rethinking project management - old truths and new insights

OLD TRUTHS AND NEW INSIGHTS

MANAGEMENT OF PROJECTS AS PORTFOLIOS

INTEGRATED SCRIPT FOR RISK MANAGEMENT

THE TRUST FACTOR

PROJECT MANAGEMENTInternational Project Management Journal

ISSN 1455-4186

Vol. 7, No. 1, 2001

Publishers: Project Management Association FinlandNorwegian Project Management Forum

OLD TRUTHS AND NEW INSIGHTS

MANAGEMENT OF PROJECTS AS PORTFOLIOS

INTEGRATED SCRIPT FOR RISK MANAGEMENT

THE TRUST FACTOR

PROJECT MANAGEMENT

Project Management - Editor-in-ChiefKarlos A. Artto, Helsinki University of Technology, Finland

Co-EditorsProfessor Erling S. Andersen, NorwayDoctor Kalle Kähkönen, FinlandAki Latvanne, FinlandProfessor Asbjørn Rolstadås, Norway

Editorial AssistantsMarko Korpi-Filppula, Helsinki University of Technology, FinlandIiro Salkari, Helsinki University of Technology, FinlandJan Alexander Langlo, Norwegian Centre of Project Management,Norway

Executive BoardKarlos A. Artto, FinlandPekka Mäkelä, FinlandKari Gro Johanson, Norway

InquiriesAddress submissions and inquiries to:Karlos A. Artto, Editor-in-ChiefHelsinki University of TechnologyP.O. Box 9500, FIN-02015 HUT, FinlandTelephone +358 9 451 4751Facsimile +358 9 451 3665E-mail: [email protected] information about the journal can also be found from theProject Management Association Finland web site at: http://www.pry.fi/pmaf_mag.htm

SubmissionsManuscripts should be submitted to the Editor-in-Chief inelectronic format by E-mail.

Journal PolicyProject Management, ISSN 1455-4186, is published by twopublishers: 1) Project Management Association Finland (PMAF)and 2) Norwegian Project Management Forum (NPMF). NPMF isa joint venture between Norwegian Association of Project Man-agement (NAPM), and Norwegian Centre of Project Manage-ment. The mission of Project Management (PM) is to promotetheory and practice in the field of project management andproject-oriented business. It is the policy of PMAF and NPMF topublish one issue of PM yearly, which will be distributed free ofcharge. In addition to the world-wide free distribution, theFinnish and Norwegian project management associations includethe yearly issues in their publications list, which enables thatindividuals and organizations outside the distribution network canhave single copies to be sent to them for a reasonable price. Themain distribution channels comprise circulation arranged bynational project management associations to their members anddistribution to the attendants of international events on projectmanagement in cooperation with the arranging organization. Thecirculation of the journal is 5 000 copies. The aim of PM is toreach extensively interest of project management experts andprofessionals worldwide in any sector both in academic world andindustry, and this way to extend communication between alldifferent sectors of industries including the public sector, universi-ties and research organizations.The PM seeks articles on any aspects of project management forpublication. In addition to reviewed academic articles, it wel-comes papers of more practical nature. Authors are encouraged tosubmit the following types of original manuscript: summaries ofresearch results; surveys on current practices; critical analysis anddevelopments of concepts, theories, practices, methodologies,application or procedures; analyses of success or failure in thebusiness 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, researchpapers, and notions and summaries. In the selection of researchpaper manuscripts for publication the primary importance will bebased on the original contribution and novelty value and theextent to which they advance the knowledge on project manage-ment. In selecting application papers, it is required that the paperdiscusses recent advancements of project management in anyindustrial sector or public sector in terms of empirical applica-tions, applicability, and practical utility. Papers are submitted inelectronic format to the Editor-in-Chief.

Copyright noticeCopyright of the Project Management is fully owned by thepublishers, which reserve all rights to the published material asdefined in the following. No part of this publication may bereproduced, stored in a retrieval system or transmitted in anyform or by any means, electronic, mechanical, photocopying,recording or otherwise, without the prior written permission ofthe publishers. All articles in PM represent the views of theauthors and are not necessary those of PMAF nor NPMF.

International Board of Advisors and ContributorsProfessor Luis Alarcon, Universidad Catolica de Chile, ChileProfessor Erling S. Andersen, The Norwegian School of Manage-ment BI, NorwayProfessor Karlos A. Artto, Helsinki University of Technology,FinlandProfessor David Ashley, University of California, USAProfessor John Bale, Leeds Metropolitan University, UKProfessor Juan Cano, University de Zaragoza, SpainProfessor Franco Caron, Politecnico di Milano, ItalyProfessor Chris Chapman, University of Southampton, UKDoctor David Cleland, University of Pittsburgh, USADoctor Nashwan Dawood, University of Teesside, UKProfessor Mats Engwall, Stockholm School of Economics, SwedenProfessor Pernille Eskerod, Southern Denmark Business School,DenmarkProfessor Roger Flanagan, University of Reading, UKProfessor Carlos Formoso, Federal University of Rio Grande doSul, BrazilDoctor J. Davidson Frame, University of Management & Tech-nology, USAProfessor Roland Gareis, University of Economics and BusinessAdministration, AustriaDoctor Ari-Pekka Hameri, CERN, SwitzerlandDoctor Keith Hampson, Queensland University of Technology,AustraliaProfessor Francis Hartman, University of Calgary, CanadaOtto Husby, Control Bridge AS, NorwaySimon Indola, Nokia Networks., FinlandDoctor Kalle Kähkönen, VTT Building Technology, FinlandProfessor Daniel Leroy, Universite des Sciences et Technologiesde Lille, FranceMarko Luhtala, Nokia Mobile Phones Ltd., FinlandProfessor Rolf A. Lundin, Umeå University, SwedenProfessor Jens Riis, Aalborg University, DenmarkProfessor Asbjørn Rolstadås, Norwegian University of Scienceand Technology, NorwayJohn Russell-Hodge, Synergy International Limited, New ZealandProfessor Rodney Turner, Erasmus University Rotterdam, TheNetherlandsVeikko Välilä, Industrial Insurance Co. Ltd., FinlandDoctor Stephen Ward, University of Southampton, UKDoctor Kim Wikström, Åbo Academy University, FinlandDoctor Terry Williams, Strathclyde Business School, UK

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

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

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

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

ResearchContracting and the Flying Trapeze: The Trust Factor ............................................. 32Roch DeMaere, University of Calgary, CanadaGreg Skulmoski, University of Calgary, CanadaRamy Zaghloul Mohamed, University of Calgary, CanadaFrancis Hartman, University of Calgary, Canada

Rethinking Project Management: Old Truths and New Insights .............................. 36Kam Jugdev, University of Calgary, CanadaJanice Thomas, Athabasca University, CanadaConnie L. Delisle, University of Calgary, Canada

The Impact of Performance in Project Management Knowledge Areas onEarned Value Results in Information Technology Projects ....................................... 44Ralf Müller, Henley Management College, UKJ. Rodney Turner, Erasmus University, The Netherlands

Towards An Integrated Script for Risk and Value Management ............................... 52Stuart 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

P a g e 4

EDITORIAL KARLOS A. ARTTO

Management of Projectsas PortfoliosKarlos A. Artto, Editor-in-Chief, Project Management

Keywords: Project Portfolio Management, Management of Project-orientedCorporation, Project-oriented Business

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

Recently, the project researchpersonnel in my school andpersonnel in our partner

companies have made a substantialeffort into aligning projects and theirmanagement to management of thecorporation as a whole. Suchdevelopment of strategic projectmanagement is contained in the conceptof project portfolio management. Projectportfolio management is applied formaximizing the value/benefit of theprojects as a whole, balancing portfoliosrelative to e.g. risk/reward and resourceallocation, and aligning projects tobusiness objectives.

According to our definition,project portfolio managementconstitutes the management of a multi-project organization and its projects ina manner that enables the linking ofprojects to business objectives. Thisimplies development at two levels. First,there is a need to bring a holistic viewto the process of managing singleprojects. A holistic project-orientedapproach basically requires the adoptionand inclusion of all relevant knowledgeon the rich field of project management.

However, the project concept must beredefined to include the activities fromthe very early pre-project phases to verylate post-project phases. Such viewsuggests that the project must bemanaged already before the project isformally established, and that the projectmust be managed after completing theexecution and dissolving the formalproject team. This approach to theextended project process widens thescope of project management outsidethe traditional planning/executioncentered view. Second, managementprocesses and approaches must bedeveloped at the level of business unitsor other organizational units aboveprojects. Such management approachesand processes relate to questions of howresponsibilities, decision making andinformation sharing are arranged andsupported in a multi-projectenvironment so that they are linked tothe overall business scheme. This wide-scope management perspective isneeded to enable transparency acrossprojects, across whole portfolios ofprojects, and across differentorganizational units.

In a pre-study for ambitious de-velopments of project portfolio manage-ment in corporations and public organi-zations, we raised not only the impor-tance of defining portfolios and theirboundaries with appropriate responsibili-ties in organizations, but also the impor-tance of managing the interaction acrossboundaries between the portfolio and itsprojects, between single projects, be-tween different portfolios, and betweendifferent corporations in business net-works (Artto et al. 2001). We concludedthat organizational models, managementpractices, methods and tools for the stra-tegic management of projects should bedeveloped, the key areas of developmentin our current research schemes(Dietrich 2001, Ikonen 2001) being:

- Definition of extended projectprocess, its phases, and majordecision making points (withobjective setting, group decisionmaking, and commitmentbuilding)

- Definition of major decisionmaking points at the level of theorganization above projects

Pro j e c t M a n a g e m e n t Vo l . 7 , N o . 1 , 2 0 0 1 P a g e 5

- Selection and prioritizationcriteria for individual projectsand whole portfolios

- Project portfolio managementprocess with links to processes insingle projects (includingorganizational, methodologicaland process practices to linkstrategy to projects)

- Organizational models, responsi-bilities and structures at differ-ent levels in the organization

- Setting portfolios and theirboundaries in the organization

- Interacting across multipleportfolios and their projects -cross-portfolio optimizations

- Use of projects and projectportfolios to transform companytowards strategic directions

- Relevant feedback informationfrom portfolios and theirprojects that imply changes instrategy

- Organizational and method-ological constructs that linkportfolios to customers' andpartners' portfolios, and negoti-ating priorities in businessnetworks

- Definition of the relevantinformation content for decisionmaking and objective setting,and communication of theresults of the decision making tothe organization.

- Information sharing and com-munication for effective cross-project, cross portfolio andcross-functional views.

- Methodology and tools fordecision support and implement-ing the criteria

- Learning from other companiesparticipating in the researchschemes through seminars andworkshops (benchmarking).Project portfolio management is

about aligning projects with businessperformance goals. In today's complexbusiness networks, this is undoubtedlymore important than ever. Industrialcorporations and public sector organi-zations have expressed their urgent needfor in-depth portfolio managementknowledge and tools. Successful imple-mentation of project portfolio manage-ment requires industry specific under-standing and tight cooperation in a timeframe suitable for today's dynamic busi-nesses (Dietrich 2001, Ikonen 2001).

ReferencesArtto K. A., Martinsuo M., Aalto T. (eds.), 2001.

Project Portfolio Management. StrategicBusiness Management Through Projects,Project Management Association Finland,Helsinki

Dietrich P., 2001.Plan for Project Portfolio ManagementInformation System Development, City ofEspoo, Finland, Unpublished Document, inFinnish

Ikonen T., 2001.Project Portfolio Management (PPM)Development, Research Plan, GlobalProject Business (GPB) TechnologyProgram at the National TechnologyAgency (TEKES), Finland, UnpublishedDocument

Karlos A. Artto

Helsinki University of Technology(HUT), FinlandDepartment of Industrial Engineering andManagement

P.O. Box 9500FIN-02015 HUT, Finland

Tel: +359 9 451 4751Fax: +358 9 451 3665E-mail: [email protected]

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CATEGORY: NOTION ON PROJECT MANAGEMENT EDUCATION

Project Management Education inProject-oriented Societies

J. Rodney Turner, Erasmus University Rotterdam, The NetherlandsMartina Huemann, University of Economics and Business Administration Vienna, Austria

Keywords: Project Management Education, Project-oriented Society, Project Management Initiatives, ProjectManagement Competence

Project management competence is based on knowledge and experience. The provision of formal project man-agement education programmes is essential to the development of the new profession project management. Inthis paper we discuss the development of project management education using the United Kingdom as a basecase. We then describe the current state of education in project management in Austria, Germany and Switzer-land and investigate new developments in Austria and Switzerland, initiated by project management initiativesprogramm I austria and SwissPM. Finally we give an overview of project management education in project-oriented societies around the world. The paper derives from the work of the Global Working Party on Educa-tion and the International Project Management Association (IPMA) research initiative into the Project-ori-ented Society.

IntroductionThe state of maturity of project man-agement education in countries aroundthe world is currently being investigatedby two initiatives. These are:

1. the global working party foreducation in Project Manage-ment, (Turner and Huemann2000)

2. the IPMA research initiativeinto the Project-orientedSociety, (Gareis and Huemann2001).In this article, we report on what

education in project management is pro-vided in United Kingdom, and give anoverview of the project managementeducation and new developments inAustria, Germany and Switzerland.. Wethen give an overview on the currentstatus in project management educationin different countries around the world,drawing on the work of the two initia-tives above.

Based on the definitions in theOxford English Dictionary, Turner andHuemann (2000) define education as:

structured extended programmesto impart knowledge and developcompetence

and training as:short courses to develop specificskills.

Provision of Project ManagementEducation in the United KingdomWe start by describing what project man-agement education is provided in theUnited Kingdom, one of the more ma-ture project-oriented societies. We usethe developments in the United King-dom over the last half a century as a basecase to illustrate the developments thathave occurred. We consider:- tertiary education- work-based programmes- primary and secondary education

Tertiary Education in the UnitedKingdomIn the United Kingdom, the provisionof education in project managementstarted at the top and worked down.People started undertaking doctorates ormasters degrees by research, and thenoffering post-experience education atmasters degree level. From there it per-colated down through the levels of ter-tiary education, and into secondary andprimary education. Perhaps this was nec-essary; it was first necessary to train thetrainers for lower levels. Perhaps also itwas inevitable; interest at the higher lev-els creates interest at lower levels. Inother countries that came later toproject management education it wasdifferent. Taught masters degrees wereoffered first, either programmesspecialising in project management, orwith project management as an essen-tial component on wider programmes.From there, it spread up and down toother levels. This was the case in Aus-tria for instance.

P a g e 8

Doctorates and Masters Degrees byResearchIn the UK, the first doctorates in projectmanagement related subjects were donein the 1960s by some of the now leadersof the profession, Peter Morris, MartinBarnes and John Perry. It is now theo-retically possible to do a research degreein almost any business, engineering, con-struction, building or information sys-tems faculty. Rodney Turner has super-vised or examined people atBournemouth, Cranfield, Lancaster,Leeds Metropolitan, Loughborough andthe Open Universities, and at HenleyManagement College. He is also awareof people doing doctorates at HerriotWatt, Leeds and Reading Universities,Imperial College, and UMIST. There areabout 120 universities and universitycolleges in the UK, and so there are ac-tive doctoral research programmes inproject management in at least 10% ofthem.

Taught Masters DegreesIn the United Kingdom, the first taughtmasters degrees in Project Managementwere offered by Cranfield University andHenley Management College in the late1970s, sponsored by the EngineeringConstruction Industry Training Board,(ECITB). Because of the sponsor, theseprogrammes were initially not generic,but focused on the construction indus-try. Since then, both programmes havebecome generic, and there are now agrowing number of programmes offered,Table 1.

At some universities, genericprogrammes are offered. They cover themanagement of all types of projects. Atothers they tend to focus on projects ofone type or another. Note that in theUnited Kingdom, it is not possible to givea degree the name of a specialist disci-pline. Thus the name Master of ProjectManagement is not used. All the quali-fications in the top part of Table 1 arecalled MSc (Project Management) orMBA (Project Management). (The title,Master of Project Management is usedin other countries, for instance at theUniversity of Limerick in Ireland and theUniversity of Technology Sydney inAustralia.)

Then there is a range of specialistdegrees from related disciplines. Thesecover things like Construction ProjectManagement or Risk Management, andare included in the bottom part of Table1. Interestingly, to our knowledge thereare no masters programmes in Informa-

tion Systems Project Management, (al-though there are courses in InformationSystems Management incorporatingproject management).

Finally there are many other mas-ters degree programmes which incorpo-rate project management as a compul-sory or optional module. Most MBAprogrammes include a course on opera-tions management which will addressproject management, or include aproject management module. Similarlymany courses on engineering, construc-tion or information systems will includea project management module.

With about 120 universities anduniversity colleges in the UK, a littleover 10% of them offer taught mastersdegrees in project management orclosely related disciplines. A very largeproportion would offer project manage-ment modules as part of other degreeprogrammes. This figure of about 10%seems to be the level reached by themore mature countries, (Britain, Aus-tralia, New Zealand and Ireland, al-

though with the latter two, 10% is justone university or university collegeeach).

Bachelors DegreesThere are three bachelors degreeprogrammes in project management inthe UK, Table 2. You will see that all ofthese are from the building or construc-tion industry. However, project manage-ment is also taught as a compulsory oroptional module on many otherprogrammes in management, engineer-ing, construction or information systems.For instance, project management is acompulsory module on the programmeof information systems management atBournemouth University.

Rodney Turner is on record as say-ing the project management cannot betaught to undergraduates, that it is es-sentially a subject for post experiencestudy, (Turner 1995). Clearly that is notnow true, and perhaps it is part of thedeveloping project management matu-rity of societies that as project-based

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

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


ways of working become more wide-spread that people become more recep-tive to them at an earlier age. RodneyTurner is himself teaching project man-agement modules on several under-graduate programmes in the Nether-lands, and Martina Huemann in univer-sities and Fachhochschulen in Austria.However, perhaps some of the sentimentremains true, in that post-experienceand pre-experience people have differ-ent learning styles, which needs to berecognised by the educators. For pre-experience people the educationprogramme must primarily aim to im-part explicit knowledge, whereas forpost-experience people it can also aimto develop implicit knowledge, skills andbehaviours through Kolb's learningcycle, Figure 1, (Turner et al. 2000).Educators need to adapt their style tothe audience, and to be aware of thedanger of mixing students at differentstages of development in the same class.(Students perhaps also need to be awarethat educators have different teachingstyles, some aimed at post-experiencelearners and some at pre-experience).

At least three other universities orcolleges also offer postgraduate certifi-cate and diploma programmes, Table 2.In the UK's university system, a post-graduate diploma is considered as beingequivalent to a bachelors degree, but isoffered to post experience students in amuch narrower and more focused sub-ject. The three institutions offering post-graduate diploma programmes allspecialise in teaching post experiencepeople. Certificate and diploma qualifi-cations are also offered by several pro-fessional or other bodies. These measureattainment of very specific skills after ashorter training programme, and are dis-cussed at the start of the next sub-sec-tion.

Works-based Education andQualifications in the UnitedKingdomAvailable in the UK are several differ-ent types of works-based qualification,including:

- certificate and diploma qualifi-cations

- national and Scottish vocationalqualifications, NVQs/SVQs

- certification by professionalinstitutesAll these qualifications certificate

the attainment of a specific skill or levelof competence. In these cases, the quali-fying bodies merely examine the candi-date. It is beholden on the candidate todetermine what education they requireto meet the requirements of the exami-nation, and to compose their own courseof study from courses available on theopen market, (Lane 2000, 2001), lead-ing to an examination by a professionalor other body. Indeed, if someone feelscompetent, they can sit the examinationwith no study, (risky). According to theEuropean norm, EN45013, it is requiredthat the training body and examiningbody should be separate, (a requirementnot met by all higher education insti-tutes, except possibly the colleges ofLondon University).

Certificate and DiplomaQualificationsProfessional Certificate and diplomaqualifications are also offered by severalprofessional bodies. The best knowncertificates and diplomas in this categoryare those offered by the InformationSystems Education Board, ISEB. How-ever, the Association for Project Man-agement offers a range of knowledgecertificates as well. There is also a cer-tificate offered by the CCTA, a govern-

ment department, in the use of its pro-priety project management methodol-ogy, PRINCE 2

National and Scottish VocationalQualifications, NVQs and SVQsNational Vocational Qualifications(NVQs and SVQs) were introduced inthe UK during the 1990s. These areworks-based education programmes thatgive maximum credit to works basedexperiences, and to keep formal studyto a minimum. NVQs and SVQs inProject Management are offered by anumber of professional institutions andother bodies.

Certification by ProfessionalInstitutesThere is growing interest in certificationin the UK. Two competing programmesare offered:

1. the multi-stage programme ofthe International ProjectManagement Association,IPMA, operated by the Associa-tion for Project Management,APM

2. the single stage programme ofNorth American ProjectInstitute, PMIThe only stage of the PMI

programme (PMP) is equivalent to thefirst stage of the APM/IPMA programme(APMP), and both are aimed at peopleat the beginning of their professional ormanagement career. Both are based ona test of knowledge, with some measureof professional experience. The secondstage of the APM/IPMA programmecontains a further test of knowledge andexperience, with some test of appropri-ate skills and behaviours. The third stage(Certificated Project Manager, CPM) isa rounded test of competence for expe-rienced project managers. For more de-tailed descriptions refer to Turner andHuemann (2000), or to the literature ofthe relevant associations, or their webpages, (www.ipma.ch, www.apm.org.uk,www.pmi.org).

Primary and SecondaryEducation in the UnitedKingdomAt a workshop benchmarking the resultsof research into the project oriented so-ciety, (Gareis and Huemann 2001),some of the six countries present (Aus-tria, Denmark, Hungary, Romania, Swe-den, UK), claimed that all their primaryand secondary school children receivededucation in project management, and

Figure 1. Kolb's experiential learning cycle

some said none did. In particular the UKand Sweden said it depends how youinterpreted the question. In the UK, al-most all primary school children aregiven termly project to complete. Someof their learning is through being set thisresearch exercise to complete each term;it is part of the National Curriculum.The question was whether these projectscounted as project management educa-tion. Some argued that because the chil-dren were given no guidance in projectmanagement systems and process, thisdid not count as project managementeducation. Others argued that it didcount as project management educationbecause:

1. It gave the children a projectmindset. They learnt from anearly age that project-based waysof working are an importantalternative to more routine waysof working. This mindset isimportant for the developmentof the project-oriented society.

2. The children are probably givenguidance in simple systems andprocesses, appropriate to theirage. At six years old, children donot have the structural skill toapply a work break downstructure, nor the social skills forcomplex team behaviours. Butthey can be taught to setthemselves a simple objective,work out what they have to doin a limited amount of time, andset themselves weekly tasks.They can also learn to sharework amongst themselves,drawing in their different skills.That is all part of developing themindset.Thus most of us concluded that

at primary schools in Western Europeancountries, and particularly the UK, Swe-den and Denmark, children are giveneducation in project working appropri-ate to their age. The children may notbe given explicit knowledge of projectsystems and processes, but they are givenimplicit knowledge of project objectivesetting, project scheduling and projectteam working.

However, at secondary schools,where perhaps the children are nowready for more explicit training in projectmanagement, none is yet given in theUK, Sweden, nor Denmark. They con-tinue to do some of their work throughprojects, and so continue to develop theimplicit knowledge of project working.

Provision of ProjectManagement Education inAustria, Germany andSwitzerlandWe now describe project managementeducation provided in German speak-ing countries. We also discuss new de-velopments currently being undertakenin Switzerland and in Austria to furtherdevelop the project-oriented societies.In Switzerland the project SwissPM,organised by the Swiss Project Manage-ment Association (SPM), concentrateson the implementation and further de-velopment of project management edu-cation and training to develop Switzer-land into a project management com-petence centre. The Austrian ProjectManagement Association (PMA) haschosen a different approach to furtherdevelop the competences of the project-oriented society Austria. Withinprogramm I austria, the strategy is topromote project management in indus-try, and to provide project managementto families, schools and municipalities,to raise a wider understanding of theprofession project management.

Tertiary Education in GermanSpeaking Countries

UniversitiesIn Austria and Germany there is thepossibility to specialise in project man-agement in doctorate programmes attechnical or management universities.At the master degree level there are sev-eral universities that include a projectmanagement courses in theirprogrammes.

In Austria and in Switzerlandthere are no programmes equivalent toa master degree in project management.At the University of Economics andBusiness Administration Vienna projectmanagement is formally established in achair. Project management is offeredformally as an elective within the cur-ricula of business administration, inter-national trade and economics at thisuniversity.

