's (1981) concept of satisficing and as such is based on a post-positivist position. The ontological position of naive realism is seemingly weakened to one of critical realism, see (Guba E. G. and Lincoln Y. S., 1998). Whilst Mak seems to accept that optimal solutions cannot be identified due to the limitations of human perception, he still seems to believe that they exist at least in theory.

The Need for A Broader Framework Much of the uncertainty which occurs during construction cannot be construed as 'technical'. This is especially true for the earlier stages of the project life-cycle, where decisions need to span the boundary between the construction project and the broader environment. The context for many construction projects is provided by multi-faceted client organisations that comprise several different interest groups whose objec-

tives often differ (Cherns A. B. and Bryant D. T., 1984). Within this context, risk management can no longer be considered to be a narrow activity that is applied to 'technical' issues in isolation of other factors. The process of risk management therefore only becomes meaningful through the active participation of the client's project stakeholders. Effective risk management of this nature depends less upon probabilistic forecasting and more upon the need to maintain a viable political consistency within the client organisation. It is notable that there is as yet no recognised framework that embraces both the notion of technical risk with the less tangible uncertainties that characterise the strategic interface between construction projects and client organisations.

The Case for Integration The continued acceptance of risk and value management as two discreet disciplines can be traced back to neo-classical economics and decision theory. Once stripped of its popularist rhetoric, the guiding intellectual framework for value management can be seen to be provided by the 'theory of riskless choice', otherwise labelled the 'fundamental theorem of utility' (Fishburn P. C., 1970). It is the notion of 'riskless utility' which provides the basis for multi-attribute utility theory (MAUT) and the associated weighted preference methods which are so popular within the value management literature, e.g. (Connaughton J. N. and Green S. D., 1996; HM Treasury, 1996; Institution of Civil Engineers, 1996). In contrast, the guiding intellectual framework for risk management stems from the 'theory of risky choice'. This was originally developed from von Neumann and Morgenstern's (1947) concept of 'risky utility', as defined within the context of hypothetical gambles. At the time, the supposed discovery of measurable utility caused considerable furore within the economics community. Subsequent contributions by Ellsberg (1954) and Edwards (1954) served to classify the two types of utility into entirely different concepts. Hence the distinction between the 'theory of risky choice' and the 'theory of riskless choice' as initially labelled by Edwards (1954). Modern writers on decision theory perpetuate this distinction by referring to value functions when utility is used in the neo-classical sense (i.e. in

Page 53

the absence of uncertainty) and utility functions when used in the risky sense. It is their respective allegiance to these two different traditions that primarily distinguishes value management from risk management. However, even within the context of decision theory, an increasing number of commentators have questioned the extent to which this distinction is meaningful. Fishburn (1970) suggests that the phrase 'decision making under certainty' is simply an abbreviation of 'decision making in which uncertainty, whatever form it may take, is suppressed and not given explicit recognition'. Von Winterfeldt and Edwards (1986) have also expressed doubts whether the distinction between 'utility' and 'value' is valid: "In our opinion, the distinction between value and utility is spurious because....there are no sure things, and therefore values that are attached to presumably riskless outcomes are in fact attached to gambles." In the light of the above, it is valid to question whether the continued distinction between value management and risk management is meaningful. The CIRIA report on risk management suggests that 'the techniques of risk management are similar to those used in the management process known as value management, outputs from each being closely linked and inter dependent' (Godfrey P. S., 1996). If the techniques really are similar, and there is no such thing as a 'riskless decision', there would seem to be little logic in defining value management and risk management as separate services.

A Postmodernist Interpretation Reality Construction through Language A postmodernist perspective provides an alternative reading of the current practices of risk and value management. The advocates of postmodernism contend that the world is constituted by shared language and can only be understood through particular forms of discourse (Hassard J., 1994; Legge K., 1995). In other words, humans experience the world through a given set of words and concepts (Cooper R. and Burrell G., 1988). This is in direct opposition to the modernist view that language describes something which already exists 'out there'. From a postmodernist perspective, the expressions 'risk' and 'value' do