In Germany project managementis formally established as a chair at someuniversities like the University ofBremen and the University of Giessen.There are also professor of constructionproject management at the Universitiesof Wuppertal and Dortmund. TheMunich Centre for Management Devel-opment (Universität der Bundeswehr)offers an MBA in Project Management.

This programme is carried out in coop-eration with Henley Management Col-lege, (see Table 1). The programme isdesigned to prepare general managers forsenior positions in project basedorganisations and to enable technicalmanagers to improve their pm compe-tence and gain a broader perspective onmanagement.

FachhochschulenThere are several Fachhochschulen inall three countries, with project manage-ment as an integrated compulsory mod-ule on certain degree courses, from en-gineering, management, export, infor-mation systems, telecommunication,tourism, art and social professions. Fur-ther there are Fachhochschulen , whichgive project management a much higheremphasis often in the connection witha specific industry. In all three countriesthere are Fachhochschulen that provideproject management in a generic formsuitable for all industries.

At Fachhochschulen the studentsmight or might not be post experience.As in the UK, some universities offerpostgraduate certificate or diplomaprogrammes. There the students are postexperience and study in a much nar-rower and more focused subject. Oneexample for such a programme is thepostgraduate programme InternationalProject Management organised by theUniversity of Economics and the Tech-nical University Vienna. The partici-pants come from all different kinds ofindustries and have already at least someexperience in project management

Austria has threeFachhochschulen offering project man-agement programmes. Germany has atleast ten offering project managementeducation in at least some modules.Programmes in construction and engi-neering especially include courses inproject management. The University ofBremen has a post graduate programme(European Project Manager) in theiroffer, Table 3.

In Switzerland, as a part of theproject management initiative,SwissPM, (mentioned above), projectmanagement was integrated in allprogrammes at the Private HoschschuleWirtschaft (e.g. Graduate BusinessSchool St.Gallen). Further one post-graduate programme in project manage-ment was established. The contents ofthe project management education werebased on a survey analysing the require-ments of Swiss-German companies re-

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

garding education (Niederer et al 2000).

Professional Certificates andDiplomasProfessional certificates and diplomaqualifications are also offered by severalprofessional or other bodies. For instancein Germany the German Project Man-agement Association (GPM) togetherwith RKW offers programme (PM-Fachmann/-frau) which qualifies for theIPMA D-level certification. Also otherproject management educationprogrammes are closely linked to thecertification. For instance, the projectmanagement programme at the Gradu-ate Business School St.Gallen preparescandidates for IPMA certification LevelC.

Vocational qualifications like inthe UK do not exist in Austria, Germanyor Switzerland. However, IPMA projectmanagement certifications exist in allthree countries.

Primary and SecondaryEducation in German SpeakingCountriesAt secondary school level, project man-agement is part of the curricula in tradeschools in Austria. For instance in alltrade schools the pupils age 19 (lastgrade of trade school) have to do a

project work in their specialisation theyhave chosen, e.g. marketing or informa-tion technology. The projects are basedon real cases and are coached by practi-tioners. Project management methodslike project work break down structure,project environment analysis schedulingmethods are applied. In an annual com-petition these projects are judged for anaward. The criteria against which theyare judged focus mainly on content , butalso include whether they have done theproject management professionally.Many of these pupils are taught by pro-fessionally qualified teachers. Some ofthe teachers in trade schools are certi-fied at IPMA D-level.

In High Schools project work ispart of the curriculum, but no projectmanagement is thought to date. Withinprogramm I austria further attempts tointegrate project management in theseschools have been started. In a pilotschool project management is intro-duced to selected teachers and pupils.The project management methods areapplied for instance in event projects(school theatre, school ball, class jour-neys, etc.)

In Switzerland the school systemis changing. Project work has beenwidely integrated in all kind of schooltypes The establishment of project man-

agement in primary and secondary edu-cation is described as one of the essen-tial promoters to become a truly project-oriented society and stay competitive inthe long run. Within SwissPM one theobjectives is to integrate project work/project management according to theage level. In the age group 16 and upselected pm methods should be intro-duced. Even the importance of the agegroup was stressed, the initiative gavepriority to the establishment of projectmanagement in Fachhochschulen.

SummaryThe UK is probably one of the mostmature societies world-wide for the pro-vision of education in project manage-ment, with 10% of higher educationalinstitutions offering taught masters andresearch degrees in project management,and many professional institutions sup-porting opportunities for works-basededucation. Areas of immediate develop-ment would be the widening of provi-sion at undergraduate level, particularlythe offering of first degrees in informa-tion systems project management, andthe introduction of teaching on projectmanagement systems and process at sec-ondary school. However, it must berecognised that, at all levels, educationin project management must be appro-priate for the age.

In comparison to the UK, in Aus-tria, Switzerland and Germany there isless project management education pro-vided. In Austria and Switzerland nomaster programme in project manage-ment is offered. At which level of edu-cation project management is providedalso depends on the university or schoolsystem in that particular country. InAustria for instance the university sys-tem is rather rigid, so no master degreeprogrammes in project management canbe found. But in the newly establishedFachhochschulen project managementis offered widely. To react to the demandof educated project managers in the lastview years further to one postgraduateprogramme that has been in existencesince the early 80s two programmes havebeen established.

In all four countries project workhas already been integrated at primaryand secondary level, but that does notnecessarily mean that project manage-ment methods are included. One excep-tion to mention are trade schools inAustria, were project management isexplicitly taught to pupils age 19.

Table 3. Fachhochschulen or equivalent programmes in Austria,Germany and Switzerland

Country ProvisionSo how does the provision of projectmanagement education in these coun-tries described above compare withother countries? Table 4.1 and 4.2 showthe status of education in project man-agement in several countries fromaround the world. All the countrieslisted have been represented in themeetings of the global working party ineducation (Turner and Huemann 2000)or the benchmarking of the project ori-ented society (Gareis and Huemann2001) or both. The schedule of meet-ings is shown in Table 5.

From Table 4.1 and 4.2, it can beseen that the UK has the greatest matu-rity in the provision of project manage-ment education. However, several coun-tries are close behind, including Swedenfrom Europe, the USA and Canada fromthe Americas, Australia, New Zealandand South Africa for the Common-wealth of Nations. In the more maturecountries, about 10% of universities oruniversity colleges offer doctorates andtaught masters degrees in project man-agement. This figure is achieved by Brit-ain, Sweden, Australia, New Zealandand Ireland. The USA, Canada, Ger-

many, Switzerland and Denmark haveabout half that figure.

We would expect eventually thenumber of universities offering bachelordegree qualifications to grow to a simi-lar number. Unless, that is, as argued byTurner (1995), project management isessentially a post experience qualifica-tion, and individuals will learn someother profession as their first discipline,and project management second as apost-experience discipline. We predictthat there will be a growing number ofprogrammes combining project manage-ment with another major, construction

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

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


project management, information sys-tems project management, etc.

But as societies become mature intheir use of project management, and itbecomes a more widely used way ofworking, project management must betaught at secondary and primary schools.Perhaps at primary schools, the level ofteaching will not progress beyond whatis done at the moment. That is all thatis needed to give very young childrenan appreciation of the role of projectsand the methods of working. But at sec-ondary schools, older children need tobe given formal instruction in projectmanagement systems and process. Thisprocess will be self propagating, as moreand more people become familiar withthe techniques, they will become morenatural, and will percolate through alllevels of education in the society.

Table 5. Meetings of the global workingparty (GWP) on education in projectmanagement and the project-orientedsociety (POS) benchmarking research

project.

Conclusion and Future ResearchWe conclude that project managementeducation provisions differ in differentsocieties because of its specific context.Some reasons for differences in projectmanagement education are:

- the maturity of the project-oriented society

- history of provision of projectmanagement education

- the rigidity of education systemin the society

- government support to establishproject management education

- provision of project manage-ment training by project ori-ented companiesSocieties with a high competence

as project-oriented society have a broadoffer in project management education.Closely linked to that assumption is thehistory of provision of project manage-ment education. e.g. The UK has not

only a broad offer in project manage-ment education, but also a quite longhistory in the application of project man-agement in industries.

The rigidity of the education sys-tem often makes it rather difficult tointroduce project management in theeducation structures existing. Whennew study types are established it ismuch easier to introduce new ideas e.g.a lot of project management educationwas introduced in Austria, whenFachhochschulen were established onlya couple of years ago. The university sys-tem in Austria still is rather rigid andnot able to react to the demand forproject management personnel.

In some countries like the Ukrainethe government supports the establish-ment of project management education.In the Ukraine a lot of project manage-ment education at universities (e.g. mas-ter programmes in project management)are provided. Romania has a low com-petence as project oriented society butprovides quite a lot of project manage-ment education at university level(Gareis and Huemann). The establish-ment of education was supported by EUfunding. Probably project managementeducation can serve as a starting pointfor (further) developing the project-ori-ented society.

In other countries a lot of projectmanagement education and trainingactivity can be observed within project-oriented companies to compensate thelack of project management educationsupported by state.

We will conduct further researchregarding

- the links between projectmanagement education and thematurity of the project-orientedsociety

- and to develop an ideal modelfor project management educa-tion in the project-orientedsociety.

ReferencesGareis, R., Huemann, M. 2001.

Assessment and Benchmarking of Project-oriented Societies, in Project Management,Vol. 7, No.1.

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

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

XII(3), March.

Lane, K. (ed) 2001.Project Manager Today, special issue withTraining and Education Focus, XIII(3),March.

Turner, J.R. 1995.The Qualification Arena: making informedchoices, in The Project Management YearBook 1995/96, Association for ProjectManagement, High Wycombe.

Turner, J.R., Huemann, M. 2000.Formal education in project Management,in The Project Management Year Book2000, Association for Project Management,High Wycombe.

Turner, J.R., Keegan, A.E., Crawford, L. 2000.Learning by Experience in the Project-Based Organization, ERIM Report Series,ERS-2000-58-ORG, Erasmus ResearchInstitute of Management, Rotterdam,(http://www.erim.nl).

Professor J. RodneyTurner

MA, MSc, DPhil(Oxon), BE (Auck),CEng, FIMechE,FAPM, CMath,MIMA, MInstD

Department of Marketing and Organiza-tionFaculty of Economics,Erasmus University Rotterdam

Burgemeester Oudlaan, 503062 PA Rotterdam, The Netherlands

Tel: +31-(0)10-408-2723Fax: +31-(0)10-408-9169E-mail: [email protected]

Dr MartinaHuemann

PROJEKTMANAGEMENT GROUP

University of Economics and BusinessAdministration Vienna

Franz Klein-Gasse 1A-1190 Vienna, Austria

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

Assessing and BenchmarkingProject-oriented Societies

Roland Gareis, University of Economics and Business Administration Vienna, AustriaMartina Huemann, University of Economics and Business Administration Vienna, Austria

Keywords: Project-oriented Society, Project-oriented Companies, Benchmarking, Competitive Advantage

The POS Research Initiative

The Structure of the POS ResearchInitiativeThe IPMA - International Project Man-agement Association conducts a re-search initiative with the objective todevelop the model of the POS. In a"POS Conception Project" the model ofthe POS was constructed and elementsfor the description of a POS were de-fined. Based on these conceptual resultsthe project "POS Benchmarking" is per-formed currently. The objectives of thisproject are to assess the competenciesof different POSs, to analyse common-alties and differences between thesePOSs and to define strategies for furtherdeveloping the competencies of thePOSs. A first group of POSs has beenbenchmarked. It is planned to bench-mark a further group of POSs in 2002.

The Research ApproachIn the POS research initiative a sys-temic-constructivistic research ap-proach is applied based on the followingthree fundamental paradigms:

CATEGORY: NOTION ON STUDYING PROJECTS IN SOCIETIES

- the radical constructivism (seeGlasersfeld 1992) as the episte-mological approach,

- the social systems theory (seeLuhmann 1995) as theorganisational approach, and

- the qualitative social research(see Lamnek 1995) as themethodological approach.The research emphasis lies on the

generation of hypotheses and the devel-opment of the POS model. The empiri-cal assessment and benchmarking worksupports the creation of a viable POSmodel. The research is carried out in acyclic process and consists of severalloops of information gathering, hypoth-eses generation and reflection. For theinformation gathering a multi-methodapproach, including questionnaire basedassessments, documentation analyses,observations, and group discussions, isapplied. The interpretation of the datagathered and the hypotheses generatedis done in several workshops with rep-resentatives of the different POSs. The

quality of the assessment data dependson the assessment process applied in thesingle POSs. The benchmarking resultsrepresent the perception of the POSTeam.

The POS model as well as the as-sessment and benchmarking results aresocial constructs. These constructs arefurther developed and examined in dif-ferent team structures to allow for dif-ferent perceptions.

The POS is perceived as a socialsystem. According to Luhmann`scategorisation of social systems in inter-actions, organisations and societies, thesociety is the most complex social sys-tem. Social systems establish and main-tain themselves by constructing a differ-ence to their social environment. There-fore, Luhmann (1995) defines a socialsystem as everything, for which a differ-entiation in internal and external is pos-sible. Other societies as well as the eco-nomic and political systems of a societyunder consideration are defined as con-text of the POS.

A society, which applies projects and programs as temporary organisations to perform unique processes ofmedium or high complexity, can be perceived as a project-oriented society (POS). It is the objective of a POSresearch initiative, to develop and to apply a model of the POS, which identifies and describes the specificprocesses and services of a POS, and provides criteria for the measurement of the competencies of a POS. Thispaper reports about the results of this research. It describes the POS model and it shows its application inassessing 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 Initiativeis presented as an example for the further development of the competencies of a POS.


The Project-oriented Society: BasicHypothesesMore projects and programs (of projects)are performed in companies, but also inmunicipalities, schools and even fami-lies. "Management by Projects" becomesan organisational strategy of "Project-oriented Companies", to cope with in-creasing complexities and dynamics inthe business environment .Theglobalisation of the economy, new tech-nologies with ever shorter product de-velopment cycles, and the applicationof a new management paradigm,characterised by virtual organisations,empowerment, knowledge manage-ment, etc. promote the application ofproject and program management.

Not only traditional industries butalso the public sector and non-profitorganisations consider projects and pro-grams as appropriate organisations toperform complex business processes.New project types, such as marketing-,product development-, andorganisational development projects,gain in importance. A society, whichapplies projects and programs as tempo-rary organisations to perform uniqueprocesses of medium or high complex-ity, can be perceived as a POS.

The research initiative is based onthe following hypotheses:

- Societies are becoming moreproject-oriented. Projects andprograms are applied as tempo-rary organisation forms.

- Project management is not just amicro-economic but also amacro-economic concern.

- POSs can be defined by nationalor by regional boundaries.

- POSs are characterised byspecific processes applied byproject-oriented companies,such as project management,program management, projectportfolio management, person-nel management, andorganisational design, and byspecific project managementrelated services, provided by PMeducation, PM research, PMmarketing, and PMstandardisation institutions.

- Different POSs have differentcompetencies to perform thesespecific processes and to providethese PM related services.Competencies of POSs can bebenchmarked.

- The more competencies a POShas, the more competitive it isinternationally. There is no idealPOS. The competencies re-quired by a POS depend on itscontext, especially on theimportance of projects andprograms, and the managementculture of the society.

- The competencies of a POS canbe further developed. This canbe done by national projectmanagement initiatives.

- POSs with similar competencieshave a high potential forefficient co-operations. POSswith high competencies cantransfer their knowledge tosocieties with little competen-cies.All but the last hypothesis have

been considered in the empirical workand interpretations so far.

The Model of the Project-oriented Society

Boundaries of the POSThe perception of a society as a POS isa construction; it requires the observa-tion of a society with a specific "pair ofglasses", the glasses of project-orienta-tion. The focus is on those communica-tions of the society, which relate toprojects, programs and project portfo-lios.

Generally, the boundaries of soci-eties can be constructed according todifferent criteria. By applying a func-tional differentiation as primary differ-entiation criterion for the constructionof societies, subsystems, like economy,science, education, politics, law, art, re-ligion, etc. can be defined. As far as thisfunctional differentiation of the societyis concerned, the POS model concen-trates on the subsystem economy, butalso considers supporting activities of thesubsystems education, science and law.

As secondary differentiation cri-terion for the construction of societiesLuhmann (1995) suggests territories andthe extent of the economic develop-ment. Examples for application of thesecondary 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 develop-

ment: developed , transforma-tion, developing countries.Here the boundaries of the POS

are defined to include all communica-tions of a nation's economy-system,which relate to projects, programs, andproject portfolios and those communi-cations of a nations science-, education-, and law-system providing services re-lated to project, program and projectportfolio management.

Context of the POSThe competencies of a POS are influ-enced by the importance projects andprograms have for a POS, by the overallstructure of the society and by its his-tory and expectations about the future.The importance of projects and pro-grams for the society can be determinedby assessing the number of project-ori-ented industries and companies. Infor-mation about the history and the futureof the society can be described regard-ing the social sub-systems economy, sci-ence, education, politics, law, religion,arts, etc.

Processes and Services of the POSThe POS model considers on the onehand the processes of project-orientedcompanies (POCs), such as project man-agement, program management, projectportfolio management, personnel man-agement and organisational design, andon the other hand the services of PMrelated institutions, such as PM educa-tion, PM research, PM marketing andPM standardisation institutions, as ele-ments for describing a POS.

The POS model can be visualisedby a spider web. The axes of the spiderweb represent the processes and servicesof the POS.

Below the elements of the POSare shortly described:- Project management: A project is a

temporary organisation for per-forming a unique, short- ormidterm process of medium orhigh complexity. PM is a businessprocess of the project-orientedcompany. The PM process startswith the project assignment andends with the project approval. Itconsists of the sub-processesproject start, project co-ordination,project controlling, project discon-tinuity management and projectclose-down.

- Program management: A programis a temporary organisation forperforming a unique, mid-or long-term process of high complexity. Aprogram is a set of projects andtasks which are closely coupled bycommon objectives. Programs arelimited as to time and budget.Program management is a businessprocess of the project-orientedcompany. The program manage-ment process consists of the sub-processes program start, programco-ordination, program control-ling, program close-down andoccasional the management of aprogram discontinuity.

- Project portfolio management: Aproject portfolio is a set of projects(and programs), which are per-formed by a project-orientedcompany at a certain point in time.A project portfolio is more thanthe sum of its projects. A projectportfolio database is the basis forproject portfolio management.Information of this database can beused to decide, if new projectsshould be started and to establishpriorities among projects. Theobjective of project portfoliomanagement is to optimise theresults of the project portfolio.

- Personnel management in project-oriented companies: Personnelmanagement processes in project-oriented companies are recruit-ment, disposition and developmentof project personnel. In project-oriented companies a PM careerpath includes the PM-roles JuniorProject Manager, Project Manager,Senior Project Manager and PM

Executive.- Organisational design of project-

oriented companies: Project-oriented companies have specificintegrative organisational struc-tures, such as PM Offices, ProjectPortfolio Groups or Expert Pools,and specific integrative tools suchas PM procedures and standardproject plans.

- PM education: Formal PM educa-tion programs are provided bydifferent institutions and mightlead to academic degrees in PM.The PM approach taught and thenumber of courses vary in differentprograms.

- PM research: PM research projectsand programs, PM related publica-tions and events and PM relatedresearch financing are servicesprovided by PM research institu-tions.

- PM marketing: The primary PMmarketing institution in a POS isthe national PM association.Services like membership, certifi-cations of project managers, PMevents, etc. are services providedby these institutions.

- PM standardisation: Servicesprovided by PM standardisationinstitutions, such as a nationalnorming institute, are PM normsand formal PM requirements forpublic tenders.

The POS QuestionnaireThe context of the POS as well as eachelement of the POS model is specifiedin detail in the POS questionnaire. Thequestionnaire consists of

- Part A: Context of the POS andimportance of projects andprograms in the POS,

- Part B: Services of PM-relatedinstitutions in the POS, and

- Part C: Practices of project-oriented companies in the POS.Part A of the questionnaire asks

for context information regarding themanagerial competitiveness of each so-ciety based on international competi-tiveness reports such as the Global Com-petitiveness Report (Sachs et al.1998)and the World Competitiveness Report(International Institute for ManagementDevelopment 1997).

Part B of the questionnaire asksfor the services of PM-related institu-tions such as PM education, PM re-search, PM marketing and PMstandardisation institutions. Part C con-sists of questions regarding the practicesof project-oriented companies in projectmanagement, program management,project portfolio management, person-nel management and in organisationaldesign. In Figure 2 and Figure 3 examplesof questions of the questionnaire areshown.

The questionnaire of the POSmodel can be applied for assessing andbenchmarking POSs.

Assessing and Benchmarking theCompetencies of POSsA POS requires competencies, i.e.knowledge and experience, to performits specific processes and to provide thePM related services. The assessing andthe benchmarking of the competenciesof POSs is performed in the project "POSBenchmarking".

The first level of the work breakdown structure of the project "POSBenchmarking" is shown in Figure 4.

The conception of the POS modelstarted in May 1999. The assessmentsand the benchmarking of the POSs ofBM Group 1 was performed in the pe-riod from October 2000 to March 2001.It is planned to start the assessments andthe benchmarking for the BM Group 2at the end of 2001. The projectorganisation chart of the project "POSBenchmarking" is shown in Figure 5.The members of the project organisationare listed in Table1.

The Process of Assessing andBenchmarking the First Group ofPOSsThe project "POS Benchmarking" is

0

20

40

60

80

100Project management

Programme management

Project portfolio management

Personnel management in project-oriented companies

Organizational design of project-oriented companies

PM education

PM research

PM marketing

PM standardization

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


performed as a co-operation of IPMAand the PROJEKTMANAGEMENTGROUP of the University of Econom-ics and Business Administration Viennawith different national PM Associationsand organisations representing POSs.

The process of assessing andbenchmarking the POSs is the follow-ing:- Each POS nominates a POS

Assessment Team with representa-tives of the national PM associa-tion, of project-oriented compa-nies, PM researchers and PMstudents. A National Co-ordinatorrepresents the POS in the overallPOS Team.

- The PM related services providedby institutions (PM education, PMresearch, PM marketing, PMstandardisation) are assessed bynational PM Institutions Teams.Internet information and docu-ments, that describe the services ofthese PM institutions, areanalysed. This assessment isquestionnaire based. It is supportedby interviews.

- The assessments of the practices ofthe project-oriented companies areperformed by national PM PracticePanels in workshop form, consider-ing the practices in project man-agement, program management,project portfolio management,personnel management and inorganisational design. This assess-ment is also questionnaire based.

- The analyses and the discussions ofthe results of the assessments ofthe single POSs are performed bythe overall POS Team withrepresentatives of the differentPOS Assessment Teams in work-shop form. Commonalties anddifferences between the POSs areinterpreted. Overall strategies forthe further development of thePOSs are planned.

- A POS benchmarking report isprepared, and the benchmarkingresults are published and commu-nicated in the single POSs.

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

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

Figure 4. Work break down structure of the project "POS Benchmarking"

Results of Assessing andBenchmarking the Services ofPM Related InstitutionsThe services provided by PM education,PM research, PM marketing, and by PMstandardisation institutions in the differ-ent POSs are described and compared.

PM EducationIn Austria a formal PM degree is pro-vided by three colleges(Fachhochschulen). Three postgraduateprograms in PM exist, but there is nomaster degree program in PM. PM is pro-vided in the form of an elective educa-tion program at the University of Eco-nomics and Business AdministrationVienna. There students can do theirPhD thesis or master thesis in PM andby that specialise in PM. In trade schoolsPM education is provided.

In Denmark there is no formaldegree "Master in PM", but similar as inAustria students can do a master or PhDtheses in PM. PM education is providedat six universities. One bachelor degreein PM is offered. None formal degree isgranted by continuing education pro-grams. PM is included in secondary edu-cation programs.

In Romania at the Academy ofEconomic Studies in Bucharest and atthe Ovidiu University Constanta mas-ter degree programs in PM were estab-lished in 2000. In some other Romanianuniversities PM modules have been in-cluded. No other formal PM educationexists in Romania so far. Some consult-ing companies offer PM training.

Sweden has two universities pro-viding formal master degree programs inPM. In many more universities (at least10) PM education is offered and it ispossible to do a master or PhD thesis inPM. No formal degrees in colleges orcontinuing education institutes exist,but at least 13 colleges and 3 continu-ing education institutes offer PM edu-cation.

In Hungary two master degreeprograms in PM are running. PM edu-cation is provided in form of single mod-ules at at least three universities and atsome continuing education institutions.Some secondary schools in the field ofenvironment protection have includedPM in their curricula.

In the UK 13 master degrees inPM (or closely related disciplines) areoffered. Of about 120 universities anduniversity colleges in the UK, about 10%offer masters degrees in PM or closelyrelated disciplines. Doctorates in PM

can be done at at least 13 institutions.Three bachelor degrees and three di-ploma programs in PM exist in the UK.

In all assessed POSs PM educa-tion can be found in tertiary education(universities, colleges, continuing edu-cation). UK is the most mature societyregarding degrees in PM and formal PMeducation. Supported by EU fundingRomania has established PM masterdegree programs. No other formal PMeducation is provided so far. In Austriaand in Denmark no master degrees inPM are provided.

PM is provided in secondaryschools in Austria, Denmark, Hungaryand Sweden. In all POSs except Roma-nia project work is often included in pri-mary education. But no PM educationis provided at this education level.

The PM approach taught in PMeducation programs is rather planningoriented in Hungary and Romania, whilein Austria and Denmark the approachis rather organisational oriented. Swe-den states that their PM education isorganisational oriented. In the UK edu-cation programs with different PM ap-proaches exist, ranging from tradition-ally planning oriented to organisationaloriented.

Only Romania states that theyhave a national institute co-ordinatingthe PM education. Objects of consider-ation in this co-ordinations are the con-tents as well as the teaching methods ofthe PM education programs. The co-ordinating institute is also responsible forthe co-ordination between educationinstitutes.

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

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

BM Group 2

POS -Ass is tants

ProjectManager

POSMarketing

POS Off ice

POS BM P a rtner B

POS BM P a rtner 7

POS BM P a rtner A

POS FinancingTeam

ProjectOwner

POS Tea m

ProjectOrg aniza tion

PM Pra cticePanel

PM Pra cticePanel

Na tiona lCo-ordinator

Na tiona lCo-ordinator PM

Ins titutionsTea m

PM Pra cticePanel

BM Group 1

POS BM P a rtner X

PM Pra cticePanelNa tiona l

Co-ordinator

PMIns titutions

Tea m

PMIns titutions

Tea m

Na tiona lCo-ordinator

PMIns titutions

Tea m

.

.

.

.

.

.


PM ResearchIn none of the POSs a national institu-tion co-ordinating PM research exists.Partly the co-ordination is done by na-tional PM associations, like in the UK,where the national association APM alsocarries out PM research. The assess-ments show that in Austria, Denmark,Sweden and the UK quite a number ofPM research projects (and programmes)have been carried out during the last fiveyears. In Austria for instance within theresearch programme "Best PM Practice"a process-oriented PM approach hasbeen developed at the University of Eco-nomics and Business Administration(1996-1999).

PM research initiatives often sup-port the promotion of PM as a profes-sion in the society. For instance in the

UK one of the most important researchprojects was the renewal of the APM´sbody of knowledge, which was per-formed in co-operation with UMIST. InSweden project sweden - based on acollaboration between universities andindustries - aims at enhancing PM com-petence through research (see also PMmarketing table).

In Hungary only some PM re-search was carried out during the lastfive years. In Romania PM research hasnot yet been established. In Austria,Denmark, Sweden and the UK a few PMrelated research events took place dur-ing the last five years.

PM MarketingIn all assessed POSs national PM asso-ciations exist. In Romania a national PMassociation was established in 2000 and

is currently seeking for IPMA member-ship. The PM associations in some coun-tries (Austria, Denmark, Sweden andthe UK) offer a lot of services like PMmarketing, PM events, PM publications,PM discussion platforms and develop-ing PM standards. In Austria, Denmark,Hungary, Sweden and the United King-dom PM certifications according toIPMA standards are carried out.

In Hungary and in the UK sev-eral PM associations exist. In Austria,Denmark, Hungary, Romania, Swedenand the UK also PMI chapters exist. Nodoubt that APM the Association forProject Management in UK with about9.000 individual members is a verystrong and very active force for promot-ing PM in the UK. The most importantinitiative in the last five years wasAPM´s development of a revised bodyof knowledge. Other national associa-tions are of course smaller because of thenumber of inhabitants in the country,but probably also because of cultural dif-ferences. For instance, while in the UKit is a habit to join clubs or associations,in Austria people do not like to formallyjoin in. Nevertheless there also exist veryactive small PM associations e.g. in Den-mark or in Austria.

The PM approach represented bythe PM associations of Sweden andAustria is organisationally oriented.Romania's approach can becharacterised as rather organisationallyoriented. In Hungary the associationfollows a rather planning oriented ap-proach. UK stated that within the asso-ciation all PM approaches ranging fromorganisationally oriented to planningoriented are represented.

None of the societies stated thatthe profession project manager has al-ready been formally established. In allPOSs PM initiatives are currently run-ning or have been accomplished. ThesePM initiatives are often aiming at fur-ther developing the profession.

PM StandardisationIn Austria and the UK national PM bod-ies of knowledge according to the ICB -International Competence Baseline ex-ist. In Austria there are also some spe-cial norms (DIN, ÖNORM) for thestandardisation of PM applied. Denmarkis currently developing a new PM bodyof knowledge, which will be issued laterin 2001. In Hungary the PMBok andPrince are used widely as a PM standard.In Romania no PM norms or standardsexist. The UK is the only society stating

Table 2. PM education in POSs

Table 3. Project management initiatives in POSs

that formal PM requirements are askedfor in public tenders. Namely Prince andAPM competency certificates are askedfor.

Results of Assessing andBenchmarking the Practices ofProject-oriented CompaniesThe data resulting from the assessmentsof the practices of project-oriented com-panies are average data relating to allproject types performed by all industriesin the different POSs. Different datamight result from assessments of specificindustries and/or specific project typesin the POSs.

Project ManagementThe benchmarking results regarding PMare shown in figure 6 and 7. Figure 6visualises the competencies in theproject start process. Figure 7 illustratesthe competencies in the other PM sub-processes, namely the project co-ordi-nation, project controlling, project dis-continuity management and projectclose-down.

In Austria in the project start pro-cess PM methods for planning (likeproject goals, wbs, bar chart, project costplan, project resources plan, businesscase analysis, etc.), for project context(such as the project environment analy-sis), design of project organisation(project organisation chart, project roledescriptions, etc.) and project risk man-agement methods (such as the projectrisk analysis) are sometimes applied,while PM methods for designing aproject culture (like project name,project slogans, project mission state-ments etc. ) and project discontinuitymanagement (project scenario analysis,escalation plans, alternative plans) areseldom applied.

A similar picture shows Denmark,where also PM methods to design aproject culture are sometimes applied.In the project start process in HungaryPM methods concerning the design ofthe project organisation and the projectculture are sometimes applied, while allPM methods for other objects of con-sideration are seldom used. In SwedenPM methods considering project con-text, the design of project organisationsand project culture are often applied inthe project start process. PM methodsfor planning, project risk managementand discontinuity management aresometimes used. In the UK all PM meth-ods are sometimes used in the projectstart process. Figure 7. Benchmarking results: Project management - Part 2

Figure 6. Benchmarking results: Project management - Part 1


Regarding the competencies forthe performance of the project start pro-cess the following general interpretationsare possible:

- Two groups of POSs can bedifferentiated. Romania andHungary show less competenciesin comparison to the otherPOSs.

- The scores are seldom orsometimes, only Sweden claimsto apply certain methods often.

- There is less application ofproject risk management and ofproject discontinuity manage-ment than of the other PMmethods.Austria, Denmark and Hungary

show similar competencies for the per-formance of the other PM sub-processes.In these POSs PM methods are oftenused in the project co-ordination pro-cess. The project plans (goals, workbreakdown structure, schedules, costplan, etc) are sometimes adapted in theproject controlling process.

In Romania less PM methods areused. For instance PM methods like up-dating the project organisation chart are

never used. Sweden and the UK showmore competencies for the performanceof these PM sub-processes than all theother societies. PM methods are alwaysused in the project co-ordination pro-cess. In the UK representatives of rel-evant environments, such as customersand suppliers are always invited to par-ticipate in project workshops. But theseworkshops like project start or projectclose-down workshops only sometimestake place.

Regarding the competencies forthe performance of the other PM sub-processes the following general interpre-tations are possible:

- The competencies for theperformance of the project co-ordination process is the highestin all POSs.

- The competencies for theproject co-ordination and forthe project close-down processare pretty homogeneous.

- The competencies for theperformance of project control-ling and for project discontinuitymanagement are very heteroge-neous.

Programme ManagementAustria, Denmark, Hungary and the UKshow a similar picture in theirprogramme management competencies.In Austria and the United Kingdomprogramme management is seldom ap-plied. Again Romania shows less com-petence in comparison to the otherPOSs. In Sweden the sub-processesprogramme start, programme co-ordina-tion, programme controlling,programme discontinuity managementand programme close-down are oftenperformed. Programme managementmethods are often applied and specificprogramme organisations are often de-signed.

Project Portfolio ManagementIn general the competencies in projectportfolio management are rather low inthe considered societies. Project portfo-lio processes (like assigning projects andprogrammes, managing the project port-folio, etc.) are seldom performed in Aus-tria, Sweden and in the UK, sometimesperformed in Denmark and Hungary. InAustria and Sweden project portfoliomanagement methods like project pro-posals, project portfolio database andproject portfolio reports are sometimesapplied, while they are seldom appliedin Denmark, Hungary and the UK. Swe-den states that in project-oriented com-panies project portfolio groups to man-age the portfolio are always established.

Project Personnel ManagementAustria and Denmark show a similarpicture again. In both POSs project per-sonnel development processes (like as-sessing project personnel, PM training,PM coaching, etc.) are often performed.In Austria, Denmark and Hungary PMdevelopment methods such as internal/external PM seminars, PM certification,coaching of PM personnel and assess-ment centres for project personnel aresometimes applied. Personnel develop-ment activities are sometimes organisedfor the roles project owner, project man-ager, project team member and projectcoach. While in Austria and Denmarkseldom a PM career path exists, project-oriented companies in Hungary some-times have such a career path. In Den-mark, Hungary and the UK PM offices,internal PM trainers, PM coaches andnetworks of project managers sometimessupport project personnel development.In Austria such supportive structuresseldom exist. Romania shows less com-petence in comparison with all other

Figure 8. Benchmarking results: Programme management

Figure 9. Benchmarking results: Project portfolio management

POSs. Sweden and UK show highcompetences in project personnel man-agement. Project personnel processes areoften performed and project personnelmethods are often applied, often con-sidering all PM roles. In Sweden specificstructures for supporting the project per-sonnel development often exist.

Organisational DesignAustria and Hungary show the same pic-ture regarding their competencies inorganisational design. Integrative struc-tures, like expert pools, project portfo-lio groups and PM office seldom exist.Specific tools like PM procedures, stan-dard project plans, PM marketing toolssometimes exist, while organisationaldevelopment processes like auditing, selfassessment and benchmarking of the PMprocess are seldom performed. Roles likePM office manager, (internal) consult-ants to support the organisational de-velopment seldom exist. The UK showsa similar picture. Again Romania showsthe lowest competencies inorganisational design of project-orientedcompanies within the assessed POSs.Denmark and Sweden have more com-petencies regarding the organisationaldesign of project-oriented companiesthan the other POSs. In Denmark spe-cific tools and PM roles to support theorganisational development often exist.In Sweden integrative structures alwaysexist in project-oriented companies.

The overall Competencies of theAssessed POSs

POS Competence AlgorithmOn the one hand the competencies of aPOS can be shown in a spider web-model and on the other hand a POSratio can be calculated. The POS ratiois a weighted sum of the competenciesfor performing the specific processes andfor providing PM related services. Asproject management is considered as themost important process in the POS, thisprocess has the weight of 20%. All otherprocesses are weighted with 10%. Theweight of each question is proportionalto the number of questions per process.The competencies are measured accord-ing to a scale of 0-100. In table 4 therelations between the competence scaleand the answering categories in the POSquestionnaire, for questions relating tothe practices of POCs, are defined.

The competence scores for theservices provided by PM related institu-tions are determined in a qualitative

approach. The quantitative and quali-tative data resulting from the answersare integrated. The resulting scores arerelative values, relating each nationalscore to those of the other POSs.

POS RatiosTable 5 shows the weighted competen-cies for each process and service, the PMservice ratios and the POC practice ra-tios, and the overall POS ratios for theassessed POSs.

Overall one can see that the UKhas the highest POS competence, whileRomania has the lowest one. There aretwo pairs of POSs with similar compe-tencies: UK and Sweden on the onehand and Austria and Denmark on the

other hand. While also the PM serviceratios and the PM practice ratios fromAustria and Denmark are pretty similar,these ratios show big differences for theUK and Sweden. UK, with a higher PMservice ratio has a much lower POCpractice ratio than Sweden. This mightmean that the provision of a highamount of PM related services by e.g.education and research institutions doesnot guarantee high quality POC prac-tice in the project-oriented companiesimmediately. From the Eastern Euro-pean countries Hungary has a muchhigher competence than Romania. ThePOS ratios of the single POSs have tobe interpreted within the context.

Figure 10. Benchmarking results: Project personnel management

Figure 11. Benchmarking results: Organisational design


Interpretation of the Competencies ofthe Single POSs

AustriaAustria has a lot of small and mediumsized industries. Despite this fact theimportance of projects has increased inthe last few years significantly. Tradition-ally external projects are performed inthe building and construction industry,in the engineering industry and in theIT-industry. Internal projects are per-formed in different industries only sincerecently. It is rather difficult to imple-ment internal projects in traditional in-dustries like the engineering industry.Especially in health services and in thepublic administration the importance ofprojects continues to rise. There is anincreasing demand for PM proceduresand for formal PM qualifications, suchas certifications for project managers.Working in project-oriented companiesis seen as being attractive. Students areinterested in studying PM and compa-nies in turn are trying to get in contactwith PM graduates.

Competent staff is available inAustria, but there is little flexibility ofthe people to adapt to new challenges.Further there exist quite a lot of admin-istrative regulations in Austria, which isnot too favourable for project work(Sachs et al. 1998, International Insti-tute for Management Development1997). Austria has a POS ratio of about400, the PM service ratio of 170 is a bitlower than the POC practice ratio ofabout 240. This shows that the PM re-lated services provided by institutionsare still rather limited, and that theproject-oriented industry takes on re-sponsibility to ensure adequate compe-tencies for themselves.

DenmarkDenmark also has a lot of small andmedium sized industries. In the past PMwas only applied in a few industries, likein the building and construction indus-try. Denmark is now in a change pro-cess from companies based on hierar-chies to project-oriented companies.

Projects are becoming very important inthe IT, public and finance industries andare more and more common in otherindustries and sectors. Projects are com-mon in the areas of change manage-ment, internal organisational develop-ment and customer oriented productdevelopment.

Considering the World Competi-tiveness Report Denmark shows a goodground for PM, for instance the willing-ness to work in teams is very high (Sachset al. 1998, International Institute forManagement Development 1997). ForDenmark a POS ratio of about 420 hasbeen calculated. Denmark still showslittle competence regarding the PM re-lated services (140 out of 400), but morecompetencies regarding the POC prac-tices (277 out of 600).

HungaryIn the past projects and programmeswere of little importance for Hungary.Nowadays projects are of medium im-portance but in the future projects andprogrammes will gain a lot in impor-tance. The POS ratio calculated is about320, whereby the POC practice ratio isquite high (239) for the project-orientedcompanies that exist in Hungary. Lesscompetence is shown regarding the PMrelated services, where Hungary onlyreaches 80 out of 400 points. Concern-ing the managerial context an advan-tage for PM might be that administra-tive regulations are rather low and for-eign investors are relatively free to ac-quire control in domestic companies(Sachs et al. 1998, International Insti-tute for Management Development1997).

RomaniaIn Romania projects were only used insome specific industries, like buildingconstruction, energy, chemistry, engi-neering and IT. Romania now passesthrough a rough economic restructur-ing process, applying projects forprivatising large state-owned enterprises,modernising and updating strategic eco-nomic units, creating new business units.For all industries and the non-profit sec-tor projects are becoming very impor-tant. Companies which offer consultingservices for PM tend to cover a lot ofproject types from different areas. De-mand for the application of projects andprogrammes of the markets is increas-ing.

Table 5. Weighted competences and POS ratios

Table 4. Relationships between answering categories and the competence scale

It is not surprising that Romaniahas the lowest POS ratio with nearly200. In the last two years emphasis wasgiven to the development of formal PMeducation programmes, but except thatthere is not much competence in theother PM related services like research,marketing or standardisation. Neverthe-less Romanian project-oriented compa-nies show already some PM competence(63 out of 200), while programme man-agement and portfolio management al-most do not exist yet.

SwedenIn Sweden projects are commonly usedand important in different industries andin the non-profit sector. Sweden hassome big players in telecommunicationindustry and has a lot of big internationalcompanies. Ericsson for instance does80% of its business in project orprogramme form. Projects have alsogrown in importance in the non-profitsector during the last years, due to anincreased awareness of EC-projects. In-creasing importance of projects can beobserved, because of an increase in prod-uct development and R&D.

Sweden shows a quite high POSratio of 540. Concerning the PM relatedservices with a ratio of 160 Swedenshows a similar ratio as Austria. Look-ing at the POC practice ratio Swedenshows a value of 380. Sweden seems toprovide an excellent managerial contextfor PM (Sachs et al. 1998, InternationalInstitute for Management Development1997).

UKIn the UK there is wide recognition ofthe role of projects and programmes inthe achievement of business objectives.There is growing recognition of whenprojects need to be used and when rou-tine operations should be used. UKshows a POS ratio of about 560. In pro-viding PM related services a competenceof 290 is reached. So the UK is the mostmature POS regarding the provided PMservices. The POC practice ratio is about270. An explanation for this imbalancemight be found in the managerial con-text, where structures and people aredescribed as not flexible and adapt ratherbad to new challenges (Sachs et al. 1998,International Institute for ManagementDevelopment 1997).

OverallOverall it can be observed that all as-sessed nations are still in an early phaseas a POS. There are high development

potentials and demands, given the dy-namics of the overall economic devel-opment in these nations. The performedassessments and the benchmarking givea view at the beginning of 2001 only. Itcan be assumed that due to the dynam-ics at the beginning of 2001 the compe-tencies of these nations as POSs will bemuch higher in a few years.

programm | austria - TheAustrian Project ManagementInitiativeThe dark area in the POS spider webfor Austria (Figure 12) shows the as-sessed competences of Austria as a POS.

The assessment results show thatthe competencies of Austrian project-oriented companies are most developedin project management and in person-nel management, even these competen-cies have a score of 87 (out of 200) and50 (out of 100) only. Programme man-agement, project portfolio managementand the organisational design are evenless developed yet. This shows the tra-ditional focus on the development ofcompetencies for the management ofthe single projects. Within the servicesprovided by PM related institutions thePM marketing efforts by Projekt Man-agement Austria result in the score of50. The other PM service areas are nottoo well developed. This analysis por-trays the development potentials Aus-tria as a POS has. The dark line in Fig-ure 12 shows the planned competencesof Austria as a POS in 2010.

In Austria the further develop-

ment of the POS is organised byprogramm I austria, which started inOctober 2000 and has a duration of fouryears. The promoters of programm Iaustria are Projekt Management Austria,Projektmanagement Group of the Uni-versity of Economics and Business Ad-ministration and Roland Gareis Consult-ing. The objective of programm | austriais to contribute to the further develop-ment of Austria as a POS. By that theinternational competitiveness of Austriashall be ensured.

The following results shall beachieved by the end of programm |austria:

- PM is well known in the public

- The profession "Project Man-ager" is implemented andaccepted

- Research results on the project-oriented society are published

- Project-oriented companieshave analysed and developedtheir competences

- Networking of project managersand PM Office managers takesplace

- A structural basis for the furtherdevelopment of Austria as aPOS is provided.

One of the strategies of programm| austria is "PM for everybody". Thisstrategy is implemented by performingprojects such as "PM in schools", "PMin families", "PM in small municipalities",

0

20

40

60

80

100Project management

Programme management

Project portfolio management

Personnel management in project-oriented companies

Organizational design of project-oriented companies

PM education

PM research

PM marketing

PM standardization

Figure 12: Actual and planned POS competencies of Austria


etc. Another strategy is the "Furtherdevelopment of project-oriented com-panies". This strategy is implemented byprojects such as "PM Auditing", "Net-work of PM Office Managers" etc.

ConclusionProjects and programmes as temporaryorganisations are becoming a broadlyapplied form of organising for the per-formance of complex and dynamic pro-cesses. Therefore project andprogramme management is not just amicro economic but it becomes a macroeconomic concern. The objective of thePOS research initiative is to develop aviable model to describe the POS. Theempirical application of the POS modelin the POS benchmarking project con-tributes to the development of the POSmodel.

Furthermore, the assessing andthe benchmarking of the different POSscontribute to the promotion and mar-keting of project management in thesenations. Based on the POSbenchmarking results the societies aredeveloping strategies to further developtheir society as a POS.

ReferencesGareis R., 2000. Competences of the project-

oriented society, in: Proceedings of IPMAWorld Conference, London.

Gareis R., 2001. The Project-oriented Society: Anew creation to ensure internationalcompetitiveness, Paper presented at theIPMA International Symposium andNORDNET 2001, Stockholm, Sweden.

Gareis R., 2001. Research Report: Assessment andBenchmarking of Project-oriented Societies:Results of the POS Benchmarking Group1,University of Economics and BusinessAdministration, Vienna.

Gareis R., Huemann M., 2000. PM-Competencesin the Project-oriented Organisation, in:The Gower Handbook of ProjectManagement, JR Turner, SJ Simister (ed.),Gower, Aldershot, pp. 709-721.

von Glasersfeld, E., 1992. Konstruktion derWirklichkeit und des Begriffs derObjektivität, in: Gumin, H., Meier, H.:Einführung in den Konstruktivismus,München.

International Institute for Management Develop-ment, 1997. The World CompetitivenessYearbook 1997, Lausanne.

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

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

Sachs J. D., Schwab K., 1998. The GlobalCompetitiveness Report 1998, WorldEconomic Forum, Geneva.

Roland Gareis

ProjektmanagementGroupUniversity ofEconomics andBusiness Administra-tion, Vienna

Franz Klein-Gasse 11190 Vienna, Austria

Tel: +43/1/4277-29401Fax: +43/1/3687510E-mail: [email protected]

Martina Huemann

ProjektmanagementGroupUniversity ofEconomics andBusiness Administra-tion, Vienna

Franz Klein-Gasse 11190 Vienna, Austria

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

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Risk Analysis to AssessCompletion Time of a Tram-Line

Enrico Cagno, Politecnico di Milano, ItalyFranco Caron, Politecnico di Milano, ItalyMauro 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 tramlines to improve the urban public transport system. The risk analysis process includes risk Identification andquantification phases. Since no data record was available about project risk analysis and management in previ-ous similar projects, both phases were based on the elicitation of experts knowledge. A simulation model hasbeen implemented in order to evaluate the probability distribution of the overall project duration. The paperdescribes the assessment of strengths and weaknesses of the proposed approach and identifies areas of interestfor possible future developments.

IntroductionThe paper describes an industrial casestudy concerning the schedule riskanalysis developed for a project involv-ing the construction of new tram linesto improve the urban public transportsystem. Due to the project complexity,many critical elements emerged, both ofa general nature (difficulties in imple-menting a suitable project managementsystem in the public sector) and of a spe-cific nature (the involvement of severalpublic authorities in the decision mak-ing process).

The project risk analysis processwas divided into two major phases: riskidentification and risk quantification.The former aims to identify possible risksources, risk events and correspondingrisk responses. The latter aims to evalu-ate possible risk consequences in termsof completion delay for single activities;in this context a simulation approachwas applied, using a network model ofthe project and considering also statis-tical correlation between activity dura-tions, in order to evaluate the probabil-ity distribution of the overall projectduration.

CATEGORY: NOTION ON INDUSTRIAL RISK MANAGEMENT APPLICATION

Since no data record was availableabout project risk analysis and manage-ment in previous similar projects, boththe risk identification and risk quantifi-cation phases were based on the elicita-tion of experts' knowledge.

In particular, in the risk quantifi-cation phase, in order to evaluate thejoint effect of different risks on eachactivity duration, a suitable approachwas implemented based on discreteprobability distribution and event trees.