Page 54

not relate to any sort of external reality, but provide the language through which managers construct their own reality. The contention is that neither value management nor risk management possess any substantive content other than the language within which there are presented. They are only implemented as discrete activities because there is an expectation that 'risk' and 'value' should be managed separately. This expectation is created by the literature that has fabricated the nonsense that value management and risk management exist independently. Note that neither of these actually 'exist' at all, they have merely been constructed as separate entities. A postmodernist interpretation also serves to challenge the grandiose claims often made in favour of 'methodology'. A methodology becomes a 'script' that uses particular forms of rhetoric to be persuasive. Such an interpretation would question the argument that different methodologies are characterised by different assumptions. The notion that 'soft' and 'hard' approaches are characterised by different epistemological positions would seem to be somewhat contrived. A more defendable position is that different methodologies are characterised by different forms of rhetoric.

Motivations and Benefits It is interesting to consider the motivations that drive practitioners to adopt initiatives such as risk management and value management. A common motivation will be a desire to demonstrate to clients and colleagues that they are efficient and up-to-date in the latest management techniques. Apart from issues of image, an organisation could realistically benefit through a more participative and reflective means of decisionmaking. However, both of these potential benefits are extremely fragile. The arena for the desired participation is too often limited to the risk (or value) management workshop. The decision to implement a 'participatory' approach is invariably made unilaterally by top management. The outputs of any such exercise are therefore constrained to those that are acceptable to top management. Hence the nature of the 'participation' and the outputs are both highly controlled. This may lead many 'participants' to suspect that the real agenda is one of manipulation rather than genuine participation. The second potential benefit of providing a more reflective means of

decision-making will also rapidly disperse should the same approach be implemented time over again. Once the structure of the exercise is allowed to become predictable, it will provide no more benefit than any other mechanistic 'boxticking' exercise.

Unrealistic Expectations Some of the claims commonly made in support of risk and value management serve to create unrealistic expectations. The following quote from Don Ward, Chief Executive of the UK Construction Industry Board, is by no means unusual: "Techniques such as value management ensure better definition of needs and lead to fewer changes during the project. The result? A better product, typically, delivered ahead of programme (which in turn can mean earlier business income, for example, to a retail client), with improved cost certainty and lower whole-life costs." (Ward D., 1998) Unfortunately, the techniques of value management are not capable of 'ensuring' anything. Techniques do not have any meaning in isolation of the way in which they are enacted, and people enact value management in different ways. There is no established causal link between the use of value management and a resulting better product. So-called improvement techniques such as value management can only meaningfully be evaluated in terms of whether or not the participants found the process to be useful. Much clearly depends upon the rhetoric used initially to justify the use of value management and the subsequent degree of post hoc rationalisation. Furthermore, there is no consensus on which techniques constitute value management. It would seem that Ward (1998), the Construction Industry Board (1997), and others, have fallen victim to the propaganda of those who wish to propagate value management for their own purposes. Ward's (1998) naive faith in value management is perhaps indicative of the Western world's general weakness for management panaceas. Managers everywhere feel overwhelmed by uncertainty and struggle to exert control over their day-to-day environment. They are therefore desperate for any promise of a 'quick fix'. The result is that the construction industry becomes ever more desperate as it lurches from one improvement technique to another. Total quality management, business process

re-engineering, value management, risk management and lean thinking are all held up in turn to be the saviour of the construction industry. All are notoriously amorphous constructs that are strong on rhetoric and weak on coherence. Managers seem to have an in-built weakness for the rhetoric of reductionalist management improvement recipes. The construction industry would surely be better served by more thoughtful managers who recognise that uncertainty cannot be 'managed away' by a programmed technique.

The Dramaturgical Metaphor The concept of gaining insights into managerial practice through the use of metaphors was popularised by Morgan (1986). Although the roots of the dramaturgical metaphor can be traced back as far as Goffman (1959), the notion that 'management' can usefully be perceived as a performing art owes much to Mangham (1990). Clark and Salaman (1996) have since examined management consultancy from a dramaturgical perspective, that is, they argue that insights can be gained by thinking in terms of the consultant's performance in front of a client. The way in which value management, and increasingly risk management, evolve around participative workshops makes the dramaturgical metaphor especially powerful. The conceptualisation is that the facilitators attempt to create a reality for their audience (i.e. the client) which captures their imagination and commitment. All participants are assigned roles that are acted out in accordance with a previously agreed script. The success of the facilitator is primarily judged in terms of her performance. The performance is initially commissioned by the client in accordance with the accepted scripts on how 'best practice' clients should behave, e.g. (1997). The decision to implement risk/ value management is therefore the outcome of a previous 'act' in the drama of management. The client's representative would be required to act out the expected role of a project manager. As an effective project manager, she would be expected to instigate the latest management ideas, including risk management and value management. Given that these are conceptualised in the literature entirely separately, the expectation would be that they should be performed separately.