The case considered includes thefollowing activities (divided into three,distinct sub-projects):

1. Construction of three newtramlines;

2. Purchase of new generationtrams for these lines, togetherwith the respective maintenancefacilities;

3. Construction of a depot for thegaraging and maintenance of thevehicles.The major aspects of the project

are:1. very close inter-connections

between the sub-projects: workon the depot must be completed

in time to accept delivery of thenew vehicles; delays in comple-tion of the lines with respect todelivery of the trams wouldimmobilise substantial capital, asthe vehicles cannot be used onother lines; lines must becompleted to test vehicles, and,in particular, one of the threelines must be completed torealise connections to the depot;

2. a long and complex financialand technical approval processby authorities outside theproject organisation;

3. the large number of actorsinvolved directly or indirectly inthe various activities.These aspects mean that the time

required to finalise decisions is difficultto forecast and extremely variable, sothat a project management system fo-cused on risk, in particular schedule risk,has to be implemented.

The first step, during project de-velopment, 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 intothree or four levels using anactivity based approach; theWBS for the construction of thedepot is shown below as anexample (Figure 1).The risk analysis process has been

divided into two major phases: risk iden-tification and risk quantification. In thefirst phase risk sources, risk events andassociated risk responses have been iden-tified. In the second phase, assumingthat risks affect activity durations, a du-ration distribution has been estimatedfor each activity allowing , through anetwork based simulation model, for theestimation of the variability of the over-all project duration.

Identification of risks andresponsesThe Identification phase can be brokendown into five steps:

1. identification of the sources ofrisk (i.e.: an element inside oroutside the project which causesa significant risk for the project);

2. identification of the project risks(i.e.: uncertain event which maycause a variation in the comple-tion date of an activity) stem-ming 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, riskanalysis was included for the first timein the project management system andthe project team was therefore not suf-ficiently acquainted with risk analysistechniques, the most suitable approachfor the first step was the use of a check-list. Experts thus identified 20 mainsources of risk which were classified inthe following categories (Wideman,1992): a) external sources determinedby social, environmental or legislativefactors; b) internal risks concerningproject management system and pro-cesses; c) technical risks concerningdesign process; and d) legal risks of acontractual nature.

The next step was the move fromsources of risk to project risks. Expertswere asked to indicate the main risks infunction of the sources of risk given inthe previous step (see for instance Fig-ure 2).

The identified risks were classifiedby type and associated to the WBS. Each

Depot design

Approval andfunding

Specs maintenaceequipment

DESIGN

Tenders forconstruction

Tenders formaintenance equipment

SUBCONTRACTING

Fittings andline equipment

Maintenanceequipment

SUPPLY

Demolitions andopening of sites

Civil works

Utilities

Equipment installation

Completionsand finishing

PROCUREMENT

System testing

TESTING

DEPOT

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

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

Figure 2. Extract from the risk identification document.

Outstanding tecnicalapproval

Outstanding financialapproval

Approvalsand funding

Difficulties inproject development

Re-design

Def. tech. featuresmaintenance eqpt.

ENGINEERING

Change of supplier

Supplies offittings/lines

Delays insupply

Disputes withsupplier

Approval ofmaintenance eqpt.

PROCUREMENT

Outstanding technicalapproval

Constructiondifficulties

Demolitions andopening of sites

Construction difficulties

Conflict withcontractors

Civil works



Utilities/eqpt.



Finishing andcompletions

CONSTRUCTION

Non conformityto tests

Testing ofmaintenance eqpt.

TESTING

Legaldisputes

Tenders for the supllyof maintenance eqpt.

TENDERING

DEPOT

project activity may be affected by oneor more risks causing a possible varia-tion in the activity duration. The resultcan be presented in a hybrid structure(see the example in Figure 3) derivedfrom the cross-tabulation of the risk listand the WBS for each subproject.

The last step in the Identificationphase concerns specification of the ap-propriate responses to the risks found(Diekman et al., 1988). A discussion ofrisk management procedures goes be-yond the objectives of the present pa-per. However, the criteria used can besummarised briefly. Project managerswere asked to indicate the main re-sponses to the identified risks and, whereappropriate, to assess in quantitativeterms the reduction in the probabilityof occurrence or in the impact. This in-formation was used in the final phase ofthe analysis to highlight the iterativenature of the process and compare re-sults obtained after implementing vari-ous responses with those initially ob-tained without any corrective measure.The Identification phase represents theprerequisite for the following quantifi-cation phase which quantifies risks andaims to provide some quantitative mea-sure of the variability in the duration ofeach activity.

Risk quantificationRisks identified in the previous phasemust be quantified in terms of the levelof uncertainty (by assessing the relativeprobability of occurrence) and the en-tity of the consequences (variation in-duced in the duration of the activity),so obtaining a range for overall projectduration. This operation was dividedinto two parts:

1. determination of the probabilitydistribution for the duration ofeach activity;

2. assessment of possible correla-tions between activities anddetermination of overall projectduration.

Determination of the probabilitydistribution for the duration of eachactivityThe main inputs to the first part of thequantitative analysis were:

- risks associated to each activity,i.e. the results of the precedingidentification phase;

- estimated duration of eachactivity.

In the present case, in order tofollow managers customary behaviour,they were asked to provide a determin-istic duration for each activity, assum-ing this value referred to a target esti-mate, i.e. execution of the respectiveactivity under normal conditions andwithout manifestation of any risk. Thevariability in the duration of activitiescan be described in terms of the distri-bution of the offsets from the target pointestimate. Therefore, it was necessary toestimate the range of the possible varia-tions in the individual variables (in thepresent case the activity duration, withrespect to the target values: the range isgiven by the minimum and maximumthat the variables are not expected toexceed) and the probability distributionof the values within the range. In gen-eral, the starting point for the collectionof data for the analysis is historical dataand/or recourse to the subjective opin-ion of experts (Bowers, 1994). In thepresent case, historical data was notavailable, as it was the first case of imple-mentation of a risk analysis in the pub-lic transport sector and there had beenno systematic archiving of information.Consequently, only expert opinion couldbe used (refer to Cagno and Caron,1997, to identify the most suitable typeof questionnaire on the basis of the avail-ability and reliability of the data). Theinterviewees rejected the possibility toassess the impact of each risk, in terms

of delay, and the respective probabilityof occurrence by means of a continuousdistribution, as it was less intuitive. Con-sequently, each risk was given one ormore discrete values for the variationinduced in the expected duration andfor the respective probability of occur-rence.

Strictly tied to the question of thesources of the input data to the riskanalysis process is the problem of howto represent this data for the analysis(Williams, 1992). It was felt appropri-ate to use an empirical discrete distri-bution and a methodology which usesevent trees to derive the probability dis-tribution of the duration from the jointeffect of the various risks affecting theactivities. To determine the probabilitydistribution of each activity by appro-priately combining the effects of the risksassociated to each activity (Ren, 1994),the first step was to identify relationsbetween the associated effects and soconstruct a model to define the overallimpact of the risks affecting the activ-ity. When the effects of two events areadditive, the risks are given 'in series',otherwise they are given 'in parallel', i.e.the occurrence of both risks causes anoverall delay equal to the greater of thedelays induced by the individual risks.Figure 4 gives an example of the model-ling for one of the activities in theproject, considering also conditionalprobabilities.

Figure 4. Representation of the relations between risks


In cases where two elements arelinked in parallel, e.g. R1 and R2 over-lapping in Figure 4, the overall delay(RP) is equal to the larger of the twoelements: RP = Max (R1;R2). A simplerepresentation of the calculation usinga table (cf. Table 1) shows the resultsobtained for delays R1 and R2 (Figure4).

If the elements are linked 'in se-ries', e.g. the RP delay (given by the cal-culation of R1 and R2) and R3 in Fig-ure 4, the overall delay is given by thesum of the individualdelays: RS = RP +R3. An example isgiven in Table 2, inwhich the calcula-tion takes account ofthe fact that theprobability of the val-ues of R3 is depen-dent on the values ofRP.

Proceeding inthe resolution of thesystem, the distribu-tion of the overall delay induced in theactivity is obtained. If this distributionis added to the deterministic durationestimated previously by the experts, thevariability in the duration of each activ-ity is obtained, which can be representedby an empirical discrete distribution (Fig-ure 5). It should be noted that the useof empirical discrete distributions allowsmulti-modal distributions to be shown,as well as highlighting the contributionof each risk to the variability in dura-tion. This information may prove usefulin a subsequent risk management phase.The distributions obtained represent theprincipal input to the subsequent Quan-tification phase, based on a simulationmodel, allowing for the calculation of theprobability distribution of the overallproject duration.

Determination of overall projectdurationThe second part of the quantitative as-

sessment of project risks involves calcu-lating the probability distribution of theoverall duration of the project. Amongthe various probability analysis tech-niques, simulation based on the MonteCarlo method (Rubinstein, 1981) wasconsidered the most appropriate for thepurpose. The simulation approach(Cagno and Caron, 1997) is substantiallydefined by three elements: input vari-ables, output variables, and a projectrepresentation model which highlightsrelations between the project elements.In the present case, the input variableswere given by the probability distribu-tions for the duration of each activity inthe project, while the output variablewas the overall duration of the project.The durations of the individual sub-projects were added to the latter in or-der to assess performance separately andwith respect to the total duration. Thequantitative output of the simulationwas a cumulative probability curvewhich shows the relation between the

possible project durations and theirprobability of occurrence. To constructa representative model of the situationin question, account had to be taken oftwo different types of relation betweenthe activities:

1. temporal dependence, i.e.precedence relations betweenactivities which identify thesequence of events;

2. statistical dependence, i.e.possible correlations betweenvariations in duration of thedifferent activities.The grid was based on the activi-

ties in the project WBS, and time de-pendency relations between the activi-ties and the points of convergence be-tween the sub-projects were defined inconsultation with project managers.

The other fundamental aspect washow correlations between activities weremanaged. In the present case, the vari-

ous activities were examined to detectany statistical dependence. As histori-cal data was not available, expert opin-ion was again used. The main criterionin establishing correlations is the pres-ence of common sources of risk. Theunderlying idea is that if two activitieshave a common source of risk, they mustbe considered potentially related. Thefirst step was, therefore, to draw up alist of potentially related activities on thebasis of the given criterion. The expertsthen assessed the list of pairs to identifyeffective correlations. The level of cor-relation then had to be quantified. Theideal situation is to derive a direct esti-mate of a correlation coefficient whichcan be used as an input to the simula-tion. Unfortunately, experience showsthat deriving a number which representsthe correlation between two activitiesis neither easy nor intuitive, and thereis a risk of defining an insignificant fig-ure. The easiest approach is thus to de-fine conditioned distributions for the

correlated pairs. Thedependencies be-tween the activitieswere represented asfollows:1. the entityof the induced delayon the dependentactivity was definedwith reference to theduration of theactivity identified asindependent; as theduration of the latter

increases, the induced delay isgreater (Figure 6);

2. the induced delay is then simplyadded to the values of thedependent distribution, takingaccount, however, of the factthat this delay is progressivelyabsorbed for higher values in thedependent distribution. In otherwords, given a delay induced bythe duration of the independentdistribution, for short durationsin the dependent activity, the

Utilitie s construction

0 ,0 0

0 ,0 5

0 ,1 0

0 ,1 5

0 ,2 0

0 ,2 5

4 5 6 7 8 9 10Duration (m onths )

Pro

ba

bil

ity

Table 1. Calculation of the delaydistribution of two elements linked 'in

parallel'

Figure 5. Duration distribution

Table 2. Calculation of the delay distribution of two elements linked 'in series'

delay is added in full, while forlonger durations it is progres-sively absorbed into the delay ofthe dependent activity (Figure8). If the induced delay is zero,the dependent activity main-tains the delay distributionderived in the previous Quanti-fication phase (Figure 7). Thesecorrelations were then insertedinto the model to ensure thatthe simulation did not underes-timate the real variance of theoutput distribution. The simula-tion using the defined modeland the data collected wascarried out with the @Risksoftware package. Five thousanditerations were performed.

Assessment of resultsThe most significant comments refer tothe following results from the simulation:

1. the expected value and thestandard deviation for the totalduration of the project and theindividual sub-projects;

2. the probability distribution forthe total duration;

3. the sensitivity analysis for theindividual sub-projects and,consequently for the overallproject.Tab. 3 summarises the principal

results for the duration distribution ofthe overall project and the individualsub-projects. The figures reveal two criti-cal areas:

1. the duration distribution for theconstruction of tramlines Nord,Sud and Testi has a higherstandard deviation than that forthe other projects;

2. the realisation of the depotdetermines final completion ofthe overall project.

It should be noted that the vari-ance associate to the tramline projectsis absorbed in the final convergencepoint, as the longest path crosses thedepot project. Indeed, the standard de-viation for the total duration is very simi-lar to that for the duration of the depotproject. The graph in Figure 9 shows thedistribution for the total duration as acumulative curve. It is evident that fora completion probability of 80% withina fixed date, an overall duration of 79months must be expected, i.e. 18 months

longer than the optimistic estimate forthe completion of the depot. The soft-ware used can perform a sensitivityanalysis of the input variables to assessthe effect of each on the final result.Results can be presented in a bar chartillustrating the impact of each variable.The sensitivity analysis was performedfor the overall project and the individualsub-projects. The activities with thegreatest impact on the final results are'design', 'technical and financial ap-proval' and some parts of the 'construc-tion' phase.

Simulation of an alternativescenarioAs a demonstration of the iterative na-ture of the risk analysis and managementprocess, identification of the main re-sponses to project risks, together withthe respective effects on the probabilityof occurrence and/or on the impact ofthe risks, led to revised estimates of theduration of the individual activitiesbased on new assumptions and assessedby simulating the consequent impact onoverall duration. The expected resultsmainly concern reduced variability inoverall duration as a result of the reduc-tion in overall project uncertainty bymeans of the definition of appropriateresponses. Table 4 summarises the mainresults of the duration distributions forthe overall project and the individualsub-projects in the second simulation.In effect, the values obtained are belowthose in the previous case, but the sameobservations remain, i.e. the fact that thedepot project is the aspect which mostdetermines total duration. As a result ofthe reduction in the level of project risk,the output distribution (Figure 10)shows less dispersion. In the new sce-nario, a completion probability within afixed date of 80%, is given after 75months, a period which in the previousscenario guaranteed only a 50% prob-ability of completion. A sensitivity analy-sis of the new scenario was carried out.Comparing the results with the previ-ous cases, the criticality of the variablesin terms of the impact on results was thesame, but the level of impact of designfell after implementation of the re-sponses.

ConclusionsMajor contracting projects are generallysubject to the risks of exceeding initialbudget and delays in completion time.

Utilitie s construction

0 ,0 0

0 ,0 5

0 ,1 0

0 ,1 5

0 ,2 0

0 ,2 5

4 5 6 7 8 9 10Duration (m onths )

Pro

ba

bil

ity

Figure 6. Independent activity andinduced delay

Figure 7. Dependent distribution for aninduced delay of zero

Figure 8. Dependent distribution for aninduced delay not equal to zero

F inish in g (1)

0

0,05

0,1

0,15

0,2

0,25

0,3

5 6 7 8 9 10 11Du ra tio n M o nths)

Pro

ba

bil

ity

F in ish in g (2)

0

0,05

0,1

0,15

0,2

0,25

0,3

6 7 8 8,5 9,5 10 11Du ra tio n (m o nth s)

Pro

ba

bil

ity

Table 3. Parameters of the outputdistributions

Figure 9. Probability curve for overallduration

0

0,2

0,4

0,6

0,8

1

60 63,5 67 70,5 74 77,5 81 84,5 88 91,5 95

DURATION (months)

PR

OB

AB

ILIT

Y


This means that a systematic andrigorous analysis of the major sources ofproject risk is necessary as early as thefirst phases of the life cycle.

In the case considered a risk analy-sis approach has been developed in or-der to do obtain a distribution probabil-ity of the overall project duration.

In fact, the possibility of realisingthe initial 'schedule' objectives must beassessed in the face of uncertainties as-sociated to the duration of activities inthe individual projects. From this pointof view, the aim of the risk analysis andmanagement process is first the formu-lation of reliable estimates for projecttime planning based on the identifica-tion of the principal risks and their ef-fects on the individual activities and onoverall duration. Secondly, it shoulddevelop the foundations for the correctmanagement of these risks by means ofthe definition and implementation ofappropriate responses. Assessment of theresults of this process leads to the iden-tification of critical areas within theproject which are mainly responsible forthe variability in total duration. Theseresults should therefore not be seen as adefinitive solution to the difficultiesfaced in the project, but rather as a start-ing point in the control process towardsrealising the initial objectives.

The process of eliciting the datanecessary to assess uncertainty (Bowers,1994) is probably the most importantaspect of the analysis, particularly whendata records are scarce or not available,as in the public transport case consid-ered. The importance of a Risk Man-agement Corporate Memory, which cancorrect and progressively improve anorganisation ability to draw up reliableestimates, suggests the need to invest inthis aspect. This can form the structureof a system to capitalise experience andarchive information on past projects in-telligently, so possibly improving futureestimates.

ReferencesBowers J.A., 1994.

"Data for Project Risk Analyses",International Journal of Project Manage-ment.

Cagno E. and Caron F, 1997."Integration of Subjective Judgements andHistorical 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 breakdownstructure" in Cleland D., King W., "ProjectManagement Handbook", Van NostrandReinold.

Raz T. and Globerson S., 1998."Effective Sizing and Content Definition ofWork Packages", International Journal ofProject Management.

Ren H., 1994."Risk Lifecycle and Risk Relationships onConstruction Projects", InternationalJournal 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 GuidewayTransit System Construction".

Ward S.C. and Chapman C.B., 1991."Extending the use of risk analysis in projectmanagement", International Journal ofProject Management.

Wideman M., 1992."Project and Program Risk Management, AGuide to Managing Project Risks andOpportunities", PMI, Drexel Hill, Pa..

Williams T.M., 1992."Practical Use of Distributions in NetworkAnalysis", Journal of Operational ResearchSociety.

0

0,2

0,4

0,6

0,8

1

60 62,5 65 67,5 70 72,5 75 77,5 80 82,5 85

DURATION (months)

PR

OB

AB

ILIT

Y

Enrico Cagno,PhD (Engr)

Politecnico di MilanoDepartment of Mechanical Engineering

P.zza Leonardo da Vinci 3220133 Milan - ITALY

Tel: +39 02 23994730Fax: +39 02 70638377E-mail: [email protected]

Franco Caron,Professor,corresponding author




Mauro Mancini,PhD (Engr)




Figure 10. Probability curve for overallduration

Table 4. Parameters of the outputdistributions

CATEGORY: RESEARCH

Contracting and the FlyingTrapeze: The Trust FactorRoch DeMaere, University of Calgary, CanadaGreg Skulmoski, University of Calgary, CanadaRamy Zaghloul Mohamed, University of Calgary, CanadaFrancis 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 oftrust is outlined. We present practical suggestions as to how trust can be built-or at least not destroyed-throughcontracting activities. The suggestions include identifying and choosing trustworthy partners, "practising" orgaining experience with potential partners, and effectively allocating risks. Results from research exploring therelationship 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 andincrease overall project costs. We present a strategy based on trust to overcome some of the problems associ-ated with risk allocation and the use of exculpatory clauses. To aid in the analysis we compare the relationshipbetween contracting parties to that of individuals performing on the flying trapeze.

IntroductionTonight is the night. You have waitedlong to see the featured trapeze artistsattempt a never before completed stunt.This could be historic. The two artistswill co-ordinate their acrobatic move-ments that require the highest degreeof precision possible; many say this mayeven be impossible to complete-at leastwithout injury. Yet the trapeze artistshave trained all their lives for this amaz-ing feat that will require ultimate team-work. Now is the time. High above thecrowd, with music for dramatic effect,the trapeze artists begin to swing. Theyare focused on the stunt. They are build-ing their concentration and co-ordinating their timing so that the con-ditions for success are optimal... NOW!One of the artists lets go, with the pre-cise amount of momentum, he fliesthrough the air, twisting and turningwith the grace of a dancer. He completesthe stunt and is cleanly caught by hispartner. The crowd roars. History ismade. Now imagine that the two indi-viduals do not trust each other. Wouldone expect to see such precision, daringand creativity now that uncertainty ex-

ists as to whether the other will preciselyperform?

As with the flying trapeze, trustbetween contracting parties can be anessential foundation for successful con-tracting. Trust can decrease project costs(Zaghloul & Hartman 1999), propitiateopen communication, and facilitate in-novation. A lack of trust between part-ners can result in defensive behaviour, adecrease in problem-solving effective-ness, a reluctance to share or be candid(Gibb 1961; Gibb 1964; Klimoski andKarol 1976). Participants in low trustenvironments are more likely to conceal,disguise or distort information (Zand1972). In an interesting experiment(Klimoski and Karol 1976), high trustand low trust groups were created to testthe effect that trust has on the numberof creative solutions each group coulddevelop in brainstorming sessions. Theresult was that the high trust groupsoutperformed the low trust groups interms of the number of ideas generatedby each group and also regarding theparticipants' perceptions of group per-formance. Trust can have a positive im-pact on project success by stimulating

creative and innovative solutions.In this paper we focus on the im-

portant role trust plays in contractualrelationships. A conceptual model oftrust is outlined in the first portion ofthis paper. Following that, we presentpractical suggestions as to how trust canbe built-or at least not destroyed-through contracting activities. Finally,research results exploring the relation-ship between trust and use of exculpa-tory clauses in the Canadian construc-tion industry are presented. The resultssuggest that the use of exculpatoryclauses can decrease trust and increaseoverall project costs. Throughout thispaper we compare the relationship be-tween contracting parties to that of in-dividuals performing on the flying tra-peze to aid in the analysis

What is trust?Before moving ahead, it is important tohave a common understanding of trust.The concept of trust is very complex andmultidimensional and there has beenmuch debate within academic circlesregarding a definition (Hosmer 1995;Mayer et al. 1995; Rousseau et al. 1998).


In an attempt to advance the concep-tual understanding of the topic,Hartman (2000) developed a model oftrust that enables a more simplified un-derstanding of the concept. The modeldepicts three types of trust: Blue, Yel-low, and Red trust.

Blue trust is all about competenceand ability. Blue trust is based on theperception of the other's capacity to per-form what is required. "Can they do thejob?" is the question associated with thistype of trust. Blue trust can be builtthrough an organization's reputation, ona recommendation from another party,through previous experience, throughcredentials, etc. Our perception ofanother's competence is primarilyfounded on a rational or cognitive evalu-ation of the available evidence about theother party (McAllister 1995; Hartman2000). However, just because someonecan do the job does not necessarily meanthat they will do the job, and that bringsus to the other types of trust.

Yellow trust is based on integrity.Yellow trust is founded upon the percep-tion of the other's aptitude to act ethi-cally, to adhere to values that we holdimportant, and to be motivated to nottake advantage of us (Mayer et al. 1995;Hartman 2000). To evaluate this typeof trust we ask, "will they look out formy interests?" Yellow trust is fragile andquickly damaged if violated. Once bro-ken, yellow trust is very difficult if notimpossible to repair (Hartman 2000).

Red trust is based on intuition.Red trust is the result of a combinationof emotional response and rapid process-ing of information and may be describedas the instincts or "gut feelings" that oneperson has about the other, a situation,or an artefact. Red trust is not foundedon a cognitive judgement or decision;rather it is emotional and hard to sup-port with available evidence. Friendship,liking, or affect often accompanies thistype of trust. Red trust can dominateover Blue and Yellow trust. For example,we may judge a particular political can-didate to have high levels of competenceand integrity, yet still not feel "good"about him or her for some reason we maynot be able to identify and therefore notvote for him or her. To measure this typeof trust we ask the question, "Does thisfeel right?"

You may have noticed that thethree primary colours represent the threedifferent types of trust. Just as the pri-mary colours can be mixed together tomake diverse colours, so too can the dif-ferent types of trust. Different types oftrust (or combinations of the three) are

important for different relationships andsituations. For example, a marriagewould most likely be some tone of or-ange, a combination of red and yellowtrust where blue trust may be of lesserimportance. Business relationshipswould typically be some shade of blueor green trust, formed by some combi-nation of blue and yellow trust. The situ-ation or circumstances dictate thecolour and intensity of trust requisite forthe relationship. The colour model andits applications in different types of re-lationships are illustrated in Table 1.

The Analogy of the FlyingTrapezeWith a common understanding of trust,we can now glean some lessons from theanalogy of the flying trapeze. There arethree primary points that we wish tomake with the analogy: (1) choose theright partner, (2) practice makes perfect,and finally (3) use a net�and share it!

Choose the right partnerLet's go back to a time before the twotrapeze artists have met. One of them,our protagonist, has an idea that willbring him fame and fortune. The idea isto perform a stunt that no one has at-tempted before, one that most criticswould agree is likely impossible, and onethat could put his very well-being injeopardy. This proposed act is danger-ously risky, requires an enormous invest-ment in time and resources to constructthe necessary structure and specializedapparatus, and it requires a partner thatis both creative and can be relied upon.What if our protagonist graduated fromthe traditional school of contracting? Tochoose his partner he tenders out thejob to whoever thinks they can do it andawards it to the lowest bidder�

Well, maybe not. Considering thenature of this specific task, our protago-nist will likely use different criteria forselecting his partner. The point of thisexample is that, depending on the situ-ation, there may be other factors that

are equally (if not more) important thanprice when choosing a partner. Althoughthe previous statement may seem obvi-ous, it bears repeating as current prac-tice (at least in Canada) would suggestthat price is a prime consideration whenselecting contracting partners. Whenthere is high risk and dependence uponanother party, it may be prudent to con-sider trustworthiness when evaluatingand selecting potential partners.

In most business relationships,blue trust or competence is certainly arequirement of any formal or informalarrangement; most firms would not con-sider partnering with an organizationthat they believe could not do the workin the first place. Yellow and red trusttend not to be as important. Contractsor other forms of bureaucracy are oftensubstituted for yellow and red trust toensure the other party fulfils their obli-gations. This is often the most appropri-ate strategy when the objective of aproject is to complete a task that is sec-ond nature or business as usual for allthe parties involved. Where uncertaintyand complexity are low a "tight" contractis often appropriate (Skulmoski et al.1998). However, if the project is large,risky, complex, and covers new groundit becomes an increasingly difficult taskto account for everything that couldpossibly happen within the confines ofa contract. Under these circumstancesa "looser" contract may be more appro-priate (Skulmoski et al. 1998). Some-times there is no substitute for a partnerwho has integrity and can be relied uponto look out for your interests when thingsdo not go as expected.

The question then becomes "howdoes one go about identifying and choos-ing a trustworthy partner?" This can bea difficult process, as no potential part-ner would purposely send out signals thatthey could not be trusted. In fact, allpotential candidates will be on their bestbehaviour with any misdemeanours oftheir past hidden neatly away. The firststep to identifying trustworthiness is to

Table 1. Colours of trust in Different Relationships

simply make trust a priority and part ofthe selection criteria. The process of rec-ognizing clues and pertinent evidencecan be facilitated if the importance oftrust is salient in the contracting phaseof a business relationship. Blue and yel-low trust are built from evidence, thisevidence can come from first hand ex-perience or numerous secondary sources(For a more thorough analysis of identi-fying and choosing trustworthy partnerssee Barney and Hansen 1994). The mostpowerful evidence would be from directexperience, which leads us to the nextpoint of the analogy.

Practice makes perfectImagine that our protagonist on the tra-peze has chosen a trustworthy partnerto perform the proposed dangerous anddifficult stunt and they are ready to be-gin working together. Would you expectthem to start right out with the mostdifficult feat? They would most likelystart out easy and work up to the moredifficult stunts. Practice allows the tra-peze artists to learn about each other'smotivations, strengths, weaknesses, etc.This enables the trapeze artists to pre-dict certain responses and anticipateeach other's actions. Firsthand experi-ence furnishes potent evidence regard-ing the type and level of trust that canbe placed in the other party.

If the analogy were applied to abusiness relationship, it would denotethat the parties have some experienceworking with each other before imple-menting innovative solutions or becom-ing highly vulnerable to each other. Itmay not always be possible or practicalfor partnering organizations to "practice"together first; however, such experiencewould be invaluable for building trustand identifying trustworthy partners(Barney and Hansen 1994).

Use a netImagine the difference in the type ofstunts that our friends on the flying tra-peze would be engaged in if there was orwas not a net below to catch them ifsomething went wrong. With a net wewould expect to see more creativity anddaring; without a net we would likelyexpect to see the opposite behaviour.The "net" in a project would consist ofrisk mitigation, backup plans, stagegates, tolerance for human error, andallowance for unexpected events thatmay occur even after a thorough riskanalysis. Additionally, it entails that theparties recognize and compensate for thefact that implementing projects of thisnature may require iterative processes

and certain activities may have to bedone more than once. There are costsassociated with using a "net" or imple-menting contingency plans when prob-lems are encountered. Incentives couldbe in place to motivate the participantsto do be successful in implementing aplan the first time without resorting toplan "B". Whatever the approach, a bal-ance should be sought so that appropri-ate action is encouraged and inappro-priate behaviour is discouraged.

"Using a net" is really risk man-agement and it includes risk identifica-tion, quantification, mitigation, and al-location. Ensuring that risks arerecognised and managed is good prac-tice in any project. This activity is animportant step in that risk managementand allocation can significantly influ-ence the behaviour of the project par-ticipants and hence impact both projectperformance and the final cost. Addi-tionally, the manner in which risks areshared or allocated can have a signifi-cant affect on trust and the relationshipbetween contracting parties, and thisbrings us to the next point.

�Share the netImagine that our protagonist on the tra-peze positions the entire net under him-self and leaves his partner with a veryhard and potentially painful landingspot. How would this type of situationaffect the relationship between the par-ties or the behaviour of the individualat risk? Potentially, this scenario couldcreate an adversarial relationship be-tween the two participants. We wouldalso probably expect that the individualat risk would want to be compensatedfor the potential danger and would mostlikely perform very cautiously.

The above scenario would seeminappropriate on the flying trapeze, butit is a prevalent practice in many con-tractual relationships in Canada. Excul-patory clauses-also known as "weaselclauses"-are extensively used in manyindustries. Exculpatory clauses transferrisk from one party to another, usuallyin favour of the party that writes thecontract while the other party has littlecontrol or no control over these risks.For example, in the late 1990s when theyear 2000 (Y2K) was a potential threatto all computer systems, an IT consult-ing firm placed one computer program-mer temporarily with a client organiza-tion to be one member of a large projectteam to accomplish a project related toY2K. The programmer was under thedirect supervision of the client organi-zation and the IT consulting firm was

not involved in the project in any otherway and was not even informed of theproject objectives. As part of the con-tract the client organization included aclause that stated that the IT consult-ing firm would be responsible for theY2K compliance of the software to bedeveloped. Those at the IT consultingfirm felt that this was unreasonable con-sidering they had no control overproject. In this case, the utilization ofthe exculpatory clause resulted in muchheated debate between the two organi-zations.

Three hundred and fifty partici-pants from organizations in the Cana-dian construction industry responded toa survey to gain a better understandingof the relationship between the use ofexculpatory clauses, trust and projectcosts. The results show that exculpatoryclauses are used in 75% of the contracts.A case for using exculpatory clauses caneasily be substantiated because they arevery effective at transferring risk. An-other reason exculpatory clauses may beused could be due to a lack of yellow orred trust between the parties, resultingin a general unwillingness to be at riskto the other party. However, regardlessof the reason they are used, there aretwo major disadvantages. First, there isa cost associated with their use. Con-tractors compensate by adding an addi-tional 9% to 19% to their bids (Hartman1998; Zaghloul and Hartman 1999).The dollar value of these premiums isbetween $9 billion and $19 billion CDNin that industry alone. The ironic thingabout this situation is that 69% of theowners are unaware that they are pay-ing a premium when such clauses areused (Zaghloul 2001).

The second problem with usingweasel clauses is that they may destroyyellow and/or red trust. Although muchless quantifiable, the end result could beequally detrimental. yellow trust is abelief that the other party will look outfor your interests and Red trust is animpression that the relationship feelsright. Exculpatory clauses can send aclear message about how much one partyvalues or, maybe more appropriately,does not value the other party or therelationship. The effects of low trust maybe a decrease in innovation, an increasein defensive behaviour and conflict, areduced potential for establishing a long-term relationship, and jeopardization ofproject success.

In many cases, the current con-tracting practice of using exculpatoryclauses does encourage a specific typeof creativity-to find more creative ways


Roch DeMaere

University of CalgaryDepartment of Civil EngineeringProject Management Specialization

2500 University NW Calgary,Alberta, Canada, T2N 1N4

Tel +403 2202875Fax +403 2827026E-mail [email protected]

Greg Skulmoski

University of Calgary, Department ofCivil EngineeringProject Management Specialization

2500 University Drive NWCalgary, Alberta, Canada, T2N 1N4

Tel +403 2202875Fax +403 [email protected]

Francis Hartman

University of CalgaryDepartment of Civil EngineeringProject Management Specialization

2500 University Drive NWCalgary, Alberta, Canada, T2N 1N4

Tel +403 2202875Fax +403 [email protected]

Ramy ZaghloulMohamed

University of Calgary, Canada

to make claims and to maximize theamount of money that can be drawnfrom the project at the other party's ex-pense. And it seems the more adversarialthe relationship, the more "encourage-ment" there is to be creative in this re-gard.

Avoiding exculpatory clauses andadopting more efficient risk allocationpractices by contracting organizationscould potentially be a source for substan-tial increases in trust, profit and com-petitive advantage. Efficient risk alloca-tion means that the party most suitedfor dealing with the risk takes responsi-bility for it. For example, in a construc-tion project, if the party most suited toaccept the risk is the owner, a potentialrisk allocation strategy may be the fol-lowing:- Clearly identify all potential risks.

The party in the best position tomanage a specific risk shouldassume responsibility for it.

- Avoid using exculpatory clauses.- Negotiate a contract that does not

include the expensive risk premi-ums.

- Set aside the savings as contin-gency.

- Share the windfall savings if therisk does not occur.

Implementing a strategy such asthe one described above requires a rela-tionship of trust between the partiesbecause there may be more exposure torisk without the use of exculpatoryclauses. However, their may be signifi-cant rewards and competitive advantagefor those organizations that can make itwork. Thus the development of trustcould have some very tangible benefitsto partnering organizations.

ConclusionContracting is much like performing onthe flying trapeze. Both entail interde-pendency and risk, both can be enliv-ening, and both can add value to theparties involved. In order to realize thepotential benefits of contracting, trustshould be developed between the par-ties. Trust can be developed betweencontracting partners by (1) identifyingand choosing the right partner, (2) bypractising working together on easierprojects before more risky or difficultprojects are attempted, and (3) by usingeffective risk allocation practices. Ifpartnering organizations will make trusta priority, new opportunities may ariseto adopt contracting strategies that maylead to increased profits and competi-tive advantage in the market place.

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thiness as a Source of CompetitiveAdvantage." Strategeic ManagementJournal 15(Special Issue): 175-190.

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Gibb, J. R., 1964. Climate for Trust Formation. T-Group 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 DisputeResolution Through an ImprovedContracting Process in the CanadianContext. Faculty of Engineering.Leughborough, U.K., University ofTechnology.

Hartman, F. T., 1998. The Real Cost of WeaselClauses in Your Contracts. Proceedings ofthe Annual Project Management InstituteSeminars & Symposium, Long Beach,California.

Hartman, F. T., 2000. Don't Park Your BrainOutside. North Carolina, PMI.

Hartman, F. T. and G. Skulmoski, 1999. "Questfor Team Competence." Project Manage-ment 5(1): 10-15.

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CATEGORY: RESEARCH

Rethinking Project Management:Old Truths and New Insights

Kam Jugdev, University of Calgary, CanadaJanice Thomas, Athabasca University, CanadaConnie L. Delisle, University of Calgary, Canada

Keywords: Trends, Project Management, Project Management Maturity Models, Core Competence, Old & NewEconomy, Professionalization, Success, Performance, Competitive Advantage

Change, learning and leadership are prevailing concepts of the New Economy. This paper reviews old truthsand 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 certificationprograms and management maturity models. Then we present some new insights on two areas of currentresearch - developing a firm level core competence in project management and practices to promote projectmanagement to executives. The paper concludes by encouraging those in project management to learn fromthe old truths and be receptive to change and learning as they lead the way into the New Economy.

IntroductionChange, learning and leadership arethree key concepts of the New Economy(Fastcompany, 2000). With the expo-nential growth of project management,emerging trends within the disciplinelend themselves to new insights. In theOld Economy, classical or traditionalproject management involves gettingwork done on time, on budget andwithin scope. In the New Economy,modern project management involvesleading change in organizations andlearning from the process (Hartman &Skulmoski, 1998; Morris & Jones, 1998).Old Economy thinking focused onproject management as a tactical con-struct; New Economy thinking positionsproject management as a strategic con-struct. These terms enable us to exam-ine our practices for gaps so that we canchallenge axioms (self-evident truths)and theorems (logical conclusions)about success (Delisle, 2001). "First,while the subject of 'project manage-ment' is now comparatively mature, andrecognized by thousands if not millionsof managers as vitally important, it is inmany respects still stuck in a 1960s timewarp" (Morris, 2000, p. 2).

Although some of the literaturelinks project management competenceto project management effectiveness,standards describing project manage-ment capabilities and the link to orga-nizational success are still lacking(Cooke-Davies, 2000). There is a sig-nificant gap in our understanding of howproject management can be integral tostrategic management by definingproject management's role in achieving

organizational effectiveness and longterm business success. Though projectmanagement is a relatively young disci-pline, it has been around long enoughfor an exploration of some old truths andnew insights. This paper highlights per-spectives necessary to build a NewEconomy viewpoint on project manage-ment. The main themes discussed in thispaper are summarized as follows:

Table 1: Old Truths and New Insights about Project Management


Trends and DefinitionsA number of global trends directly andindirectly influence the growth ofproject management. One such trend isthe increased competitiveness of the glo-bal market place and emphasis on effi-ciency. Other trends include the expo-nential growth of the computer indus-try, reliance on Information Technologyto store and analyze information, theInternet market space, deregulation,mergers and acquisitions, environmen-tal concerns and growing customer ex-pectations. These trends and others con-tribute to the corporate adoption of thefollowing types of practices in the questto remain ahead of the status quo: qual-ity improvement, business processreengineering, outsourcing, restructur-ing, downsizing and project-based workto name a few (Stewart, 1995; Wirth,1992). Over the past 50 years, projectmanagement grew exponentially to meetthe demands of global competition. In1998 it was an $850 (US) million indus-try and growing at 20 percent a year(Bounds, 1998). Membership in theProject Management Institute® (PMI),one of several standards associationsworldwide, is over 78,000 as of May 2001(PMBOK, 2001).

Most early descriptions and defi-nitions of project management weremechanistic and referred to the con-structs of time, cost and scope - other-wise known as the iron or priority tri-angle (Archibald, 2000; Atkinson, 1999;Meredith & Mantel, 1995; Wallace &Halverson, 1992; Wirth, 1992)(Skulmoski & Hartman, 2000). Tradi-tionally, project management referred tothe discipline, methodologies, tools andtechniques to manage projects andprojects were "temporary endeavors un-dertaken to create a unique product orservice" (PMBOK, 2001, p. 167).

Moving towards a New Economyperspective, a more holistic descriptionrefers to addressing stakeholder needsand expectations by balancing the de-mands between a) time, cost and qual-ity, b) different stakeholders, and c)identified requirements and unidentifiedrequirements (expectations) (PMBOK,2001). The literature also describesproject management as involving ablend of "hard" and "soft" processes, toolsand techniques (Kress, 1994). The lit-erature sometimes describes projectmanagement as involving cultural, struc-tural, practical and personal aspects(Cooke-Davies, 1990). A New Economy

definition of project management thatcaptures the essence of the disciplinestates that project management is "theart and science of converting vision intoreality" (Turner, as cited in Atkinson,1999 p. 338). Project Management re-searchers and practitioners are only nowbeginning to explore the implicationsthis shift in perspective has on the dis-cipline (Thomas & Tjader, 2000). Alongwith the evolving understanding thatproject management is a complex un-dertaking, there is growing awarenessaround its professionalization.

The Profession of ProjectManagementFrom the Old Economy perspective,project management is an applied disci-pline with value at the tactical and op-erational level. It is usually considered asubset or extension of a person's techni-cal domain. In the period followingWorld War II, project managementevolved as a subset of technical knowl-edge areas such as defense, aerospaceand civil engineering (Morris et al.,1998). It is beginning to be more widelyacclaimed as a "profession" in it's ownright (Verzuh, 1999). As a young voca-tion not yet recognized as an occupa-tion by many census bureaus, projectmanagers require a balance of skills inthe business, technical and project man-agement domains and are increasinglyviewed as industry independent profes-sionals (Verzuh, 1999). Clearly, practi-tioners and major associations viewproject 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 clearis what that term means to its propo-nents and to the discipline as a whole.

For over 75 years, the disciplineof sociology has studied what distin-guishes a profession from an occupation.The list of attributes of a profession typi-cally includes a body of knowledge, aculture sustained by a professional as-sociation, code of ethics, recognizedauthority and community sanction(Greenwood, 1966; Millerson, 1964).Project management is evolving towardsprofessional status on some of the crite-ria as noted by the following trends(Zwerman et al., 2001):- Bodies of knowledge exist for the

profession e.g. Project Manage-ment Body of Knowledge Guide®and some include codes of ethics;

- The culture is sustained throughprofessional development initia-tives, conference and seminarvenues as well as local chapteractivities;

- Professional certification designa-tions support recognized authority;and,

- Universities offer degrees at thegraduate and doctoral level inproject management (AACE,2000; AIPM, 2000; APM, 2001;CCTA, 2000; CIPPM, 2001; ESI-International, 2001; Hartman etal., 1998; IPMA, 2000; PMI,2001).

Based on the traditional definitionof a profession, project management ismissing an esoteric body of knowledgeor theories that are unique to the prac-tice. It is also missing community sanc-tion or government recognition that thepractice has enough impact on the pub-lic good to be reserved for "profession-als" as is the case in law, medicine, engi-neering and accounting. The PMI re-cently recognized the need to examinethe lack of project management theo-retical roots as evidenced by its supportfor a research study on the topic in May2001 (PMI, 2001). Many associationbodies including PMI and academic re-searchers (such as Morris and Thomas)are endeavoring to develop theories ofproject management which will ulti-mately distinguish it from general man-agement and other process skills andapplications. The trickier question willbe accomplishing the community sanc-tion necessary to make it truly a profes-sion in the traditional sense of the term.The other issue to consider is whetheror not project management is matureenough as an occupation for practitio-ners to be measured against performancestandards and whether an acceptablelevel of accountability is in place to regu-late the discipline. Are the professionalassociations and practitioners in agree-ment on what this entails? Are theyready for this challenge? The answer towhether project management is a pro-fession or not is likely to be debated forsome time.

Adding to this debate is that theNew Economy global playing field is in-creasingly complex. Project managerswork in diverse organizational struc-tures, manage or work with multipleteams and have many operational andproject responsibilities. They deal with

changing customer demands, multiplestakeholders, senior management,teams, staff, and project responsibilities(Kerzner, 2001). The role involves con-siderable leadership and flexibility in aworld of uncertainty. In addition to theirtechnical responsibilities, they are in-creasingly aware of societal project is-sues (Hartman, 2000). These trendsboth drive towards professionalization(through the increasing potential impacton society of project outcomes and re-lated need for community sanction andpolicing) and away from it (through in-creasing project complexity that makesit more difficult for project managers toaccept responsibility for outcomes).

Performance Metrics of Success

Defining the Elusive Concept ofSuccessIn the Old Economy, project and projectmanagement performance metrics as in-dicators of success are of particular im-portance in determining progress.Whether time to market, reduced cycletime or quality products are the goals ormore broadly, returns on investment ormarket share, firms compete and seekthe advantages offered by strategies andtechniques such as project management.Historically, success was efficiency fo-cused, measured in terms of the iron tri-angle of time, cost and scope (quality)and emphasized the implementationphase of the project lifecycle (Pinto &Slevin, 1987).

Newer insights are slow in beingadopted. They relate to understandingthat success is not a one-time measure,it can be subjective and it is a multidi-

mensional construct. Success may referto indicators (aspects that are paid at-tention to) or outcomes (aspects that arejudged) (Delisle, 2001). Success metricsalso changes over the project lifecycleand can extend into the product lifecycle(Atkinson, 1999; Baccarini, 1999; Might& Fischer, 1985; Munns & Bjeirmi,1996; Shenhar, Levy, & Dvir, 1997).Success involves both objective perfor-mance metrics (efficiency measures e.g.return on investment) and subjectivemetrics (effectiveness and innovationmeasures) (EIU, 1999). Some examplesof effectiveness metrics involve the cus-tomer perspective, improved internalprocesses, learning and competencies(Germain, 2000; Sveiby, 1997). Anotherarea of contrast between old truths andnew insights is related to success andinvolves the constructs of competitiveconvergence and competitive advan-tage.

Competitive Convergence vs.Competitive AdvantageIn the Old Economy, the emphasis is onefficiency whereas the New Economyperspective includes effectiveness andinnovation metrics in a balanced man-ner akin to how the iron triangle war-rants negotiations on time, cost andscope. Effectiveness values emphasizecustomer service, collaboration, organi-zational effectiveness and knowledgesharing. Innovation values involve mar-ket expansion and advantage creationstrategies (EIU, 1999). Being more suc-cessful than the competition is key to-wards achieving a competitive advan-tage. However, as explained by Porter'sproductivity frontier diagram that fol-

lows, companies that compete on projectmanagement competences but rarely ona core competence in the disciplineachieve operational advantages insteadof competitive advantages. Firms areconstantly pressured by both internaland external factors to increase produc-tivity, improve performance and improvequality. Performance is also indicative ofsuccess and at the firm level, being suc-cessful means survival in the competi-tive marketplace, staying ahead of thepack and increasing profits (Cleland,1991; Stewart, 1995; Wirth, 1992). Tooutperform rivals, firms must delivergreater or a more full range of value forcustomers or create comparable value atlower costs (Porter, 1996).

Operational effectiveness meansdoing similar activities better than rivals.Operational effectiveness is insufficientin achieving a competitive advantagethough, because after a while, firms lookalike, do the same things and this leadsto diminishing returns as they reachcompetitive convergence (Porter, 1996).Porter depicts this as follows.

On the productivity frontier(based on non-price buyer value deliv-ered and relative cost position), the fron-tier shifts constantly due to the diffu-sion of innovative practices. Commonstrategies such as project management,project management maturity models,quality improvement, empowermentand outsourcing can be used to keep upwith the productivity frontier. Howeverthe frontier continues to shift as rivalsimitate each other and generic solutionsdiffuse into the marketplace. Opera-tional effectiveness is a necessary partof management but it is not the same as

Figure 1: Operational Effectiveness Versus Strategic Positioning


innovation. Operational effectivenessshifts the productivity frontier outwardand continues to raise the standard ofexpected firm performance. However, itdoes not lead to a relative improvementposition for firms. In contrast, strategicpositioning refers to doing different ac-tivities from rivals or similar activitiesdifferently - in other words, being inno-vative and creative. Innovation involvesrevolution, remodeling or introducingnewness (EIU, 1999). As explained innext section, this is an area whereproject management has not moved for-ward rapidly in the New Economy.Project management continues to sup-port incremental improvements throughOld Economy practices in relation tocertification and maturity models.

Individual Certification andProject Management MaturityModelsCertification programs and project man-agement maturity models both measurecompetence. Certification measurescompetence at the individual level andthe project management maturity mod-els measure competence at the project,program or firm level.

Individual CertificationWorldwide, project management asso-ciations such as PMI, the Associationof Project Management (APM) and theAustralian Institute of Project Manage-ment (AIPM) offer professional desig-nations or certifications. These are basedon combinations of questions that testindividual rote knowledge and resumesand project summaries that assess re-ported experience. Most exams do notspecifically test personal competenciesor technical level detail (CCTA, 2000).Only the AIPM provides detailed evi-dence guidelines to measure capabilities.Examples of extant certification pro-grams include: the PMI's Project Man-agement Professional designation; theIPMA's certification; the APM certifi-cation; and, the AIPM certification(AIPM, 2000; CCTA, 2000; IPMA,2000; PMI, 2001). The old truth is thatproject management is evolving as a dis-cipline to warrant a number of certifi-cation programs as a way of establishingprofessional credibility. However, globalstandards are not in place and certifica-tions remain continent specific for themost part.

The new insight is that existingcertification programs will be challenged

to raise the bar and assess membercompetences more rigorously by devel-oping tests that go beyond rote memori-zation. Otherwise, project managementassociations run the risk of diluting thevalue of certification and this will de-tract from the establishment of the pro-fession. Two other pressures to movefrom the Old Economy to NewEconomy relate to the growing debateon the professionalization of projectmanagement and industry demands forbetter-qualified personnel in light of pre-vailing project failures (Standish, 1996).In addition, another frontier where in-cremental progress is being made relatesto project management maturity mod-els.