P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

The Drama of Value Management If the client's representative decided initially to act out value management, she would read some of the readily available publications before approaching a number of consultants. The consultants would act out the role of appearing authoritative and would confidently describe the services that they have to offer. Note that the consultant would 'tell a different story' depending on which school of thought they subscribed to. Advocates of Barton (1996) would use a different language from the advocates of SAVE International (1997). The language would be different because they would be talking from different scripts. Once commissioned, there would be an expectation that the consultant would perform in accordance with the agreed script. If she had emphasised the use of 'function analysis' in her initial interview, she would be expected to perform 'function analysis' in the workshop. Briefing notes would be sent to the intended participants emphasising what their roles in the drama would be. On the day of the workshop, the drama would be enacted. The facilitator would arrive with the necessary 'props': coloured pens, bluetac and flipcharts. All parties would then act out roles in accordance with the script, hopefully leaving some scope for improvisation. The facilitator would be highly animated, usually waving her arms about a good deal. She would steer the workshop through the various stages of the script. The closing act would invariably be the formulation of an 'action list'.

The Drama of Risk Management Given the previous contention that there is no substantive difference between risk management and value management, it would be reasonable to suppose that the enactment of a risk management workshop would be broadly similar to that described above. The main difference would lie in the language dictated by the alternative script. Whereas a value management facilitator would say the words 'value' and 'function' often and loudly, a risk management facilitator would rely on phrases such as 'risk identification' and 'risk response'. Both would share the same practical reliance on coloured pens, bluetac and flipcharts. The 'outputs' of each workshop would be shaped by the language of their respective scripts. These would in turn shape the expectations for some subsequent 'act' in the on-going

management drama. The preceding interpretation is admittedly more reflective of the 'soft' approaches to risk management which are enacted through participative workshops. Nevertheless, the 'hard' quantitative approach can also be conceived in terms of a performance, albeit to a different script. For example, a practitioner who followed the script provided by Chapman and Ward (1997) would be expected to play the role of 'rational calculator'. Key props would include a laptop computer and risk analysis software. The initial consultations would contain their own elements of drama, before the consultant withdraws to complete the 'analysis' (also a necessary part of the drama). A further act of drama would follow when the consultant presents the 'findings' to the client. The action taken would be primarily dependent on the persuasiveness of the consultant's rhetoric. Note that no risk assessment exercise can ever be 'complete'. Constraints are always imposed by the resources available to conduct the analysis and the unavoidable limitations of bounded rationality. The rigour of any risk assessment exercise is therefore ultimately judged in terms of the currently accepted standard. In other words, it is the standard that provides the script for the justification. Note also that such standards are themselves socially negotiated and that the requirements of rigour change over time. For example, in the nuclear industry there have been numerous examples of risk assessment exercises which, whilst persuasive at the time, have seemed much less than persuasive in retrospect.

Towards An Integrated Script The Language of Uncertainty The first step towards an integrated script for risk and value management is to reject the language of 'risk' and 'value' in favour of the language of uncertainty. Value management is primarily concerned with resolving uncertainty regarding project objectives. In contrast, risk management addresses uncertainty regarding outcomes. When expressed in these terms, the inter-dependence between risk and value management is readily apparent. The effect of unknown outcomes cannot be assessed until the objectives are clear. At the same time, the project objectives may well depend upon the identified areas of uncertainty.

Page 55

A feasible script that addresses both types of uncertainty is provided by the group decision support methodology known as 'strategic choice'.