Project Management MaturityModelsAlong with measuring individual capa-bilities, project management has focusedon maturity models to assess projectstandards and practices as well as firmsupport for the discipline. As of 2001,there were approximately eight extantmaturity models at various stages of de-velopment and use. Many are based onthe Software Engineering Institute's fivestage capability maturity model wherethe levels move incrementally from ini-tial, repeatable, defined, quantitative tooptimized performance (SEI, 2001).Most models are also based on theproject management bodies of knowl-edge supported by the prevailing asso-ciation. The models involve step-wisequality improvements on processes andpractices.

Some of the maturity models in-volve commercially available softwareand others are conceptual or involveguidelines and templates. The range ofextant project management maturitymodels includes: Organizational ProjectManagement Maturity Model (OPM3);Projects in Controlled EnvironmentsMethodology (PRINCE2); Project Man-agement Assessment (PMA 2000);Project Management Maturity Model;Project Framework; EFQM Excellence;IBM Progress Maturity Model; SMARTProject Management; Project Manage-ment Maturity Model (AACE, 2000;AIPM, 2000; CCTA, 2000; Hartman etal., 1998; IPMA, 2000; PRINCE2, 2000;Schlichter, 1999). Only one model isdescribed as "open" in contrast to theothers that are linear and incremental -the Leshem-Nituv Engineers(Lubianiker & Schwartz, 2001).

The models are useful in advanc-ing project management practices andstandardizing processes. They combineinputs, processes and outputs as well asknowledge, experience and competen-cies. They investigate the premise thatsuccess could be improved by address-ing project competence and maturity(Skulmoski, 2001). The models improveour understanding of practitioner com-petence, the working environment andthe business purposes (Hartman et al.,1998). The maturity models also iden-tify project or organizational strengthsand weaknesses as well as providebenchmarking information.

However, few have been empiri-cally tested and most are based on an-ecdotal material, case studies or es-poused best practices (Skulmoski, 2001).Project management maturity modelstend to be hierarchical and the exactpoints of transition between the levelsare not always clear. Furthermore, theyoften blend individual project manage-ment maturity with program or organi-zational maturity. From a New Economyperspective, considering the shift in skillsand roles project managers play in newtypes of organizations and teams in theglobal economy (i.e. virtual teams),maturity models need re-thinking(Delisle, 2001). Just as no one certifica-tion standard exists in the NewEconomy, neither does a generally ac-cepted model for project managementmaturity (Schlichter, 2000). This areais relatively young and lacks empiricalsupport for determining which compe-tencies contribute most to project suc-cess (Skulmoski, 2001). Although themodels have been useful in improvingproject related practices, they have alsoresulted in competitive convergencewherein companies are "doing much ofthe same", and few companies are stra-tegically positioned as a result of achiev-ing a high project management matu-rity level (Kujala & Artto, 2000).

The old truths on project manage-ment maturity models are that hierar-chical, closed models can assess projectmanagement maturity and supportproject management as an operationalconstruct as evidenced by the focus onthe business unit or project level. Themodels typically lack a holistic, strate-gic dimension (Jugdev, 2001). As a con-sequence, business improvements ap-pear incremental rather than strategic.

Project Management as a CoreCompetenceThe old truth is that project manage-ment is an operational construct. Thenew insight is that project managementhas a role at the strategic planning levelof the organization. There is an econom-ics and strategy based construct called acore competence that has yet to be ex-plored in terms of what this means toproject management. Achieving a highproject management maturity score isnot enough as it simply contributes tocompetitive convergence. However,companies with high levels of projectmanagement maturity are better posi-tioned to achieve a competitive businessadvantage than their rivals, especially ifthey integrate the practice with otherstrategic initiatives.

"Current research and projectmanagement applications often

have a limited focus onapplications at the operative

level. As a result, they seldomprovide links between operativeand strategic management in aproject-oriented organization�Projects have the potential tochange the purpose and the

future of the organization, andin that respect, they are part ofthe strategy creation process"(Kujala et al., 2000, p. 47-48).

As presented thus far, the incre-mental progress in such areas as mea-suring success, performance, individualand project competence lends itself toOld Economy thinking and supports atheme of competitive convergence. Howcan firms then move forward and strivefor New Economy thinking and prac-tice? One approach would be to developa core competence in project manage-ment. A core competency is what a firmdoes (e.g. functional skills and culturalhabits, attitudes and beliefs) in contrastto tangible assets that a firm has (Nelson,1994). This area has not been studiedin project management and it stems fromthe Resource-Based Perspective of thefirm. This perspective, rooted in eco-nomic theory, has produced the strate-gic management literature supportingthe premise that systematic differencesexist across firms that are relativelystable, and that intra-firm resources are

unique and contribute to a firm's com-petitive advantage (Foss, 1997; Schulze,1994).

The Resource-Based perspectivedescribes core competences in terms oftangible and intangible resources. Corecompetences are rooted in the intra-firmheterogeneous resources involving hu-man resource practices, asset specializa-tion, learning, culture, team-embodiedskills and routines, hard to manage tasks/processes, alliances for learning and trust(Schulze, 1994). Organizational knowl-edge and collective practice are dimen-sions of the intangible assets a firm cancapitalize on to achieve a dynamic ca-pability or innovative competitive ad-vantage (Teece, Pisano, & Shuen,1997). Resources must be synergistic,unique, inimitable and or unexpectedotherwise efficient markets will ensurethat abnormal returns from any resourcewill be competed away (Barney, 1986).Overall, a core competence is "a messyaccumulation of learning�(and) com-prises both tacit and explicit knowledge"(Hamel, 1994, p 12). In addition, corecompetencies are dynamic, as theychange over time (Bogner & Thomas,1994; Hall, 1994; Turner & Crawford,1994). Thus, their definition and mea-surement appear difficult.

Research should consider projectmanagement as more than a tacticalconstruct consisting of tools and tech-niques, and introduce the softer, culturaland belief driven nature of project man-agement. This may make it easier to seea holistic application of project manage-ment at the organizational level andencourage its application to generate astrategic advantage. One major issuemay relate to addressing change at thecultural level of the firm. Looked at thisway, we can make an argument that aproject management culture is:

- Inimitable - while there isabundant reporting of bestpractices, organizations find itextremely difficult to transplantthese practices across organiza-tions;

- Synergistic - higher levels ofproject management applicationare found in organizations withbase level cultures supportive ofa high achievement, highaccountability process; and,

- Unique - organizations that haveachieved excellence in projectmanagement tend to have theirown unique approach to

applying it internally. A vanilla,"mature" application of standardmethodologies does not produceexcellence.DeFillippi and Arthur (1998) sug-

gest that project management contrib-utes to developing stable strategic re-sources in the following ways:

- Although projects are temporalin nature, involve cross-func-tional teams and essentially renthuman capital, they can accu-mulate core competencies;

- Although projects do notinvolve a stable workforce, theycan convey tacit knowledge andknowledge transfer; and,

- Although projects involve verymobile staff, they can createcompetitive advantage throughpossessing inimitable resources(DeFillippi & Arthur, 1998).The old truths confirm that when

firms apply project management basicsas measured through the project man-agement maturity models, most achievecompetitive convergence. As such, op-erational effectiveness is a given. How-ever, Porter (1996) suggests operationaleffectiveness "is a required practice forfirm survival but it is not a strategy" (p.78). Project management maturity mod-els tend to support an operational ap-proach that supports incremental im-provements instead of strategic ones.Stepwise improvements are the norm forcompetitive convergence but not for acompetitive advantage (EIU, 1999;Hartman & Skulmoski, 1999).

The new insights indicate thatlittle research has been conducted onproject management core competencies.To date, certification approaches havenot addressed this and the maturitymodels emphasize project focused incre-mental improvements but not tacitknowledge or dimensions of a core com-petence that link it to the strategic man-agement level of the firm. Firms invest-ing in project management stand to gaina competitive advantage in the marketplace by capitalizing on their projectmanagement abilities and turning theminto core competencies through thealignment of operations managementwith strategic management. Some firmscould achieve strategic project manage-ment wherein the following constructsare supported:1. Project management maturity

levels: These firms have a founda-


tional project managementmaturity level;

2. Success Factors: Senior managersembrace the concepts and provideleadership based on success criteriaand indicators that are defined andmeasured up front (Belassi &Tukel, 1996);

3. Strategic Management: Executivepractices are aligned with opera-tions management. Operationalmanagement support alone isinsufficient to develop a corecompetence in project manage-ment, as it does not result in aprogram of projects that arealigned among themselves or withthe strategic directions. This mightlead to competitive convergenceinstead of a competitive advan-tage;

4. Developing and Protecting: Projectmanagement core competences aresupported and protected by seniormanagement in innovative ways aswarranted by the unique resourcebundles. Firms that fail to do soend up in competitive convergencebecause rivals can easily andreadily replicate their practices.4.1. The project management

program is aligned with qualitymanagement and knowledgemanagement practices as thislends itself to explicit and tacitknowledge sharing and practiceimprovements. An effort todevelop a project managementcore competence in isolation ofthese practices lends itself tofractured knowledge warehous-ing and limited sharing. Thisconstrains the firm's abilities toholistically address qualitydimensions of project manage-ment;

5. Valuation: Project management isvalued in both tangible andintangible ways and viewed moreas a rent-generating asset than anoverhead or cost. Firms that viewproject management as an ex-pense, are less likely to view it as astrategic asset or make the invest-ment in it;

6. Organizational Learning: Doubleloop learning (learn-do-assess-learn) and the ability to addressthe knowing-doing gap is a jointrequirement for a core competence

in project management (Pfeffer &Sutton, 1999) (Thomas, Delisle,Jugdev, & Buckle, 2001b); and,

7. Dynamicism: Innovation andadaptability are the norm overrigidity and control. There is atolerance for paradoxical situationsand the firm is both effective andineffective at the same time indifferent aspects of function(Helleloid & Simonin, 1994;Thomas, 1998) (Anderson, 2000;Thomas et al., 2000).

The old truth is that a high projectmanagement maturity level means ex-cellence had been achieved. The newinsight is that there are practices to beachieved beyond a linear maturity levelfocused on the project. Such practicesrelate are organizational in nature, in-volve corporate directions and corecompetences. This is a New Economytheory the authors are currently re-searching so this discussion is a first at-tempt to build a case for theorists andpractitioners alike to view project man-agement as a potential strategic resourceand core competence (Jugdev, 2001).Furthermore, developing and sustainingcore competences cannot occur with-out the commitment and leadershipfrom executives or the investment in thelearning process. "Without specificcompetences related to reshaping thefirms future competences, corporate sur-vival is no more than a chance event"(Turner et al., 1994, p. 262).

Selling Project ManagementLast but not least, the Old Economysupports the premise that it is enoughto practice project management at theoperational level and promote it in tac-tical ways by emphasizing tools and tech-niques. The Old Economy perspectivesupports practicing project managementreactively, in response to crises, insteadof proactively. A recent internationalresearch study (n= 1,867) confirms thatthis does not contribute to senior man-agement appreciating the greater valuepossible with project management (Tho-mas, Delisle, Jugdev, & Buckle, 2001a).Instead it results in executives furtherviewing project management as a tacti-cal construct lending itself to mid-levelattention instead of senior level atten-tion:

- 71.1% agree that the sellingissue is an important one fortheir organizations;

- 45% somewhat or strongly agree(12.4%) that selling projectmanagement is difficult to dowithin their organizations;

- 58.6% somewhat agree thatproject management is used intimes of crises and 16.7%strongly agree;

- The concept of the AccidentalProject Manager is supported.60.2 % of respondents agree thatthe title project manager isusually not accompanied byincreased pay or recognitionwhile 57.8% agree that little orno project management trainingis given to those who take onthe role of project manager; and,

- 21.8 % of respondents stronglyagree with the statement thatproject management is a valueddiscipline in organizations,ranking with accounting,finance and engineering and26.8% somewhat agree. At thesame time 11.8% stronglydisagree and 26.1% somewhatdisagree.Insights of the New Economy are

that firms support practices of advocat-ing and championing project manage-ment by aligning the value of the disci-pline to the firm's strategic priorities. Inaddition, project managers understandthe organization's business priorities andspeak the language of executives as theyextol the virtues of the discipline; projectmanagers and senior managers strive todevelop an environment conducive tosustaining a core competence (Thomaset al., 2001b).

SummaryTo summarize, the paper has addressedold truths and new insights in the fol-lowing areas:

a) Definitions on project manage-ment in either narrow terms orholistic ways;

b) The debate on describingproject management as adiscipline or profession;

c) Success and performancemeasures that are now multidi-mensional and recognize jointconnection at the operationaland strategic level;

d) Aspects where project manage-ment has demonstrated com-petitive convergence instead of

competitive advantages e.g.certification, maturity models;

e) Competences vs. corecompetences; and,

f) Practicing project managementvs. selling project managementin proactive ways and demon-strating its strategic value.Earlier, we identified change,

learning and leadership as three drivingconcepts of the New Economy. Clearly,those aware of the old truths and theirlimitations and willing to take the risksof venturing into the New Economystand increased chances to succeed.Furthermore, the area of corecompetences in project managementwill bear watching for the next few years.In a world of changing organizationalforms where projects are more the normthan bureaucracies, developing a corecompetence in project management maybe the key to survival and growth formany companies. Developing the "pro-fession" of project management may bethe route to further success or a few deadends along the journey.

We encourage you to learn fromthe old truths and be receptive to changeand learning as you lead the way intothe New Economy.

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AcknowledgementsThe authors would like to thank theUniversity of Calgary and AthabascaUniversity for their valued support.

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

PhD Student

Project Management Specialization,University of Calgary

8311-11 Street SWCalgary Alberta T2V 1N7

Tel: (403) 258-2513E-mail: [email protected]

Dr. Janice Thomas,PhD, MBA, BSc

Associate Professor, Centre for Innova-tion Management, Athabasca University

Adjunct Professor, Project ManagementSpecialization, University of Calgary

96 Manyhorses DriveRedwood Meadows, Alberta T3Z 1A1

Tel: (403) 949-4965e-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]

The Impact of Performance inProject Management KnowledgeAreas on Earned Value Results inInformation Technology Projects

Ralf Müller, Henley Management College, UKJ. 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 ofthe different project management knowledge areas on the Earned Value (EV) measures of Percent ScheduleVariance (%sv) and Percent Cost Variance (%cv) in Information Technology (IT) projects. The results showthat a planning stage after contract signature has the strongest impact on %sv, whereas Communication Man-agement, Change Management and Human Resource Management have the strongest impact on %cv. Re-source management and project planning practices are most influential on a project's risk status. A formula tocalculate Return on Investment (ROI) for project management improvement activities is also developed. Itallows focusing project management improvement activities on those knowledge areas that have strongestimpact on project performance results and therefore the highest ROI.

IntroductionA Project Management Body of Knowl-edge (PMBoK) provides a framework forproject management execution, i.e. abroad set of management dimensions tocover the vast variety of possible projectsin many industries. The Project Man-agement Institute's (PMI) PMBoK (PMI1996), defines 9 project managementknowledge areas that comprise goodproject management execution today:

- Project Integration Management- Project Scope Management- Project Time Management- Project Cost Management- Project Quality Management

CATEGORY: RESEARCH

- Project Human ResourceManagement

- Project CommunicationsManagement

- Project Risk Management- Project Procurement Manage-

ment.These project management

knowledge areas are also used as a refer-ence to review projects and project man-agement execution. Identification ofweakly executed knowledge areas allowsfocusing improvement activities, e.g.through awareness building or training,for subsequent improvement of theproject's overall performance results.

One of the widely used measuresfor performance in project managementis Earned Value (Alexander 2000, Spar-row 2000, Stratton 2000), which is de-fined in the PMI PMBoK (PMI 1996)as:

"A method for measuring project per-formance. It compares the amount ofwork that was planned with what wasactually accomplished to determine ifcost and schedule performance is asplanned"

Two of the most important perfor-mance result metrics in EV are PercentCost Variance (%cv) and PercentSchedule Variance (%sv), which aredefined by Defense System Management


College (2000) and the company per-forming this study as:

Cost Variance % = (BudgetedCost of Work Performed - ActualCost of Work Performed) /Budgeted Cost of Work Performed

Schedule Variance % = (BudgetedCost of Work Performed - Bud-geted Cost of Work Scheduled) /Budgeted Cost of Work Scheduled

where:Actual Cost of Work Performed(ACWP) = Total costs incurred(direct and indirect) in accomplish-ing work during a given timeperiod.

Budgeted Cost of Work Performed(BCWP) = The sum of theapproved cost estimates (includingany overhead allocation) foractivities (or portions of activities)completed during a given period.Also known as "earned value".

Budgeted Cost of Work Scheduled(BCWS) = The sum of theapproved cost estimates (includingany overhead allocation) foractivities (or portions of activities)scheduled to be performed during agiven period (usually project-to-date)

(PMI 1996)

The two measures of %sv and %cvindicate current project performance interms of cost and time management.They allow for calculations of projectedfinal performance results or for devel-opment of appropriate contingency ac-tivities to improve the performance dur-ing the remaining part of the project.

These knowledge areas and EVtechniques are widely known in theProject Management Community,which is shown by the wide recognitionthat the PMI PMBoK has achieved(Turner 2000). With almost 400,000copies in circulation by the end of 1999the PMI PMBoK is the knowledge foun-dation for the more than 18,000 PMIcertified Project Management Profes-sionals (PMI 2000), who were tested inthe knowledge areas and EV techniquesas part of their certification exam. How-ever, little research is done on how theknowledge areas defined by PMI influ-ence project results measured by use ofEV techniques.

The objective of this research was

to explore the results of 36 IT projectaudits to identify project managementknowledge areas that have the largestinfluence on project variances, mea-sured in %cv and %sv. Once known bythe IT industry, improvement activitiesfor cost and schedule variances can beimplemented more economically by fo-cusing on those knowledge areas thathave the strongest impact on the vari-ances, thereby leading to the highestReturn on Investment.

MethodologyThe research aim was to determinewhether generalizable laws might existin project management execution, pro-vided that reasonably stable relation-ships can be found among project resultsand performance in project manage-ment knowledge areas. Given the ex-ploratory nature of the research no hy-pothesis was developed in advance of thestudy.

The methodology used semi-structured group interviews (here calledaudits) using an a priori developed ques-tionnaire, followed by structured meth-ods of data analysis.

Audit Methodology and MaterialThe research is based on a series ofproject audits that were held worldwideby NCR Corporation, a US Headquar-tered, global IT company (further called:the company) in April and May 1999.All audits were performed on projectsfor IT data warehousing solutions inCustomer Relationship Management.Contrary to the usual practice of audit-ing only troubled projects, these auditswere performed on all projects of thisparticular solution, independent of theproject's performance status or geo-graphical location. The results reflect thewhole spectrum from good to weak per-

formance and therefore allow for analy-sis of the underlying structures and re-lationships among the project manage-ment knowledge areas in these projects.

Prior to the audit work a question-naire was developed by the prospectiveauditors and management of the com-pany as a guideline and tool for the au-ditors. This questionnaire was based onthe PMI defined knowledge areas andexpanded for assessment of project sta-tus, selling and contracting practices,and project specific business & technol-ogy management. Through that thequestionnaire was aligned with thecompany's Project Management Meth-odology GlobalPM® (NCR 1998). A to-tal of 13 Project Management Areas(PMA's) were defined. These are shownin Table 1.

For each of the PMA's a set ofquestions was developed (an example forthe PMA 'Selling' is provided in theAppendix). The responses to the ques-tionnaire have formed the basis for theauditors to rate the PMA's according totheir maturity in execution. The ratinglevels used by the auditors were:

1 = PMA non-existent2 = inadequate performance3 = adequate performance4 = best-in-class performance

In an attempt to ensure consis-tency in audit execution a training ses-sion was held for the audit team lead-ers. In this training session the leaderswere familiarized with the objectives ofthe audit, the project documentation,audit and data collection method, howto code the responses and the nature ofthe audit report to be fed back to Head-quarters.

On a project-by-project basis themethodology used for the audits was:

- Review of the project documen-

Table 1: Project Management Areas

tation, including proposal,contract, project plan, risk andquality plans, reports fromearlier audits, and other plans asavailable, as well as the monthlyproject status reports

- Face-to-face meeting of theaudit team with the ProjectManager and Sales Representa-tive of each project. The ProjectManager presented the projectand its status, and discussedissues and concerns of theproject. The audit team leaderused the questionnaire to ensureassessment of all dimensions ofeach PMA. A final performancerating for each PMA was jointlyagreed by the 3 auditors basedon the results of the presenta-tion, the verbal assessment ofthe PMA's, the response to thequestions from the question-naire, as well as the quality ofthe documentation provided.

- Consolidation of the results intoan audit report, which wasforwarded to the company'sHeadquarters for consolidation.The reports were analyzed on a

worldwide basis and the findings pre-sented to corporate management in or-der to launch improvement activitieswithin business and project managementpractices.

Data16 audit teams collected data from 77projects. For several projects the %cvand %sv values were not provided. Alsosome projects were in the pre-implemen-tation stage and hence no implementa-tion data available. This resulted in fulldata being available for only 36 of the

projects. The data were collected withina time frame of four weeks, from Aprilto May 1999. Further definitions of thedata can be found in Table 2.

Analysis of the Audit ResultsComplementary to the business-relatedanalysis, which gained insight in thecompany's performance level per PMA,a more general, project managementrelated analysis of the results was doneand is described in this paper. The goalof the analysis was:

- Identification of PMA's thatsignificantly influence %cv, %sv,and a project's risk status

- Identification of key PMAgroupingsAnalysis was done on the level of

PMA rating. Data on %cv and %sv weretaken from the audit reports, as well asthe risk level of the projects, which isclassified within the company in threecategories, namely red, yellow and green,which are mutually exclusive and com-pletely exhaustive categories. Criteria fordetermination of the risk level werequantitative and qualitative:- Quantitative - using EV measures:

- green = %cv and/or %sv lessthan -5%

- yellow = %cv and/or %svbetween -5% and -15%

- red = %cv and/or %sv morethan -15%

- Qualitative - anticipating prob-lems:- green = no major issues fore-

seen- yellow = issues foreseen and

help required to solve them- red = major issues foreseen,

threatening successful projectimplementationThe analysis was done using SPSS

Rel. 9.0.0 on Windows NT as computerprogram. The multivariate data analy-sis techniques used were mainly appliedas described in Hair et al. "MultivariateData Analysis" 1998, with other support-ing documentation on quantitativemethods (Remenyi et al. 1998, Targett1990).

PMA's were classified as indepen-dent variables, whereas %cv, %sv andproject risk level were classified as de-pendent variables. The analysis wasdone using Stepwise Regression Analy-sis to identify the PMA's with the larg-est impact on %cv and %sv. FactorAnalysis was used to reduce the num-ber of possible factors (PMA's) for a sub-sequent Stepwise Regression Analysis toidentify the drivers for project risk lev-els. Discriminant analysis was applied todevelop a model for predicting a project'srisk level, but the resulting group sizeswere too small to validate the findings.Table 2 shows the areas of exploration,research technique used, data used andthe expectations underlying the re-search:

The level of detail in reporting theresults within the sections below followsthe recommendation of Chin (1998).

Analysis of Drivers for %sv, %cvand RiskOnly 11 of the reported 13 PMA's wereincluded in this analysis. SubcontractorManagement was excluded because itwas scored sometimes 1 and sometimes3 in case of projects without subcontrac-tors. The PMA Selling was excludedbecause of collinearity with other inde-pendent variables.

Table 2: Data and Research Techniques used


Drivers for %svThe results of the stepwise regression analysis showed that Post-contract Planninghas the largest impact on %sv results(Table 3). No other PMA proved to havesignificant impact at the .1 significance level. This model has a significance of .047at an R2 of .111 and F value of 4.263.

Post-contract planning, as defined in the company's project managementmethodology (NCR 1998), is a planning step that follows contract signature inorder to account for any changes in the project scope or objectives that occurredbetween pre-sales planning and contract signature, i.e. during contract negotia-tions following a proposal.

Questions asked during the assessment of Post-contract Planning focused onthe project manager's empowerment, his possession of all contracts, the develop-ment of a Work Breakdown Structure (WBS) to a level where resources can beassigned 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 betweenthe performance score in Post-contract Planning (PPost-contract Planning) and the %sv insubsequent project results (see fig. 1). Considering all other variables as unchanged,it allows a prediction of %sv increase at increasing performance levels in Post-con-tract 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

expected to be 5% positive. It also showsthat adequate performance (score 3)may not prevent a project from a slightnegative %sv of -1%. Good planning isnecessary to keep the project at zeroschedule variance or above. The figurebelow outlines the relationship betweenperformance in Post-contract Planningand the %sv of the project, cet. par.