Strategic Choice Strategic choice is rooted in the sociotechnical approach pioneered by the Tavistock Institute during the 1970s. The approach is facilitator-driven with no specific constraints regarding the number or length of workshops. The description that follows is primarily derived from Friend and Hickling (1997) and Friend (1989). The basic premise of strategic choice is that managerial decisions are made in conditions of uncertainty. It seeks to aid the decision-making process by conceptualising three different types of uncertainty, the first of which relates to the clarity of 'guiding values'. This type of uncertainty, labelled UV, is primarily caused by ambiguous objectives. A decision-making group's response to UV may be to seek policy guidance from a higher authority, or to commission a consensus-building exercise such as a value management exercise. The second type of uncertainty pertains to the broader environment and is labelled UE. This is the kind of uncertainty which is normally dealt with through risk management techniques. Responses to UE are usually of a technical nature, comprising surveys, forecasting exercises or cost estimations (Friend J. K., 1989). The third kind of uncertainty concerns 'related decision fields'. This is labelled UR and relates to the 'interconnectiveness' between decision areas. In other words, uncertainty concerning the wider implications of an individual decision. The response here may be to re-frame the decision area or to consult with others beyond the immediate constituency of the problem-owners. The conceptualisation of three different kinds of uncertainty is useful in that it provides a framework that subsumes not only the current practice of value management, but also that of risk management. However, neither of these two existing scripts gives explicit recognition to UR as a distinct area of uncertainty. Strategic choice makes explicit all three types of uncertainty and deals with them through an iterative decisionmaking process. Implementation is framed around four complementary modes of decision-making activity. The first mode, described as the shaping mode, is concerned with probPage 56

lem formulation. Key techniques include the graphical identification of, and linkage between, decision areas. This enables the decision-makers to identify the most urgent problems and agree upon an initial problem shape. The second mode is labelled the designing mode during which the facilitator steers the participants towards the identification of different options. Of particular importance is the grouping of different combinations of options into discreet decision schemes. It is recognised that whilst some options would be compatible, others would be mutually exclusive. The third mode is the comparing mode and consists of a sequence of techniques that seek to compare the benefits of alternative decision schemes. These techniques differ from those of decision analysis in that they allow for a combination of quantitative and qualitative comparison. The final stage of strategic choice is described as the choosing mode and is concerned both with making immediate decisions and with devising a strategy for managing those decisions which are best made in the light of further information. The outcome of any particular meeting would therefore always include immediate commitments to action and also strategies for resolving identified areas of uncertainty to aid future decisions. The latter aspect has some commonality with the established practice of maintaining risk registers. In advocating the 'use' of strategic choice it is important not to repeat the grandiose claims made in support of more prescriptive methodologies. Friend and Hickling (1997) recognise that the established decision-making norms of linearity, objectivity, certainty and comprehensiveness inevitably break down when faced with real-world problems. The strategic choice approach is characterised by less simple prescriptions (Friend J. K. and Hickling A.,1997): - Don't aim for linearity - learn to work with cyclicity. - Don't aim for objectivity - learn to work with subjectivity. - Don't aim for certainty - learn to work with uncertainty. - Don't aim for comprehensiveness - learn to work with selectivity. The prime issue of importance is the way in which the embedded language of the strategic choice approach provides a different script for facilitated

interventions. The language of uncertainty can serve to combine the separate story lines of risk and value management. The intervention can be justified in terms of the language of uncertainty. The workshop can be enacted and the outcomes justified in the same language. Whilst the strategic choice approach has appropriated numerous techniques associated with the four specified modes of decision making, it must be recognised that these techniques are inseparable from their embedded language. From a postmodernist perspective, a new technique is only useful in helping participants think differently because the language and imagery are unfamiliar. Once the techniques become familiar, they cease to stimulate different ways of thinking and therefore too easily regress to mechanistic exercises of dubious value. The metaphor of a facilitated workshop as an act of drama remains important. Given that so many risk (and value) workshops result in few tangible outcomes, it is important that the 'drama' engages project stakeholders as active participants rather than members of a passive audience. The intention must be to ensure that the process is 'on-line'. Too many existing value management exercises take place 'offline' with little impact on day-to-day project management. This is probably even more true in the case of risk management.