Drivers for %cvA stepwise regression analysis, at a sig-nificance level of .1, showed that Com-munication Management has the larg-est impact on %cv results, followed byChange Control and ResourceManagement(Table4). The model has asignificance of .045, R2 of .22 and F valueof 3.003.

Communication Management, asassessed during the audits, looked for theexistence of steering committees, execu-tive sponsors, communication plans, sta-tus meetings, reports, customer relationplans, lessons learned documentation,and the existence of issues and actionitem management processes.

Assessment of Resource Manage-ment, the second strongest PMA im-pacting %cv, was done by focusing onplans and processes for identifying eli-gible resources and their current orga-nizations. Further assessed were theresource's qualifications, training andorientation needs, commitments andmorale, as well as the mix of internalversus external resources and the projectmanager's level of control over the re-sources assigned to the project.

Table 3: Driver for %sv

Table 4: Drivers for %cv

-14%

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

1 2 3 4

Performance Level in Post Contract Planning

Proj

ecte

d %

sv

Figure 1: %sv as a function of Post-contract Planning

- Significance is the probability thatmarks the borderline between whathappened by chance and what nothappened by chance (Targett 1990).

- R2 measures the proportion of varia-tion explained by regression (Targett1990).

- F-value tests the hypothesis that theamount of variation explained by theregression model is more than thevariation explained by the average(Hair 1998)

- t-value is a significance test carriedout for each variable in the regres-sion. A t-test on each x variable co-efficient will indicate if the variablehas a significant effect on the y vari-able. (Targett 1990)

- Regression Coefficient (B) is the mul-tiplier of x variables in y = Constant+ Bx

Change Control, as the thirddriver for %cv, was assessed by lookingfor updated scope and schedulebaselines, as well as quality plans andresource plans to reflect approvedchange requests, and actions on vari-ances in project performance togetherwith the associated results. The nega-tive value of the B coefficient indicatesmore rigorous control practices once aproject is over budget. An effect like thisis described by Drummond (1999) in herresearch on the collapse of the Taurusproject, a £ 500 million IT venture bythe London Stock Exchange, where in-creased requests for information fromthe project's monitoring group led tomore rigorous control practices:

"It was assumed that because impor-tant milestones were being missed, theproject must be brought under control.When control failed the response wasto 'apply more of the same' [control]."

Drummond's research explainswhy projects with a negative %cv canhave a strong correlation with goodchange management performance.However, a detailed answer to the ques-tion in the context of data warehouseprojects requires a longitudinal study.

Drivers for Project Risk LevelsIn the next step the drivers for a project'srisk level, expressed in red, yellow orgreen were identified. Factor Analysiswas used to reduce the data and iden-tify the underlying structure and rela-tionships of the PMAs in preparation fora subsequent Regression Analysis, whichidentified the factors driving the risklevel.

A Principal Component FactorAnalysis with Varimax rotation was usedto reduce the data and to explore thestructure of the PMA's assessed. A fac-tor loading of .48 with power 80% for asample size of 36 was used (Hair et al.1998) to identify the component struc-ture. The rotation converged after 4 it-erations with a KMO of .746 at a sig-nificance level of .000. A scree testshowed that three factors are necessaryto represent the data from the audit re-ports. Care has to be taken in acceptingthe results because of the small samplesize that might lead to an overstating(overfitting) of the results.

The factors identified representgroups of project implementation knowl-edge areas, selling and planning activi-ties, as well as Human Resource Man-agement. So they can be named as:

Factor 1: Project implementation

Factor 2: Project selling & planningFactor 3: Resource management

Figure 2 shows the structure ofthese Project ManagementAreas(PMA's).

This indicates a clear distinctionbetween a project's selling & planningactivities, management tasks duringimplementation, and the managementof resources.

Results for Drivers on Project RiskLevelsWith the three factors identified as in-dependent variables and the project risklevel as dependent variable a StepwiseRegression Analysis was performed toidentify the factors that determine aproject's risk level as defined in Table 5.

The results show that Factor 3 and2 (Resource Management and ProjectSelling & Planning respectively) are themain drivers for a project being red, yel-low or green. The model has an R2 of.20, F value of 4.116 with a significanceof .025.

The negative Beta Coefficients forfactor 3 and 2 show that higher perfor-mance levels in the factors and its com-ponents will result in lower risk levels(green risk status). The result confirmsthe importance of resource management(factor 3) for project results, as alreadyoutlined in the analysis of %cv, and iden-tify this PMA as being influential on sev-eral measures throughout this analysis.

The second important factor fora project risk level is project selling andplanning. This factor comprises thePMA's Selling, Contracting, ContractManagement and Post-contract Plan-

Figure 2: Structure of PMA's

ning, showing the importance of goodpre-sales and planning work for the low-ering of a project's implementation risk.It confirms earlier findings from the %svanalysis, which outlined the importanceof post-contract planning for project re-sults.

- Principal Component Analysis iden-tifies the underlying structure of re-lationships. Component analysissummarises most of the original in-formation (variance) in a minimumnumber of factors for prediction pur-poses. Varimax rotation is a methodto achieve simpler and theoreticallymore meaningful factor solutions.The Varimax method has proved verysuccessful as an analytic approach toobtaining an orthogonal rotation offactors (Hair 1998).

- Factor loadings indicate the degreeof correspondence between the vari-able and the factor, with higher load-ings making the variable representa-tive of the factor (Hair 1998).

- Power is the probability that a signifi-cant relationship will be found if itactually exists. Complements themore widely used significance levelalpha (Hair 1998).

- KMO, the Kaiser-Meyer-Olkin mea-sure of sampling adequacy testswhether the partial correlationamong variables are small (SPSS1998).

- Scree test is used to identify the op-timum number of factors that can beextracted before the amount ofunique variance begins to dominatethe common variance structure (Hair1998, citing Cattel 1966)


Return on InvestmentCalculationThe Ibbs and Kwak model for ROI cal-culations in project management (Ibbs& Kwak 1997, Ibbs 2000), together withthe results from the study above allowfor a calculation of ROI per individualPMA identified here as having signifi-cant impact on project results. With the%cv or %sv improvement achievedthrough investment in a particular PMAthe overall ROI per project or per orga-nization can be calculated.

Assuming that a spending of x forimprovement in a particular PMA yieldsan improvement in %cv leads to the for-mula

then the ROI per project can becalculated as:

where:- ROI = Return on investment in

improvement of PMA perfor-mance

- Project cost = Estimated costsper project (or estimated cost tocomplete, if the improvementactivity took place during thecause of a project)

- δ %cv = incremental %cvimprovement after spending xon training or other improve-ment activities on a PMA

- %cv(post invest) = %cv for theperiod after the implementationof improvement activities

- %cv(pre invest) = %cv prior toimplementation of improvementactivities

- x = cost of training or otherimprovement activities for agiven PMAThe steps for calculating the ROI

per project are:1. Calculate %cv(pre invest) of a

project using earned valuetechniques as described above

2. Determine PMA for improve-

ment, implement improvementactivities and capture spendingfor it (x)

3. Calculate %cv(post invest) for thetime after improvement activi-ties are finished and newpractices are implemented

4. Calculate the improvement in%cv using the formula for δ %cv

5. Calculate ROI per project usingthe formula above.The same calculation can be ap-

plied on an organizational level by sub-stituting the %cv calculation, spendingand costs per project with those per or-ganizational unit.

ExampleAn organization's annual project costsare $ 10,000,000 with an average %cvof - 1%. Training and process improve-ment activities in Communication Man-agement were implemented at a cost of$ 450,000. Average %cv for the threereporting periods after implementationis 0.5%. Using the formulas above theimprovement in %cv is:

δ %cv = 0.5% - (-1%) = 1.5%

That leads to a ROI of:

The return on investment realizedthrough the improvement activities inCommunication Management is 33%,equal to annual cost savings of $150,000.

ConclusionsFindings of general applicability for ITdata warehouse projects are the highimpact that Communication Manage-ment, Resource Management andChange Control have on %cv, as well asthe impact of Post-contract Planning on%sv. Communication Management andPost-contract Planning have been foundas the main drivers for %cv and %sv re-spectively.

In the past researchers repeatedlyidentified communication skills as cru-

cial for successful project management(Pitman 1994). However, its priority ininfluencing cost variances in IT datawarehouse projects was not yet investi-gated. These findings are in line with theannually issued reports from TheStandish Group (Standish Group 1998b,Standish Group 1995), which repeat theimportance of executive support andcommunication with users for success-ful IT projects. Improving the manage-ment of communication will have thestrongest positive impact of all PMA'son a project's cost variance.

Post-contracting planning has thestrongest influence on %sv in IT datawarehouse projects. This planning, per-formed after the contract is signed -when the true scope and budgets of theprojects are known - ensures that projectplans are realistic, up-to-date and canbe implemented in a timely manner. Itshows the importance of up-to-dateplanning for reliable schedule estimates.

Resource Management has beenfound influential on two of the threemeasures, i.e. cost variance and projectrisk level. It is also a main factor thatdetermines the structure of the PMA's.The quality of Resource Managementis thus a major factor determiningproject results.

Building on the model of Ibbs andKwak (Ibbs & Kwak 1997, Ibbs 2000) aROI formula was developed that can beapplied on project level or on organiza-tional level to determine the respectivereturn on improvement investments inindividual PMA's. This provides the fi-nancial measures which may be supple-mented by non-financial ones, such asbalanced scorecards, to present projectmanagement value (Crawford et al.2000).

The sample of 36 audit results ofprojects with varying performance lev-els allowed for the identification ofPMA's driving project results in termsof cost and schedule variances. The ben-efit of having a sample comprising thewhole spectrum from good to weak per-formance was offset by the fact that itwas focused on one specific data ware-house solution only. The applicability ofthe results beyond IT data warehouseprojects must be investigated.

The Standish Group reports onreasons why projects fail define costoverrun as a major problem in the ITindustry (Standish Group 1998a) andcommunication as one of the three mainfactors for project success (StandishGroup 1998b). Other research shows the

Table 5: Factors Driving Risk Levels

central importance of communicationfor successful projects (Cleland 1988 and1995, Tushman 1979, Couillard 1995,Clarke 1999, Bajaj 2000, Kuprenas et al.2000). The analysis done in this studyconfirms and complements these find-ings by identifying CommunicationManagement as the main driver for costvariations. In the past many researchstudies focused on project team inter-nal communication. Much lesser re-search was done on the ProjectManager's external communication, es-pecially communication with SteeringCommittees and Project Sponsors.Building on the existing work of (Turner1993, Remenyi et al. 1999) further re-search is recommended in external com-munication for Project Managers tocomprehend the whole scope of Com-munication Management.

ReferencesAlexander, S. 2000, "Earned Value Management:

Bureaucratic Decree or ManagerialChoice?," in Proceedings of the ProjectManagement Institute Annual Seminars &Symposium, September 7-16, 2000, PMI,Houston, Texas, USA.

Bajaj, D. 2000, "Examination of RelationshipsBetween Client, Project, Project Team,Documentation and Variation Claims onProjects," in Proceedings of IRNOP IV:Fourth International Conference of theInternational Research Network onOrganizing by Projects, 1 edn, Sydney,Australia, pp. 333-345.

Chin, W. W. 1998, "Issues and Opinion onStructural Equation Modeling", MISQuarterly, vol. 22, no. 1, p. vii-xvi.

Clarke, A. 1999, "A practical use of key successfactors to improve the effectiveness ofproject management", International Journalof Project Management, vol. 17, no. 3, pp.139-145.

Cleland, D. L. & King, W. R. 1988, "BehavioralDimensions and Teamwork in ProjectManagement," in Project ManagementHandbook, John Wiley & Sons, Inc.,USA, pp. 860-866.

Cleland, D. L. 1995, "Leadership and the project-management body of knowledge",International Journal of Project Manage-ment, vol. 13, no. 2, pp. 83-88.

Couillard, J. 1995, "The role of project risk indetermining project management approach",Project Management Journal, vol. 26, no.4, pp. 3-16.

Crawford, K. & Pennypacker, J. S. 2000, "TheValue of Project Management: Why Every21st Century Company Must Have anEffective Project Management Culture," inProceedings of the Project ManagementInstitute Annual Seminars & Symposium,September 7-16, 2000, PMI, Houston,Texas, USA.

Defense Systems Management College 2000.Earned Value Management Gold Card.Internet publication: http://www.dsmc.dsm.mil/educdept/ev_hold_card.htm, Defense SystemsManagement College, USA.

Drummond, H. 1999, "Are we any closer to theend? Escalation and the case of Taurus",International Journal of Project Manage-ment, vol. 17, no. 1, pp. 11-16.

Hair, J. F., Anderson, R. E., Tatham, R. L., &Black, W. C. 1998, Multivariate DataAnalysis, fifth edn, Prentice Hall, USA.

Ibbs, C. W. 2000, "Measuring ProjectManagement's Value: New Directions forQuantifying PM/ROI," in Proceedings ofPMI Research Conference 2000, 1 edn,PMI, USA, pp. 35-40.

Ibbs, W. C. & Kwak, Y. H. 1997, The Benefits ofProject Management, Project ManagementInstitute, USA.

Kuprenas, J. A., Vanir, M. 2000, "Impact ofCommunication on Success of EngineeringDesign Projects," in Proceedings of PMIResearch Conference 2000, 1 edn, PMI,USA, pp. 323-332.

NCR 1998, GlobalPM 4.0, 4 edn, NCRCorporation, USA.

Pitman, B. 1994, "Stop wasting training dollars:Train for outcomes, not outputs", Journal ofSystems Management, vol. 45, no. 6, p. 25.

PMI 1996, A Guide to the Project ManagementBody of Knowledge, 1996 edn, ProjectManagement Institute, USA.

PMI 2000. "A Journey Towards the NewMillennium". Internet publication: http://www.pmi.org/news/review/1999%20Review.pdf 1999, pp. 1-15,Project Management Institute, USA. 6-5-2000.

Remenyi, D., White, T., & Sherwood-Smith, M.1999, "Language and a post-modernmanagement approach to informationsystems", International Journal ofInformation Management, vol. 19, no.1999, pp. 17-32.

Remenyi, D., Williams, B., Money, A., & Swartz,E. 1998, Doing Research in Business andManagement, SAGE Publications, UK.

Sparrow, H. 2000, "EVM=EVM:Earned ValueManagement Results in Early Visibility andManagement Opportunities," in Proceed-ings of the Project Management InstituteAnnual Seminars & Symposium,September 7-16, 2000, PMI, HoustonTexas, USA.

SPSS 1998, SPSS V9.0 for Windows or WindowsNT 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 - TheChanging Tide. Internet publication: http://www.standishgroup.com/_compass/chaos97.htm 1998, 1-4. 3-31-1998.

Corresponding Author

Ralf MüllerMBA, PMP

Director,Global ProgramManagement Office

NCR Corporation, Teradata Division

Sjöbogatan 10, 212 28 Malmö, Sweden

Tel: +46 40 68 91 312Mobile Phone: +45 40 56 91 88Fax: +46 40 68 91 512E-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 andOrganizationFaculty of Economics,Erasmus University Rotterdam

Burgemeester Oudlaan, 503062 PA Rotterdam, The Netherlands

Tel: +31-(0)10-408-2723Fax: +31-(0)10-408-9169E-mail: [email protected]

Standish Group, 1998b. CHAOS '98: A SummaryReview. A Standish Group Research Note1998, pp. 1-4. 1998, Standish Group,USA.

Stratton, R. W. 2000, "The EVM Maturity Model-EVM3 ," in Proceedings of the ProjectManagement Institute Annual Seminars &Symposium, September 7-16, 2000, PMI,Houston, Texas, USA.

Targett, D. 1990, Quantitative Methods, PitmanPublishing, London, UK.

Tushman, M. L. 1979, "Managing CommunicationNetworks in R&D Laboratories", SloanManagement Review, Winter 1979, pp. 39-49.

Turner, J. R. 1993, Handbook of Project-basedManagement: Improving the Process forAchieving Strategic Objectives, 1 edn,McGraw-Hill, UK.

Turner, J. R. 2000, "The global body of knowledge,and its coverage by referees and members ofthe international editorial board of thisjournal", International Journal of ProjectManagement, vol. 18, pp. 1-5.


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.

What is the overall status of the project? (Include EV reports)

Overall forecasted Revenue and Margin at completion:

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

Cost/schedule variance against plan:

What was the original revenue and margin planned at contract (the original baseline)?

Current percent complete:

Overall status (Red, Yellow, Green):

What is current level of customer satisfaction?

High or Low, why, how do you know?

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

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?

Question Yes No

A. Selling

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

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

3. Has the same salesperson been involved in this project since pre-contract planning?

4. Is there a pre-contract project plan?

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

6. Was the WBS used in cost estimating?

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

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

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 opportunitieson 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?

Linking Innovations

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etso.com

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

Towards An Integrated Script forRisk and Value ManagementStuart 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 isunsustainable. 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 interms of 'performance'. The scripts for such performances are seen to be provided by the accepted methodolo-gies which determine the language to be used and the roles to be acted out. A coherent integrated script for riskand value management can be provided by the methodology known as strategic choice, which replaces thelanguage of 'risk' and 'value' with that of 'uncertainty'. The benefits of adopting this alternative script areillustrated through six case studies.

CATEGORY: RESEARCH

IntroductionRisk management and value manage-ment are both widely recognised to bean essential part of best practice (Con-struction Industry Board, 1997; HMGovernment, 1995). Although signifi-cant attention has been directed to thetwo topics in isolation, there has as yetbeen little progress in the developmentof an integrated approach. The separa-tion of the two disciplines is well illus-trated by the way in which the Construc-tion Industry Research and InformationAssociation (CIRIA) and HM Treasuryhave both published separate guides torisk management (Godfrey P.S., 1996;HM Treasury, 1993) and value manage-ment (Connaughton J. N. and Green S.D., 1996; HM Treasury, 1996).

The main objective of this paperis to propose an integrated approach forrisk and value management. In devel-oping the argument in support of theneed for an integrated process, it is ini-tially necessary to establish the intellec-tual origins of the two disciplines. Thecase will be made that the two disciplinesonly really differ in terms of the rhetoricin which they are presented. It will thenbe suggested that an alternative scriptfor integrated risk and value manage-ment can be provided by the strategic

choice approach. The benefits of thisapproach will be illustrated through asummary of six case studies. The casewill also be made for a continuous pro-cess of intellectual deconstruction ofestablished concepts as an essentiallyrequirement for an innovative and re-flexive construction industry.

Value ManagementTwo schools of thought can be identi-fied in the value management literature.The first follows the tradition of systemsengineering and seeks to achieve givenidentified functions at minimum cost(Dell'Isola A., 1982; Miles L. D., 1972;SAVE International, 1997). This ap-proach tends to be implemented by anexternal team in response to a projectedcost overspend and is usefully labelled'value engineering' (Green S. D., 1994).It is essentially a technical activity thatseeks efficient means of achievingknown ends.

The second school of thought fo-cuses on the strategic interface betweenclient organisations and constructionprojects (Barton R. T., 1996; Kelly J. andMale S., 1993). From this point of view,the primary purpose of value manage-ment is to resolve ambiguity and estab-lish a shared commitment to a common

set of design objectives (ConnaughtonJ. N. and Green S. D., 1996). The em-phasis no longer lies on the technicalevaluation of design alternatives, but ona process of communication and con-sensus building with the active partici-pation of the project stakeholders.Within this school of thought, valuemanagement is primarily perceived as anaid to the briefing process rather than atechnique of cost reduction. Whereasvalue engineering is characterised by anunderlying positivism, the emerging 'sec-ond generation' of value managementowes its allegiance to an underlying epis-temology of social constructivism(Green S. D. and Simister S. J., 1996).Sources such as Barton (1996) are es-pecially notable in emphasising the roleof the facilitator rather than the appli-cation of mechanistic techniques.

It is useful to classify the abovetwo approaches to value managementas 'hard' and 'soft'. Similar distinctionshave been made within the more estab-lished fields of operational research(Rosenhead J., 1989) and systems theory(Checkland P. B., 1981). The same twoalternative 'hard' and 'soft' approachesare also evident within the constructionrisk management literature.


Risk Management

The Hard ParadigmThe established techniques of risk man-agement are well described in Chapmanand Ward (1997), Flanagan andNorman (1993) and Raftery (1994).Such sources directly reflect the 'hard'paradigm of value engineering in thatthey are primarily concerned with quan-titative techniques. The emphasis givenby Raftery (1994) to the role of external'experts' in the risk management processis especially notable. The intellectualorigins of these approaches can be tracedback to probability theory and the con-cept of 'risky utility' (von Neumann J.and Morgenstern O., 1947). It is theconcept of risky utility that underpinsthe frequently described techniques ofexpected monetary value (EMV) andexpected net present value (ENPV).The dominant assumption behind theseapproaches is that risk relates to theuncertainty of future outcomes. It is fur-ther assumed that the stakeholders canagree on a common interpretation onthe likelihood of their occurrence. Inmany respects, previous critiques of'hard' value engineering are also directlyrelevant to the corresponding paradigmof risk management. Both approachesare limited to problem contexts that aretechnical, static and well-defined. It isinvariably assumed that the definitionof the 'problem' is in itselfunproblematic. Traditional risk manage-ment is too often limited to 'technical'issues. The definition of 'technical' fre-quently embraces financial issues andhazardous operations. Nevertheless, the'soft' factors relating to the ways in whichstakeholders think, behave and interactare at best under-emphasised, and atworst ignored.

An Emerging Alternative ParadigmThe established texts on risk manage-ment (Chapman C. and Ward S., 1997;Flanagan R. and Norman G., 1993;Raftery J., 1994) are further notable inthe way that they tend to be prescrip-tive rather than descriptive. The in-cluded case studies tend be to highlyidealised and divorced from theorganisational context from which theywere derived. Those few sources whichset out to describe current practice arenotably at odds with the prescriptive lit-erature, e.g. (Akintoye A. S. andMacLeod M. J., 1997; Stevens D., 1996).However, there is evidence that a ten-tative 'soft' paradigm of risk management

is gaining ground. Sources such asGodfrey (1996) place much less empha-sis on the use of quantitative techniques,stressing the team nature of risk man-agement and the corresponding impor-tance of an independent facilitator. Therisk management process is no longerconceptualised in terms of 'decision-making', but as a means of continuouslearning. In this respect, Godfrey's ap-proach to risk management echoes manyof the characteristics of 'soft' value man-agement. Indeed, it is notable that bothare advocated primarily as a means ofresolving conflict within the projectteam.

The Epistemology of RiskManagementOn the basis of the available literature,it would seem that the emerging softparadigm of risk management remainsless conceptually developed than itsequivalent within value management.Certainly within the domain of con-struction management, there is a notableabsence of any risk management ap-proaches laying claim to a guiding epis-temology of social constructivism. Thisis not to say that the hard paradigm iswithout its critics. Mak (1995) has chal-lenged the paradigm of quantitative riskmanagement and the validity of its un-derlying reliance on normative Bayesianstatistics. Nevertheless, the articulatedalternative falls some way short of so-cial constructivism. Mak emphasises theuse of heuristics in searching out solu-tions that are 'good enough'. The ap-proach therefore follows Simon's (1981)concept of satisficing and as such is basedon a post-positivist position. The onto-logical position of naive realism is seem-ingly weakened to one of critical real-ism, see (Guba E. G. and Lincoln Y. S.,1998). Whilst Mak seems to accept thatoptimal solutions cannot be identifieddue to the limitations of human percep-tion, he still seems to believe that theyexist at least in theory.

The Need for A Broader FrameworkMuch of the uncertainty which occursduring construction cannot be con-strued as 'technical'. This is especiallytrue for the earlier stages of the projectlife-cycle, where decisions need to spanthe boundary between the constructionproject and the broader environment.The context for many constructionprojects is provided by multi-faceted cli-ent organisations that comprise severaldifferent interest groups whose objec-

tives often differ (Cherns A. B. andBryant D. T., 1984). Within this con-text, risk management can no longer beconsidered to be a narrow activity thatis applied to 'technical' issues in isola-tion of other factors. The process of riskmanagement therefore only becomesmeaningful through the active partici-pation of the client's project stakehold-ers. Effective risk management of thisnature depends less upon probabilisticforecasting and more upon the need tomaintain a viable political consistencywithin the client organisation. It is no-table that there is as yet no recognisedframework that embraces both the no-tion of technical risk with the less tan-gible uncertainties that characterise thestrategic interface between constructionprojects and client organisations.