Case Studies The author has to date used the 'uncertainty script' of strategic choice on six separate occasions in a variety of different project contexts. Within the confines of this paper it is not possible to describe each occasion in detail. Nevertheless, it is possible to communicate the essence of what took place. Each project comprised an action-research intervention that sought to help with real-world projects. The six projects can be summarised as follows: - PFI submission for a Schools project; - Master planning exercise for the re-development of a major university campus; - £100M mixed retail and residential development in central London; - New supermarket development; - Major highways scheme; - A national programme of high

street shop conversions. Three of the above were billed as 'value management' and three were billed as 'risk management'. Each intervention consisted of a series of briefing meetings followed by a one-day facilitated workshop. The same approach was adopted irrespective of how the workshop was billed. The workshops were deliberately light on formal methodology whilst being loosely informed by the strategic choice framework. The sessions were facilitated in a positive manner whilst avoiding any tendency to impose solutions. Indeed, the facilitator avoided any temptation even to suggest courses of action. Each workshop involved a broad cross-section of stakeholders; numbers varied from twelve to twentyseven. The workshops would typically begin by asking the participants to state their four key issues of concern. These were written onto a post-it note that was then attached to a display board. The post-it stickers were then grouped into 'problem areas' that provided the agenda for the rest of the day. In broad terms, the groups were then sub-divided into three smaller groups on a forty-five minute cycle. Initially the groups were tasked to diagnose why the identified 'problem area' was problematic. Each group appointed their own facilitator who subsequently acted a spokesperson. The groups were asked to ensure that everything that they considered important was written down on their flipchart. After forty-five minutes (or so) the main workshop reconvened and the three presentations were made in turn. After the resultant discussion, the agenda for the next cycle was agreed and the workshop was again sub-divided into separate groups. Sometimes the groups were the same as previously, sometimes they were re-constituted. More often than not the focus of the second cycle was directed towards the production of recommendations. The facilitator endeavoured to be neutral at all times and deliberately avoided introducing any unfamiliar language, although he did often build on the discussion of the group. The three categories of UV, UE and UR were occasionally used as prompts for different sub-groups to identify different sources of uncertainly. On each occasion the last session of the workshop was devoted to the derivation of an 'action list' to which specific responsibilities were assigned. The staged outcomes of the workshops were recorded on flipcharts and summarised in a brief written report. On P r o j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1

all six occasions the scripts were accepted by the audience and the resultant 'performance' was well received. Whilst the enactment of the workshops was loosely structured around the strategic choice methodology, the adopted approach was essentially pragmatic. However, the justification of the events depended upon the broader theoretical conceptualisation that underpins strategic choice. This provides a practical manifestation of the dramaturgical metaphor described previously. It was noticeable that the different sub-groups frequently resorted to the language of risk management, rarely did the terminology of value management provide the basis for discussion. It should also be added that many of the workshops participants were very experienced in the established approaches to risk management. Without exception, such participants were warmly supportive of the adopted approach. They were often especially complementary about the highly participative style of the events and the way in which the detailed agenda was formulated on the day. The relative absence of quantitative analysis was seen to be a strength rather than a weakness. Effective risk management is of course dependent upon quantitative assessments, but the view was accepted that such assessments are best carried once the overall 'problem frame' has been established. Future publications will described the workshops and resultant feedback in further detail. For the present, suffice it to say that there is evidence that the strategic choice approach can provide a feasible integrated script that embraces the story lines of both risk management and value management. The adoption of the dramaturgical metaphor however militates against any grandiose claims on the behalf of 'methodology'. The intention must be to propagate a more thoughtful approach to the management of uncertainty, rather than laying claim to yet another panacea.

Discussion In accordance with the adopted postmodernist position, it is necessary to concede that the insights achieved from the dramaturgical metaphor are inevitably incomplete. In contrast to popularist management gurus, academics must always be aware of the limitations of their adopted standpoint. It is notable that several authors readily concede the limitations of 'mechanistic,

checklist approaches to risk analysis' and claim no monopoly on the truth. Different insights are gained from different perspectives. Each way of seeing is also a way of not seeing. Perhaps the most important aspect of thinking in terms of metaphor is the way in which any one chosen metaphor exposes the limitations of others. This awareness of the incompleteness of metaphor therefore fosters a healthy cynicism of all metaphorical approaches, be they implicit or explicit. A postmodernist position requires a continual process of reality deconstruction and reconstruction (Morgan G., 1986). The benefits of this process have been demonstrated in the case of risk and value management. However, there is a danger that the strategic choice approach might be routinised through regular use. A continuous process of deconstruction and reconstruction is necessary to guard against this possibility. Indeed, it is contended that this cycle of intellectual activity is vital to continued innovation. It is also possible to make the argument that a greater understanding of metaphor and postmodernism amongst managers in the construction industry would serve to make them more creative and less susceptible to the mindless ideology of management panaceas. To promote a more thoughtful industry must surely be the prime responsibility of construction academics. It is also necessary to concede that the author's background and expertise are in construction management and value management. Therefore the trials and relating validation are based of the practice in construction sector. However, the principles of risk and value management described are by no means unique to the construction industry. The arguments developed can easily be extended to other industrial sectors. The interpretation of risk and value management methodologies as dramaturgical scripts presents a new way of thinking that has wide application. The results presented in this paper can be of value to a range of different disciplines and to the development of a generic understanding of the way in which project management is enacted.

Conclusion This paper has presented a new way of thinking about risk and value management. It has been suggested that the current literature propagates a false distinction between these two activities. An Page 57

alternative integrated script based on the strategic choice approach has been suggested. The legitimacy of this approach has been established through six actionresearch interventions. However, it has also been suggested that the relationship between a published 'methodology' and what happens in practice is much weaker than is commonly supposed. From a postmodernist perspective, the prime contribution of a methodology is the way in which the adopted discourse shapes practice. The initial need for a management-type intervention will be justified in terms of the rhetoric of the favoured methodology. The text of the methodology will then provide the script for the enactment of the 'drama'. The rhetoric of the methodology will subsequently be used for the post hoc rationalisation of what took place. However, the dramaturgical metaphor cannot provide a complete explanation of the way in which methodologies are enacted. To make such a claim would be contrary to the adopted postmodernist position.

Acknowledgements The research described was supported by the UK's Engineering and Physical Sciences Research Council (GR/ M42657). The fieldwork and empirical analysis was conducted with the assistance of Ian Compson. An earlier version of this paper was presented at the 1999 CIB W-55 and W-65 Joint Triennial Symposium in Cape Town, South Africa. The author is grateful for the subsequent feedback from conference participants.

References Akintoye, A. S. and MacLeod, M. J. (1997) Risk analysis and management in construction, International Journal of Project Management, Vol. 15, No.1. pp. 31-38. Barton, R. T (1996) The application of value management to the development of project concepts, in Proc. CIB W-65 International Symposium, Organisation and Management in Construction: Shaping Theory and Practice, (eds. D. A. Langford and A. Retik), Vol. 2, E & FN Spon, London, pp. 115-123. Chapman, C. and Ward, S. (1997) Project Risk Management, Wiley, Chichester. Checkland, P. B. (1981) Systems Thinking, Systems Practice, Wiley, Chichester. Cherns, A. B. and Bryant, D. T. (1984) Studying the client's role in construction management, Construction Management and Economics, Vol. 2, No. 2. pp. 177-184. Clark, T. and Salaman, G. (1996) The use of metaphor in the client-consultant relationship: A study of management

consultancies, in Organization Development: Metaphorical Explorations, (eds. C. Oswick and D. Grant), Pitman, London, pp. 154-174. Connaughton J. N. and Green, S D. (1996) Value Management in Construction: A Client's Guide, Construction Industry Research and Information Association, London. Construction Industry Board (1997) Constructing Success: Code of Practice for Clients in the Construction Industry, Thomas Telford, London. Cooper, R. and Burrell, G. (1988) Modernism, postmodernism and organizational analysis: an introduction, Organization Studies, Vol. 9, No. 1. pp. 91-112. Dell'Isola, A. (1982) Value Engineering in the Construction Industry, 3rd edn., Van Nostrand Reinhold, New York. Edwards, W. (1954) The theory of decision making, Psychological Bulletin, Vol. 51. pp. 380-417. Ellsberg, D. (1954) Classic and current notions of "measurement utility", Economic Journal, Vol. 64. pp. 528-556. Fishburn, P. C. (1970) Utility Theory for Decision Making, Wiley, New York. Flanagan, R. and Norman, G. (1993) Risk Management and Construction, Blackwell Science, Oxford. Friend, J. K. (1989) The strategic choice approach, in Rational Analysis for a Problematic World: Problem Structuring Techniques for Complexity, Uncertainty and Conflict, (ed. J. Rosenhead), Wiley, Chichester, pp. 121157. Friend, J. K. and Hickling, A. (1997) Planning under Pressure: the Strategic Choice Approach, 2nd edn., ButterworthHeinemann, Oxford. Godfrey, P. S. (1996) Control of Risk: A Guide to the Systematic Management of Risk from Construction, Construction Industry Research and Information Association, London.