The Case for IntegrationThe continued acceptance of risk andvalue management as two discreet dis-ciplines can be traced back to neo-clas-sical economics and decision theory.Once stripped of its popularist rhetoric,the guiding intellectual framework forvalue management can be seen to beprovided by the 'theory of risklesschoice', otherwise labelled the 'funda-mental theorem of utility' (Fishburn P.C., 1970). It is the notion of 'risklessutility' which provides the basis formulti-attribute utility theory (MAUT)and the associated weighted preferencemethods which are so popular within thevalue management literature, e.g.(Connaughton J. N. and Green S. D.,1996; HM Treasury, 1996; Institution ofCivil Engineers, 1996).

In contrast, the guiding intellec-tual framework for risk managementstems from the 'theory of risky choice'.This was originally developed from vonNeumann and Morgenstern's (1947)concept of 'risky utility', as definedwithin the context of hypotheticalgambles. At the time, the supposed dis-covery of measurable utility caused con-siderable furore within the economicscommunity. Subsequent contributionsby Ellsberg (1954) and Edwards (1954)served to classify the two types of utilityinto entirely different concepts. Hencethe distinction between the 'theory ofrisky choice' and the 'theory of risklesschoice' as initially labelled by Edwards(1954). Modern writers on decisiontheory perpetuate this distinction by re-ferring to value functions when utility isused in the neo-classical sense (i.e. in

the absence of uncertainty) and utilityfunctions when used in the risky sense.It is their respective allegiance to thesetwo different traditions that primarilydistinguishes value management fromrisk management. However, even withinthe context of decision theory, an in-creasing number of commentators havequestioned the extent to which this dis-tinction is meaningful. Fishburn (1970)suggests that the phrase 'decision mak-ing under certainty' is simply an abbre-viation of 'decision making in whichuncertainty, whatever form it may take,is suppressed and not given explicit rec-ognition'. Von Winterfeldt and Edwards(1986) have also expressed doubtswhether the distinction between 'util-ity' and 'value' is valid:

"In our opinion, the distinction betweenvalue and utility is spuriousbecause....there are no sure things, andtherefore values that are attached topresumably riskless outcomes are in factattached to gambles."

In the light of the above, it is validto question whether the continued dis-tinction between value managementand risk management is meaningful. TheCIRIA report on risk management sug-gests that 'the techniques of risk man-agement are similar to those used in themanagement process known as valuemanagement, outputs from each beingclosely linked and inter dependent'(Godfrey P. S., 1996). If the techniquesreally are similar, and there is no suchthing as a 'riskless decision', there wouldseem to be little logic in defining valuemanagement and risk management asseparate services.

A Postmodernist Interpretation

Reality Construction throughLanguageA postmodernist perspective provides analternative reading of the current prac-tices of risk and value management. Theadvocates of postmodernism contendthat the world is constituted by sharedlanguage and can only be understoodthrough particular forms of discourse(Hassard J., 1994; Legge K., 1995). Inother words, humans experience theworld through a given set of words andconcepts (Cooper R. and Burrell G.,1988). This is in direct opposition to themodernist view that language describessomething which already exists 'outthere'. From a postmodernist perspec-tive, the expressions 'risk' and 'value' do

not relate to any sort of external reality,but provide the language through whichmanagers construct their own reality.The contention is that neither valuemanagement nor risk management pos-sess any substantive content other thanthe language within which there are pre-sented. They are only implemented asdiscrete activities because there is anexpectation that 'risk' and 'value' shouldbe managed separately. This expectationis created by the literature that has fab-ricated the nonsense that value manage-ment and risk management exist inde-pendently. Note that neither of theseactually 'exist' at all, they have merelybeen constructed as separate entities. Apostmodernist interpretation also servesto challenge the grandiose claims oftenmade in favour of 'methodology'. Amethodology becomes a 'script' that usesparticular forms of rhetoric to be per-suasive. Such an interpretation wouldquestion the argument that differentmethodologies are characterised by dif-ferent assumptions. The notion that'soft' and 'hard' approaches arecharacterised by different epistemologi-cal positions would seem to be somewhatcontrived. A more defendable positionis that different methodologies arecharacterised by different forms of rheto-ric.

Motivations and BenefitsIt is interesting to consider the motiva-tions that drive practitioners to adoptinitiatives such as risk management andvalue management. A common motiva-tion will be a desire to demonstrate toclients and colleagues that they are effi-cient and up-to-date in the latest man-agement techniques. Apart from issuesof image, an organisation could realisti-cally benefit through a more participa-tive and reflective means of decision-making. However, both of these poten-tial benefits are extremely fragile. Thearena for the desired participation is toooften limited to the risk (or value) man-agement workshop. The decision toimplement a 'participatory' approach isinvariably made unilaterally by top man-agement. The outputs of any such exer-cise are therefore constrained to thosethat are acceptable to top management.Hence the nature of the 'participation'and the outputs are both highly con-trolled. This may lead many 'participants'to suspect that the real agenda is one ofmanipulation rather than genuine par-ticipation. The second potential benefitof providing a more reflective means of

decision-making will also rapidly disperseshould the same approach be imple-mented time over again. Once the struc-ture of the exercise is allowed to becomepredictable, it will provide no more ben-efit than any other mechanistic 'box-ticking' exercise.

Unrealistic ExpectationsSome of the claims commonly made insupport of risk and value managementserve to create unrealistic expectations.The following quote from Don Ward,Chief Executive of the UK ConstructionIndustry Board, is by no means unusual:

"Techniques such as value managementensure better definition of needs andlead to fewer changes during the project.The result? A better product, typically,delivered ahead of programme (whichin turn can mean earlier business in-come, for example, to a retail client),with improved cost certainty and lowerwhole-life costs." (Ward D., 1998)

Unfortunately, the techniques ofvalue management are not capable of'ensuring' anything. Techniques do nothave any meaning in isolation of the wayin which they are enacted, and peopleenact value management in differentways. There is no established causal linkbetween the use of value managementand a resulting better product. So-calledimprovement techniques such as valuemanagement can only meaningfully beevaluated in terms of whether or not theparticipants found the process to be use-ful. Much clearly depends upon therhetoric used initially to justify the useof value management and the subse-quent degree of post hoc rationalisation.Furthermore, there is no consensus onwhich techniques constitute value man-agement. It would seem that Ward(1998), the Construction Industry Board(1997), and others, have fallen victimto the propaganda of those who wish topropagate value management for theirown purposes.

Ward's (1998) naive faith in valuemanagement is perhaps indicative of theWestern world's general weakness formanagement panaceas. Managers every-where feel overwhelmed by uncertaintyand struggle to exert control over theirday-to-day environment. They aretherefore desperate for any promise of a'quick fix'. The result is that the con-struction industry becomes ever moredesperate as it lurches from one im-provement technique to another. Totalquality management, business process


re-engineering, value management, riskmanagement and lean thinking are allheld up in turn to be the saviour of theconstruction industry. All are notori-ously amorphous constructs that arestrong on rhetoric and weak on coher-ence. Managers seem to have an in-builtweakness for the rhetoric ofreductionalist management improve-ment recipes. The construction indus-try would surely be better served by morethoughtful managers who recognise thatuncertainty cannot be 'managed away'by a programmed technique.

The Dramaturgical MetaphorThe concept of gaining insights intomanagerial practice through the use ofmetaphors was popularised by Morgan(1986). Although the roots of thedramaturgical metaphor can be tracedback as far as Goffman (1959), the no-tion that 'management' can usefully beperceived as a performing art owes muchto Mangham (1990). Clark and Salaman(1996) have since examined manage-ment consultancy from a dramaturgicalperspective, that is, they argue that in-sights can be gained by thinking in termsof the consultant's performance in frontof a client. The way in which value man-agement, and increasingly risk manage-ment, evolve around participative work-shops makes the dramaturgical meta-phor especially powerful. Theconceptualisation is that the facilitatorsattempt to create a reality for their au-dience (i.e. the client) which capturestheir imagination and commitment. Allparticipants are assigned roles that areacted out in accordance with a previ-ously agreed script. The success of thefacilitator is primarily judged in terms ofher performance.

The performance is initially com-missioned by the client in accordancewith the accepted scripts on how 'bestpractice' clients should behave, e.g.(1997). The decision to implement risk/value management is therefore the out-come of a previous 'act' in the drama ofmanagement. The client's representa-tive would be required to act out theexpected role of a project manager. Asan effective project manager, she wouldbe expected to instigate the latest man-agement ideas, including risk manage-ment and value management. Giventhat these are conceptualised in the lit-erature entirely separately, the expecta-tion would be that they should be per-formed separately.

The Drama of Value ManagementIf the client's representative decided ini-tially to act out value management, shewould read some of the readily availablepublications before approaching a num-ber of consultants. The consultantswould act out the role of appearing au-thoritative and would confidently de-scribe the services that they have to of-fer. Note that the consultant would 'tella different story' depending on whichschool of thought they subscribed to.Advocates of Barton (1996) would usea different language from the advocatesof SAVE International (1997). The lan-guage would be different because theywould be talking from different scripts.Once commissioned, there would be anexpectation that the consultant wouldperform in accordance with the agreedscript. If she had emphasised the use of'function analysis' in her initial interview,she would be expected to perform 'func-tion analysis' in the workshop. Briefingnotes would be sent to the intended par-ticipants emphasising what their roles inthe drama would be. On the day of theworkshop, the drama would be enacted.The facilitator would arrive with thenecessary 'props': coloured pens, bluetacand flipcharts. All parties would then actout roles in accordance with the script,hopefully leaving some scope for impro-visation. The facilitator would be highlyanimated, usually waving her arms abouta good deal. She would steer the work-shop through the various stages of thescript. The closing act would invariablybe the formulation of an 'action list'.

The Drama of Risk ManagementGiven the previous contention thatthere is no substantive difference be-tween risk management and value man-agement, it would be reasonable to sup-pose that the enactment of a risk man-agement workshop would be broadlysimilar to that described above. Themain difference would lie in the lan-guage dictated by the alternative script.Whereas a value management facilita-tor would say the words 'value' and 'func-tion' often and loudly, a risk manage-ment facilitator would rely on phrasessuch as 'risk identification' and 'risk re-sponse'. Both would share the same prac-tical reliance on coloured pens, bluetacand flipcharts. The 'outputs' of eachworkshop would be shaped by the lan-guage of their respective scripts. Thesewould in turn shape the expectations forsome subsequent 'act' in the on-going

management drama.The preceding interpretation is

admittedly more reflective of the 'soft'approaches to risk management whichare enacted through participative work-shops. Nevertheless, the 'hard' quanti-tative approach can also be conceivedin terms of a performance, albeit to adifferent script. For example, a practi-tioner who followed the script providedby Chapman and Ward (1997) would beexpected to play the role of 'rational cal-culator'. Key props would include alaptop computer and risk analysis soft-ware. The initial consultations wouldcontain their own elements of drama,before the consultant withdraws to com-plete the 'analysis' (also a necessary partof the drama). A further act of dramawould follow when the consultant pre-sents the 'findings' to the client. Theaction taken would be primarily depen-dent on the persuasiveness of theconsultant's rhetoric. Note that no riskassessment exercise can ever be 'com-plete'. Constraints are always imposedby the resources available to conduct theanalysis and the unavoidable limitationsof bounded rationality. The rigour of anyrisk assessment exercise is therefore ul-timately judged in terms of the currentlyaccepted standard. In other words, it isthe standard that provides the script forthe justification. Note also that suchstandards are themselves socially nego-tiated and that the requirements ofrigour change over time. For example,in the nuclear industry there have beennumerous examples of risk assessmentexercises which, whilst persuasive at thetime, have seemed much less than per-suasive in retrospect.

Towards An Integrated Script

The Language of UncertaintyThe first step towards an integratedscript for risk and value management isto reject the language of 'risk' and 'value'in favour of the language of uncertainty.Value management is primarily con-cerned with resolving uncertainty re-garding project objectives. In contrast,risk management addresses uncertaintyregarding outcomes. When expressed inthese terms, the inter-dependence be-tween risk and value management isreadily apparent. The effect of unknownoutcomes cannot be assessed until theobjectives are clear. At the same time,the project objectives may well dependupon the identified areas of uncertainty.

A feasible script that addresses bothtypes of uncertainty is provided by thegroup decision support methodologyknown as 'strategic choice'.

Strategic ChoiceStrategic choice is rooted in the socio-technical approach pioneered by theTavistock Institute during the 1970s.The approach is facilitator-driven withno specific constraints regarding thenumber or length of workshops. Thedescription that follows is primarily de-rived from Friend and Hickling (1997)and Friend (1989).

The basic premise of strategicchoice is that managerial decisions aremade in conditions of uncertainty. Itseeks to aid the decision-making processby conceptualising three different typesof uncertainty, the first of which relatesto the clarity of 'guiding values'. Thistype of uncertainty, labelled UV, is pri-marily caused by ambiguous objectives.A decision-making group's response toUV may be to seek policy guidance froma higher authority, or to commission aconsensus-building exercise such as avalue management exercise. The secondtype of uncertainty pertains to thebroader environment and is labelled UE.This is the kind of uncertainty which isnormally dealt with through risk man-agement techniques. Responses to UEare usually of a technical nature, com-prising surveys, forecasting exercises orcost estimations (Friend J. K., 1989).The third kind of uncertainty concerns'related decision fields'. This is labelledUR and relates to the 'inter-connectiveness' between decision areas.In other words, uncertainty concerningthe wider implications of an individualdecision. The response here may be tore-frame the decision area or to consultwith others beyond the immediate con-stituency of the problem-owners.

The conceptualisation of threedifferent kinds of uncertainty is usefulin that it provides a framework that sub-sumes not only the current practice ofvalue management, but also that of riskmanagement. However, neither of thesetwo existing scripts gives explicit recog-nition to UR as a distinct area of uncer-tainty. Strategic choice makes explicitall three types of uncertainty and dealswith them through an iterative decision-making process. Implementation isframed around four complementarymodes of decision-making activity.

The first mode, described as theshaping mode, is concerned with prob-

lem formulation. Key techniques includethe graphical identification of, and link-age between, decision areas. This en-ables the decision-makers to identify themost urgent problems and agree uponan initial problem shape. The secondmode is labelled the designing modeduring which the facilitator steers theparticipants towards the identificationof different options. Of particular impor-tance is the grouping of different com-binations of options into discreet deci-sion schemes. It is recognised that whilstsome options would be compatible, oth-ers would be mutually exclusive. Thethird mode is the comparing mode andconsists of a sequence of techniques thatseek to compare the benefits of alterna-tive decision schemes. These techniquesdiffer from those of decision analysis inthat they allow for a combination ofquantitative and qualitative comparison.The final stage of strategic choice is de-scribed as the choosing mode and is con-cerned both with making immediatedecisions and with devising a strategy formanaging those decisions which are bestmade in the light of further information.The outcome of any particular meetingwould therefore always include imme-diate commitments to action and alsostrategies for resolving identified areasof uncertainty to aid future decisions.The latter aspect has some commonal-ity with the established practice of main-taining risk registers.

In advocating the 'use' of strate-gic choice it is important not to repeatthe grandiose claims made in support ofmore prescriptive methodologies. Friendand Hickling (1997) recognise that theestablished decision-making norms oflinearity, objectivity, certainty and com-prehensiveness inevitably break downwhen faced with real-world problems.The strategic choice approach ischaracterised by less simple prescriptions(Friend J. K. and Hickling A.,1997):

- Don't aim for linearity - learn towork with cyclicity.

- Don't aim for objectivity - learnto work with subjectivity.

- Don't aim for certainty - learn towork with uncertainty.

- Don't aim for comprehensive-ness - learn to work withselectivity.The prime issue of importance is

the way in which the embedded lan-guage of the strategic choice approachprovides a different script for facilitated

interventions. The language of uncer-tainty can serve to combine the sepa-rate story lines of risk and value man-agement. The intervention can be jus-tified in terms of the language of uncer-tainty. The workshop can be enactedand the outcomes justified in the samelanguage. Whilst the strategic choiceapproach has appropriated numeroustechniques associated with the fourspecified modes of decision making, itmust be recognised that these tech-niques are inseparable from their embed-ded language. From a postmodernistperspective, a new technique is only use-ful in helping participants think differ-ently because the language and imageryare unfamiliar. Once the techniques be-come familiar, they cease to stimulatedifferent ways of thinking and thereforetoo easily regress to mechanistic exer-cises of dubious value. The metaphor ofa facilitated workshop as an act of dramaremains important. Given that so manyrisk (and value) workshops result in fewtangible outcomes, it is important thatthe 'drama' engages project stakehold-ers as active participants rather thanmembers of a passive audience. The in-tention must be to ensure that the pro-cess is 'on-line'. Too many existing valuemanagement exercises take place 'off-line' with little impact on day-to-dayproject management. This is probablyeven more true in the case of risk man-agement.

Case StudiesThe author has to date used the 'uncer-tainty script' of strategic choice on sixseparate occasions in a variety of differ-ent project contexts. Within the con-fines of this paper it is not possible todescribe each occasion in detail. Never-theless, it is possible to communicate theessence of what took place. Each projectcomprised an action-research interven-tion that sought to help with real-worldprojects. The six projects can besummarised as follows:

- PFI submission for a Schoolsproject;

- Master planning exercise for there-development of a majoruniversity campus;

- £100M mixed retail and residen-tial development in centralLondon;

- 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 werebilled as 'risk management'. Each inter-vention consisted of a series of briefingmeetings followed by a one-day facili-tated workshop. The same approach wasadopted irrespective of how the work-shop was billed. The workshops weredeliberately light on formal methodol-ogy whilst being loosely informed by thestrategic choice framework. The sessionswere facilitated in a positive mannerwhilst avoiding any tendency to imposesolutions. Indeed, the facilitator avoidedany temptation even to suggest coursesof action. Each workshop involved abroad cross-section of stakeholders;numbers varied from twelve to twenty-seven. The workshops would typicallybegin by asking the participants to statetheir four key issues of concern. Thesewere written onto a post-it note that wasthen attached to a display board. Thepost-it stickers were then grouped into'problem areas' that provided the agendafor the rest of the day. In broad terms,the groups were then sub-divided intothree smaller groups on a forty-fiveminute cycle. Initially the groups weretasked to diagnose why the identified'problem area' was problematic. Eachgroup appointed their own facilitatorwho subsequently acted a spokesperson.The groups were asked to ensure thateverything that they considered impor-tant was written down on their flipchart.After forty-five minutes (or so) the mainworkshop reconvened and the three pre-sentations were made in turn. After theresultant discussion, the agenda for thenext cycle was agreed and the workshopwas again sub-divided into separategroups. Sometimes the groups were thesame as previously, sometimes they werere-constituted. More often than not thefocus of the second cycle was directedtowards the production of recommen-dations. The facilitator endeavoured tobe neutral at all times and deliberatelyavoided introducing any unfamiliar lan-guage, although he did often build onthe discussion of the group. The threecategories of UV, UE and UR were oc-casionally used as prompts for differentsub-groups to identify different sourcesof uncertainly. On each occasion the lastsession of the workshop was devoted tothe derivation of an 'action list' to whichspecific responsibilities were assigned.

The staged outcomes of the work-shops were recorded on flipcharts andsummarised in a brief written report. On

all six occasions the scripts were ac-cepted by the audience and the result-ant 'performance' was well received.Whilst the enactment of the workshopswas loosely structured around the stra-tegic choice methodology, the adoptedapproach was essentially pragmatic.However, the justification of the eventsdepended upon the broader theoreticalconceptualisation that underpins stra-tegic choice. This provides a practicalmanifestation of the dramaturgicalmetaphor described previously. It wasnoticeable that the different sub-groupsfrequently resorted to the language ofrisk management, rarely did the termi-nology of value management provide thebasis for discussion. It should also beadded that many of the workshops par-ticipants were very experienced in theestablished approaches to risk manage-ment. Without exception, such partici-pants were warmly supportive of theadopted approach. They were often es-pecially complementary about the highlyparticipative style of the events and theway in which the detailed agenda wasformulated on the day. The relative ab-sence of quantitative analysis was seento be a strength rather than a weakness.Effective risk management is of coursedependent upon quantitative assess-ments, but the view was accepted thatsuch assessments are best carried oncethe overall 'problem frame' has been es-tablished.

Future publications will describedthe workshops and resultant feedbackin further detail. For the present, sufficeit to say that there is evidence that thestrategic choice approach can provide afeasible integrated script that embracesthe story lines of both risk managementand value management. The adoptionof the dramaturgical metaphor howevermilitates against any grandiose claims onthe behalf of 'methodology'. The inten-tion must be to propagate a morethoughtful approach to the managementof uncertainty, rather than laying claimto yet another panacea.

DiscussionIn accordance with the adoptedpostmodernist position, it is necessary toconcede that the insights achieved fromthe dramaturgical metaphor are inevi-tably incomplete. In contrast topopularist management gurus, academ-ics must always be aware of the limita-tions of their adopted standpoint. It isnotable that several authors readily con-cede the limitations of 'mechanistic,

checklist approaches to risk analysis' andclaim no monopoly on the truth. Differ-ent insights are gained from differentperspectives. Each way of seeing is alsoa way of not seeing. Perhaps the mostimportant aspect of thinking in terms ofmetaphor is the way in which any onechosen metaphor exposes the limitationsof others. This awareness of the incom-pleteness of metaphor therefore fostersa healthy cynicism of all metaphoricalapproaches, be they implicit or explicit.A postmodernist position requires a con-tinual process of reality deconstructionand reconstruction (Morgan G., 1986).The benefits of this process have beendemonstrated in the case of risk andvalue management. However, there is adanger that the strategic choice ap-proach might be routinised throughregular use. A continuous process ofdeconstruction and reconstruction isnecessary to guard against this possibil-ity. Indeed, it is contended that this cycleof intellectual activity is vital to contin-ued innovation. It is also possible tomake the argument that a greater un-derstanding of metaphor andpostmodernism amongst managers inthe construction industry would serveto make them more creative and lesssusceptible to the mindless ideology ofmanagement panaceas. To promote amore thoughtful industry must surely bethe prime responsibility of constructionacademics.

It is also necessary to concede thatthe author's background and expertiseare in construction management andvalue management. Therefore the trialsand relating validation are based of thepractice in construction sector. How-ever, the principles of risk and valuemanagement described are by no meansunique to the construction industry. Thearguments developed can easily be ex-tended to other industrial sectors. Theinterpretation of risk and value manage-ment methodologies as dramaturgicalscripts presents a new way of thinkingthat has wide application. The resultspresented in this paper can be of valueto a range of different disciplines and tothe development of a generic under-standing of the way in which projectmanagement is enacted.

ConclusionThis paper has presented a new way ofthinking about risk and value manage-ment. It has been suggested that the cur-rent literature propagates a false distinc-tion between these two activities. An

alternative integrated script based on thestrategic choice approach has been sug-gested. The legitimacy of this approachhas been established through six action-research interventions. However, it hasalso been suggested that the relationshipbetween a published 'methodology' andwhat happens in practice is muchweaker than is commonly supposed.From a postmodernist perspective, theprime contribution of a methodology isthe way in which the adopted discourseshapes practice. The initial need for amanagement-type intervention will bejustified in terms of the rhetoric of thefavoured methodology. The text of themethodology will then provide the scriptfor the enactment of the 'drama'. Therhetoric of the methodology will subse-quently be used for the post hocrationalisation of what took place. How-ever, the dramaturgical metaphor can-not provide a complete explanation ofthe way in which methodologies areenacted. To make such a claim wouldbe contrary to the adoptedpostmodernist position.

AcknowledgementsThe research described was supportedby the UK's Engineering and PhysicalSciences Research Council (GR/M42657). The fieldwork and empiricalanalysis was conducted with the assis-tance of Ian Compson. An earlier ver-sion of this paper was presented at the1999 CIB W-55 and W-65 Joint Trien-nial Symposium in Cape Town, SouthAfrica. The author is grateful for thesubsequent feedback from conferenceparticipants.

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Dr Stuart D. Green

Department ofConstructionManagement &EngineeringThe University ofReading

Whiteknights, PO Box 219, Reading,RG6 6AW, UK

Tel: +44 (0)118 931 8201Fax: +44 (0)118 931 3856E-mail: [email protected]: http://www.rdg.ac.uk/~kcsgrest/

rethinking project management - old truths and new insights

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