HM Treasury (1996) Value Management, CUP Guidance Note No. 54, Central Unit on Procurement, HM Treasury, London. Institution of Civil Engineers (1996) Creating Value in Engineering, Thomas Telford, London. Kelly, J. and Male, S. (1993) Value Management in Design and Construction: The Economic Management of Projects, E. & F.N. Spon, London. Legge, K. (1995) Human Resource Management: Rhetorics and Realities, MacMillan, Basingstoke. Mak, S. W. (1995) Risk analysis in construction: a paradigm shift from a hard to soft approach, Construction Management and Economics, Vol. 13, No. 5. pp. 385-392. Mangham, I. L. (1990) Managing as a performing art, British Journal of Management, Vol. 1. pp. 105-115. Miles, L. D. (1972) Techniques for Value Analysis and Engineering, 2nd edn., McGraw-Hill, New York. Morgan, G. (1986) Images of Organization, Sage, London. von Neumann, J. and Morgenstern, O. (1947) Theory of Games and Economic Behavior, 2nd edn., Princeton University Press, Princeton, NJ. Raftery, J. (1994) Risk Analysis in Project Management, E & FN Spon, London. Rosenhead, J. (1989) Introduction: old and new paradigms of analysis, in Rational Analysis for a Problematic World: Problem Structuring Techniques for Complexity, Uncertainty and Conflict, (ed. J. Rosenhead), Wiley, Chichester, pp. 1-20. SAVE International (1997) Value Methodology Standard, SAVE International, USA. Simon, H. A. (1981) The Sciences of the Artificial, 2nd edn., MIT Press, Cambridge, Mass. Stevens, D. (1996) Strategic Thinking, McGrawHill, Roseville, Australia.

Goffman, E. (1959) The Presentation of Self in Everyday Life, Doubleday, Garden City, NY.

Ward, D. (1998) When it comes to costs, get your terminology right, letter to Building, 3 July, pg. 31.

Green, S. D. (1994) Beyond value engineering: SMART value management for building projects, International Journal of Project Management, Vol. 12, No. 1. pp. 49-56.

von Winterfeldt, D. and Edwards, W. (1986) Decision Analysis and Behavioral Research, Cambridge University Press, Cambridge.

Green, S. D. and Simister, S. J. (1996) Group decision support for value management, in The Organisation and Management of Construction, (eds. D. A. Langford and A. Retik), Vol. 2, E. & F.N. Spon, pp. 529540. Guba, E. G. and Lincoln, Y. S. (1998) Competing paradigms in qualitative research, in The Landscape of Qualitative Research: Theories and Issues (eds. Denzin, N. K. and Lincoln, Y. S.) Sage, Thousand Oaks, CA. Hassard, J. (1994) Postmodernism and organizational analysis: an overview, in Postmodernism and Organizations, (eds. J. Hassard and M. Parker), Sage, London, pp. 1-23. HM Government (1995) Setting New Standards: A Strategy for Government Procurement, Cm 2840, HMSO, London. HM Treasury (1993) Managing Risk and Contingency for Works Projects, CUP Guidance Note No. 41, Central Unit on Procurement, HM Treasury, London.

Dr Stuart D. Green Department of Construction Management & Engineering The University of Reading Whiteknights, PO Box 219, Reading, RG6 6AW, UK Tel: +44 (0)118 931 8201 Fax: +44 (0)118 931 3856 E-mail: [email protected] Web: http://www.rdg.ac.uk/~kcsgrest/